Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Favello Pty Ltd & Ors v Chief Commissioner of State Revenue [2014] NSWCATAD 47 Hearing dates: 22 - 26, 29 - 31 July 2013, 13 - 15 August 2013, 8 - 11, 14 October 2013 and 3 February 2014. Decision date: 16 April 2014 Before: A Verick, Senior Member Decision: The land tax assessments under review are affirmed Catchwords: TAXES AND DUTIES - Land Tax - Primary Production Exemption - Twenty Seven disparate properties - Whether land used for the cultivation of nut trees - Whether the use is the dominant use - Land Tax Management Act 1956, s 10AA. Legislation Cited: Civil and Administrative Tribunal Act 2013 Land Tax Management Act 1956 Cases Cited: Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867, [2010] 79 NSWLR 724 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 Saville v Commissioner of Land Tax (1980) 12 ATR 7 Abbott v Commissioner of Land Tax (1978) 38 LGRA 417, (1978) 9 ATR 728 Romano v Chief Commissioner of State Revenue (2010) 84 ATR 28 Gareffa v Chief Commissioner of State Revenue [2012] NSWADT 41 Reolon v Chief Commissioner of State Revenue [2013] NSWADT 96 Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25 FCT v Dalco (1990) 168 CLR 614 B & L Linings v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 Hope v Bathurst City Council (No 2) (1984) 52 LGRA 79 Hope v Bathurst City Council (1986) 7 NSWLR 669 Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 Brown v Commissioner of Land Tax (NSW) (1977) 7 ATR 642 Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278 Safety Beach Estate Pty Ltd v Commissioner of Land Tax (1978) 9 ATR 451 Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 204 Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25 Krew v Federal Commissioner of Tax 71 ATC 4213 Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23 Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWCA 408 Warriewood Pty Ltd v FCT (1993) 26 ATR 270 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Category: Principal judgment Parties: Favello Pty Ltd, Dr Preslav Trenchev, and Preslav Trechev Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: G Foster (Applicants) A S Valenti, Valenti & Valenti (Applicants) S Gordon, Crown Solicitor's Office (Respondent) File Number(s): 106096, 106097, 106098 and 136051 reasons for decision 1These applications were commenced in the Revenue Division of the Administrative Decisions Tribunal ("ADT") pursuant to the Administrative Decisions Tribunal Act 1997 ("the ADT Act"). On 1 January 2014, the ADT, with a number of other tribunals in New South Wales, were abolished and their jurisdiction and functions integrated into the Civil and Administrative Tribunal of New South Wales ("NCAT") established under the Civil and Administrative Tribunal Act 2013 ("NCAT Act"). Because the proceedings in this matter were 'part heard proceedings' on 1 January 2014 as defined in clause 6(1) of Schedule 1 to the NCAT Act, they are to be determined by the Tribunal sitting as NCAT (clause 7(2)(a) of Schedule 1). This decision is accordingly a decision of NCAT. 2The applicants collectively own 27 different properties, located across the west and north-west outskirts of Sydney extending from Lower Macdonald in the north to Lithgow in west and to Mt Hunter (near Camden) in the south as set out in Appendix A to this decision. In respect of 26 of these properties, the applicants seek exemption from land tax for the 2006-2010 land tax years pursuant to s 10 AA of the Land Tax Management Act 1956 (the "Act") on the grounds that the land in each case was used for primary production. In respect of 66 Chaseling Road, Webbs Creek, the claim for exemption is only for the 2008-2010 land tax years. 3The Chief Commissioner of State Revenue (the "Chief Commissioner") assessed the applicants to land tax with respect to the years in issue and disallowed the applicants' objections that the relevant properties were exempt under s 10AA of the Act, which was in the following terms: Section 10AA exemption for land used for primary production (1)Land that is rural land is exempt from taxation if it is land used for primary production. (2)Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land: (a)has a significant and substantial commercial purpose or character, and (b)is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made). (3)For the purposes of this section, "land used for primary production" means land the dominant use of which is for: (a)cultivation, for the purpose of selling the produce of the cultivation, or (b)the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or (c)commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or (d)the keeping of bees, for the purpose of selling their honey, or (e)a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or (f)the propagation for sale of mushrooms, orchids or flowers. For the purposes of this section, land is "rural land" if: (a)the land is zoned "rural", "rural residential" or "non-urban" under a planning instrument or (b)the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied that the land is rural land. 4Lots 61, 62, and 63 Springwood Road, Yarramundi is owned by Favello Pty Limited and the property situated at 66 Chaseling Road, Webbs Creek is owned by Preslav Trenchev Pty Limited. With the exception of these two properties, all the other properties are owned by Dr Preslav Trenchev. Dr Trenchev is also the sole shareholder and director of the two companies. 5Twelve properties have residential accommodation on part of each property and were rented to tenants in the years in issue. (See Appendix B) The other properties are unoccupied. With the exception of 106 Golden Valley Drive, Glossodia, all of the properties are zoned rural. 6Section 7 of the Act provides that land tax shall be 'levied and paid on the land value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act)'. By s 8 land tax shall be charged on land as owned at midnight on the thirty-first of December immediately preceding the year for which land tax is levied. 7At issue in this matter is whether the applicants are entitled to the primary production exemption under s 10AA(3)(a) of the Act for the cultivation of nut trees in the relevant years in respect of the properties. In the case of the Glossodia property, it must also satisfy the commerciality tests set out in s 10AA(2)(a) and (b) of the Act. 8This matter was heard over a number of days and included two days when the parties and the Tribunal made a personal inspection of what activity was being conducted on certain selected properties including visiting the University of Western Sydney (to see some matured nut bearing pecan nut trees) and St Alban's Pecan Nut Farm (a pecan nut farm), both not the subject of this review. (See Appendix C) 9In addition, to various voluminous folders containing documents filed pursuant to s 58 of the Administrative Decisions Tribunal Act 1997 ("ADT Act"), the parties produced several other reports and documents by way of evidence at the hearing. The ADT Act was renamed and amended as from I January 2014 and now is referred to as the Administrative Decisions Review Act 1997 ("ADR Act") 10The parties also provided the Tribunal with very lengthy written submissions at the hearing and after the hearing with the final submissions filed in February 2014. Applicants' Evidence 11For the applicants evidence was given by the following: (1)Dr Trenchev, the principal applicant; (2)Mr Paul Barry, accountant for the applicants; (3)Mr Stephen Colaguiri, estate agent who managed the 12 rented residences including the "grounds immediately around each house"; (4)Mr John Robb, a horticulturalist; (5)Ms Rebecca Field, an agronomist; (6)Dr George Orel, a research scientist; and (7)Mr Anthony Curry, a consultant. 12Reliance was also placed by the applicants on a statement by Mr Youkhana. Dr Trenchev 13Dr Trenchev, the principal applicant gave oral evidence and was cross-examined. 14Dr Trenchev is a medical practitioner and has, during the relevant years, operated a private pathology business. Prior to the years under review he said he was advised to set up a research foundation, which, he said, was to be funded with income from land he would purchase. In a statement handed to the Tribunal (Exhibit A4) he states that the foundation will, on his death, inherit his fairly substantial land holdings and most of his wealth. 15At about the same time, he decided to pursue the cultivation of nut trees. He had some experience in growing walnuts in Bulgaria and with, some help from his father-in-law; he started a nut-growing nursery on land at his residence in Kemps Creek, which comprises of 25 acres. His intention was to propagate walnuts and to plant them on farms on land he would purchase using the agro-forestry style of cultivation. 16Dr Trenchev was asked by Mr Foster when did he first start planting seedlings. He could not 'tell ... exactly because it was a gradual process'. Later he suggested that it 'would be 99, 2001, 2003, 2004'. He was more specific, when Mr Foster tried to ascertain 'the activities, which were being carried out on all the farms' in 2005. Dr Trenchev indicated that, other than the Chaseling Road property, he with help from his father-in-law 'had more or less covered all the farms similar to what we have today'. He began with walnut nuts but due to 'a fungal infection for walnuts' around Sydney, he decided to switch to growing pecan nuts and chestnuts. 17Until 2004, his father-in-law was managing his properties but, after 2004, he did not 'have a formal manager'. Dr Trenchev indicated that he hired workers but could not remember the names of any because 'they don't last long'. Since 2004 he has not employed any employees or manager to attend to the nut growing operations. When asked by the Tribunal, whether he maintained any records of persons he contracts on a part time basis, his response was that he destroyed them after preparing the information for the respondent because he did not see any reason to keep the originals. 18His evidence was that he would purchase nuts 'from surrounding farms' and plant some 10,000 nuts each year at his nursery in Kemps Creek. He was not able to provide a precise timeframe for the planting each year but estimated it 'maybe a month or two'. He further indicated that the chestnuts would sprout within one month, pecan within two months and walnuts 'minimum three months, can take up to six months'. 19Dr Trenchev was asked by Mr Foster as to how he selected for purchase the properties the subject of this review. His answer was as follows: Yes, I select the properties from what I have experienced in Europe, what I think is going to be suitable for growing nut trees. Of course there has been talking about alluvial soil on the banks of rivers. I usually buy properties which not many people want because they are cheap properties, so that is why I have some alluvial soil and this and that but would say that is about one third. I haven't measured, that is just an estimate, and the rest of it is more slopey or even some of it steep and because nobody wants to buy it, I bought it. 20Dr Trenchev was also asked by Mr Foster about irrigation on the properties. His response was that, initially, he used 'long black pipes' with filters, which did not function well because the system got blocked through impurities and sometimes damaged by wild animals in search for water. He replaced that system with what he called the 'eco planter' for each individual tree. He also indicated that he used a weed mat for each planting made from a 'building type of material which looks like black plastic'. In the written statement (Exhibit A4) referred to above, he states - ... The severe draught (sic) of 2007/2008 has set me back tremendously. My response has been to create my "Eco Planter". It is a device that captures water, stores it and slowly feeds it to the roots of the young trees. It is designed to sustain, together with fertilizer fed through it, the young trees through their vulnerable stage. I found it very effective. 21In a statement handed to the Tribunal (Exhibit A5) he set out the benefits of agroforestry as against commercial nut farming. 22In addition to producing various documents as exhibits at the hearing, Dr Trenchev also relied on documents lodged with the respondent and included with the documents produced by the respondent under s 58 of the ADT Act. These documents were described by Mr Foster as the 'Filed evidence of Dr Trenchev'. 23Reference is made in the applicants' written submissions to the relevant documents that the applicants relied upon in this matter. They were as follows: (3)For each of the subject properties, Dr Trenchev attached a 'Business Farming Plan" (see eg., Vol 5 pp 39 - 45 in re Lot 29 Bells Line of Road), in which he confirms: (a)the land size; (b)the terrain; (c) the vegetation; (d)the soil type; (e) the climate; (f)whether the land is suitable for agroforestry; (g)irrigation proposals with costs; (h)costs & income estimates; (i)Cost analysis. (4)In addition to each 'Business Farming Plan', Dr. Trenchev attached a report on Land Usage (see eg Vol 5 pp 46 - 54), wherein he confirms: (a)the land cost; (b) where there is a house, the estimated investment in the house vs the investment in the surrounding land; (c)number of trees as at February 2011,; (d) income comparison with other land usages; (e). whether the parcel has been otherwise exempted from Land Tax; (f)historical tables setting out the number of trees planted vs number of trees alive in years 2006 - 2010; (g)land usage pre 2008; (h)land usage post 2008, focussing on the eco planter as a solution to problem of drought. (5)In addition to the 'Business Farming Plan' and the report on Land Usage, Dr Trenchev also included 2 graphs which illustrate the number of trees planted/alive during the years 2006 - 2010 expressed numerically and as a % of the maximum possible (see eg., Vol 5 pp 55 - 56). He also included a 3rd graph reflecting the land use, distinguishing between land around a house, land unavailable for farming, available land planted with trees, and land available for trees but not planted. (p 57) (6)Tax Returns: Contained within Vols 5 (pp 9 - 38) are copies of Dr. Trenchev's 2006 - 2009 income tax returns, covering the period 1/7/2005 - 30/6/2009. [Subsequent returns were produced during the hearing.] 24Dr Trenchev was cross-examined by Mr Young on a number of matters. 25Dr Trenchev in cross-examination stated that his accountant for many years has been Mr Paul Barry who prepared his land tax and income tax returns. When asked if he was aware of the contents of the returns prior to signing them his response was - Q. So your evidence is you just signed whatever Mr Barry puts in front of you, is that your evidence? A. Correct, absolutely, sometimes even Paul Barry is not there. Q. So your evidence is to the effect you have no idea what you might have been signing but because Mr Barry said sign it you signed it? A. Yes, I trust him. Q. Without reading it? A. Yes, correct, as I said I wouldn't understand it. 26Further, Mr Young asked Dr Trenchev in respect of particular claims made in land tax returns lodged on his behalf by Mr Barry. Dr Trenchev stated that 'Paul Barry has no idea what I am doing' and information about activities on the properties was supplied by him to Mr Barry. 27Dr Trenchev was asked by Mr Young if Mr Barry was attending the Tribunal to give evidence, his response was - Q. Mr Barry would be available to come to this Tribunal to give evidence as far as you are aware, is that correct? A. Well what good is Mr Barry to me. Mr Barry doesn't know anything. Q. As far as you are aware Mr Barry today would be able to come to this Tribunal to give evidence to this Tribunal? A. Mr Barry doesn't know anything about my things, and after all this mess-- 28Dr Trenchev confirmed that, in March 2005, a Mr Bascamolon was conducting a rose nursery on the Catherine Field property but could not remember when he ceased to conduct the rose nursery on the property. 29Dr Trenchev was shown the objection lodged in August 2010 by him, and Mr Young pointed out that there was no mention of pecan nut trees on the 27 properties in the objection. Dr Trenchev's explanation was - Q. No reference to pecans? A. Paul Barry probably wouldn't know the difference. When he says walnut he means pecans and chestnuts as well. Q. You don't know that at all do you? A. Well I know because he says walnuts and when I tell him he says you are planting walnuts, no. I plant the other things. It is not something I have to discuss with Paul Barry. "Look not just walnut, you should say pecan nuts or chestnuts. It's nuts." ... Q. You have signed it without reading any attention to detail, is that correct? A. Yes. 30Dr Trenchev agreed with Mr Young that he has known Dr Orel for some ten years and that he 'continuously sought his advice over that ten year period'. He also confirmed that he sought Dr Orel's opinion in 2007 as to the prototype eco planter that he had constructed. Dr Trenchev also stated that Dr Orel 'has been involved every time I have difficulties'. 31Dr Trenchev also confirmed that Dr Orel introduced him to Mr Curry and that one of them more recently introduced him to Mr Robb. Mr Robb is the owner of 'a very successful international business which is selling seeds' who was also engaged by the applicants to give expert evidence. 32Dr Trenchev was cross-examined as to how the trees were counted for each property for each year in issue - Q. Did you do an actual stock take each year of the number of trees planted, the number of trees alive? A. If you mean stock take calculating how many trees were planted. Q. An actual physical count? A. For me to walk on the property and count the trees Q. Yes? A. No. Q. So, taking this Chaseling Road property, ... what is the basis of ascertainment of those figures, can you explain that? A. Yes, when the workers come in the morning they dig out some trees and plant them. The next day I ask them how many trees they planted because the trees they take doesn't necessarily end up planted, for sorts of reasons which if you are interested I can explain. When they tell me how many trees I write it down, so yesterday we planted so many trees. I don't even write the date but write under the Chaseling Road folio I write how many trees and then at the end of it I add up all the figures together. Q. And where is that piece of paper where you wrote down the number of trees for Chaseling Road in 2008. Where is that piece of paper now? A. Long gone. Q. Long gone? A. Yes, who keeps draft documents when you have a clean copy and print it, you know, numbers. ... Q. When was this prepared by you? A. This land use, it was prepared before 28 February 2011 for the purpose-- Q. Yes, so when you prepared this you must have looked at some record? A. Yes, I did have it in there. Q. Where are the records? A. The records, the original ones? Q. Yes? A. I threw them away. ... Q. Did you do that for all your properties? A. For all my properties. Q. Like this report? A. I did it for all of them because I was preparing my submission to OSR. Q. And after doing that you destroyed all the papers? A. Threw them away, yes. 33Mr Young further inquired of Dr Trenchev about his record keeping of trees planted since 2011 and he confirmed that he was not able to produce any daily recordings of trees planted. Pursuant to Mr Young's request Dr Trenchev was only able to produce a 'typed up record' of trees planting that occurred in 2011, 2012 and 2013 (Exhibit R6). 34Dr Trenchev was cross-examined in respect of properties subject of residential tenancies. He could not remember the exact number but thought the number was 10 or 11 which 'have been tenanted throughout the period 2006 to 2010'. But he agreed with Mr Young that the correct number was 12. There was an exchange of views as to the gross rental received from these properties in the year ended 30 June 2010 and Dr Trenchev was shown his tax return where the gross amount stated was $170,798. 35Dr Trenchev was asked about Mr El Sayed, who the applicants claim provided them with workers for the planting and cultivation of trees on the properties between 2005 and 2009. Dr Trenchev stated that Mr El Sayed was a travel agent but had contact with migrant workers. He also has had no contact with Mr El Sayed since 2009. When asked by Mr Young whether any efforts have been made, in particular with knowledge of his Australian Business Number, to produce him as a witness, Dr Trenchev agreed that he did not contact Dr El Sayed to come to this Tribunal. Dr George Orel 36Dr Orel, who described himself as a research scientist, produced two reports and gave evidence at the hearing. He holds a Doctor of Philosophy degree (PhD) obtained in 2007 from the University of Western Sydney with an unpublished thesis. He is currently attached to the Royal Botanic Gardens, Sydney as an honorary researcher. 37Dr Orel produced two reports on instructions from the applicants, the first filed on 7 November 2011 and the second filed on 7 April 2013. They were marked, respectively, as exhibits A22 and A23. 38In respect with the first report he was instructed by the applicants to express his opinion - ... as to whether or not the methods and protocols used on the stipulated properties conform to activities which define agro forestry and whether the operation of a natural timber forest in conjunction with the growing of fruit bearing trees in a natural environment may be accepted as a product of cultivation. 39Dr Orel was also asked to advise - ... whether or not the project concerned with the cultivation, fruit production and marketing of walnuts (Juglans regia L), pecan nuts (Carya illinoinenssi K Koch), chestnuts (Castanea sativa Mill) and the so called 'Ice Cream Tree' (Inga edulis Mart.) is purposeful and if it may be considered a professional, potentially profit making operation and whether any significant works have been regularly carried out on the properties. 40This report was prepared after he visited some five of the properties in issue and on the basis of data supplied to him by Dr Trenchev in respect of all the properties. 41Dr Orel helps the reader of his report to understand the meaning of the term 'agro forestry' with following definitions- Agro forestry can be defined as a system of sustainable land management that involves the integration of forestry and agriculture/horticulture on the same land unit (VGAG 1991) (Victorian Government Advisory Group, Victorian Joint Agroforestry Management Committee). It can also be defined as the incorporation of natural tree cover with widespread tree plantings of cultivated plant species (FGAG1999) (Federal Government Advisory Group, National Farm Forestry Roundtable.) 42Dr Orel, after visiting the five properties and 'evaluating the material supplied by Dr. Trenchev, was of the view that all the properties 'lend themselves very well to the practice of agro forestry'. 43He also observed that the 'introduction of a long term fertilization regime into the cultivation schedule is quite significant' and was of the opinion that the 'use of the Trenchev irrigation system (the Eco Planter) facilitates the cultivation of intended crops by continuously supplying water for the newly planted seedlings'. 44He further makes some general remarks about site suitability, soil depth measurements, plant-soil interaction and grafting. 45Dr Orel's second report, dated 7 April 2013, was essentially his 'responses to statements made in reports of Messrs. P Scholefield, B Walker and M Durack', the respondent's experts. 46Dr Orel asserts in response as follows: Australian production of nut crops in global terms is very small and the experience of Australian growers is limited to local conditions only. As such, Australian experience in growing nut crops cannot be considered to be a 'yardstick' for global production. Put in simple terms, Rohla & Locke (2012) confirm that the predominant commercial production of pecans is from agro forestry or from 'native stands' and not from rectilinear monoculture oriented orchard farming. Evidence shows that Dr. Trenchev's nut crops cultivation methods follow the tried and profitable overseas precedents. Dr. Trenchev is not a 'pioneer' who is breaking new ground in nut growing culture. He is simply copying and adapting a tried and proven way of profitable cultivation to Australian conditions. Agricultural land around Sydney can be described as mostly altered and marginal. Very little of it can be classified as prime, deep alluvial soil. Australian and world wide experience both show that pecans do tolerate wet and poorly drained soils. If pecans are growing well at St. Albans, why should they not grow well on Dr. Trenchev's properties? ... nut tree seedlings grow where ever they are given opportunity to do so. The so called 'sloping land' is admirably suitable for this purpose. ... the water requirement calculations ... completely fail to recognise the important roles of the existing water tables (on each property), the role of the Ecoplanter, the role of the natural and artificial mulching, the significance of the undistributed root run (the deep tap root) and the fact that once the seedlings become established and reach the age of 3 to 6 years, no additional water supplies will be required. In agro forestry setting spread of pests and diseases is limited by unreceptive tree species, e.g. the Eucalypts and other native plant species ... This is not the case in monocultural orchard situations, where pests and diseases can easily 'jump' from one identical (grafted) tree to another. Claims of exclusivity re Australian, rectilinear, monoculture based farm practices, as being the only way to produce commercially viable nut crops, can not be sustained and are not supported by available evidence. 47Dr Orel also concluded that the ruling, prevailing or most influential use of the land was one of nut crop growing. 48Dr Orel was cross-examined by Mr Young. 49Dr Orel confirmed that all data that he used to prepare his reports was supplied by Dr Trenchev. 50He was asked by Mr Young about his relationship with Dr Trenchev and provided the following information - Q. When did you first become acquainted with Dr Trenchev? A. I can't find my notes but from recollection I was still doing my undergraduate degree, I haven't started my honours degree as yet. So he just turned up one day in the office of my boss and said that he's interested in walnuts and wanted to talk to somebody about it. So they passed him onto me. Q. So you've known Dr Trenchev since the year 2000? A. Prior to that I would say. Here we go, I found the note, okay, met Dr Trenchev in 2005. This is when he came first time, then I haven't seen Dr Trenchev for some time and had no contact with him until about middle to end of 2006, then I haven't seen Dr Trenchev for a long time, once or twice inquiring about propagation and I don't have dates of those phone calls and then Dr Trenchev contacted me in 2011 saying that he would like a report written. Q. But in either of your reports, can you point me to and show me where there's any reference or disclosure to prior relationship or meeting with Dr Trenchev? A. It is not in the report, no. Q. So what if I were to tell you that Dr Trenchev's given to this Tribunal that in fact he first met you around the year 2000? A. No. 2000? Q. The year 2000? A. I have no recollection of that. I don't know. Look it's very hard to recall because many things have happened since and I don't keep notes of things like this, I don't keep diary or anything like that. 51Dr Orel also confirmed that 'in the period 2006/2007 onwards' he was in touch with Dr Trenchev when he sought his advice on the eco planter. And after testing one given to him he found it worked as claimed by Dr Trenchev. He agreed with Mr Young that he had not mentioned in either of his reports his relationship and dealings with Dr Trenchev prior to writing his reports. 52Dr Orel was asked about his research background and agreed with Mr Young that 'the totality of those published papers are all in camellias' with the exception of his unpublished thesis where - 'Pecans were a very, very big part of my PhD'. He further agreed that he has not grown pecans 'either commercially or for hobby' but had 'a firsthand experience of growing walnuts and pecans in open fields in agro forestry way'. 53In his second report he stated that he saw twenty-five adult nut trees on a property but in cross-examination he confirmed that he only saw between two to five adult trees but could not remember on which property. He was further cross examined as to the location of these adult trees - Q. You can't even tell us which properties the two to five were located? A. No. Q. You can't tell us which properties they were? A. All I mentioned in my report, that were some adult trees that were flowering. I did not have to specify where they actually were. I'm not a lawyer. I am scientist who is writing a report about things I've seen ... Q. But wasn't that exciting news for a scientist to see two trees with flowers, you'd have made a note? That's not a lawyer's problem, it's a ... A. Okay, I saw those trees and I saw so many before, so I just mentioned in the report that they were there. 54Mr Young asked Dr Orel as to how he counted 6000 trees on the properties, his answer was - A. I counted - right I counted individually part of the property and I noted the density and that can be extrapolated on the whole land parcel, bearing in mind that there are parts that are not available for planting, and I got to 6,000 trees, and actually I got probably 6,400-- 55Dr Orel was further cross-examined as to his statement that 'the rents the tenants pay are low to very low' and agreed that he was not a tenancy expert and had included it in the report because he was supplied with 'this information by Dr Trenchev'. Dr Orel's further explanation was that he was comparing the potential profits from the sale of nuts. He, however, agreed with Mr Young that he was talking 'about a crop in the year 2025 to 2030'. 56Mr Young cross-examined Dr Orel at length as regards soil analysis but nothing turns on the questions and answers in that encounter. 57He accepted that he had no firsthand knowledge of native pecan operations in the United States but relied on 'personal communications re growing of pecans in US from W Rice' and other literature from US experts. He further agreed with Mr Young that he did not have 'firsthand knowledge or observations' whether the US operations 'use the same techniques' that he 'attributed to Dr Trenchev'. 58Dr Orel was finally cross-examined as to his firsthand knowledge of the activities on the properties in the relevant years - Q. Dr Orel, I take it from your evidence that your visits to the farms occurred, five farms in 2011, correct? A. Yes, I think so. Q. So you'd have no knowledge or evidence of Dr Trenchev planting trees in 2006, 7, 8, 9 or 10 would you? A. No the only thing I can go on, that in 2005 Dr Trenchev approached me asking about propagation of walnuts and pecans, but that's all I know and he contacted me again in 2006, more or less with the same idea. What Dr Trenchev was doing at the period of time, I don't have knowledge of, but what I'm thinking, he wouldn't be asking for information, but that's what I know. Q. Again that's pure speculation on your part isn't it? A. Which part of what I said is speculation? Q. The assumption that Dr Trenchev because he spoke to you in 2006, you've got no firsthand knowledge of any description have you? A. Of whether he planted any trees or not? No I don't. Q. Whether he planted trees or not? A. And I freely admit it, no. Mr Anthony Stephen Curry 59Mr Curry holds diplomas in agriculture and was at the time of his first report employed as a Teacher (Horticulture) at Richmond College. He has retired from employment and currently works as a consultant. For purposes of this matter he prepared two reports, the first filed on 30 November 2011 (Exhibit A18) and second on 17 June 2013 (Exhibit A19). 60He was instructed in relation to the first report to provide his 'opinion and assessment of the activities carried out by Dr Preslav Trenchev' on twenty five of his properties. For purposes of his report he 'assumed the following: All of the nominated parcels of land are zoned 'rural' That material and data has been prepared by Dr Trenchev and that it sets out the history of each parcel are accurate. 61From his observations by visiting five of the properties 'and from the information and data provided by Dr Trenchev' he was 'of the opinion that prior to 2008 the owner and his employees and contractors cultivated, planted out and maintained several thousand nut tree plants but many died as a result of the drought from 2006-2008'. 62He further made some general observations - The nut tree plantings, installation of the "eco-planter" as well as low mown or slashed surfaces around and between the trees in my opinion is evidence of significant works being regularly carried out on the properties to suggest that an activity of cultivation is taking place. ... In my opinion the nominated parcels of land have a significant and substantial commercial purpose or character, namely tree nut orchards and agroforestry. ... The dominant use of the land is primary production of nuts for sale. Most of the available arable land is used for that purpose. The remainder is simply not arable. The work and investment is overwhelmingly in the nut production area. An agroforestry approach comprising permacultural, horticultural and agricultural practices has been adopted by Dr Trenchev to set up his nut tree orchards and other tree plantings, cultivate and manage his crops for nut production and income generation. 63His second report (Exhibit A 19) was prepared after visiting all the properties and was essentially a response to statements made by the respondent's experts. Mr Curry, in his executive summary, states that the criteria required to establish the exemption had been fulfilled - ... in the opinion of the author of this report is demonstrated in the body of this report through the provision of documented responses to the questions posed by the office of State Revenue and NSW Crown Solicitor's Office with regard to the nature, scope and purpose of Applicant's agricultural enterprise, as well as the provision of commentary on the 'Joint Report', and the three (3) 'Individual Reports' prepared on for the NSW Crown Solicitor's Office on behalf of the Chief Minister (sic) of State Revenue. 64In his second report, Mr Curry expressed his opinion on various matters including the following - From visits, observations as well as information and data provided by the Applicant it was apparent that during the period 2006 - 2008 the owner, employees and contractors 'cultivated', planted out and maintained several thousand nut trees plants on the subject properties. However many trees died as a result of the dry spell/drought from 2006-2010. This extreme event necessitated replanting of many hundreds of 'saplings' and the propagation of many more thousands of seedlings by the Applicant. The monitoring and maintenance program for the nut trees and other plantings on the Applicant's properties was carried out by some of the leaseholders on the properties with rental houses, the Applicant's staff and contractors or by the Applicant. The 'Ecoplanter' was a local adaptation of drip or trickle irrigation technology. ... So long as water is collected from rainfall or is available for topping up the reservoirs of the 'Ecoplanters", the plants are supplied with water during establishment, the period when most cultivated field plants are most vulnerable to water stress, i.e. wilting of a plant, and even death, due to the plant's inability to take up sufficient water to meet its needs for growth and respiration. The cultivation practices undertaken on the twenty (20) nominated properties are broadly based on low input conservation farming, agroforestry, organic and permaculture techniques. The Applicant and staff have incorporated a range of accepted agroforestry, permaculture, land care and practical horticultural and agricultural practices into the cultivation and maintenance programs for the nut trees growing on the nominated properties. In the opinion of the author the nut tree plantings, installation of the 'Ecoplanter', installation of Weed Mat around each 'sapling' and tree guards where and when necessary, as well as the mown or slashed surfaces around and between the trees were evidence of performance of significant routine work on the properties. This evidence suggested cultivation had taken place from 2006-2010 in the opinion of the author. It is the author's opinion that the nominated parcels of land have significant and substantial commercial purpose or character (as the nut trees attain maturity), which derives from the Applicant's tree nut orchards'/agroforestry enterprise. The author of this report is satisfied that the Applicant's pecan nut tree 'orchard'/agroforestry enterprise is the dominant use and prime purpose of the agricultural/agroforestry operations on twenty seven (27) subject parcels of land. The percentage of land use for nut cultivation on the Applicant subject parcels of land range between: 58 and 100%. On these parcels of land the Applicant has adopted an agroforestry approach comprises permacultural, horticultural and agricultural principles ... 65Mr Young cross-examined Mr Curry. 66 Mr Curry confirmed that he relied on information supplied to him by Dr Trenchev when preparing the first report because he 'didn't have any knowledge of the period 2006 to 2010'. He also agreed with Mr Young that if the material and data prepared by Dr Trenchev that he was supplied with was not correct then that would mean that his conclusions would not be correct. 67Mr Curry also accepted that he was not an agro forestry expert or a nut specialist. 68He also accepted that he had no commercial experience in growing pecans and that he did not have any firsthand knowledge of native pecan operations in the United States nor how Dr Trenchev's operations compared with those in the United States. 69Mr Curry also in cross-examination stated that in preparing his second report he visited the 27 properties in 3 days and spending 'a couple of hours at each one'. 70He was further cross-examined in relation to his claim that he had seen workers on the properties - Q. You have seen them on one or two occasions. You are talking about the three days and whatever other time it was back in November 2011? A. All I'm saying is to plant that number of plants, I can't see Dr Trenchev planting all those plants, putting out all those weed mats. So somebody's done it, so I don't know how it is done. I can only speak for the days that I saw and I presume - yes I am presuming, I can't do that. Yes there is a lot of work being done. Q. So I take it, going through your dot points, did you observe with your own eyes the planting of seedlings or saplings and the cultivation or mowing of the planting site selected to remove or reduce existing ground cover, could you see that? A. I could see the end results. I could see areas around - Q. Would you answer the question? A. No, I didn't see it firsthand. 71Mr Young also sought to clarify Mr Curry's claim that 'monitoring and maintenance of the nut trees and other plantings was carried out by some of the leaseholders on the properties with rental houses' - Q. So the tenants didn't assist with maintaining the trees, is that what you say? A. That is what I have been led to - that is what I have been instructed. Q. That is a pretty big mistake isn't it? A. I know, it is a big mistake and I got it wrong. Q. What number mistake are we up to now? A. I'm not counting, but I know, I know. Q. Again you have staff and contractors? A. Same thing, yes, I don't know firsthand. Q. You were told by Dr Trenchev but you misunderstood what you were told? A. About the - Q. The leaseholders -- A. Yes, that's correct. Q. What about the applicant's staff and contractors? A. No, just the leaseholders, it's the same story as before, I don't have firsthand knowledge of that. Q. What about "This work was performed every two to three months" see that? A. That is what I was instructed but I don't have firsthand knowledge. Ms Rebecca Field 72Ms Field, a sales agronomist, was employed by Elders until 27 September 2013. She was engaged by the solicitors for the applicants and asked to provide a report addressing a number of matters concerning the properties. In particular, she was asked to address in relation to each property, 'of the land area, what percentage was unusable for agricultural purposes due to geographical, weather, climate or any other reason, and provide your reasons'. She was also asked to count the trees and estimate their ages, take aerial photographs, describe general location of the trees and whether the Type A (Ecoplanters with aluminium trays; may have weed mat present) or Type B Ecoplanters (weed mat present, but no bucket or aluminium tray) have been used. 73Ms Field inspected 21 of the properties between 23 May 2013 and 17 June 2013 and produced a report including an addendum to her report (Exhibit A25). 74In preparing her report and addendum she was provided by Dr Trenchev with the total area of each property and the number of trees planted and alive on each property in each year during the period 2006 to 2011. 75In her written report she acknowledged that she 'does not possess expert specialist knowledge in agroforestry and mapping beyond that presented in a bachelor degree qualification'. 76She was described by Mr Foster as 'more or less a tree counter'. She was also asked to express her opinion in relation to the area of land used or useable or unusable. 77Ms Field in her examination in chief was asked how she calculated the number of trees planted and the area planted and responded as follows: Q. How was the number calculated? A. By mapping the area planted with nut trees using a handheld GPS. Q. How did you arrive at the area planted; how did you physically do that? A. So I held a GPS in my hand and from the literature provided to me by Dr Trenchev, taking into account that nut trees can grow to a radius of seven and half metres, I maintained as much as practicable a seven and half metre distance from each tree and walked around the boundary of all trees. ... ... Q. So in relation to the column total unplanted area, what did you mean by that? A. So the total unplanted area, that means an area that may - that could possibly have been planted that had not been planted. So, in my opinion, could have been planted with nut trees but had not been planted, and that was very variable, according to terrain. Q. So then we move to the right, that is, the right most column, headed "Unplanted and unusable area(HA)"? A. Yes. Q. Can you explain what that column means? A. So that column is the remaining area of the property that is not allocated to total planted or total unplanted area. 78Further, Ms Field was asked by Mr Foster about trees planted and her responses to the specific questions were as follows: Q. When you were counting the trees, did you make any distinction in relation to the trees as to whether they were alive or dead? A. No. Q. In relation to the categorising of the age of the trees, did you make some distinction in relation to the trees and age? A. As much as was practicable, as described in the table on page 9. Q. The distinction that you were drawing in the tables about the age of the trees, what was the distinction? A. Whether the trees had been recently or not so recently planted. On the table in page 9, table 2 you will see the trees that were planted greater than two months ago and the trees that were planted less than two months. Q. How, in the preparation of your tables, were you able to make that distinction, through your own observations? A. By instructions given to me by Dr Trenchev regarding the type of watering system that the trees were provided with, called Eco Planter. So Eco Planter type A or Eco Planter type B. Q. So an Eco Planter type A, was that described to you, what to look for? A. Yes. Q. What was that? A. That was an Eco Planter with a bucket and foil tray. Q. If you observed an Eco Planter A by a tree, how would you categorise that in terms of your tabling? A. That was trees greater than two months old. Q. How then did you categorise trees under two months old? A. Trees without the Eco Planter type A. 79Ms Field was cross-examined by Mr Young. 80Ms Field was asked if she had to go back and recount the trees in respect of the St Albans property. She stated that Dr Trenchev had requested that she do a recount because she had missed some trees. 81She was further asked by Mr Young - Q. Are there any other properties where you went back to recount? A. I believe there was a number, because of the difficulty of the terrain and the physical difficulty of the task, that I was sent back to check a number of the properties, with the advice to recount. 82Ms Field was asked to explain what she meant when in her written report she referred to 'unplanted and unusable area' in respect of each property inspected. Ms Field clarified that useable land in her opinion was land 'suitable to planting nuts' and unusable land was not suitable for planting nut trees. She also confirmed that she did not consider whether the unplanted areas of the properties had other uses because that was beyond the scope of what she was asked to do. 83She also confirmed that the dominant use of the land in each case is nut tree plantings 'when the total planted area is greater than the total unplanted area'. She agreed with Mr Young that in the case of the rental properties, she did not take into account the leasehold use or the rents received under the lease. 84In respect of each counting Ms Field was asked - Q. Just one other thing, You say you made no attempt to differentiate between dead trees and alive trees; that's correct? A. No. Q. Not at all. A. No. It was beyond the scope of what I was asked to do. 85Ms Field also agreed with Mr Young that she did not have any firsthand knowledge of any tree plantings on the properties for the years 2006 to 2012. 86Details of Ms Field's views pursuant to the inspection of the properties and included in her report are set out below. In respect of each property, Ms Field in her written report expressed the view that the 'dominant use of useable land is agroforestry nut farming'. Mr John Robb 87Mr Robb, who is a horticulturalist, was retained 'in his capacity as an expert' to provide similar information as Ms Field was required to do in respect of the properties. 88 But due to 'pre-existing work commitments and impending business related travel' he was only able to examine the following six properties - (1)256 The Driftway, Londonderry (Property 22) (2)329 Calf farm Rd, Mt Hunter (Property 26 (3)2169 Elizabeth Dr, Cecil Park (Property 18) (4)Lot 85 Deepfield Rd, Catherine Field (Property 25) (5)127 Dwyer Rd, Leppington (Property 23) (6)Lot 6, Seventh Ave, Llandilo (Property 24) 89Mr Robb gave evidence and tendered a written report (Exhibit A17). 90Mr Robb's responses are included below in respect of the properties he visited. In respect of each property he expressed the view that the dominant land usage was planting of nut trees. 91Mr Robb was cross-examined by Mr Young. He was asked about his experience as follows: Q. What would you describe yourself as? A. Horticulturalist. Q. Any particular speciality? A. Probably nursery production and probably plant breeding. Q. Plant breeding. Any particular experience with pecans? A. Not particularly, no. ... Q. You say no particular experience with pecans. Do you have any particular experience with agro forestry? A. It's a very broad term, so I would have to say yes in some respects but certainly that's not my main focus in horticulture. Q. Your main focus is that of a specialist nurseryman? A. I've managed a nursery for many years, I'm quite familiar with that; I'm also the director of a company called Australian Green Tea, which looks at developing new industry in Australia in relation to green tea. I'm also from a dairy farm upbringing. I've worked in Mildura amongst wine grapes, so I guess I've travelled the world looking at plants, so I guess it's probably a little bit more broad than simply nursery production. 92Mr Robb was asked to explain how he reached the view that the majority of the trees were two to three years old and his response was that - A. It's an estimation based on the plant size in relation to the trees that are on that property. Beyond that I can't be more specific because that's a very difficult thing, to assess the age of the plant. 93He was also asked if in his inspection he did 'attempt to differentiate dead trees and live trees' and his response was - A. Dead trees weren't included ... in that count. Well I have to clarify that. At the time of the year, its deciduous, so a lot of trees are without leaves and it's - and I did not go and scratch the bark of every plant to make sure they were all alive. 94He was questioned as to whether he had erred by including in respect of each property the residential house and surrounds as usable land - Q. In your calculation of area that is useable for agriculture or agro forestry, you've made it quite clear that you've included the house and the surrounds within your ascertainment of what area useable is? A. Yes. Q. I appreciate that you've made it quite clear that you've counted the house, but I want to put to you that in a particular respect that's an unreal view because, for example, you haven't looked at the tenancy arrangement with that particular tenant, have you? A. No. Q. You haven't taken account of the fact that the tenant has got rights of exclusive possession to exclude the land? A. No. I have not considered that, no. 95Mr Robb was also asked whether in reaching the conclusion that the dominant usage of each property inspected was planting of nut trees he took into account of the tenancy arrangements. His response was - Q. When you say this appeared to be the dominant land usage, I take it that you didn't consider any usage by the tenant, for example, did you? A. That's probably not accurate, no. Q. Well, you didn't consider, for example, the financial arrangements with respect to the property? You didn't consider the level of rent received? A. No. Q. You didn't consider the level of expenditure and repairs and maintenance on the property? A. Only visually. Q. Yes, so that when you say this appeared to be the dominant land usage, you're only talking about a visual inspection? A. That's correct. Q. Nothing more than that? A. That's correct. 96Mr Robb was re-examined by Mr Foster in relation to the trees - Q. I think you have given evidence that the number of trees that you counted were trees which were alive? A. Well, that were present. Q. Of that number, if we take, for example, 2169 Elizabeth Drive, Cecil Park ... are you able to say of the trees that you counted, in this case, for example, 185, of that proportion how many would have been dead, how many would have been alive or you are unable to say? A. I'm unable to say. Mr Stephen Colaguri 97The applicants also relied on the evidence of Mr Stephen Colaguri, a real estate agent who has managed Dr Trenchev's rental properties, subject of this review. Mr Colaguri provided a written statement (Exhibit A11) and was cross-examined by Mr Young. 98In his statement, Mr Colaguri stated that he managed for the years 2006 to 2010 the following properties - 1. 2169 Elizabeth Dr, Cecil Park 2. 127 Dwyer Rd, Leppington 3. 109 Deepfield Rd, Catherine Fields 4. 252 The Driftway, Londonderry 5. 329 Calf Farm Rd, Mount Hunter 6. 2148 Bells Line Rd, Bilpin 7. 96 Sackville Ferry Rd, South Maroota 8. 72 Mitchells Rd, Sackville North 9. 102 Mitchells Rd, Sackville North 10. Lot 6 Seventh Ave Llandilo 11. 106 Golden Valley Dr, Glossodia 12. 433 St Albans Rd, Wiseman Ferry 99He further stated - (3)Each of the properties comprises of one occupancy residence, set on acres of land of various sizes. (4)I only manage the residence and the grounds immediately around each house and not the whole of the land acreage. As part of managing duties I visit the properties about every 6 months and I inspect the land and the area immediately surrounding the house. (5)I have entered into a residential lease agreement on behalf of the landlord Dr Trenchev for each of the properties when he has rented them. To each tenant I have made it clear that they are only renting the house and the land immediately around it and the landlord would be using the rest of the property for his own use. Each of the tenants has accepted these conditions by saying words to the effect of "I agree". 100He also stated that 'the houses are in a state of high neglect' and little is spent by Dr Trenchev to improve and maintain the properties. He set out in his statement the current rental for each property and also an indication of a higher rent if the whole property is leased to the tenant. He also confirmed that the tenants of the properties, Glossodia and Londonderry have been permitted to have two horses on each property and on the Llandillo property the tenant is permitted to have one horse. 101He also confirmed in the statement that - (12)I do not monitor any damage that the horses may have caused to Dr Trenchev's nut trees. (13)I do not have any involvement in Dr Trenchev's farming. 102In cross-examination Mr Colaguiri was shown a table of expenses incurred in respect of the rented properties and was asked for an explanation - Q. I take it, then, largely repairs and maintenance to the properties, usually occasioned by departing tenants not treating the property well such that that's your evidence? A. Part of it is to make the place a little bit more habitable for the tenants and to comply with the council regulations and the tenancy laws. 103Further, he was cross-examined as regards the rental amounts that he had included in his statement. In particular, Mr Young drew his attention to the following amounts that had been disclosed in Dr Trenchev's income tax returns - Tax Year Amount 2006 $201,601 2007 $159,595 2008 $168,081 2009 $168,549 2010 $170,798 104Mr Colaguuiri offered no explanation. 105He was also cross-examined at some length in relation to farmland rating applications lodged by him on behalf of Dr Trenchev to Hawkesbury Shire Council, Penrith City Council, the Hills Shire Council and Fairfield City Council in December 2011. He was asked why, in the application to the Hawkesbury Shire Council with respect to the Blaxlands Ridge property, he had inserted 2008 as the year Dr Trenchev commenced farming on the property. His explanation was that he 'thought he would give it a go and try it for the last two or three years'. The relevant cross-examination was as follows - Q. So look again then at the form as you prepared it, in the form that it was when Dr Trenchev came in to sign it, it didn't have 23 and 24 complete; is that what you're saying? A. No. I'm not saying that. When I filled these forms in I spoke to the doctor by phone and we got - because I had to find out how many nut trees on each property because I don't - I've never visited this property, particular property, or any of the other parts of the farms, so I had to - and this is the items that he told me to put on the application form, which I did. Q. That was done by phone; is that what you're saying? A. The questions I asked him by phone, then he came in I said, "The forms are prepared. Come in sign them", which he did. Q. When he came in to sign the forms, did you take him through the forms? A. I just said to him exactly what he told me and I put it on the forms and he just signed it. 106The Tribunal also sought an explanation as to why no applications were made before 2011 and his response was - Q. The only application you made was in 2011? A. And also the latest ones I've done. Q. Yes, but why wasn't an application made in 2008? A. Because the doctor only decided to tell me to do them in 2011; he never told me to do them beforehand. Q. But you were managing his properties, you knew they were farming land? A. Well, it's not up to me to - not up to me to tell the owner to get rural rating on the properties. I only work on his instructions. He tells me to do something, I do it. Mr Paul Barry 107Mr Paul Barry the accountant of all the applicants tendered a written statement (Exhibit A 21) and was cross-examined. 108In his written statement he states that he 'commenced preparing Income Tax Returns and Financial Statements for Dr. Trenchev in approximately 1992' and has 'continued to do this for him since then to present day'. He also prepared 'Tax Returns and Financial Statements for his related companies' including Preslev Trenchev Pty Ltd and Favello Pty Ltd. 109Mr Barry went on to state - 8. Dr. Trenchev worked in the medical field as a pathologist. He received income by way of distributions from a family trust known as the Preslav family Trust. The trust in turn earned income from providing medical pathology services. I also prepare Tax returns and Financial Statements for the trust. 9. I usually kept photocopy records of many source documents, but returned the originals to Dr. Trenchev after completion of the return/s. 10. I recall that prior to about 1998, Dr. Trenchev owned a number of income producing suburban rental properties. He sold many of these around 1998. He told me he wanted to sell them because he felt they would not produce the gains he desired, and that he wished to open a Medical Research Foundation instead. He also told me that he wished to purchase rural lands and plant nut trees on the lands, which would continue to produce nuts for sale over a very long time (and well after he died), thereby providing necessary income to sustain the Foundation. 11. I am aware that he subsequently purchased the subject rural properties around Sydney and the Blue Mountains areas, with this intention in mind. 110Mr Barry in his statement further explains the 'salient features' of Tax Returns (copies annexed to his statement) he lodged on behalf of Dr Trenchev for tax years 2005 - 2010. In each year, there was a very large distribution from the Preslav Family Trust and a claim for a very substantial interest amount 'on the properties costs' under 'primary production expenses' - Year Trust Distribution Interest Deduction 2005 $430,000 $386,872 2006 $700,000 $590,850 2007 $405,153 $277,758 2008 $500,000 $290,962 2009 $465,000 $206,826 111The tax returns also disclosed other primary production expenses claimed and the final tax bill in the above years as follows - Year Other Expenses Taxable Income/Loss 2005 $97,593 $83,126 Loss 2006 $126,783 $20,294 Loss 2007 $224,166 $35,556 2008 $132,468 $32,940 2009 $227,375 $33,742 112Attached to his statement were some Tax Invoices issued by Mourad El Sayed - Date Description Amount 7 Oct 05 Planting Trees $21,780.00 2 March 06 Clearing Weeds/ $32,479.70 Spray Lantana 5 May 06 Hand Watering $2,530.00 2 June 06 Planting Trees $13,530.00 11 May 08 Replace Dead Trees $22,880.00 9 April 08 Planting Trees $29,315.00 6 June 08 Planting Trees $41,184.55 10 Sept 08 Planting Trees $29,315.00 113The 2009 tax year return attached to the statement discloses a claim for $155,215 for 'Contractor sub contractor and commission fees' but Mr Barry was only able to produce a tax invoice for the payment of $29,315.00 to Mourad El Sayed in respect of this claim. 114After giving evidence he forwarded to the Tribunal the following day further tax invoices issued by Moured El Sayed - Date Description Amount 3 Aug 06 Planting Trees $34,320.00 7 Sept 06 Replaced Dead Trees $26,317.50 6 Oct 06 Replaced Dead Trees $32,835.00 7 Jun 07 Replaced Dead Trees $51,480.00 1 Jun 07 Spray Weeds $1,100.00 115Primary production income was disclosed in the 2005 tax year ($51,000), 2006 tax year ($133,778), 2007 tax year ($143,862), 2008 tax year ($38,477) and 2009 tax year ($17,940). In all years the income was royalties received 'from sale of timber from Putty and from a property at Stroud'. 116Mr Barry was cross-examined by Mr Young and was asked what 'general procedure' he used to prepare the applicants' financial statements as well as the tax returns. His response was - Basically he leaves the records with me. I then go through the cheque butts and the bank statements. I then prepare a reconcillation for the bank account and from that we - that's the basis for preparing financial accounts and then if any questions, then I ask him the question. 117Mr Barry confirmed that he has lodged BAS statements for Dr Trenchev and that Dr Trenchev is no longer registered but was not able to provide any details of when he ceased to be registered. He, however, agreed with Mr Young that Dr Trenchev was registered for GST from 1 April 2005 and ceased being registered on 30 March 2007 because Dr Trenchev had received timber royalties above the GST threshold during the period. He also agreed that in later years, notwithstanding incurring expenses, no tax input claims were made. 118He was asked whether, when signing off Dr Trenchev's tax returns, he would 'take him through the return' and his response was 'Generally'. He was further asked - Q. Mr Barry I asked you before about being a careful accountant and so for Dr Trenchev, you've prepared the returns on the basis of information that Dr Trenchev has supplied, correct? A. Yes. 119Mr Barry was further asked about the tax treatment of Dr Trenchev's large trust distributions - Q. The effect of the tax returns, and I'm speaking - I can take you to each individual return if you like, but the structure of the returns is that there's a very substantial trust distribution from Preslev Family Trust? A. Yes. Q. Ranging in magnitude from 400,000 odd up to 700,000 depending upon the year? A. Yes Q. Offset against that is a considerable interest expense bill, correct? A. Yes. ... Q. The effect of all those adjustments - sorry all those expenses, is that the distribution out of the family trust is effectively quashed, leaving Dr Trenchev with generally speaking - and again I can take you to each individual return if you'd like - but leaving him with a taxable income of about 25 to 30,000 each year? A. Yes. Q. In fact he qualifies for low income supplement in one year, is that correct? A. Yes. Q. The availability of that interest expense for income tax purposes, dependent upon there being a business of primary production being carried on in respect of nuts and timber, correct? A. Yes, it needs to be an incoming earning nexus. Q. Nexus, yes? A. Or of a business being conducted, yes. Q. In the case of timber, pretty obvious, the rent expense would tie directly to timber? A. Yes. Q. In respect of the other properties, the interest tied to production of rental income? A. Yes. Q. The classic negative gearing on that? A. Yes. Q. In respect of the untenanted properties, we need to point to a business of primary production? A. Primary production, yes. George Youkhana 120A statement dated 30 July 2013 by George Youkhana, who works as a courier for Dr Trenchev (Exhibit A26), was also tendered by the applicants. In his short statement he speaks of seeing 'thousands of plants at Dr Trenchev's property in Kemps Creek' and 'would often see four or five people working in Dr Trenchev's nursery looking after his little plants'. He was not cross-examined by the respondent. Respondent's Expert Evidence 121The respondent relied upon three experts - (1)Mr Mathew Durack, owns and manages the Stahmann Farms, Moree; (2)Mr Peter Scholefield, a horticulturalist; and (3)Mr Robert Walker, a scientist. 122In addition to providing the Tribunal with written reports/statements, they also gave oral evidence and were cross-examined. Mr Mathew Kimberley Durack 123Mr Durack currently owns and manages an '830 hectare intensive commercial pecan grove near Moree' with a processing and business headquarters in Toowoomba. His company produces 'over 2,000 Metric Tonnes of pecans annually and sufficient nursery stock to plant out approximately 15 - 20,000 trees per annum'. He was commissioned by the Crown Solicitor 'to provide a report on behalf of the Chief Commissioner in these proceedings in relation to a range of specific matters' (Exhibit R8). He was further asked to respond 'to specific questions asked by the Crown Solicitor's Office in relation to the Applicants Evidence' (Exhibit R9). 124In his first report he acknowledged that his judgment in these matters is based around his experience as a commercial operator in the pecan industry since July 1987. He also indicated that he has 'general experience of the walnut and macadamia industries, being one of the largest processors in Australia for both these nuts as well as managing smaller plantations of both'. He is 'an active member of the Australian Pecan Growers Association for over 20 years' and has 'had considerable exposure to other production systems within Australia and numerous trips to the United States over the years' which has exposed him 'to the wide range of production systems seen there'. 125Mr Durack also acknowledged that in reading his report it should be taken into account that he has 'not physically visited any of the properties in question' and in preparing his reports he has relied 'entirely on the various reports made available to the court (sic) by the Applicant directly and by experts engaged by both the Applicant and the Crown Solicitors Office'. 126In his first report dated 15 February 2013 he expresses various general essentials for commercial pecan growing and his opinion in relation to the properties under review - Water Pecans are physiologically poorly suited to performing well under moisture stress. In my opinion the combination of the current cultural practice, the climate of the region and ecosystem conditions present on most of the properties investigated are unlikely to support productive pecan trees. Nutrients Although high intensity irrigated pecan production does involve relatively high nutrient input programs the tree itself does not require very high levels for survival. In situations where moisture stress is not limiting the inherent poor fertility of most of these soils will reduce productivity. It is my opinion that the cultural practices currently demonstrated by the applicant will not provide a nutritional program which would support actively growing trees. Light Pecan trees do not produce well under low light conditions in a commercial orchard setting. From the evidence provided any surviving trees are likely to encounter production loss due to shading from companion species within the forest. Shading will become a problem from other forest species and where seedlings have been planted at less than the applicants target of 15 x 15 metre spacings in a relatively short period of time. 127Mr Durack goes on to address a series of matters that he was asked to provide his opinion on. 128First, he was asked to comment on the husbandry practices used by the applicants. In his response, he set out cultural practices used in the United States by commercial managers of native pecan groves - Establishing a clear, even grass sward able to be mowed down close to the ground in order to facilitate harvest - this has involved significant land levelling and pasture improvement; Continuous maintenance of this sward during the year to enable a stress free harvest period; Fertilising the trees with either organic or in-organic fertilizers based around the tree requirements; Active control of pests and pecan diseases through the application of pesticides and fungicides; Control of livestock and wild life to limit crop loss and faecal contamination of the crop. 129He assessed the husbandry practices of the applicants against the above style of production and concluded - I have not seen evidence in any of the reports that the Applicant intends taking such hands on approach to the management of the trees either in the establishment or productive phase and as such find it difficult to see that he will be successful even in the context of this alternate production system. 130Next, he provided his opinion as to whether planting of saplings by the applicants during the years under review would produce a yield of nuts in the future. His response was that - Individual trees may produce irregular but significant yields but taken as a whole it is my opinion that the plantings undertaken to date will not generate a significant yield of quality nuts even after 20 years. 131He was asked what was in his opinion 'the cause of death for the many saplings planted by the applicants, Mr Durack's response was - The primary cause of death on the basis of the information provided would almost certainly have been lack of water during the critical early establishment phase. Although some trees appear to have got past this point and died subsequently - also from lack of water. 132In relation to the use of the eco-planter by the applicants, he was asked if it's use alone result in the saplings planted during the relevant years have a greater chance of survival. His response was - The concept present in the Eco planter design are sound and are common to a range of commercial products on the market. Even if the device worked perfectly it is my opinion that the volume of water likely to be available during normal hot dry conditions which occur in this region would not be sufficient to support tree establishment. 133Mr Durack also compared the applicants' eco planter with the Groasis 'a highly engineered robust commercial product which would appear to have a significant track record in a range of environments'. His view was that - The EcoPlanter combines a number of very cheap components to achieve the same concept but its performance and reliability based on the evidence presented suffer accordingly. 134Finally, Mr Durack, after taking into account all the available information of the activities carried out by the applicants, concluded that 'the applicants' actions have not resulted in a venture which has now or is ever likely to have a significant commercial purpose or character'. 135Mr Durack in his second report dated 25 July 2013 (Exhibit R9) provided his opinion on various matters including statements that the applicants' experts, Mr Curry and Dr Orel had made in their reports. 136In response to Mr Curry's claim that the applicants' properties could have tree density ranging from 89 to 270 trees per hectare, Mr Durack was of the opinion that Pecan trees are rarely planted at a higher density than 250 per hectare and that 25 year old trees will normally have been thinned to less than 100 trees per hectare. 137In response to the applicants' yield expectations, he was also of the opinion that - ... conventional definitions of a commercially viable yield are unlikely to be achieved in high density plantings as represented in some of the applicants farms. The applicant has indicated that he expects yields of 20 - 40kgs/tree per annum - such yields are unlikely on a consistent basis under any conditions in trees planted at higher than 100 trees per hectare. 138In response to Mr Curry's claim that the applicants' business proposes 'the eventual establishment of up to 10,000 nut trees over the subject properties, Mr Durack's response was that 'this will result in an average tree density of only 14 trees/Ha'. Based on his 'experience of native groves in the US they generally operate at around 50 Trees/Ha under good growing conditions'. 139In response to Mr Curry's assertion that 'running repairs and maintenance are required for all irrigation systems, not just the "eco-planter"', Mr Durack's stated - Generally speaking the greater the level of capital expended on an irrigation system the lower the maintenance costs will be. I would expect that the EcoPlanters will require at least weekly checking to support their effective operation due to their fragile construction. 140Mr Durack disagreed with Dr Orel's statement 'that most of the commercial production of pecan nuts in the USA and Mexico is generated by agro forestry. His response was - Native Pecan groves contribute on average 20% of the total inshell supply out of the USA by volume and some 30% less than this by value. It is true that in some states such as Oklahoma up to 80% of the inshell supply is derived from native pecan groves. 141Mr Durack went on to state that from his visits to native pecan groves in Oklahoma, Georgia and Texas he noted the following characteristics: * They are intensely managed with all competing undergrowth and trees removed and the orchard floor actively mowed and cared for; * They were grown on deep alluvial fertile soil; * In most cases the managers applied fertiliser and crop protection products regularly. 142Mr Durack was cross-examined by Mr Foster. 143Mr Foster sought to know Mr Durack's experience in relation to pecan nut cultivation - Q. So I am imagining then that from 1987 to 1997 as farm manager you would have had hands-on experience with the trees. A. That's correct. Q. Since 97 have you had hands-on experience? A. Since 97 I retained contact with the farm and provided advice and discussion and visited the farm during that period but was not managing the farm directly or any other nut related business at that time from 97 through to 2006. Q. So would it be correct then for me to suggest that your only hands-on experience with pecan nut trees and the harvesting of pecan nut trees and the maintenance and management of the trees themselves would have been between 1987 and 1997? A. And from 2006 to the present day. Q. What hands-on experience have you had since 06? A. I sat on the advisory board for a period of about six months and then in late 2006 early 2007 I took back over the management of the Stahmann business and management of - and therefore management of the farm and associated processing and marketing activities. ... Q. And do you have any - apart from your experience do you have any tertiary qualifications, doctorates, PhDs, masters? A. No, none at in that related disciple. 144To further cross-examination Mr Durack agreed that he had 'virtually no production related experience with chestnuts' but in relation to walnuts, his response was - Q. With walnuts? A. With walnuts in 2010 or in the years 2008 and 2009 I began to take an interest in walnut production and whether or not it may have been possible in the Moree district and in 2010, following the research that you do to figure out whether you should or you shouldn't do something, we planted 20 acres of walnuts or about 2,700 trees on the farm property and we have been tending and growing those ever since. They have not as yet produced any nuts. 145Mr Durack agreed with Mr Foster that pecans can grow in 'an agro forestry situation' and accepted 'that pecan nut trees can be grown amongst other trees and if they are managed it could well amount to agro forestry'. 146He was cross-examined at length in relation to native pecan operations in the United States. His main response was - And from my experience with native pecan operations in the US the way in which they manage those trees is not dissimilar to the way we manage our trees planted in rows. ... The only difference is that there they didn't have to plant the trees and they're generally not grafted, so the nuts are smaller and the mean yield is much lower therefore the price of a nut off a native pecan is lower. 147He was asked if he was aware of various pecan and walnut farms close to the applicants' properties including those pecan trees growing at the University of Western Sydney, Richmond. Mr Durack was aware of them being there but did not have any personal knowledge. He also agreed that 'there's no reason why the trees can't grow in the area if the soil and soil depth and fertility is present and they have some access to water'. 148There was a great deal of debate about soil conditions necessary for pecan growing but nothing really turns on the either the questions or the responses. It was, however, agreed that pecan trees 'will grow in quite a range of soil types, but the depth of the soil and it's porosity, the fact that water can move through it, is a key feature'. 149Mr Durack was asked in what circumstances he permitted growth of other plants in between the rows of pecan nut trees at his farm. His response was - A. They are very different, and that's what I was trying to respond to, if I haven't made it clear. The applicant - we really only have - the applicant's farm is at that establishment - in that establishment phase. It's in the first phase, not in the productive phase when you tend to start looking at encouraging a diversity of species in the orchard. In that first five or six years in the commercial pecan production system that I'm used to, we stay - we try to maintain pretty much a scorched earth policy - that is, that the pecan is the only thing in the growing region so there's no competition and we give them all the best chance of getting up and away. It's only when they start producing nuts that we need to encourage the diversity of species in the orchard to get the beneficial insects in that prevent predation on the nuts. So that's not - you know, inter row we grow millet and various things in to try and produce organic matter, but down that tree row, we try and keep it bare, and the way the applicant has gone about things is very different. 150There was some lengthy cross-examination relating to the applicants' use of the eco-planter, but nothing really turns on the evidence. Mr Peter Scholefield and Mr Robert Walker 151Mr Scholefield and Mr Walker were engaged by the respondent to provide advice on various matters relating to the properties under review, including, in respect of each property the suitability of the soil for growing pecan nuts, the number of plantings on each property and the cultivation methods used in particular whether proper irrigation was available for the plantings. 152They essentially worked together and had a firsthand inspection of the properties over a period of 12 days. 153Mr Scholefield is a director of the firm Scholefield Robinson Horticultural Services Ltd, based in South Australia. In his curriculum vitae he sets out his areas of expertise, which include 'extensive crop knowledge of grapevines, almonds and other nut crops, olives, avocadoes, citrus, tropical fruits'. 154On instructions from the respondent's solicitor, he prepared three individual reports including an addendum to the third report (Exhibits R14, R15, R16 and R17) and one joint expert report with Mr Walker (Exhibit R13). 155Mr Walker, who described himself as a rural and natural resource management scientist, has his own business situated at Toowoomba, Queensland. He was engaged by the respondent as a soil specialist to prepare a report as to land suitability of the 27 properties that are in issue in these proceedings. 156He produced his individual report (Exhibit R18), a response to observations made by the applicants' experts (Exhibit R19) and in addition he produced a folder containing various photographs of the properties (Exhibits R20 and R21). In addition, he with Mr Scholefield, produced a joint report (Exhibit R 13). 157Their observations, wherever relevant, are referred to when considering the properties individually. 158Both were cross-examined by Mr Foster, in particular about their experience in growing pecan nuts in an agro-forestry environment. 159When cross-examined by Mr Foster about his experience, Mr Walker explained that in offering comments on soil conditions, it is not necessary to have any 'intimate knowledge of pecans' because what is required is 'to have an understanding, a scientific understanding of the agronomy of how soils work, how soils operate, how soils function, how landscapes function'. This was, he said, his 'skill base'. Mr Scholefield made a similar response. Short Details of the Properties 160The following are short details of the properties in issue with reference to relevant opinions expressed by the experts of both parties: Properties 1,2 and 3 - Lots 61, 62 and 63 (DP 751660) - Springwood Road, Yarramundi (Rural) Ms Field, in her report prepared in 2013 recorded that total planted area was 5.15 ha (8.55%) and was of the opinion that 44.14 ha (90.87%) of these properties is unplanted and unusable. Mr Walker in his individual report filed on 11 February 2013 expressed his view that the property was not suitable for nut growing because most of the land in question was severely constrained by slope, low fertility, shallow soils and rock outcrops. He was also of the opinion that the majority of the land was too heavily timbered. Dr Trenchev provided the number of trees planted and alive in the relevant years - Date Planted Alive 2005 No figures were provided 2006` 266 0 2007 238 0 2008 292 8 2009 270 14 Dr Trenchev's statement further states that in 2010 there were 263 trees alive whilst both Mr Walker and Mr Scholefield on their inspection of the land found only 3 trees. Property 4 - Lots 4,5 and 6 (DP 848265) - Halcrows Road, Cattai (Rural) Ms Field, in her report, indicates that 30 ha (87.32%) of the land was 'unplanted and unusable for nut growing'. The total area planted with nut trees was 4.38 ha (12.68%). Mr Walker, on the other hand, was of the opinion that the majority of the land was unsuitable for growing nut trees. Dr Trenchev provided the number of trees planted and alive in the relevant years - 2005 No figures were provided 0 2006 511 0 2007 583 3 2008 527 3 2009 610 44 Properties 5, 12 and 14 - Lot 8 (DP 753828) Lower Macdonald, Lot 11 (DP 540848) Albans Road, Lower Macdonald and Lot 49 (DP 753823) Webbs Creek Road, Webbs Creek (Rural) Ms Field in her report indicates that 154 ha (97.86%) of the land was 'unplanted and unusable' for nut farming. Dr Trenchev provided the number of trees planted and alive in the relevant years - Date Planted Alive 2005 No figures were provided. 2006 562 0 2007 589 0 2008 518 2 2009 453 58 Property 6 - Lot 132 (DP 825024) 66 Mountain Lagoon Road, Bilpin Ms Field noted that the planted area was 9 ha (22.26%) and in her opinion 31.46 ha (77.74%) was 'total unplanted and unusable' for nut trees. Mr Walker's opinion was that the land was suitable for nut trees depending upon the outcome of a vegetation assessment. The property was heavily timbered and it appears selective clearing is needed to enable planting. Dr Trenchev provided figures of trees planted and alive in the relevant years - Date Planted Alive 2005 No figures were provided 2006 217 1 2007 266 3 2008 234 6 2009 261 18 Property 7 - Lots 231A and 106 (DP 751650) and Lots 1 and 2 (DP 574705) - Chiefly Road, Lithgow (Rural) Ms Field in her report recorded that the total area planted was 6.74 ha (5.2%) and in her opinion 1.272 ha (0.98%) was unplanted but useable and 121.48 ha (93.81%) in total was unplanted and unusable for nut trees. Mr Walker's opinion was that the majority of the land was unsuitable for nut trees. The soil land use areas were severely constrained by slope, low fertility, shallow soils and rock outcrops, with limited light infiltration. Any new plantings were unlikely to survive in the short to medium term. Dr Trenchev provided the respondent with the following figures as trees planted and the number alive at the end of each year - Date Planted Alive 2005 No figures were provided 2006 616 0 2007 596 2 2008 527 4 2009 0 0 Properties 8, 15 and 17 - Lot 130 and Lot 142 (DP 751656), Lots 53, 54 and 56 (DP 751656) and Lot 76 (DP 751 656) - Irwins Road Blaxlands Ridge/ East Kurrajong (Rural) Ms Field noted that 19.03 ha (11.41%) of the land was planted and was of the opinion that 0.638 ha (0.38%) was unplanted but useable and 147.08 ha (88.2%) in total was unplanted and unusable land for nut trees. Mr Walker was of the opinion that - Lots 130 and 142 was unsuitable for nut trees. Most of the site was severely constrained by slope, low fertility, shallow soils and rock outcrops. Any new plantings were unlikely to survive in the short to medium term. Lots 53, 54 and 56 - upland sections were unsuitable for nut trees although the lower alluvial areas that were not waterlogged were suitable (estimated at 30% of the land). Upland soil land use areas were severely constrained by slope, low fertility, shallow soils and rock outcrops. No new plantings on this site were recommended as the remaining alluvial areas appear to be waterlogged. Lot 76 - upland sections were unsuitable for nut trees although the lower alluvial areas that were not waterlogged were suitable. Upland soil land use areas were severely constrained by slope, low fertility, shallow soils and rock outcrop. Upland areas were heavily vegetated, with limited light infiltration. No new plantings on this site were recommended as the remaining alluvial areas appear to be waterlogged. Dr Trenchev provided the following figures of umber of trees planted and were alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 880 0 2007 913 3 2008 806 7 2009 955 228 Property 9 - Lot 58 (DP 753828) 432 Webbs Creek Road, Webbs Creek (Rural) Ms Field's report noted that total planted area was 0.75 ha (5.38%) and was of the opinion that 12.32 ha (94.62%) was unplanted and unusable land for nut trees. Mr Walker's opinion was that the land was unsuitable for nut trees. Most of the site was severely constrained by slope, low fertility, shallow soils and rock outcrops or the better classed alluvial soils suffered from regular inundation and/or surface flooding. Any new plantings were unlikely to survive in the short to medium term. Dr Trenchev provided the following figures as number of trees planted and number alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 56 0 2007 72 0 2008 59 2 2009 70 8 Property 10 - Lot 4 (DP 249040) 132 Webbs Creek Road, Webbs Creek (Rural) Ms Field recorded that 0.8498 ha (8.1%) was total planted area and was of the opinion that 9.64 ha (91.9%) was total unplanted and unusable land. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was severely constrained by slope, low fertility, shallow soils and rock outcrops and smaller alluvial areas suffered from regular inundation and/ or surface flooding. Any new plantings were unlikely to survive in the short to medium term. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 32 0 2007 27 . 2008 39 2 2009 35 11 Property 11 - Lot 30 (DP 587624) and Lots 1 and 4 (DP572032) 72 and 102 Mitchells Road, Sackville North (Rural/Residential) This property has two houses for rental. Currently only one is rented by tenants. Ms Field noted that 3.01 ha (9.35%) was planted land and was of the opinion that 0.02 ha (0.09%) was unplanted of useable land and that 29.25 ha (90.56%) was total unplanted and unusable land for nut trees. Mr Walker's opinion was that 40% of the land was biophysically suitable for nut trees with some selective clearing and the remainder was unsuitable for nut trees. The unsuitable areas were severely constrained by slope, low fertility, shallow soils and rock outcrops. Any new plantings would need to be targeted. Dr Trenchev provided the following details of trees planted and trees alive in each of the relevant years - Date Planted Alive 2005 No figures were provided 2006 260 0 2007 275 4 2008 212 7 2009 286 142 Property 13 - Lot 3 (DP 549305) 100 - 102 Rickards Road, Agnes Banks/Castlereagh (Rural) Ms Field recorded that 2.74 ha (29.5%) was total planted area and was of the opinion that 0.09 ha (0.97%) was unplanted useable land and 6.4 ha (69.53%) was unplanted and unusable land for nut trees. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was severely constrained by slope, low fertility, shallow soils and rock outcrops. Any new plantings were unlikely to survive in the short to medium term. Mr Durack was of the opinion that the soil on the property showed a very acid surface soil - which could indicate problems and that he would not plant nut trees there. Further, that it was 'the perfect soil for killing a pecan'. Dr Trenchev provided the following details of trees planted and trees alive in each of the relevant years - Date Planted Alive 2005 No figures were provided 2006 310 1 2007 287 0 2008 303 4 2009 352 36 Property 16 - Lot 1181 (DP 816141) - 1427 River Road Lower Portland (Rural) Ms Field noted that an incomplete house construction is on the site with a shed and recorded that 0.43 ha (2.91%) was planted land and 14.349 ha (97.08%) was total unplanted and unusable land for nut trees. Mr Walker's opinion was that the property was unsuitable for nut trees because most of the land was severely constrained by slope, low fertility, shallow soils and rock outcrops. Any new plantings had to be targeted. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year- Date Planted Alive 2005 No figures were provided 2006 14 0 2007 11 0 2008 12 0 2009 13 0 Property 18 - Lot 9 (DP 229406) - 2169 - 2177 Elizabeth Drive, Cecil Park (Rural/Residential) This property has leased residential accommodation. Ms Field did not inspect this property for the applicants. The applicants relied on Mr Robb's evidence that all of the property was considered useable for nut trees. Mr Walker was of the same opinion but that the extent of planting would be limited by the small area, the existing residential infrastructure and the competing resident's land use demands. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 32 0 2007 27 . 2008 39 2 2009 35 11 Property 19 - Lot 4 (DP 629929) - 96 Sackville Ferry Road, South Maroota (Rural/Residential) There is a rented residential property situated on this property. Ms Field noted that 2.56 ha (25.69%) was total planted land and that 7.43 ha (74.30%) was total unplanted and unusable land for nut trees. Mr Walker's opinion was that the majority of the property was unsuitable for nut trees. A small area at the front of the site was suitable, with remainder likely to be heavily vegetated, steep, have substantial rock out-crops and shallow soils. Any new plantings are unlikely to survive in the short to medium term. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 160 1 2007 189 3 2008 192 8 2009 166 79 Property 20 - Lot 133 (DP 214754) - 106 Golden Valley Road, Glossodia (Non-Rural/Residential) Ms Field noted that nut trees were planted around a rented house and that 5.99 ha (64.44%) was planted with nut trees. In her opinion, 3.31 ha (35.56%) was total unplanted and unusable land for nut trees. Mr Walker's opinion was that the majority of the property was unsuitable for nut trees. An area at the front of the site was suitable, with the remainder likely to be heavily vegetated, steep, have substantial rock out-crops and shallow soils. Any new plantings are unlikely to survive in the short to medium term. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 60 3 2007 58 4 2008 44 5 2009 52 12 Property 21 - Lot 29 (DP 751664) - 2148 Bells Line of Road, Bilpin Ms Field noted that 1.79 ha (13.02%) of the land was planted and 11.96 ha (86.98%) was unplanted and unusable for nut trees. Mr Walker's opinion was that the upland sections of the property were unsuitable for nut trees and lower undulating areas suitable for nut trees if selectively cleared. Upland soil land use areas were severely constrained by slope, low fertility, shallow soils and rock outcrops, with heavy vegetation and limited light infiltration. No new plantings are recommended. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 310 2 2007 317 4 2008 290 2 2009 270 206 Property 22 - Lot 20 (DP 21883) 252 - 258 The Driftway, Londonderry (Rural/Residential) Mr Robb was of the opinion that 90% of of the property was usable for nut trees. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was constrained by water logging and fluctuating water table levels. Any new plantings are unlikely to survive. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 60 1 2007 67 1 2008 60 3 2009 52 24 Property 23 - Lot 64 (DP 655239) - 127 Dwyer Road, Leppington (Rural) There is a rented house on this property. Mr Robb was of the opinion that 90% of the property was usable for nut trees. Mr Walker was of the opinion that the property was unsuitable for nut trees. Most of the land was constrained by water logging and fluctuating water table levels, albeit only moderately. Any new plantings are unlikely to survive in the medium term and are not recommended. Dr Trenchev provided the following details of trees planted and trees alive - Date Planted Alive 2005 No figures were provided 2006 88 2 2007 90 2 2008 78 5 2009 70 36 Planted Alive Property 24 - Lot 6 (DP 29178) - 6 Seventh Avenue, Llandilo (Rural/Residential) The property has a leased rental property. Mr Robb was of the opinion that the property was usable for nut trees. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was constrained by water logging and fluctuating water table levels. Any new plantings are unlikely to survive. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 58 2 2007 43 2 2008 50 8 2009 48 23 Property 25 - Lot 85 (DP 27602) - 109 Deepfields Road, Catherine Field (Rural/Residential) Mr Robb was of the opinion that 30% of the property was unusable for nut trees. Mr Walker's opinion was that the majority of the property was not suitable for nut trees. An area at the front of the residential building was suitable and the remaining back areas are water logged for long periods of time rendering these areas unsuitable. There are no suitable areas remaining for new plantings. If planted they are unlikely to survive. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 60 3 2007 62 4 2008 71 5 2009 88 19 Property 26 - Lot 19 (DP 2550291) - 329 Calf Farm Road, Mount Hunter Rural/Residential) The property has a leased rental house. Mr Robb's view was that only 8% of the land was usable and 92% being unsuitable. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was constrained by slope, low fertility, shallow soils and rock outcrops. Any new plantings are unlikely to survive. Dr Trenchev provided the following details of trees planted and trees alive in each relevant year - Date Planted Alive 2005 No figures were provided 2006 54 0 2007 71 3 2008 62 5 2009 70 34 Property 27 - Lot 1 (DP 198456) - 66 Chaseling Road, Webbs Creek (Rural) Ms Field noted that 0.39 ha (2.45%) was planted and the rest (15.88 ha 97.54%) was unplanted and unusable for nut framing. Mr Walker's opinion was that the property was unsuitable for nut trees. Most of the site was constrained by slope, low fertility, shallow soils and rock outcrops. There is a poor prognosis for new plantings. Dr Trenchev provided the following details of trees planted and trees alive - Date Planted Alive 2008 94 7 2009 136 16 Applicants' Case - Summary 161The applicants' cases were summarised by Mr Foster in his written submissions as follows: (1)The Applicants' cases are that the owners during the relevant years can be broken into 3 categories: the Glossodia property, those properties upon which rental houses existed, and the remaining parcels which did not have any rental houses. The 3 Applicants' submit that, apart from cultivation [of all subject properties] and rental/residential [of some subject properties only], there are no other relevant uses to which any part of the subject properties have been put during the relevant years. (2)In respect of the Glossodia property, Dr Trenchev submits that the dominant use was not residential but agricultural, and further that that use of the land had a significant and substantial commercial purpose or character; and that that use of the land was engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made) during the relevant years. (3)For those properties upon which rental houses existed during the relevant years, the Applicants submit the dominant use was not residential but cultivation of nut trees, for the purpose of selling the produce of the cultivation. In these cases there is a need to consider alternate uses. (4)For the balance of the subject properties, the Applicants' submit the dominant use was not residential but cultivation of nut trees, for the purpose of selling the produce of the cultivation. In these cases there is no need to consider alternate uses. (5)However, should the Tribunal find that there are other uses apart from rental or cultivation applicable to any property, the Applicants' submit that the dominant use would nevertheless be cultivation of nut trees, for the purpose of selling the produce of the cultivation (or, in the cases of Glossodia, as per paragraph 2 above). (6)In the event it is necessary to consider whether any land not used for rental or cultivation purposes is usable, the Applicants' submit that any land unused for either rental or cultivation purposes is unusable for any agricultural purpose. (7)The Applicants submit that, in those parcels where there is unused land described as 'unusable' by the experts, it is unusable for agriculture including agroforestry, and should be disregarded from the exercise of considering the dominant purpose question. (8)In support of these preliminary submissions, the Applicants rely primarily upon the filed statements and oral evidence of: Dr Trenchev, Rebecca Field, George Orel, Paul Barry, Stephen Colaguiri, John Robb, Mr Youkhana & Anthony Curry. (9)In addition, documentary material was tendered during the course of the hearing by way of Exhibit, some of which would also be relied upon in support of the above proposition and submissions. Outline of the Respondent's Case 162The Chief Commissioner's case summarised by Mr Young in his written submissions was as follows: (11)Against that statement of the relevant legislation, in summary form the CCSR contends that: (a)The 'dominant use', objectively ascertained, of the Relevant Properties is: (i)in the case of the Unoccupied Properties, is as unused land - that is, the Applicants' nut growing use is not sufficiently substantial to prevail over the proposition the Unoccupied Properties are unused land within the principles in Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30, at 35, Greenville Pty Limited v Commissioner of Land Tax NSW (1977) 7 ATR 278 at 280; Saville v Commissioner of Land Tax (1980) 12 ATR 7, at 10; Abbott v Commissioner of Land Tax (1978) 38 LGRA 417, at 422-423 and Leda Manorstead Pty Ltd v CCSR (2010) 79 NSWLR 724 at [67]. (ii)in the case of the Rental Properties, is for letting as residential tenancies - that is, the residential tenancy use prevails over any nut growing use: see Romano v Chief Commissioner of State Revenue (2010) 84 ATR 28; Gareffa v Chief Commissioner of State Revenue [2012] NSWADT 41, Reolon v Chief Commissioner of State Revenue [2013] NSWADT 96. (b)The nut growing activities of the Applicants do not satisfy the legal requirements of 'cultivation', established in Safety Beach Pty Ltd v Commissioner of Land Tax (1978) 9 ATR 451 at 455 as being "subject to a programme of tending, in accordance with practices of husbandry applicable to that crop". (c)The relevant "purpose" is to be objectively ascertained and the subjective attitudes and aspirations of the Applicants are not relevant: see Abbott v Commissioner of Land Tax (1978) 9 ATR 728. (d)Following on from the requirements that the dominant use and the purpose be objectively ascertained, the requirement of maintaining or tending for "selling the produce" and the like concepts of sale in each paragraph of sec 10AA(3)(a) - (f), point to more than a hobby or folly - something akin to, or in the nature of a commercial operation (though not carried on to the exactitude of sec 10AA(2)(a) and (b), that objectively has, reasonable prospects of producing a crop for sale. Viewed calmly, objectively and dispassionately, the activities of these Applicants do not have a realistic or reasonable objective prospect of producing a crop for sale. (e)With respect to the Glossodia land, sec 10AA(2)(a) and (b) take the requirements of sec 10AA(3) "to a further level of exactitude": see Ashleigh Developments Pty Ltd v CCSR [2012] NSWADTAP 25 at [45]. In the submission of the CCSR, on any reasonable and rationale evaluation, the activities of the Applicants do not exhibit "a business enterprise of a well-structured long term character, with administrative features (organisation, management, book keeping) which support the conclusion that it is set up with the aim of generating a profit year to year over a succession of years". That proposition may be tested in a simple and straightforward manner - Dr Trenchev cancelled his GST registration as carrying on an "enterprise" for GST purposes, notwithstanding the immediate availability of input tax credits in respect of his expenditure. (f)Additionally, the Applicants bear the onus of proof of establishing each element of section 10AA(2) and (3) on the balance of probabilities: see FCT v Dalco (1990) 168 CLR 614; B & L Linings v CCSR (2008) 74 NSWLR 481 and Cornish Investments Pty Ltd v CCSR (2013) NSWADTAP 25. In terms of lay evidence, the case for the Applicants, largely rests on the evidence of Dr. Trenchev. That evidence, in any event, must "be considered most closely and received with the greatest caution": Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 at 403 per Fullagar J. But in addition to that automatic caution and close scrutiny, in the submission of the CCSR, the evidence of Dr. Trenchev on his oath is generally unsatisfactory, and should not be accepted unless it is corroborated, or consistent with contemporary arms' length documents. At this stage and by way of illustration only of the unreliable and possibly disingenuous nature of Dr. Trenchev's evidence, reference could be made to the content of the Land tax variation form submitted on 9/2/2009 and the undisclosed amendment of Mr. Robb's report (12)For the Applicants to succeed, each and every contention above has to be negated on the balance of probabilities. A failure to establish even one element, for example negating the dominant use of the Unoccupied properties being unused and the rented Properties as residential leases has the consequence that the assessments must be upheld. (13)This follows if Dr Trenchev does not satisfy the onus of proof because his evidence on key matters is unreliable. Relevant Legal Principles 163In the case of a rural property, it is exempt from land tax under s 10AA(1) of the Act if the rural property was 'land used for primary production' as at midnight on the thirty-first day of December immediately preceding the year for which the exemption is claimed. 164The phrase 'land used for primary production' is further defined in s 10AA(3) of the Act, relevantly, to mean land, the dominant use of which is for cultivation, for the purpose of selling the produce of the cultivation. 165The fundamental question in respect of each of the 26 rural properties that is required to be considered is whether the activity of nut growing represented the dominant use of the relevant land on the thirty-first December immediately preceding each land tax year in issue. An important threshold question also arises in this matter as to whether the activity of nut growing in each land tax year constituted 'cultivation for the purpose of selling the produce of the cultivation'. 166In the case of the Glossodia property, the terms of s 10AA(2) of the Act require that, in each land tax year the use of the land for nut growing activity had a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis. And the activity was cultivation for the purpose of selling the produce of the cultivation. 167The parties were generally in agreement as to the meaning of 'dominant use'. Both parties relied on Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 where his Honour Gzell J examined in the context of s 10AA of the Act the meaning of 'dominant use of land'. His Honour has very usefully set out the principles that need to be considered in determining 'dominant use' as follows (69-76): (69)Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use. (70)That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts. (71)In Saville v Commissioner of Land Tax (1980) 12 ATR 7, Roden J was concerned with whether land was used primarily for the maintenance of animals thereon under a former provision in the Land Tax Management Act. The primary use test was not unlike the dominant use test in the present legislation. His Honour said (at 10): "I am of the view that, for any use of the land to justify the statement that the land is used primarily for that purpose, it is necessary not only that that use prevail over any competing use but also that it be sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land." 72 In Hope v Bathurst City Council (No 2) (1984) 52 LGRA 79, Perrignon J was concerned with the definition of "rural land" as land that is wholly or mainly used for carrying on the businesses or industries of grazing amongst other uses in the Local Government Act 1919, s 118. His Honour (at 84) said that what was called for where land was put to a number of uses, was the weighing of the evidence relating to the various uses to which land was put, including, but not limited to, the nature and intensity of such uses, the physical areas over which they extended, and the time and labour spent in conducting them. 73 His Honour's decision was upheld on appeal (Hope v Bathurst City Council (1986) 7 NSWLR 669). A majority of the Court of Appeal held that the characterisation of rural land as land that is wholly or mainly used for carrying on the businesses or industries of grazing, amongst other uses, did not relate solely to the quantum of area of land used for relevant purposes but related to the end to be achieved by the use and included other criteria such as the nature and intensity of the use. 74 In Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286 the Land Appeal Court of Queensland, presided over by Ambrose J, had to consider whether, at the relevant date of valuation, the subject land was "exclusively used ... for the purpose of farming". 75 In terms similar to the Land Tax Management Act, s 10AA, "farming" was defined for this purpose in the Valuation of Land Act 1944 (Qld), s 17(2) to mean the business or industry of grazing, and other specified pursuits, or any other business or industry involved in the cultivation of soils, the gathering in of crops, or the rearing of livestock, if the business or industry represented the dominant use of the land and had a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis. 76 The Court, helpfully, gave its approach to the determination of dominant use of land (at 303): "In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in s 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole." 168On appeal (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366) the Court of Appeal (Allsop P, Campbell JA and Whealy JA) upheld his Honour's decision and in particular approved the 'evaluative process' used by his Honour to determine the dominant use of the land. His Honour Allsop P, who handed down the principal judgment, was 'not persuaded that his Honour made any relevant error' in taking the above approach. 169There was some debate, on the particular facts of this matter, as to the correct test to apply when determining dominant use in the case of properties that had substantial unused or unusable land in addition to areas where planting had been done. 170The applicants' placed reliance on the decision of Rath J in Brown v Commissioner of Land Tax (NSW) (1977) 7 ATR 642 to submit that the case is significant because it acknowledges that 'it is open to find a parcel of land exempt, even where the proportion of land used for primary production was - it would appear - less than half of the land area'. 171In Brown the court was considering a predecessor exemption provision in the Act, which exempted 'land used for primary production' which was, so far as relevant, defined as follows: 'Land used for primary production' means land used primarily for - (b) the maintenance of animals or poultry thereon for the purpose of selling them or their natural increase or bodily produce. 172As noted by Gzell J in Leda the 'primary use test was not unlike the dominant use test in the present legislation'. 173On the facts in issue, his Honour Rath J found that - To summarize, as at the end of 1974 there was a substantial business of poultry farming being carried on; a small start had been made towards cattle raising; and some significant progress had been made in the pig-raising business. Later on the cattle activity was abandoned, but the pig-raising has increased. Apart from the areas occupied by the dams, roads and pipelines, some 17 acres were occupied by houses, fowlshed, pig runs, pig yards, fruit trees, grazing land and improved pastures. Apart from the fruit tree area (which does not appear to be of significance) the whole of this 17 acres would appear to fall, at that time, in the definition of land used for primary production. This 17 acres includes the 71/2 acres referred to in the return (and accepted by the Commissioner as so used) together with other land used in conjunction with it (principally for grazing). In addition the land occupied by the dams, pipelines and roads qualifies as land used for primary production on the same basis. The balance of the property was unused, except in so far as part of it was a water catchment area. It is not possible on the evidence to determine whether this unused balance was more or less than half of the land. It was approximately one half; but in so far as there is any burden on the plaintiff of proving that more than half was actually used for primary production, as distinct from being unused scrub land, he has failed to discharge the onus. 174Against the above finding, his Honour went on to say that - ... if the definition of "land used for primary production" means that the plaintiff must show that more than half of the land is so used, then in this sense he has failed to do so. As I understand the argument, neither party contended that the word "primarily" in the definition had this effect. The argument for the Commissioner was that the land should be divided into that part which was used and that part which was not used; only the former part was put to the test of the definition; the latter part, on his approach, did not qualify. When this argument is analysed, it means that the word "primarily" would relate to a comparison of intensity of divergent uses on the same piece of land. The argument for the plaintiff was, as I understood it, that the word "primarily" permitted the rural activity on one part of the land to be weighed against the non-use of another part. The argument was that where some 17 acres were used for the designated rural purposes, and the balance of about 24 acres was not used, and not readily capable of any rural use, the whole parcel of land should be regarded as land used for primary production within the meaning of the definition. This argument for the plaintiff is in my view correct, both in its approach, and on the facts of the present case. One central aspect of this case is the dam at the rear of the land, and its function in the rural enterprise. If the Commissioner's approach was correct, it would still be a consequence that this dam and the land used for the pipelines should be included in the exempt land. This would immediately make unreal any division of the land physically into exempt portion and non-exempt portion. 175I do not think his Honour was laying any general principle that where less than 50% of the land is used for primary production the whole of the land is entitled to the exemption. The outcome in Brown was essentially on the facts of the case, in particular on the basis of the intensity of the operations carried on by the owner. Also on the facts, as noted by his Honour, one could also conclude that more than 50% of the land was being used for primary production. 176As noted by his Honour Gzell J in Leda, citing with approval Roden J's statement in Saville, that the use must be 'sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land'. 177In Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278, Helsham J was concerned with whether a pumpkin patch on 1.5 acres on land that was a golf course of a total area of 130 acres, exempted the whole property from land tax under the primary use test. His Honour (at p 280) made the following relevant observations - I think the only question to be decided here is this: can it be said that land most of which is not being used at all is used primarily for the cultivation of it for the purpose of selling the produce of that cultivation if a very small part of it is under cultivation? Another way of putting the question I suppose is: when does land which is not being used at all become land used primarily for cultivation? The plaintiff would have the court answer the first question: yes, and the second question: as soon as any cultivation commences. ... To claim an exemption under the Act the owner must be able to point to an activity being conducted on the land that will give the land the character of being mainly used for that activity, or that will enable a person having to decide the matter to say that the land is, in substance and looked at as a whole, being used for an activity that gives rise to an exemption. I do not think the question: what is the main use of the land, is to be answered by pointing to the only activity on the land. An activity going on on the land does not necessarily characterize the use of the land taken as a whole, so that one can say the land is used primarily for that activity. That is evidently a correct proposition if there is more than one activity going on on the land; it does not cease to be correct where portion of the land is not being put to any use. It may follow that one activity being conducted on land means that the land is used primarily for that activity; but it does not necessarily follow. 178I think these cases highlight that 'dominant use' of land is not necessarily to be determined by reference to the sole physical activity conducted on the land. The non-use of part of the land is a relevant factor when only some part is being used for a primary production activity. 179In this matter one property, (Property 20, 106 Golden Valley Road, Glossodia), is a non-rural residential property and, accordingly, I need to briefly consider the commerciality tests set out in s 10AA(2) of the Act in relation to non-rural land. In the case of land that is not rural, land is exempt from land tax if it is used for primary production and that use of the land: (a)has a significant and substantial commercial purpose or character, and (b)is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made). 180Recently, his Honour Gzell J in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23 examined the nature of these tests. 181On appeal, his judgment was affirmed by the Court of Appeal (Meagher JA, Emmett JA and Leeming JA in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWCA 408. The Court of Appeal agreed with the approach taken by Gzell J in applying the test in s 10AA(2)(a). His Honour Emmett JA who handed down the principal judgment, helpfully summarised the approach as follows - (33)The primary judge held that s 10AA(2)(a) is concerned with the objective qualities of the use of the Subject Lands and that the words "significant" and "substantial" are to be construed in their context, by interpreting the phrase "significant and substantial commercial purpose or character" as a whole, rather than by adding up linguistic elements of each of the words. His Honour identified a number of characteristics of a business that might indicate that s 10 AA (2(a) was satisfied, namely, size, depth, bulk, weight, seriousness, importance, quality, intensity and prominence. (34)His Honour referred to the connotation, in ordinary parlance, of each of the words "significant" and "substantial" Both adjectives qualify the word "commercial" and the phrase "significant and substantial commercial" qualifies both purpose and character. His Honour observed that the "substantial" connotes an ample or considerable amount, quantity or size and that "significant" connotes importance, something of consequence or an element that is key, vital or critical. 182In Maraya it was not necessary for Gzell J to consider s 10AA(2(b), but his Honour, nevertheless, made some important observations as to its nature. The Court of Appeal agreed with the observations made by Gzell J and were summarised by Emmett JA as follows - (39)The primary judge nevertheless made some observations concerning s 10AA(2)(b). His Honour considered that the provision introduces a subjective element into the land use, insofar as the primary production use must be engaged in for the purpose of profit on a continuous or repetitive basis, whether or not a profit is actually made. His Honour did not consider that the Court was bound to accept Mr Giusti's assertion that Maraya engaged in its use of the Subject Lands for the purpose of profit. Neither on the marginal benefit approach nor on the shared cost allocation approach did Maraya have a positive financial return in the years in question. (40)His Honour considered that, while s 10AA(2)(b) does not require a profit to be made, it does require that the primary production use be engaged in for the purpose of profit. While the absence of a profit does not negate an engagement in a primary production use of the land for the purpose of profit, a continuous pattern of a lack of profit may lead the Court to question, and ultimately reject, evidence that the primary production use of land was engaged in for the purpose of profit. 183It is necessary to understand the meaning of the expression 'cultivation for the purpose of selling the produce of the cultivation' to consider the threshold question. 184In Safety Beach Estate Pty Ltd v Commissioner of Land Tax (1979) 9 ATR 451, Rath J was required to determine whether natural forests could in any circumstances be regarded for the exemption as being 'cultivation thereof for the purpose of selling the produce of such cultivation'. His Honour first expressed his views generally as to the meaning of the expression - In my opinion the expression "cultivation thereof for the purpose of selling the produce of such cultivation" should not be limited to annual crops or crops with periodical production. The idea conveyed by the expression is the improvement of the land for the purpose of selling the produce of the improved land. The land may in the relevant sense be cultivated in some instances by breaking it up, as by ploughing, or in other instances by activities that may or may not be associated with the breaking up of the soil. It is the land, not the soil alone, which is the subject of cultivation. This may be achieved by improvement to the water supply to the plants, by fertilizing, by spraying plants with insecticides and fungicides and by the establishment of windbreaks. 185His Honour went on to consider whether steps taken to conserve timber in a natural forest could be regarded as cultivation under the exemption - But however the crop is sown, there is cultivation of the land in a particular year if in that year it is tended, or subject to a programme of tending, in accordance with the practices of husbandry applicable to that crop. If this principle is correct it is applicable to natural forests as well as to planted forests; it is applicable to either sort of forest whether there is a programme of regeneration or not. I am mindful of the force of the submission made by counsel for the defendant that the operation here has a capital nature, in that it is largely the realization of a natural resource. If there had been no more to the operation than that, if the works carried out had related only to the felling and carrying away of the trees, then I do not think it could be said that the timber was the produce of cultivation. But I am satisfied that in this case there were significant works carried out for the protection and improvement of the growing timber, and the timber that was sold was in the relevant sense the produce of those works. In this connection, it must be that when para (a) speaks of "the produce of such cultivation" it means the produce of the cultivated land. 186Cultivation is therefore the activity of caring and raising plants. It follows that merely planting seedlings is not sufficient. It is necessary to provide aftercare by way of irrigation, fertilisation and regular inspections to ensure the plants are disease free. Where there is no resident care, it is also necessary to provide protection from any damage by wild animals and vandals. 187Under s 100(3) of the Taxation Administration Act 1996 the onus of proof in relation to the main issues of fact is on the applicants (see Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 204 affirmed by the Appeal Panel in Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25). 188In Cornish the Appeal Panel, in affirming the decision of the Tribunal, stated that the onus of proof is on the balance of probabilities and that 'an applicant must prove all matters necessary to enable a Tribunal to answer the statutory question in its favour'. 189An applicant needs to show in respect of each assessment that it is incorrect (see Walsh J in Krew v Federal Commissioner of Tax 71 ATC 4213 at 4216). Consideration and Conclusion 190The onus requires an applicant to establish all the facts on which it relies to claim the exemption. In the present context, the applicants have to establish that, in respect of each property, a primary production activity was being carried on as at midnight on thirty-first December in the preceding year of each of the land tax years in issue. But, as pointed out by Gzell J in Leda, the 'inquiry is not limited to the use to which land is put on the relevant date. It extends to a consideration of its use during a reasonable period preceding and following the relevant date (Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 660-661)'. In his Honour's view in Leda was that - ... six months before and after the relevant date is a reasonable period for inquiry in this case. It allows for consideration of financial records pertaining to the uses to which the land was put. 191Dr Trenchev, the principal applicant, gave evidence and was cross-examined. His evidence is crucial to any consideration as to whether the applicants were engaged in any primary production activity in the land tax years 2006, 2007, 2008, 2009 and 2010 on the relevant properties. 192Dr Trenchev, in the years in question, was in a full-time pathology business and his own evidence is that the nut growing activity was carried on by him on a part-time basis. 193He was not able to give a precise date as to when he commenced nut tree growing on the properties. Initially he said it was 'a gradual process' and that it was sometime between 1999 and 2004. But, with some help from Mr Foster, Dr Trenchev said that by 2005, other than the Chaseling Road property, he had 'more or less covered all the farms'. But, in the farmland rating applications and his personal tax returns, the start date indicated was '2008'. 194It is also important to note that Dr Trenchev provided the only evidence of tree planting in the years in question. He personally did not undertake any 'actual physical count' and relied entirely on itinerant contract workers used for planting trees. The figures, he said, were recorded on 'pieces of paper' when his workers came in the morning and informed him of the number they planted the previous day. He indicated that he had destroyed the primary documents and had the information 'on a clean copy' which he had provided the respondent. 195No figures have been provided for any plantings in 2005. 196All the experts engaged by the applicants relied entirely on the figures produced by Dr Trenchev. Both Dr Orel and Mr Curry agreed in cross-examination that they did not have any firsthand knowledge of the trees planted or alive in the years in question. Similarly, Ms Field and Mr Robb also had no knowledge of the trees planted or alive in the relevant years. There is, therefore, completely absent in this matter any independent or good documentary evidence of tree planting in the years before the Tribunal. Even Dr Trenchev's own evidence is hearsay because he merely relied on what the itinerant workers told him, which would have been some basis for their remuneration. His own evidence was that these workers 'were not reliable'. No explanation was provided by Dr Trenchev as to how he counted the dead trees in each year. 197The itinerant workers were engaged, according to Dr Trenchev's evidence, on his behalf by Mr El Sayed, a travel agent. Although aware of his BAS information, Mr El Sayed was not produced to give any independent evidence of the number of such workers engaged and the nature of their work on the properties in the relevant years. Mr El Sayed issued tax invoices to Dr Trenchev and he would have firsthand knowledge of the nature of work done on the properties. In the absence of any other independent evidence, his evidence was crucial. I think, the Tribunal is, in the circumstances, entitled to make an inference that his evidence would have been adverse to the applicants' claim of cultivating nut trees in the relevant years on all the 27 properties (see: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298). 198The applicants did not employ any manager or any fulltime employees in the years in question. Mr Durack's view was that, in the case of the native pecan groves in the United States, they are 'intensively managed' by their commercial managers to ensure proper yields. He was also of the view that, at the establishment stage, proper care was essential. There is no evidence of any proper management of the cultivation on the properties in the relevant land tax years. 199As indicated above, Dr Trenchev was only able to look after his 'farms' on a part-time basis. 200Dr Trenchev's evidence was that the applicants were growing nut trees in an 'agroforestry situation'. His experts, Dr Orel and Mr Curry both expressed the view that there were many agroforestry farms successfully growing pecan nuts overseas and in the Sydney basin. Dr Trenchev's evidence, supported by his experts was 'if it can be done elsewhere, pecan nut trees should also be successfully grown by such methods on his properties'. 201The fallacy of this argument was best pointed out by Mr Durack, in response to Mr Foster in cross-examination - ... because it depends on more than just the geographic location. It depends very much on the soil types on these particular areas whether the trees are growing well and know the soil types on the farms. ... Now, my experience with the agro forestry pecan operations that I have seen in the States is that they are very intensively managed - that is, that they're mown - in fact, they get bulldozers in to - you know, If there's unevenness in the land level it; they plant particular species underneath the trees that's suitable to harvest off. You know, it's a pretty active process and they spray them, they fertilise them. They undertake many if not all the practices that I would undertake in a commercial situation. 202Mr Durack was the only expert at the hearing of this matter with firsthand knowledge of native pecan groves in the United States and with vast experience of successfully growing pecan nut trees in Australia. 203As to irrigation during the years in question, Dr Trenchev's evidence was that he had ceased to use a drip irrigation system in 2005 because it did not function properly. He commenced to use the eco-planter in the latter half of 2009. His evidence was also that the very high death rate of the nut trees over the 2006 to 2008 years was due to the serious drought that occurred in that period. There is no evidence from Dr Trenchev or any independent witness as what efforts were made by the applicants in that period to irrigate the seedlings that had been planted. 204The evidence in terms of figures suggests there was an improved survival rate of nut trees in 2010. But there is no conclusive evidence that this was due to the use of the eco-planter. Both Mr Scholefield and Mr Walker were of the view that this might have been as a result naturally occurring rainfall. Mr Durack's opinion was that he did not think there is 'enough water in the eco planter to be certain that it will do it'. But what occurred in years 2010 onwards is of little relevance to determine what occurred in the years in question. 205Dr Trenchev agreed in cross-examination that he would sign any document prepared by Mr Paul Barry, his accountant, 'without reading it' because he trusted him. Dr Trenchev was then shown a land tax variation form for the 2007 land tax year, prepared by Mr Barry and signed by him in which he had stated that he was growing walnuts on some of his properties and had a rose nursery on another. Dr Trenchev's response was that he did not know why these statements were made by Paul Barry because 'Paul Barry has no idea' of his farming activities as he has never been to any of his farms. 206Dr Trenchev was further taken to his tax returns in cross-examination but offered little assistance to explain both income items and deductions claimed. He was of the view that Mr Barry prepared the tax returns and he did not have any idea in respect of these items. 207This was contradicted by Mr Barry who, in his cross-examination said that, as a matter of practice, he always acted on instructions given to him by Dr Trenchev and generally he would explain to Dr Trenchev the contents of the returns or other documents prepared by him before they were lodged or sent to the authorities. 208Dr Trenchev spoke of setting up a medical research foundation with the properties as assets to produce the income to support the work of the foundation. There is no evidence that any foundation has been set up and the properties continue to be owned by the applicants. 209Dr Trenchev's evidence as a whole was vague, imprecise, and incorrect or contradictory on some occasions. 210His evidence was self-serving and merely consisted of self-created documents and data. In Warriewood Pty Ltd v FCT (1993) 26 ATR 270 Lockhart J cautioned against the unqualified acceptance of such evidence: Statements by taxpayers, and, in the case of corporate taxpayers, those who control and manage their affairs, must be scrutinized with care, weighed against the objective facts and the inferences to be drawn from the taxpayer's activities generally. Statements of this kind must "be considered most closely and received with the greatest caution": Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 at 403 per Fullagar J". 211It is important to note that the applicants have not produced any independent evidence to corroborate Dr Trenchev's evidence. 212The short statement from George Youkhana, a courier employed by Dr Trenchev's pathology business adds very little to assist the applicants to discharge the burden of proof that is on them under the law. In the statement he stated that he had 'constantly seen thousands of plants at Dr Trenchev's property in Kemps Creek' and that he 'would often see four or five people working in Dr Trenchev's nursery looking after his little plants'. These very general observations made by an employee do not help the applicants because there is no evidence that he witnessed any activity on any of the properties in the relevant years. 213The applicants' two main experts, Mr Curry and Dr Orel, produced four reports, two each. When cross-examined by Mr Young, both agreed that they did not have knowledge of any activity on the properties in the relevant years and relied entirely on figures and information provided by Dr Trenchev. They both also agreed that they did not have any firsthand knowledge of pecan nut growing in either an agro-forestry environment or the traditional farming methods. They also agreed that they did not have any firsthand knowledge of the agro-forestry pecan nut growing in the United States and statements in their reports were from other experts who had such experience. 214Mr Curry made a number of statements, in his reports, which were not supported by any hard evidence. 215For example, he states in his second report - From visits, observations as well as information and data provided by the Applicant it was apparent that during the period 2006-2008 the owner, employees and contractors 'cultivated', planted out and maintained several thousand nut trees on the subject properties. However many trees died as a result of the dry spell/drought from 2006-2009. This extreme event necessitated replanting of many hundreds of 'saplings' and the propagation of many more thousands of seedlings by the Applicant and staff. 216Mr Curry does not refer to any particular evidence in making this statement, which also contained serious factual errors. Dr Trenchev's own evidence was that he did not have any employees. No statement has been provided by the applicants from any contractors other than some tax invoices from Mourad El Sayed. If Mr Curry was privy to any evidence, it has not been produced. It is a reckless observation made without any foundation. 217There is no basis advanced by him as to what evidence supported the claim that there was 'cultivation of nut trees' on the properties in the period 2006-2008. 218He refers to 'visits and observations'. In preparing his first report he only visited five properties and in preparing his second report he visited all the properties, which on his own evidence was over 13-15 August 2012. The parties and the Tribunal were only able to visit nine properties in two days. These disparate properties, as indicated above, are spread over a vast area and any inspection of all the 27 properties within three working days would only afford some few minutes for inspection of each property. His evidence was that he was 'a couple of hours at each property'. Against that background, his conclusion in respect of each property is based on a very brief visit, which would not have been sufficient for him to properly reach the conclusions he has made in his reports. In any case they were made after viewing the properties in 2012 and are not relevant to the present matter. 219When cross-examined he agreed that there were several errors in his reports. He agreed that he had no firsthand knowledge of native pecan operations in the United States and the operations in the United States described by Mr Durack differed from those used by Dr Trenchev. 220His evidence was essentially based on data provided by Dr Trenchev and without any experience of firsthand knowledge of what was being done by the applicants in the years in issue. 221Dr Orel, who described himself as a scientist, claimed his expertise in pecan nut growing from the 'four and half years growing them from seed and from cuttings and all the observations' made during the period he was doing his Ph.D. 222Dr Orel, in cross-examination agreed that he has no direct commercial experience in pecan nut growing and also no firsthand knowledge of native pecan operations in the United States. 223What is important is that he also did not have any direct firsthand knowledge of the actual activities carried out on the properties during the period 2005 to 2010. 224Dr Orel in his second report states - It is well-known and well-documented that actively growing nut trees are seen on Dr Trenchev's farms. Adult nut trees produce viable flowers and fruit for many years. 225No evidence was produced to support this claim. Dr Orel, however, in cross-examination corrected this statement by stating that he only saw two to five such trees but was not able state where they were located. Mr Scholefield, who with Mr Walker had inspected all the properties over a number of days but did not see any nut trees that had fruited or produced nuts, contradicted this evidence. 226Dr Orel has been in touch with Dr Trenchev since 2005, providing advice on at least one occasion as to the successful use of the eco planter. Against that background, he cannot be regarded as being entirely an independent expert witness. 227But, in any case, the applicants' two experts' evidence and reports dealt with a number of matters but provide very little information or any hard evidence to assist in determining the issues that under s 10AA(2) are relevant in respect of the years in issue. Their opinions as to the potential for nut farming in an agroforestry context on the properties is of little assistance to determine these issues. Their reports make interesting reading for any budding nut grower and may contain some good guidance for Dr Trenchev in the future but add very little to discharge the burden the applicants were required to discharge in this matter. 228Ms Rebecca Field was described by Mr Foster as 'more or less a tree counter'. She had, however, to recount the trees in respect some of the properties on Dr Trenchev's instructions because he was not satisfied that her figures were correct. She was asked to give her opinion as to whether any part of a property was not suitable for any agricultural use. In cross-examination she agreed that when she in her report speaks of 'unusable land' she was merely concluding that any such part of property was not suitable for nut tree growing and had not considered any alternative use the unused land could be put to. 229It should also be noted that Ms Field did not have any firsthand knowledge of growing pecan nuts either in an agroforestry context or in any commercial traditional manner. 230Her evidence on tree counting in 2013 was not relevant for purposes of this review. Ms Field in cross-examination also conceded that her counting included both live and dead trees because she was not able to distinguish one from the other. She was also not sure of the exact age of the trees, merely making a judgment on the basis of the type of ecoplanter found in respect of each tree. 231In her written report, Ms Field concluded in respect of each of the properties she inspected that 'the 'dominant use of useable land is agroforestry nut farming'. Although this reflects the use in 2013, she has not provided any reasoning for the conclusion in her report or oral evidence. In any case, the conclusion is clearly faulty because she only considered whether the land was suitable land for nut farming and not for any other kind of agricultural or non-agricultural use or pursuit, although the applicants' solicitors had instructed her to do so. In reaching the dominant use conclusion, she conceded in cross-examination that she compared the total area of land planted with nut trees with total area of land suitable for nut tree planting. And if a majority of the total area of the land suitable for nut growing was planted with nut trees, her conclusion was that the dominant use of the land of that particular property was for nut trees. 232Mr Robb clearly has very little expertise in pecan nut growing and his report in respect of some of the properties is of very limited assistance to the applicants. He merely made some very general observations of the properties he inspected. 233Mr Colaguri, the applicants' real estate agent's evidence is also of very limited assistance. In cross-examination he conceded that expenditure was incurred in respect of the rental properties to maintain them as habitable accommodation in accordance with rules and conditions for rental properties of the relevant councils and tenancy laws. This was somewhat in contradiction to his written statement that very little is done to maintain the rental properties. 234The applicants, in order to succeed, had to establish that on the 31 December in each preceding year in respect of each year in question, the activity conducted on the relevant land was the cultivation of nut trees and that use was the dominant use of the land. The inquiry to be made on the 31 December of the preceding year for any land tax year, 'is not limited to the use to which land is put on the relevant date' and a period of 'six months before and after the relevant date is a reasonable period for inquiry' (per Gzell J in Leda). 235In this matter there was an important threshold question as to whether the activities carried on each property was the cultivation of nuts for the purpose of selling the produce of the cultivation. 236The relevant provision found in s 10AA merely speaks of 'cultivation, for purpose of selling the produce of cultivation'. But is best understood when the cultivation is considered in the context of a primary production business. The use of the words 'selling the produce' clearly requires the activity to be a commercial undertaking. The various criteria that are used to determine whether an operation is a commercial undertaking would equally apply to determine whether an activity satisfies the requirement set out in s 10AA (3)(a). 237In this matter, the only evidence as to the cultivation of nut trees, besides Dr Trenchev's self created document setting out the number of trees planted and number alive before the Tribunal, was some tax invoices issued by Mourad El Sayed. These invoices are mainly for 'planting trees' and do not support any history of expenditure incurred for regular care in the cultivation of the 'trees planted'. Also these invoices do not state on which properties the planting occurred. 238No evidence has been produced as to any systematic after-planting care, for example, regular inspections, irrigation and fertilisation of these plants in the relevant years. 239Dr Trenchev's own evidence is that he did not use the eco-planter until sometime in 2009. His own evidence was that he had ceased using the drip irrigation in 2005 and hence between 2005 and until 2009 there is no evidence of any irrigation activity on the properties. 240Mr Durack with firsthand knowledge of native pecan groves in the United States explained in some detail the cultural practices used in the United States. In his opinion, the cause of death for many saplings planted by the applicants was 'almost certainly have been lack of water during critical early establishment period'. There is no evidence that any of the practices used by native pecan growers in the United States were used by the applicants during the years in question. 241No figures have been provided for 2005 but in years 2006 to 2009, ranging from 84% to 100% of the planted trees were recorded dead. But these figures are entirely those given to the respondent by Dr Trenchev. The experts, Mr Curry and Orel in their reports speak of the tree plantings in years 2011, 2012 and 2013 and their views on inspection of the properties more recently. Both in cross-examination agreed that they did not have any direct firsthand knowledge of the number of trees planted or alive in the relevant years. In fact, they agreed that they merely relied on figures provided by Dr Trenchev and did not see what activity was being conducted on the farms in any of the years in issue. 242Even when the parties and the Tribunal made the recent inspection of some of the properties, what was absent was any workers at any of the properties inspected. On the other hand, there was visual evidence that, although saplings had been planted more recently, the plants had not been maintained in any proper commercial manner. There was evidence of many dead trees and of neglect and damage to the applicants' ecoplanter system and to several plantings. Photographs, which highlight such neglect and damage, are attached to Mr Walker's affidavit sworn on 9 August 2013 (Exhibit R 20 and 21). 243What then motivates the applicants to continue what is described as 'planting of trees' in an agroforestry context on the 27 properties? In particular, when after all these years, with the exception of one or two trees, no evidence has been produced of any large scale mature nut trees on any of the properties that could be seen as a nut farm with prospects of 'selling its produce' in the future. My view is that, at stake in each land tax year, including those under review is the very substantial reduction of income tax payable by Dr Trenchev. In each year under review, a very large amount was distributed from his family trust, which receives income from his pathology business and it is effectively reduced by the expenditure that is claimed to be in relation to the alleged primary production activity on the properties. If the mere planting of nut trees is not accepted as a primary production activity by revenue authorities, Dr Trenchev would be liable to a very substantial income tax and land tax bill in each year. 244The relevant assessments the subject of the review can be affirmed on the basis that the applicants have failed to discharge the necessary onus to establish that, in the relevant years, the applicants were cultivating nut trees for sale of the produce, a prerequisite to the entitlement for the exemption under s 10AA. However, I will proceed to also consider whether the applicants have, on the assumption that they were involved in the cultivation of nut trees in the relevant years, satisfied the 'dominant use' test in respect of each property in each year under review. 245Having regard to the various factors, usefully summarised by his Honour Gzell J in Leda and other legal principles set out above, the question for determination in relation to the rental properties is whether the nut growing activity on each rental property, was the 'ruling, prevailing or most influential' use of the property as on 31 December of the preceding year for each year in issue. 246The essential short question is whether, in the relevant years, the primary production use of the properties predominated over the use of the land in each case for income-producing purposes through the derivation of residential income to stamp the land with the character of primary production land. 247No figures of any nut trees planted were before the Tribunal nor was there any evidence that there was any activity on 31 December 2005 or any evidence within the next six months. The assessments for land tax year 2006 must accordingly be affirmed. 248 In respect of the land tax years 2007, 2008, 2009 and 2010, including of course the 2006 land tax year, the rental income from the land in respect of each property clearly outweighs the extent and intensity of use of part of the land for any nut growing. The rent received in each year was substantial and each property was a residential property prior to any attempt by the applicants to plant nut trees on part of each property. The use did not change simply because some nut seedlings were planted. Until these seedlings had the potential of becoming the subject of any produce, the rental use would clearly predominate the planting use. 249In the case of the unoccupied properties, the percentage of land used for planting nut trees has to be contrasted with the percentage of land not used on 31 December of the preceding year in respect of each year under review to determine the dominant use. Unfortunately, no evidence has been produced to show what percentage of land was used in the relevant years. The only evidence but not tested, is the evidence of Dr Trenchev as to the number of seedlings planted and the number dead. No other evidence is before the Tribunal. 250The relevant unoccupied properties have not generated any income in the years in issue and in any subsequent year. It is necessary in each case to weigh the evidence relating to the use with respect to the degree, extent and intensity of the use. The inquiry in each case is essentially one of fact and degree. 251In the case of properties 1 - 3 (Lots 61, 62, and 63 Springwood Road Yarramundi), Ms Field, the applicants' tree counter was, in 2013, of the opinion that only 9.13% of the land is suitable for nut tree planting. Dr Trenchev's figures indicate that at the end of 2006 and 2007 all the trees planted were dead. And at the end of 2008 and 2009, 97.3% and 95% respectively of the trees planted were dead. These figures clearly highlight that it is difficult to conclude that the dominant use of the land in the relevant years was nut tree growing. Against the background that only a very small percentage of the land is suitable for nut tree planting, these three properties must be taken to be predominantly unused properties. The evidence establishes that the predominant use of the land in each case was not for cultivating nut trees for sale of their produce. 252In the case of property 4 (540 - 608 Halcrows Road, Cattai), according to Ms Field, 87.32% of the property was unsuitable for nut tree growing. The figures provided by Dr Trenchev indicate that, in 2006, all trees planted were dead by the year-end. At the end of 2007 and 2008, 99.4% percentage of trees planted were dead. At the end of 2009, 92.8% of the trees planted were dead. Against this background evidence, this property was not and not likely to produce any yield of produce for sale in the future. The property was dominantly unused in the relevant years. 253In the case of properties 5, 12, 14 (St Albans Road, Lower Macdonald and Webbs Creek Road, Webbs Creek) according to Ms Field, 97.86% of the land in respect of these properties was 'unplanted and unusable' for nut tree growing. Dr Trenchev's figures indicate that at the end of 2006 and 2007, there was not a single alive nut tree growing on these properties. At the end of 2008, there were only two trees alive and, at the end of 2009, there were 58 trees alive. Inspections by experts in 2012 and 2013 could not find any evidence of mature trees on these properties. Again, taking into account that only 2.14% of land is suitable for nut tree planting and the rate of trees dying in each relevant year, it is difficult to conclude that the land in respect of these properties was dominantly used for nut tree growing. The land was essentially unoccupied land in the years under review. 254Ms Field was of the opinion that, in the case of property 6 (66 Mountain Lagoon Road, Bilpin), 77.74% of the land was not suitable for nut tree growing and was unoccupied. At the end of the relevant years, ranging from 93% to 99% of the trees planted were dead. These figures by themselves suggest that the land could only be regarded as unused land in the years under review. 255In the case of property 7 (Chiefly Road, Lithgow), Ms Field was of the opinion that 93.8% of the land was not planted and was not suitable for nut trees. On the 6.2% useable land, no trees were planted or alive at the end of the 2009 year. In respect of the years 2006 - 2008, ranging from 99% to 100% of the trees planted were dead in each year. The land can only be said to be unused land, against the evidence provided by the applicants. 256In the case of properties 8, 15, and 17 (Irwins Road, Blaxlands Ridge/East Kurrajong), Ms Field was of the opinion that 88.2% of the land was not planted and was unusable for nut trees. A substantial number of trees ranging from 100% in 2006, 99.7% in 2007, 99.1% in 2008 and 76.3% in 2009 were dead at the end of the relevant year. Against this evidence, the only conclusion that can be reached is that the use of the land in respect of any activity of nut tree growing in the relevant years was not the dominant use of the land. It was essentially unused land in the years in question. 257In the case of property 9 (432 Webbs Creek Road, Webbs Creek), Ms Field noted that the total area planted was only 5.38% and that 94.62% was unplanted and unusable land for nut trees. At the end of 2006 and 2007, 100% of the trees planted in each year were dead. For 2008, the figure provided by Dr Trenchev was 96.6% and in 2009, 88.9%. In the years in question the land was essentially unused land as at 31 December of each preceding year. 258In the case of property 10 (132 Webbs Creek Road, Webbs Creek), only 8.1% of the land was, in Ms Field's opinion, suitable and planted with nut trees in 2013 when she inspected the property. Dr Trenchev's figures of trees planted and alive were, in 2006, 32 trees planted and 100% dead, in 2007, 27 trees planted and 100% dead, in 2008, 39 trees planted and only two alive and in 2009, 35 trees planted with 11 alive. These figures do not support the applicants' contention that the dominant use of the land in the relevant years was for primary production. It was unused land in these years. 259In the case of property 13 (100-102 Rickards Road, Agnes Banks), Ms Field was of the opinion that 30.47% percentage was planted and suitable for nut tree growing when she inspected the property. Mr Walker's view was that it was not suitable land for nut growing and Mr Durack was of the opinion that the land was 'suitable soil for killing a pecan'. Dr Trenchev's figures indicate that, in 2006, 310 trees were planted and only one was alive at the end of the year. In 2007, 287 trees were planted and none was alive at the end of the year. In 2008, 303 trees were planted with four alive at the end of the year. In 2009, 352 trees were planted and 36 were alive at the end of the year. In these years, from these figures, it is difficult to see that Dr Trenchev would get any produce for sale and, in any case, the land was dominantly unused land. 260In the case of property 16 (1427 River Road, Lower Portland), Ms Field was of the opinion, in 2013, that only 2.91% of the land was suitable for nut tree growing and was planted with nut trees. Mr Walker was of the opinion that the whole land was not suitable for nut tree growing. Dr Trenchev's figures indicate that he planted ranging from 11 to 14 plants with 100% dead at the end of 2006, 2007 and 2008. At the end of 2009, there was one tree alive. This was clearly not a property where one could say that the dominant use of the land in the relevant years was primary production. The land was predominantly unused land in the relevant years. 261In the case of property 27 (66 Chaseling Road, Webbs Creek) the claim for exemption was only for the 2008 - 2010 land tax years. Ms Field was of the opinion that only 2.46% of the land was planted and usable for nut trees. There is no evidence as to the number of trees planted or alive on the property as at 31 December 2007. In the case of 2008, 94 trees were planted with 92.6% dead at the end of the year. In 2009, 88.8% of the trees planted were dead at the end of the year. The area used and the intensity of the activity in 2007, 2008, and 2009 would also not assist the applicants. The land was, in those years, essentially unused land. 262In the case of property 20 (106 Golden Valley Road, Glossodia), a non-rural property and a rental property, the applicants were also required to establish other elements set out in s 10AA(2). The applicants had to establish that, in the years in issue, the land was used for primary production and that use of the land in each year had a significant and substantial commercial purpose or character and the applicants were engaged in the primary production activity for purpose of a profit on a continuous or repetitive basis. The only evidence provided by Dr Trenchev was that trees alive in the relevant years were as follows: Date Trees Alive 2006 3 2007 4 2008 5 2009 12 263Clearly, the evidence does not satisfy the commercial purpose and character of the activity of nut tree planting as being significant and substantial as required by s 10AA(2)(a). 264In view of the above analysis the applicants also fail in relation to the dominant use requirement set out in s 10AA(3) of the Act. 265Having regard to the length of the hearing, the number of experts, the volume of documentation and very lengthy submissions before the Tribunal might suggest that this matter was a very complex matter; but in reality the issues were quite simple. The burden on the applicants was essentially one of producing the hard evidence to support their allegation that a bona fide activity of cultivating nut trees for the purpose of selling the produce of the cultivation was being carried on in the relevant years and that in each case, the dominant use of the land was for such an activity. 266It follows that the land tax assessments in issue must be confirmed. APPENDIX A Property number Address Title Folio Description Zoning 1 - 3 Springvale Rd, Yarramundi Lots 61, 62, 63; DP 751660 Rural 4 540-5678 Halcrows Rd, Cattai Lots 4, 4, 6; DP 848265 Rural 5 349 St Albans Rd, Lot 8; DP 753828 Rural Lower Macdonald 6 66 Mountain Lagoon Rd, Bilpin Lot 132; DP 825024 Rural 7 Chifley Rd, Lithgow Lots 231A, 106; DP 751650: Lots 1,2; DP 574705 Rural 8 159-283 Irwins Rd, Lots 130, 142; DP 751656 Rural Blaxlands Ridge 9 432 Webbs Creek Rd. Lot 58; DP 753828 Rural Webbs Creek 10 132 Webbs Creek Rd, Lot 4; DP 249040 Rural Webbs Creek 11 72 and 102 Mitchells Rd, Lot 30; DP 587624: Residential Sackville North Lots 1, 4; DP 572032 12 433 St Albans Rd, Lot 11; DP 540848 Rural Lower Macdonald 13 100 - 102 Rickards Rd, Lot 3; DP 549305 Rural Agnes Banks 14 653 Webbs Creek Rd, Lot 49; DP 753823 Rural Webbs Creek 15 300, 302 Irwins Rd, Lots 53, 54, 56; DP 751656 Rural Blaxlands Ridge 16 1427 River Rd, Lower Portland Lot 1181; DP 816141 Rural 17 132 Irwins Rd, East Kurrajong Lot 76; DP 751656 Rural 18 2169-2177 Elizabeth Drive, Lot 9; DP 229406 Residential Cecil Park 19 96 Sackville Ferry Rd, Lot 4; DP 629929 Residential South Maroota 20 106 Golden Valley Drive Lot 133; DP214754 Residential Glossodia 21 2148 Bells Line of Road, Bilpin Lot 29; DP 751664 Residential 22 252 - 258 The Driftway, Londonderry Lot 20; DP 21883 Residential 23 127 Dwyer Rd, Leppington Lot 64; DP 655239 Residential 24 6 Seventh Ave, Llandilo Lot 6; DP 29178 Residential 25 109 Deepfields Rd, Lot 85; DP 27602 Residential Catherine Field 26 329 Calf Farm Rd, Lot 19; DP 250291 Residential Mount Hunter 27 66 Chaseling Rd, Lot 1; DP198456 Rural Webbs Creek APPENDIX B Property number Address Title Folio Description Total(a) Area (hectares) Usable(b) Area (hectares) Usable Area (%) 11 72 and 102 Mitchells Rd, Sackville North (two properties) Lot 30; DP 587624: 32.3 18.27 57 Lots 1, 4; DP 572032 (+ Lot 1) 12 433 St Albans Rd, Lot 11; DP 540848 13.76 10.87 79 Lower Macdonald 18 2169-2177 Elizabeth Drive, Lot 9; DP 229406 2.0 1.6 80 Cecil Park 19 96 Sackville Ferry Rd, Lot 4; DP 629929 10.0 8.3 83 South Maroota 20 106 Golden Valley Drive, Glossodia Lot 133; DP214754 9.3 3.11 91 21 2148 Bells Line of Road, Bilpin Lot 29; DP 751664 13.76 11.8 86 22 252 - 258 The Driftway, Londonderry Lot 20; DP 21883 2.4 2.2 92 23 127 Dwyer Rd, Leppington Lot 64; DP 655239 2.0 1.8 90 24 6 Seventh Ave, Llandilo Lot 6; DP 29178 2.02 1.6 80 25 109 Deepfields Rd, Catherine Field Lot 85; DP 27602 2.02 1.88 93 26 329 Calf Farm Rd, Lot 19; DP 250291 12.26 3.8 77 Mount Hunter Appendix C The parties and the Tribunal went to view the following properties on the following days: 23 July 2013 Property Number Address 25 109 Deepfields Rd, Catherine Field 18 2169-2177 Elizabeth Drive, Cecil Park University of Western Sydney 20 106 Golden Valley Drive, Glossodia 24 July 2013 PropertyNumber Address 4 540-5678 Halcrows Rd, Cattai 5 349 St Albans Rd, Lower Macdonald 12 433 St Albans Rd, Lower Macdonald 14 653 Webbs Creek Rd, Webbs Creek 10 132 Webbs Creek Rd, Webbs Creek St Alban's Nut Farm (known as "the Blackers' Nut Farm') 13 100-102 Rickards Rd, Agnes Banks (NOTE: All appendixes (subject to a minor amendment to Appendix A and Appendix B to include a property) were prepared by the respondent and were attached to his written submissions) ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 April 2014