Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183

Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183 Hearing dates: 3 May 2011 and 28 July 2011 Decision date: 02 August 2011 Jurisdiction: Revenue Division Before: J Block, Judicial member Decision: The decision under review is affirmed Catchwords: Primary production exemption - meaning of "use" - whether intention is sufficient - meaning of " maintenance of animals" exemption- relevance of ownership of other land . Legislation Cited: Administrative Decisions Tribunal Act 1997 (NSW) Land Tax Management Act 1956 (NSW) Cases Cited: Melbourne Hunt Club v Federal Commissioner of Land Tax [1930] VLR 365; Texts Cited: Macquarie Online Dictionary Category: Principal judgment Parties: Mannie Caruana (Applicant) Vivienne Caruana (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: J. Beck (Applicants) AH Ryder (Respondent) Argyle Lawyers (Applicants) Crown Solicitor (Respondent) File Number(s): 106050

REasons for decision

Part A: preliminary and background 1The decision under review is the disallowance by the Respondent of objections by the Applicants against assessments of land tax in respect of the 2004 to 2009 (both inclusive) land tax years. The land tax years in question are collectively referred to as the "Tax Years"; the term "First Tax Years" refers to the 2004 and 2005 land tax years; the term "Subsequent Tax Years" relates to the remaining Tax Years commencing with the 2006 land tax year; this distinction arises from a legislative change which had the effect of altering the relevant law which applied during the First Tax Years. The land tax assessments in question relate to the Applicants' land at 112 Sutherland Road, Londonderry ("Londonderry") and to their land at 186 Hume Highway, Lansdale (' Lansdale"). In respect of Londonderry the Applicants contend that they are entitled to the primary production land ("PPL") exemption in respect of all of the Tax Years because Londonderry was, during the Tax Years owned by a primary producer (and being the Applicants) who intended to use Londonderry for the purpose of primary production. (The reason why they were unable to do so appears from the facts presented by them and set out later in these reasons). In respect of Lansdale the Applicants contend that they are entitled to the PPL exemption because they complied in respect of Lansdale with the requirements of the relevant legislation. 2The Tribunal had before it the documents tendered in accordance with section 58 of the Administrative Decisions Tribunal Act 1997 . In addition it received written submissions from both parties; the term "AS" refers to the final submissions entitled "Applicants Closing Submissions and Response to Respondents Submissions" furnished on behalf of the Applicants after the hearing of this application while the term "RS" refers to the final written submissions furnished by the Respondent dated 27 June 2011. At the conclusion of the hearing of this application the parties were afforded an opportunity to furnish detailed final written submissions, (in addition to submissions previously furnished by both of them), and a hearing on the 28 July 2011 was scheduled for the purpose of enabling the Tribunal to enquire to the extent relevant or necessary in respect of the written submissions by the parties. The timetable so arranged required in the first instance final submissions by the Applicants, followed by final submissions by the Respondent and with the Applicants having a right of reply. In fact the Applicants did not exercise their right of reply and resubmitted AS noting that they did not consider that a further hearing was necessary and so that in their view the matter could then be decided on the papers. The Respondent did not agree that a further hearing was unnecessary and a brief hearing took place on 28 July 2011. The Tribunal also admitted a number of witness statements by the Applicants and their son; some of those witness statements are lengthy but the Tribunal does not think it necessary to detail them. The Tribunal also admitted a witness statement by Mr. M. Boyle on behalf of the Respondent. 3Evidence was given at the hearing by Mr Caruana who is one of the Applicants; that oral evidence indicated that there is no significant issue of fact between the parties. 4It is convenient in the first instance to draw on the content of AS under the head of "Facts"; clauses 4 to 25 (excluding footnotes) of AS read as follows: "4. The Applicants, Mr and Mrs Caruana are long term and well regarded farmers who own properties in New South Wales (Garland and Blayney) where they birth, rear, and grow cattle and goats. And in Queensland where they operate a table egg farm which prior to 2004 also grew chickens. 5.All of the Applicant's primary production businesses (including those in Queensland) are run through a family company, Hondesse Pty Limited. 6.The livestock from all three farms is (and always has) been taken to the Applicant's Property in Lansdale for processing and distribution 7.The Londonderry Property is rural bush comprising 14.2 hectares of adjoining land (lot 2 being 2.024 hectares, and lot 7 being 12.2 hectares) acquired for the purpose of using it as part of the Applicants existing primary production business. 8. Londonderry was acquired for primary production purposes and has been in the development phase for many years with approximately $150-200,000.00 being expended on consultation services and approaches to council. After approximately two years the council rejected our development application. 9.A further application was made to Penrith Council for a poultry house, further plans were drawn up and further consultants used. This application was also rejected. 10. A further approach was made to council concerning the cultivation and planting of saltbush to run the livestock. The Applicants were advised for the first time that there was a tree preservation order and that no trees could be removed. 11. After two years a further approach was made to council about erecting a fence to hold livestock. This was rejected. 12.Further approaches and rejections went on up to 2007. 13.In 2010 Mr Caruana again had the property surveyed at a cost of $4,950 and consulted Mr Gary Rhodes, who suggested spending a further $8-9,000.00 on an arborist. 14.The irony for the Applicants is that over the entire period in question the Applicants have been taxed a livestock levy by Mossvale Rural Lands Protection Board and have paid such taxes. 15.Between 2003 to the present while negotiations with Penrith council have been ongoing, it has remained in a hiatus period due to the poor health of Mr Caruana. 16.The commitment to use as primary product is established by the sheer number and size of the applications to council, the devotion of labour and money to the activity; the intention of the Applicants from the time of acquisition; and the Applicants continued negotiation with Penrith Council establishes that the end use of the land was manifest at all times. 17. The Applicants purchased Lansdale in or around 1991 and were the registered proprietors of the land during the Tax Years. 18. The land is about 6,910 square metres in area and was zoned "industrial" during the Tax Years. 19.Since at least 1993, the land has operated a poultry processing plant on the land. 20. Since 1997 the Applicants have leased the land to Hondesse for meat processing, sales and distribution. 21.During the Tax Years the land was used for meat processing, sales and distribution of meat products. 22.In 2002 Mr Caruana suffered a stroke, and was unable to personally maintain the level of processing being conducted at Lansdale. Accordingly, Hondesse sublet part of the processing plant to Farm Fresh Poultry from 2003 to 2008. In 2008 the Hondesse granted a 3 year re-assignment of lease to Farmers Garden Pty Limited. 23. In 2008 Farmers Garden introduced a new grocery line for the purpose of enhancing the primary product, such as sauces and marinades. The groceries represented a maximum of 10% of the overall operations. 24.The use of the land did not change with the subleases and the Applicant's chicken, goat and cattle meat was still processed and sold via the factory outlet. 25.From January 2011 the tenants moved out and there are no further sub-leases. 5The facts as set out in the preceding clause are, put in broad terms, in accord with the facts as contained in the Respondent's written submissions previously furnished to the Tribunal. It is perhaps desirable to make it clear that in respect of Lansdale the livestock in question was brought to Lansdale after it had been slaughtered elsewhere and so that Lansdale operated as a venue at which the carcasses were processed. The Tribunal does not consider it necessary to include the facts as stated by the Respondent since as set out previously there is no substantive dispute of fact between the parties. Put in other words it is clear that Londonderry was never used for any prescribed primary production purpose while Lansdale was used for the purpose of processing carcasses of livestock slaughtered elsewhere. 6Having regard to clause 5 of AS, the Tribunal was under the impression that the other properties in which the Applicants have interests might be owned by their family company Hondesse Pty Limited ("Hondesse"). It is of course a trite matter of law that a company has an existence separate and apart from that of its shareholders. At the hearing on 28 July 2011 Ms Beck from the bar table informed the Tribunal that the other properties are in fact owned by the Applicants but that they have been leased to Hondesse. It is convenient when referring to the brief hearing on 28 July 2011 to note that Ms Beck from the bar table emphasized that although Londonderry has never been used by the Applicants for primary production activities, their subjective intention to do so is evidenced by their expenditure in pursuit of the necessary consents and as to which see clause 8 of AS quoted in clause 4 above. At the same time Ms Beck asked the Tribunal to note that the case of Parramatta City Council referred to in clause 29 below was decided by reference to different legislation. 7Clause 2 of RS neatly summarizes the issues between the parties in the following terms: "In summary, at issue is whether the PPL exemption applied to: (a)Londonderry in circumstances where it was intended to be, but was never actually, used for primary production activities during the Tax Years; and (b)Lansdale in circumstances where, relevantly, no animals were maintained on the land during the Tax Years, but where the land was used for the processing, sale and distribution of the bodily produce of animals that had been slaughtered offsite. " 8The Respondent contends that the Applicants did not during the Tax Years conduct prescribed primary production activities on either of Londonderry or Lansdale 9Having regard to AS the case of the Applicants in his that the PPL exemption applied in all of the Tax Years in respect of: (a)Londonderry on the basis that the Applicants carried on an existing primary production business elsewhere and intended to use the land for primary production in the course of that business; and (b)Lansdale on the basis that the Applicants carried on an existing primary production business elsewhere and used the land in the course of that business. 10It may be noted, as a preliminary matter that during all the Tax Years Londonderry was zoned rural/non-urban. Accordingly it is necessary only to consider whether the primary or dominant use of Londonderry was for a prescribed primary production activity. (It will be remembered that in fact Londonderry was not used for any such purpose). Lansdale by contrast was during all of the Tax Years zoned industrial; for this reason the Applicants must in respect of Lansdale establish that Lansdale was used during the First Tax Years in the course of carrying on a business of primary production and that during the Subsequent Tax Years the use of Lansdale had a significant and substantial purpose or character. The legislation in particular in respect of this latter aspect is in some respects complex but it is not necessary for the purposes of this decision, and for reasons which will be seen, to consider the precise nature of that particular legislation.