Civil and Administrative Tribunal New South Wales Medium Neutral Citation: R. & E Drafting Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAD 75 Hearing dates: 9 September 2013; 10 September 2013; 5 December 2013; 6 December 2013 Decision date: 06 June 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: J.Block Senior Member Decision: The objection decision under review is affirmed Catchwords: Primary production - meaning of applicable tests "cultivation" Legislation Cited: Land Tax Management Act 1956 Cases Cited: Collector of Customs (Tasmania) v Davis (1989) 23 FCR 378; Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; 79 NSWLR 724 at [69]-[70], Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 at [48]; Hope v Bathurst City Council (1986) 7 NSWLR 669; Lease A Leaf Property Pty Limited v Chief Commissioner of State Revenue [2011] NSWADTAP 41; Eager v Smith (19 February 1988, SC NSW unreported; Safety Beach Estates P/L v. Commissioner of Land Tax 79 ATC 4032; Favello Pty Ltd & Ors v Chief Commissioner of State Revenue [2014] NSWCATAD 47; Category: Principal judgment Parties: R. & E Drafting Pty Limited Chief Commissioner of State Revenue Representation: Counsel D. Mitchell (Respondent) R Ennis (Applicant) Crown Solicitor (Respondent) File Number(s): 136013 reasons for decision Part A - Introduction and Preliminary 1The Applicant seeks the review of a decision by the Respondent (who is usually referred to in these reasons as the "Chief Commissioner") in terms of which the Applicant was assessed to land tax in respect of the 2011 to 2013 land tax years (collectively referred to as "the relevant years"). The assessments relate to properties situated at 2 Parsland Close Exeter ("No 2"), 42 Parsland Close ("No 42"), and 45 Parsland Close Exeter ("No 45")(collectively referred to as "the properties").The Applicant contends that it is entitled in respect of the relevant years to the primary production exemption under section 10AA of the Land Tax Management Act 1956 ('the Act') on the basis that the dominant use of the property was primary production in the form of cultivation of grasses for the making of hay for sale. The Applicant asserts also that in the case of No 2 cultivation of hardwood timber and firewood occurred. 2This application commenced in the Administrative Decisions Tribunal ("the ADT") The ADT was merged into the Civil and Administrative Tribunal of New South Wales ("NCAT") on 1 January 2014 and in consequence of which I am authorised and required to determine the matter as a matter of NCAT; see clause 7(2) in Schedule 1 to the Civil and Administrative Tribunal Act 2014 ("NCAT Act"). Matters formerly dealt with in the Revenue Division of the ADT are dealt with in the Administrative and Equal Opportunity Division of NCAT; see section 96 of the Taxation Administration Act 1996 and clause 3(1)(b) in Schedule 3 to the NCAT Act. The Tribunal had before it the documents lodged in accordance with section 58 of the Administrative Decisions Review Act 1997 (previously the Administrative Decisions Tribunal Act); those documents are referred to as the "s.58 documents". The Tribunal admitted a number of exhibits (some of which in the result proved to be of limited relevance) which will be referred to necessary in the body of the decision by reference to the exhibit number assigned to it. 3An initial decision was made on 24 September 2012 in respect of the 2011 and 2012 relevant years. An objection to that decision was lodged on 16 November 2012 (Tab 3 of the s.58 documents). An assessment then issued in respect of the 2013 year. By letter dated 25 November 2013 the Applicant sought to have its objection extended so as to include the 2013 relevant year; the Chief Commissioner disallowed the objection in respect of all three relevant years on 6 February 2013 on the basis that the alleged use of the property was not dominant and because cultivation as required by the Act did not take place. 4This matter was heard on four hearing days and being 9 September 2013 ("first day") 10 September 2013 ("second day") 5 December 2013 ("third day" and 6 December 2013 ('fourth day"); the Tribunal has received the transcript for all four hearing days; references to the transcript (or "TS") are sometimes prefaced by either 1 2 3 or 4 which should be regarded as references to the TS for the first second third and fourth hearing days respectively, however references to TS contained in this decision and quoted in RFS refer to the actual hearing dates involved. 5The Applicant was represented by Mr R. Ennis, a director and also, so he informed the Tribunal, its liquidator in that it has been placed in liquidation. At 1 TS 4 lines 8 to 20 the Tribunal asked Mr Ennis to send to the Tribunal the resolution or other document pursuant to which he was appointed liquidator of the Applicant. The Tribunal ruled in the absence of any objection of the Respondent that it accepted that Mr. Ennis was entitled to appear on behalf of the Applicant. Mr. Ennis advised the Tribunal that he is himself a qualified solicitor although not in practice as such. After the hearings had been completed Mr. Ennis submitted a joinder application which described the Applicant as being in liquidation; that application will be referred to later in these reasons. In some of the documents submitted by him Mr. Ennis described himself as a retired solicitor. 6When the hearings ended on the fourth hearing day, in December 2013, the Tribunal asked the parties to furnish it with final submissions and dealing in particular and in detail with the evidence which had been furnished to the Tribunal at the hearing. The Tribunal accepted that for this purpose the parties would require TS for all four hearing days and that it might be some while before TS became available. A time-table, which was generous as to time, was then formulated as to the dates by which final submissions would be required. The Applicant (belatedly) furnished its final submissions in April 2014; those final submissions are referred to as "AFS". The Chief Commissioner filed his final submissions ("RFS") on 16 May 2014. The Applicant was entitled in accordance with that time-table to a right of reply to be exercised within 2 weeks of receipt of RFS, but in the result has neither exercised that right of reply within that period nor has it sought an extension of time within which to do so. The Tribunal notes in this context that it has treated the two sets of final submissions as final in that they were so described by each of the parties; the Tribunal has however had regard to earlier submissions and in particular photographic evidence referred to in them. 7The hearing on the first day commenced rather later than was scheduled to allow the Chief Commissioner to consider a lengthy statement (running to 136 pages) received on the day prior to the first hearing day. That document was belated bearing in mind that the hearing had been set down on 19 July 2013. 8AFS was as, I have noted, submitted in April 2014. It consists of 24 separate parts each separately headed and consisting in aggregate of 461 pages. It is not necessary for me to burden this decision with the titles of those parts; suffice it to say that much of the content is of little or no relevance. By way of one example only I include the first page of part 6 (160 of AFS) as follows: Part 6 How does tax influence the use of land? Summary of this Part This Part summarises the forward leaps and errors made by past generations with a view to pointing the way forward for determining the application of the land tax exemption to rural lands. Egypt. The ancient Nile of Egypt created cultivation of its floodplain delta on a vast scale. Records from that antiquity show taxation of the produce. Our modern numerals and numbering come from this era. It is from that era that trigonometry became important to set the boundaries of land. Since then and most likely before, almost all human civilisations have taxed land or its produce in some way or another for the common good of that society. Human societies naturally define and defend the internal and external marked boundaries of their cultivated land. Window tax It is not only land use that is influenced. The buildings on the land fall under that influence too. From 1696 to 1851 a "window tax" applied in England and Wales. This was a tax on the number of windows in a building. The idea was a precursor to income tax which was an unpopular notion. It was thought that the larger the house the wealthier the owner and the more windows - so the more window tax that could be raised from the rich. This extremely unpopular tax was abolished when contrary to public health and good governance, windows were bricked up or houses were built without windows. The tax was generally a failure because it was perceived as a tax on light and air. 9There are other statements in AFS which fall into the same category; even more to the point is the fact that AFS does not attempt to deal with the evidence furnished at the hearing. It did however include new evidence and being evidence which was not tendered at the hearing and of which the Tribunal can take no account. 10In April 2014 the Applicant submitted a document entitled "Application to review and join an Applicant party" together with an affidavit by Mr. Ennis dated 17 April 2014. It may be noted that the application for review and joinder sought the removal of R. & E Drafting Pty Limited, which is the Applicant in this matter, as an Applicant, and the joinder of Richard John Ennis as an Applicant party. (It is relevant to note that the Applicant was therein described as being in liquidation.) It is hardly necessary for me to note that applications of this nature made after the hearings had ended and where only final submissions were outstanding, cannot be competent or dealt with at that stage and when the hearings have ended, and the Tribunal must therefore ignore the application. 11RFS by contrast did indeed deal, as the Tribunal had requested, and comprehensively with the evidence given at the hearing. It is for this reason that the Tribunal has drawn on RFS to some considerable extent for the purpose of this decision. The Tribunal here notes by way of example that it has included a number of extracts from TS cited in RFS. The Respondent noted in RFS that he had found it difficult to deal with the content of AFS; that this is so is not surprising. 12RFS contains under the head of "Background" a description of the properties and which in the view of the Tribunal (and having regard to all of the photographic evidence before the Tribunal and including photographs furnished in accordance with submissions prior to the final submissions) can be regarded as accurate; clauses 8 to 18 read as follows: 8. The subject properties, being No's 2, 42 and 45, were once part of a larger block owned by the Applicant. In about 2003 or 2004 that larger block was subdivided into 7 lots four of which were then sold and used for residences. The Applicant retained ownership of No's 2, 42 and 45, although during part of the period here under consideration it made efforts to sell them. 9. No 2 comprises approximately 2.38 ha of land. During all relevant tax years it was zoned "RU4 - Rural Small Holdings". 10. During all relevant tax years there has been a dwelling house located on No 2. The house has been rented during almost all of the period under consideration - the current lease commenced on 28 August 2010, i.e. prior to the first taxing date on 31 December and the tenants remain in occupation. The house is of brick construction with a concrete tile roof, and consists of three bedrooms, a study, a lounge room and a double garage Inspection reports undertaken by the managing agent in April and October show the house to be in good condition. The house and its associated yard (which is fenced off from the rest of No 2) occupies approximately 15.76 percent of the total area of No 2. 11. The balance of the land on No 2 comprises a large open space on which there is a dam, a metal shed and some eucalyptus trees. The Applicant asserts that hay or silage is cultivated on this portion of No 2 and that the eucalyptus trees are cultivated for hardwood and firewood. The Applicant refers to the eucalyptus trees as a forest, but this an overstatement as may be seen from the aerial photograph that is exhibit A6. A modest planting would be a more appropriate description. 12. Contrary to the Applicant's submissions at page 461, from the street No 2 has the appearance of a residence. 13. No 42 is approximately 2.37 ha. During all relevant years it was zoned "RU4 - Rural Small Holdings". 14. No 42 comprises open space and a dam. The Applicant asserts that it is used for cultivation of hay or silage. 15 The overall appearance of No 42 is that of a vacant block with a concrete drive leading into it. 16. No 45 is approximately 3.179 ha. During all relevant years it was zoned "RU4 - Rural Small Holdings". 17. No 45 comprises open space and a dam. The Applicant asserts that it is used for cultivation of hay or silage. 18. The overall appearance of No 45 is that of a vacant block with a concrete drive leading into it. PART B - APPLICABLE STATUTORY AND CASE LAW 13For the tax years under consideration S.10AA provided (and still provides): 10AA Exemption for land used for primary production Land that is rural land is exempt from taxation if it is land used for primary production. 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 (4) 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 the land is rural land. 14As all three properties were zoned rural, only the test in s.10AA (3), i.e. the dominant use test, needs to be satisfied in order for the Applicant to obtain an exemption. 15As to the dominant use test, in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 at [48], Campbell JA stated: The enquiry that is called for by s.10AA (3) is: (1) Is the land used for any of the purposes listed in s 10AA (3)(a)-(f)? (2) Is the land used for any purpose that is not listed in s 10AA (3)(a)-(f), and if so what is it? (3) If the land is used for one or more of the purposes listed in s 10AA (3)(a)-(f), and is also used for a purpose that is not listed in s 10AA (3)(a)-(f), is the use for one or more of the purposes listed in (a)-(f) the dominant use of the land? 16In Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; 79 NSWLR 724 at [69]-[70], Gzell J (at first instance) said of s.10AA(3): 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 is the main chief or paramount use. 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. 17His Honour then referred (at [72]) to Hope v Bathurst City Council (1986) 7 NSWLR 669 (a decision under the old s.118 of the Local Government Act)) and noted that the Court of Appeal in that case held that the test "did not relate solely to the quantum of area 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". 18At [76], Gzell J quoted with apparent approval the following passage from Thomason v Chief Executive, Department of Lands (1994-1995) 15 QCLR 286 (a decision under s.17(2) of the Valuation of Land Act 1944 (Qld)): 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 section 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, 19These factors must be considered from both a physical and economic perspective: Cornish Group v CCSR at [42], per Judicial Member A Verick (although see the cautionary note of Judicial Member R Perrignon in Ball v Chief Commissioner of State Revenue [2010] NSWADT 114 at [60] and [65] concerning the use of revenue). 20The approach of Gzell J in Leda v Chief Commissioner was approved on appeal by the Court of Appeal: see at [43], per Allsop P (with whom Campbell and Whealy JJA agreed). As to the period which should be examined, in Leda v Chief Commissioner Gzell J considered that in that case six months before and six months after the taxing date was a reasonable period: see at [4]. It is acknowledged that this is not a hard and fast rule, although it has been adopted as somewhat of a rule of thumb because it permits consideration of financial records. (It may be noted at this early stage that the Applicant contends that such a period is not appropriate in this case and submits that "the cultivation of rural land may be looked at holistically during the period under review without recourse to any artificial 6 month relation back and forward" (AFS 166-167). The Tribunal considers that and in any event, the consideration of a shorter period would not assist the Applicant as is apparent from the consideration of the evidence set out later in these reasons. The Applicant also seeks (AFS 453) to distinguish Leda on the basis that it was a decision under s.10AA (2) and not s.10AA (3). The Tribunal here notes that such a distinction is not competent because Leda was decided on the question of dominant use which is common to both subsections, and not on the business and commerciality tests unique to s.10AA(2)). 21In this case the Applicant in order to succeed must discharge the onus of establishing that there was in fact during the relevant years, cultivation within the provisions of the Act. In this particular context the Tribunal refers to the Appeal Panel decision of Needham DP, Verick JM & Butlin NJM in Lease A Leaf Property Pty Limited v Chief Commissioner of State Revenue [2011] NSWADTAP 41: The ordinary meaning of 'cultivation' is derived from the definition of 'cultivate' in the Macquarie Dictionary: To bestow labour upon (land) in raising crops; till; improve by husbandry; to use a cultivator on; to promote or improve the growth of (a plant, etc) by labour and attention. And from the Oxford English Dictionary: The tilling of land; tillage, husbandry. Improvement (of land); increase of fertility; the production or raising of a 'crop' of any kind (as oysters, microscopic organisms, etc.); also the product of such cultivation (of bacteria etc.) It will be noted that the word 'propagation' is not mentioned in either definition, the essence of the meaning of cultivation here being the development and care of a plant or plants. Included within the concept of cultivation of land in paragraph (a) would be, for example, the planting of trees (whether propagated on the land or not) for forestry or fruit growing purposes, which are then nurtured by fertilising, watering, pruning etc. ( Safety Beach Estates P/L v. Commissioner of Land Tax 79 ATC 4032.) 22The Tribunal refers also in this context to the decision of Senior Member Verick in Favello Pty Ltd & Ors v Chief Commissioner of State Revenue [2014] NSWCATAD 47 (16 April 2014) as follows: 186. Cultivation 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. 23The term "cultivate" has received judicial attention in other contexts: (a)in Stanway Oyster Cylinders Pty Ltd v Marks (1996) 66 FCR 577 at 585, Drummond J considered the meaning of the word in the context of a patent which included it. His Honour said: The expression "cultivation", in ordinary language, commonly refers to the activity of producing or raising a crop. See the definition of "cultivation" in the Oxford English Dictionary and in the Macquarie Dictionary, 2nd Ed Both give "husbandry" as a synonym. As each dictionary shows, this term, in ordinary language, commonly refers to the business of a farmer; agriculture; farming. I consider that the language of claim 1 must be taken to refer to these notions. If claim 1 is read in a practical commonsense way, as those to whom it is addressed, viz, persons experienced in growing oysters and other molluscs, would read it, rather than being given a strict literal construction, the claim is for an apparatus for growing molluscs for use in the activity of producing a sufficient number of molluscs to be called a crop, (b)In Collector of Customs (Tasmania) v Davis (1989) 23 FCR 378 Beaumont J was considering whether drying of parsley comprised cultivation in the context of a diesel fuel rebate for primary producers. At 383 his Honour said: The first question in the appeal is whether the respondent's drying methods fall squarely within the description the "cultivation", or "gathering in", of his crop. By "squarely" is meant the notion that the dehydration procedure is an integral part of the cultivation, or gathering in, of the crop, as distinct from something merely ancillary or incidental to it. According to the Macquarie Dictionary, three primary meanings of "cultivate" are: 1. to bestow labour upon (land) in raising crops; till; improve by husbandry. 2. to use a cultivator on. 3. to improve the growth of (a plant etc.) by labour and attention. (And see, as to the meanings of "cultivate" and "agriculture", Frauenfelder v Reid (1963) 109 CLR 42, per Windeyer J (at 52-53).) [Frauenfelder v Reid is in fact of little assistance in the present context because consideration was given to agriculture not cultivate]; (c)in Eager v Smith (19 February 1988, SC NSW, unreported), Carruthers J was considering a charge of cultivation of cannabis. That term had a statutory definition, but his Honour considered that definition to be inclusive rather than exclusive. In relation to the charge at hand his Honour concluded that: the watering of seeds and the preservation of them within wet tissue paper with the intention of planting them would, in ordinary language, involve the cultivation of those seeds". ... I note that in the judgment of the Court of Criminal Appeal of Queensland in R v Stratford McDonald [1985] 1 Qld R361, at 369, Macrossan J (with Ryan J concurring) said: "The concept of cultivation involves taking seeds or plants into care for the purpose of fostering growth or further growth from them, most frequently with a view to harvesting the plants"; (d)In R v Giorgi and Romeo (1981) 31 SASR 299 at 302-303, King CJ considered the meaning of the word in the context of South Australian legislation prohibiting cultivation of narcotics (which legislation did not provide a statutory definition). His Honour noted that the term could "encompass the whole process of production from the soil, including preparing the soil, sowing, tending and caring for the plant during the growth and reaping or harvesting". 24The Chief Commissioner contends (and the Tribunal agrees) that, in the light of the above definition and authorities, cultivation requires more than allowing grass or trees to grow on land. There must be labour and attention devoted to ensuring this occurs. Furthermore, it is apparent that the term imports a purposive element in that the labour must be engaged in to achieve an end, i.e. production of a crop. For example: (a)a person would not cultivate a weed which grows on their land of its own accord even if its growth is encouraged by the person accidentally fertilizing it while fertilizing other crops on the land; (b)a person may cut grass to promote growth. Alternatively they may cut it because long grass is a nuisance to them. It could not sensibly be argued that in the latter example the person was cultivating as opposed to managing the grass. This purposive interpretation is consistent with the need for the cultivation to be for the purpose of sale. It is also apparent from the passage from Safety Beach Estate v Commissioner of Land Tax included previously in this decision that cultivation should be "in accordance with the practices of husbandry applicable to that crop". PART C - THE EVIDENCE OF MR ENNIS; EVIDENCE IN CHIEF 25Mr. Ennis furnished one witness statement (Exhibit A11) prior to the first hearing day (and others after the hearings started); Exhibit A11 which can be regarded as containing to some considerable extent the evidence in chief of Mr. Ennis, reads as follows: "On 20 May 2013, I Richard John Ennis of 24 Thornbill Glen Nambucca Heads NSW 2448, Retired Solicitor say on oath: Applicant's share structure and my official role in it in determining a purpose for the Applicant's activities during land tax years 2011, 2012 and 2013. * At all material times, I am the sole director and sole shareholder of the Applicant (refer company extract in annexure A). * I hold the majority of shares in the Applicant non beneficially as executor of the estate of my late father, the late Douglas William Ennis, (Pa). I also hold one A class share in the Applicant non beneficially as trustee for my sister Suzanne Joy Walters (Sue). Sue is also a residuary beneficiary in Pa's deceased estate. * I understand the effect of this non beneficial ownership is that I am sole decision maker for the Applicant in determining its purposes and activities. * I am constrained in determining a purpose for the Applicant's activities by my fiduciary obligations due to Sue as executor and trustee. * As at the date of this affidavit I am further constrained as I am not satisfied that Sue has capacity to manage her own affairs by virtue of her mental illness. 26Introduction to primary production purpose * In this affidavit, I refer to each property subject to the disputed land tax assessments as Lot 3, Lot 5 or Lot 7 as the content requires. * At all material times: (a) the only land held by the Applicant was lots 3, 5 and 7. (b)the only plant and machinery owned by the Applicant was associated solely with the cultivation of lots 3, 5 and 7. (c)neither the Applicant nor myself nor members of my immediate family owned any other land where the agricultural product cultivated on lots 3, 5 and 7 could be used. (d)no associated person of the Applicant has ever used the agricultural product cultivated on lots 3, 5 and 7 including but not limited to beef, chicken, vegetable, fruit or other like produce for their personal use. (e)the agricultural product cultivated on lots 3, 5 and 7 has only been used for the purpose of selling to third parties. 27Initial genesis of primary production purpose - 1968 onwards * In late 1968 when I left high school I worked as a station hand on the wheat fields at Gurley station near Moree NSW. I was involved in the wheat harvest and replanting for the next year's wheat crop. This work included driving headers, burning off the stubble, chipping, ploughing and replanting with seed drills. Gurley station also ran sheep and cattle. 28Primary production as the purpose of Acquisition of the subject land - 1970's onwards * On 8 November 1971 as an articled law clerk I witnessed the Articles of Association of the Applicant. The owners of the initial subscriber shares were my late father, Douglas William Ennis (Pa), and my late mother, Elizabeth Joy Ennis (Ma). * In 1975, my legal firm posted me to Canberra to work. At that time, my late parents lived in Sydney. * In early 1976, Pa, Ma and I discussed buying a farm for beef production half way between Sydney and Canberra. On behalf of the Applicant as the purchaser, Pa negotiated the purchase of 2 lots of vacant rural land at Exeter NSW which is located half way between Canberra and Sydney. * The land acquired was part of a larger farm known as "Cornwall Park". Cornwall Park was used and pastured improved for grazing cattle (see Burton of Bowral Valuation in annexure 'B'). * Haidee Joy Johnston (Haidee) then the infant first grandchild of my parents called the land "Parsland" [as in "Pa's land"]. This became the name of the Applicant"sfarm. The name was on a signpost at the truck entrance then located on Cornwall Road. Where the context requires I refer to the farm as "Parsland". Where the context requires I refer to the signage on Cornwall Road as "Cornwall Road signage" (refer photo #31). * Lots 3, 5 and 7 are part of the original acquisition of Parsland. * In April 1976, the Applicant commenced breeding and grazing cattle on Parsland. The Applicant purchased a Hereford bull to service the herd. * The Applicant expanded the grazing land for Parsland by buying adjoining vacant rural land to the North (the Carmen Block shown in Annexure I). Pa engaged a stock and station agent, Ewan Murdoch, to negotiate the purchase on behalf of the Applicant. * From March 1976 to about 1979 until I went overseas for work, Pa, my brother in law, Warren Cedric Walters (Warren), and myself laboured in the farm including but not limited to the following: (a)Erecting windbreak fences on the boundaries; (b)Erecting internal fencing and farm gates to create paddocks; (c)Laying water pipes and installing water troughs for cattle; (d)Ploughing, slashing, broadcasting rye and clover seed, fertilising and scarifying the paddocks; and (e)Drenching cattle. * The Applicant employed contractors to erect extensive wooden cattle yards equipped with holding pens and a metal cattle crush. Contractors also dug 2 dams and erected some sheds. * One dam built during this period is located on Lot 3. * The shed is located on Lot 7. Later additions were made to the original shed to accommodate more machinery, a farm trailer, seed broadcaster, slashers (2) and hay. Fence posts, fuel and miscellaneous farm bits were also kept in the shed under lock. * The original shed had a concrete strip for the tractor, primitive kitchen, outdoor oven, septic toilet and shower and space for other equipment. An old caravan was parked alongside. Pa and Ma mostly used the caravan for sleepovers. These 'rural worker' facilities were very unsatisfactory and, so far as I knew, not approved by Wingecarribee Shire Council in permitting construction of the shed. 29Design of the farmhouse associated with primary production purpose * In 1979 the Applicant contracted with AV Jennings to build a farmhouse near the sheds. * Some short time after the farmhouse was built a garage was built next to the farmhouse on the Western side. So far as I am aware the construction costs are set out in the Applicant"sBalance Sheets supplied to the Respondent under the heading 'farmhouse'. Fertiliser and similar supplies were stored in one space behind a manual door to keep it dry under closer supervision to protect it from pests and weather. A motor vehicle was kept in the other space behind a door equipped with a remote control. Farm equipment (mainly trailers) was also kept in the garage when the fertiliser and seed was not stored there. The garage is designed to allow equipment to be moved in and out of it not only through the usual roller door on the Southern side but also by being able to access through an open Eastern wall. This wall was deliberately not bricked in. The arrangement allows close security of the garage. This scrutiny is aimed not only at thieves but also rat vermin attacking the seed. * Due to the design of the garage all the garage and its contents can be seen from the rear patio on the North side of the farmhouse. * The farmhouse kitchen was open to the living room along the North side of the farmhouse. The view looks out over all the paddocks. The view extended all the way to and included Carmen's Block. * The sheds on the Eastern side could be seen from the living room (a side double glass door was included in the farmhouse design of the living room especially for this). The shed could only be accessed through a locked truck entrance or by driving over a second noisy rumble cattle grid entrance off Cornwall Road and past the farmhouse. The old access lane to the sheds via the farmhouse is now the only one in use and passes a few feet away from the bedrooms of the farmhouse. * The farmhouse and garage remain on Lot 7 unaltered from 1979. Only the entrances off Cornwall Road have changed (see below). 30Use of the farmhouse associated with primary production purpose * From about 1979-1983 I worked overseas. During this time I returned to Australia on short visits only. I saw that the farm was still being reasonably well operated for grazing cattle. The farmhouse was occupied by my late parents when Pa worked on the farm. At other times, my late parents lived at their matrimonial home at 27 Darling Street Chatswood. * In October 1983 I returned to Sydney due to my parents difficulties. Ma was in the final stages of cancer and living at 27 Darling Street Chatswood. She was receiving treatment from Royal North Shore Hospital and home nursing care as a bed invalid. Pa had taken full time leave from his business to provide round the clock care for her. * In October 1983 to assist my parents, my family and I took up a caretaker role and managed Parsland full time. We lived full time in the farmhouse for about 10-12 months. 311984 onwards * In February 1984 Ma passed away. I was an executor in Ma's estate. I still hold Ma's one A class share in the Applicant as trustee for Sue. * When I became co-director of the Applicant in 1984, Pa was the other continuing co-director. * After Ma's death my wife, my 3 children and I stayed in the farmhouse while I worked full time on Parsland and while Pa put his Sydney business up for sale. To support my family, I started a business in nearby Moss Vale. * Altogether, after returning from overseas, my family and I lived in the farmhouse as caretakers at Parsland for about 12 months. After returning from overseas I observed that Warren and Sue were not involved much in any labour associated with Parsland. All necessary work was on me personally or by rural contractors engaged by either myself or Pa. * During and after the time that I lived in the farmhouse, I personally erected all internal fencing to connect Carmen's Block with the cattle yards by laneways. I also erected windbreak fencing for Carmen's Block and planted extensive Pine tree wind breaks. At this time, Pa and I ran heifers with calves and there was much work to do at calving, drenching, and so on. * I became familiar with most of the rural contractors in Moss Vale. * I often bogged the tractor in the creek on the southern boundary of lots 3 and 5 and in low areas in the wood paddock leading to Carmen's Block. Pa and I spent an enormous amount of manual labour into building culverts and laying a sandstone base to the connecting laneway. None of this work was satisfactory as flood waters destroyed the culverts. The land in the low areas near the creek is clay which when wet sucks the sandstone into deep ruts. These problems were very relevant in later constructing Parsland Close as all weather paved truck access from Cornwall Road to Lot 7 to Lots 3 and 5. * Pa had become especially friendly with a local stock and station agent, Ewan Murdoch. Through interaction with Ewan and Pa, I became more interested in cattle breeding on Parsland using only Hereford cattle genes. Ewan and other stock and station agents later became my clients in my legal practice in Moss Vale. * Soon after Ma's death, I built a house for my family in Buskers Avenue Exeter. Buskers Avenue is located about 1 km from Parsland. * For the next 12 months after my family vacated the farmhouse it was occupied as required by Pa or I or both as we worked on Parsland. * About 2 years after Ma's death, Pa sold the former matrimonial home and his business in Sydney and moved into the farmhouse at Parsland as its full time caretaker. A year or so later he bought a flat at Ulladulla which he used for a break from farming or during school holidays and so on. * Pa controlled the daily farm management, accounts and banking. I was his unpaid farm labour. Through our working together on the farm, we became very close. * Pa was the family patriarch. I generally deferred to Pa's ideas associated with any changes to primary production on Parsland and the later sale of land forming part of Parsland. 32Reasons for changes from grazing to cultivation as primary production at Parsland Study and experience My sons * While I lived at Exeter I sent my sons, Jamie and Scot, to Hurlstone Agricultural College which is a selective public boarding school providing courses in animal husbandry, agriculture farm management and associated courses as well as the usual high school subjects. The school has a farm and regular field trips. My sons also helped Pa and myself with our work on Parsland. Pa * Pa was never formally educated in farming but together we learnt a good deal from day to day experience. For example, when we first started pasture improvement in 1984 at Pa's direction I chipped and ploughed a large paddock to the East (part of Lot 7 and other land). I thought that I knew all about ploughing following on from my experience at Gurley Station as a youth. After ploughing, broad seeding rye grass and fertiliser all that grew initially was a lush paddock of weeds. * Based on my later agricultural studies I would now say to Pa if he were alive that neither of us had understood the importance of only seed drilling established pasture and the proper use of herbicides and pesticides. * Better calving and drenching techniques were also developed by Pa and me through study and experience. * I reseeded Carmen's Block and the higher parts of Lots 3 and 5 without ploughing. Pa told me words to the effect: "I reseeded and fertilised other parts of Parsland". * Pa was interested in designing farm infrastructure - culverts, laneways, fences and the like. * Pa was not interested in agriculture as opposed to cattle grazing. Due to his views on agriculture, Parsland has never had a vegetable patch or other farm activity that could be used to privately support any parties related to the Applicant. Me * Over a period of years from 1985 onwards, I began and completed rural studies courses at Moss Vale TAFE which included but was not limited to: -. Beef management. -. Mushroom growing - Land Economics - Rural Aspects -. Stock and Station Practice (refer academic record in annexure C) * In 1990 I qualified as a stock and station agent and still hold a licence for that profession (refer certificate evidencing licence in annexure D) 331990 onwards * By the early 1990's I had a network of stock and station agents (2 of whom I acted as lawyer) and teachers in rural studies (through my TAFE studies). I also met local farmers through Moss Vale Rotary and at the saleyards. * Through Ewan Murdoch I was introduced to CALM (Computer Aided Livestock Management) which was a kind of early form of EBay for cattle sales. * Through my studies and through my TAFE teacher I formed the opinion that if the Applicant's beef production activity was to continue, the best beef production on Parsland would be achieved by fattening vealers in spring and leaving the land fallow in late summer, autumn and winter. As I could not persuade Pa to his purpose, the Applicant continued to breed and fatten store cattle supplied by Ewan Murdock. * We were caught out a couple of bad seasons in a row. Parsland became over grazed (refer photograph of tractor attached to Lloyd Bruce's affidavit). We purchased expensive hay and fodder supplements for the herd to get by. I was involved in time consuming daily hand feeding. As best I can recall, the shed annex was modified at this time for storing hay bales by the addition of an extra panel. * By this time I had attended several hoof and carcass sales. Cattle sold on the hoof are slaughtered and the carcass is assessed. I had toured the Moss Vale abattoirs. I was not happy with the quality of our hoof and carcasses. * In 1991 there was an economic recession. I moved to Sydney for work as a contract lawyer. Between contracts and on weekends I was free to stay at Parsland and work the paddocks. My sons finished their high schooling at Hurlstone Agricultural College and began their tertiary education. * From Sydney, my wife and I still remained involved in the farm work at Parsland. Pa occupied the farmhouse as caretaker. * Ewan Murdoch continued to supply store cattle to Parsland as Pa directed. Once fattened, Ewan Murdock sold these store cattle for Pa at the local Moss Vale saleyards. On at least 2 occasions I said words to the effect to Pa: "We are overgrazing Parsland. All the cowpats and hoof trampling is destroying pastures. We should restrict ourselves to just fattening vealers in spring". Pa replied with words to the effect: "No. I will do what Ewan says". 34First and Second Reduction in land area * In 1993, Pa said to me words to the effect: "I've decided to sell the block in the top corner. I need some money". I said: "OK". The block was sold with Ewan Murdoch acting as selling agent for the Applicant (refer deposited plans attached to Rengger affidavit). * Pa was friendly with a neighbour and his partner, Carmen Perkins. I saw that Pa would occasionally go to dinner at the neighbour's house. The day after one of these dinners, Pa said to me words to the effect: "I agreed to sell the block on Sally's Corner Road to Carmen ....." * A few days later Pa said to me words to the effect: "I instructed Alastair to prepare a contract for sale for Carmen's Block". 'Alastair' was Pa's late solicitor. A boundary adjustment was made to give effect the sale (refer to deposited plan in annexure I). * Though no longer owned by the Applicant, Carmen's Block is still cultivated and cut for silage. * Pa continued to graze and sell cattle on the reduced land area; but no longer used breeders. He restricted the herd to store cattle. * In 1997, the Moss Vale abattoirs closed. Pa continued to graze and sell cattle. * Pa continued to live in the farmhouse as caretaker for the Parsland herd and farm operations generally. * I cut and sold fallen stands of hardwood as firewood on the hill between Lot 3 and Carmen's Block (we called this paddock the Wood Block - now lot 4 - see annexure I). The supply of fire wood from branches and fallen trees on the Wood Block was exhausted. From this experience, I knew that the native species grew well in the long term. I did not know much about eucalyptus species. I had the general idea that paperbark varieties grew better in wet soil and as the land rose out of the water table the more valuable hardwood species could be cultivated. I knew that trees on high ground acted as pumps to lower the water table on low ground through natural aspiration. I knew that a lower water table reduced salt levels and allowed for better pasture. * In about 1997 I became interested in cultivating the ridges of Parsland for commercial hardwood timber. At my request, Pa travelled to Goulburn to meet the local department expert on the topic. After soil sampling tests by the department that Pa arranged, Pa a selected a species of eucalyptus for trial. At my expense, I planted trials of this species of eucalyptus on lot 7, the Wood Block and at various other parts of Parsland. I fenced the trials areas off from cattle grazing * My purpose was that once the trees matured the timber could be logged and sold for valuable hardwood timber. In the meantime, the branches pruned from time to time could be sold for firewood. The gum branches would not require splitting and were popular firewood. * There is a problem with high water table levels in the low areas. I had seen pine trees in our windbreaks suffer in these areas. They were prone to storm damage and root fungi. Pine trees took hold quickly on higher ground. * Soil on the high ground at Parsland has protrusions of basalt. Soil in the low areas has a covering of clay and loam over basalt. The clay can quickly and with little warning bog heavy equipment when wet (see above) but because it closes up the soil in small particles it also drowns young trees when wet. * There is a problem with weeds suffocating young plantings and even small trees. This problem is made worse by watering the base of the planting. Yet the young tree needs a good water supply for a few years until the roots get down to the basalt. * My trials convinced me that good weed protection for the young eucalyptus plantings was essential. The trials were watered by me using a hose from our large tanker trailer towed by our tractor. This equipment compacted the soil and could be bogged without warning - a disaster in a row of trees. I became convinced that it was better to have a good drip water supply to each tree. I had seen this work very well in a well managed property further along Cornwall Road. * In 1999, I was satisfied that it was worthwhile planting a commercial forest. Pa did not agree to spend the money on a drip water supply. Pa had purchased a tractor attachment to dig water furrows (channels). At his direction, I dug channels using this attachment. I used wood chip mulch as protection and planted the forest at my expense. I purchased an electric Flymo to be used to knock down the weeds. The Flymo was to be attached to a generator mounted on the tractor trailer. * My first eucalyptus forest was successful on the high ground. It is located in the South eastern corner of lot 7 and pictured in the photographic montage. * The eucalyptus trial in a wet area on lot 7 was less successful. The tops were lopped to encourage secondary growth of branches for later firewood sales. * There is also a discernable lowering effect on the nearby water table which improves cultivation. * If the forest cultivation is to be repeated more successfully on other sites on the farm then I would have water supplied from the dam on each lot pumped to each planting through a dedicated drip reticulation system. Using a tanker is labour intensive, compacts or ruts the soil and sometimes damages the young trees. Weed control initially is best dealt with by a combination of Ecocover (a form of recycled paper compressed into weed matting) or similar with mulch on top. Then, when this protection naturally decomposes over time, apply herbicide and use a zero turn commercial mower. Eventually the eucalyptus forest will poison and smother most grasses and weeds (except blackberry). Systemic blackberry herbicide (I used Brushoff) must be applied by moistened hand glove to avoid spray drift issues on the forest. * If the forest cultivation is to be extended then I would probably extend the existing forest West along the ridge in lot 7 and plant a new forest on the Northern boundary ridge of lots 3 and 5. 352000 onwards * By this time, I had come to the conclusion that the days for beef production on Parsland were coming to an end. A combination of cropping hay and hardwood forestry was the way forward. * Some farms in nearby Sutton Forest had been planted out for vineyards. I did some research on vineyards and wine production combined with bee keeping for the sale of honey. This did not go forward. However, the dams I later installed on lots 5 and 7 with all weather paved road access along Parsland Close allow for this and other forms of cultivation. * The land had been effectively trampled and roughly compacted by Pa's hungry steers. Any grazed area needed to be left fallow to recover. * Nonetheless, Pa continued to graze and sell cattle. 36Third Reduction in land area * About 2002 Pa said words to the effect to me: "I want to sell Parsland and use the money for my retirement. .... I've been offered ...... walk in walk out." We then discussed generally the financial return from beef production and the hard work involved and the risk of personal injury. Pa had crushed his big tow under the slasher. He had also injured himself in the cattle crusher. * As part of this general conversation I said words to the effect: ".... There is too much of both our time effort and capital invested in Parsland to throw it all away. It's not a good offer. ..... let me sell off some paddocks from the farm to get you some better money. ... ..... I don't want you to guarantee any new loans and put yourself at risk. You will need to resign as director so I can do all the negotiation with the bank. I can give all the guarantees the bank may need. Lorraine can be appointed co director to sign things too in your place or if I am away or die or whatever." * He replied: "Alright". * Pa had money to live on so far as I was aware but no funds to apply towards the development capital required by the Applicant. With the assistance of Arella Pty Limited (Peter Lowry and his son, Christopher Lowry), I looked after the finance, construction and all marketing matters associated with the sale of paddocks known as lots 1,2, 4 and 6. * About 2002 a rural contractor, Arthur Griffiths, removed the internal fencing with his own equipment. Arthur stacked the posts, scrap barbed wire and materials near the sheds on lot 7. I was surprised at how much debris there was. * The zoning certificate issued at the time for attaching to the Contracts for Sale of those lots shows a zoning of Rural 1C. 37Sale of hay crop * The first hay crop was cut, raked and baled once all the paddock fences were removed. * At my direction and with my consent a hay crop was under harvested under the control of the late John Mail, the project manager for Arella Pty Limited. The crop was harvested by Arthur Griffiths initially at the expense of Arella Pty Limited. The Applicant reimbursed Arella Pty Limited for the costs of harvesting by Arthur Griffiths ($3,102) and Arella allowed the sale of the hay against its fee due from the Applicant ($4,733) for work in carrying out the development. The adjustment for the hay crop was taken into consideration in the final settlement over Arella's fee in assisting the subdividing of the farm paddocks into 7 lots and successfully marketing the sale of 4 paddocks. * I believed that the 4 lots sold were the least suitable for cultivation. These were lots 1, 2, 4 and 6 Parsland Close. * Lot 1 was not suitable as it has a large dam and boggy area above and below the dam. Lot 2 is not suitable as a large proportion is within the creek flood plain. At the time of sale it had a bulrush and blackberry infestation. Lot 4 was not suitable as it too had a large dam and boggy areas to the East and West of the dam (the new owners have since spent a fortune in drainage works and have approached me to drain their dam through lot 3). Lot 6 was in reasonable condition for cultivation but the low areas had not been pasture improved. In hindsight, I should have kept it. None of the current owners of the lots that were sold use their lots for baling hay and silage. Many neighbours do so. * As part of the works carried out under the supervision of Peter Lowry, the earth moving contractor created one dam on each of lot 5 and lot 7. This work accorded with my intentions for future cultivation on lots, 3, 5 and 7. Each of lots 3, 5 and 7 owned by the Applicant now had a permanent dam for reticulation. * At the time, cultivation of a vineyard, olive grove or Christmas tree plantation was a possibility too. 38Income Stream and its effect on the use of the farmhouse * All 3 lots retained by the Applicant were zoned Rural 1C and a land tax exemption applied. * The Applicant continued its cultivation program on the 3 lots at Parsland. * The proceeds of sale from the unwanted lots were paid into the bank account of the Applicant. The Applicant invested the money raised in cash management accounts and a share portfolio. The income generated from these investments provided fully franked dividends from the Applicant for Pa. Pa received both a dividend and tax refund based on the franked dividends. I have never received any dividend or director's fees from the Applicant. 39Div7A restraints on associated persons of the Applicant using the farmhouse * After the sale of lots 1, 2 4 and 6, my attention was drawn to changes in the application of Div7 A Income Tax Assessment Act (Div 7A). The change prevents any associated person of the Applicant occupying the farmhouse full time without paying market rent. To do so would create a deemed dividend under Div 7A and could adversely effect the franking account for Pa. For this and other family reasons related to Sue and Pa's directions regarding Sue, no associated person of the Applicant could occupy the farmhouse full time. * The Applicant entered into a loan that complied with Div7A Income Tax Assessment Act being a loan to an associated entity. * In the rating years after the sale of the paddocks, Wingecarribee Shire Council did not charge water charges to lots 3 and 5 as they were not connected to town water. Even though the farmhouse was vacant, water charges did apply to Lot 7. * After the sale of lots 1, 2 4 and 6, the lots kept by the Applicant, being lots 3, 5 and 7, were cultivated as per my purpose alone (Pa had resigned as director). Further rye grass was seed drilled on poor patches on the 3 lots created by heavy equipment used for creating Parsland Close. There were sprays for weeds and blackberries. There was regular slashing to promote growth and sweet grasses on every lot. Over a long period sour cow pat grasses eventually disappeared and were smothered by the rye. The soil was left fallow to allow deep earth worm aeration. * The cattle yards and holding pens on lot 7 were removed and debris stacked on site on Lot 7. * The lower branches in the eucalyptus forest were pruned to promote growth. Undergrowth in the gum forest was removed. 40External finance arranged for extra farm infra-structure on Parsland * In 2006, the Applicant created a finance facility with Perpetual secured by mortgage on lot 7 and my personal guarantee as sole director. The finance facility would allow the Applicant to invest up to about $190,000 in planned farm infrastructure. * The Applicant did not need to use this finance facility from Perpetual and it was kept at nil balance. 41Reduction in labour force supplied by associated persons of the Applicant * Sometime after arranging the finance facility with Perpetual, I lost the top of my right thumb in a mowing accident which also injured the fingers and tendons in my right hand. Thereafter contractors did most of the heavy manual labour on Parsland. * On 3 August 2009, Pa died. He was cremated and his ashes scattered at Parsland next to Ma's memorial under a Golden Cypress (see below). 421 January 2010 onwards - Beginning the first land tax year under review * At all material times I believed that Parsland was exempt from land tax. * In early January 2010 I took holiday leave and worked full time at Parsland. * I hired a power cutter in Moss Vale. * I worked on pruning the forest and cleaning up blackberries and the windbreaks generally. I picked up sticks and fallen timber. * I hired a utility and took some loads to the Moss Vale Recycling. * On Thursday 28 January 2010 I purchased a commercial mower and additional farm equipment for cultivating Parsland. I stored this plant and equipment with the other equipment in the shed at Parsland. I called Jason at Alpine Locks to fit new locks to the shed. * I returned to my office. At 13:48 on Tuesday 3 February 2010 from that office I called Jason at Alpine Locks and said words to the effect: "Have those locks been fitted. I have put some valuable gear in the shed." He replied "No not yet. I will do the locks today". * I have read the affidavit of Bruce Noble filed in these proceedings and agree with its contents generally. I confirm that on Wednesday 3 February 2010 from 11:41 to 12 noon I orally negotiated by telephone from my office with Bruce Noble on behalf of Noble Contractors to take away most of the debris on lot 7 and remove the concrete footings etc still lying around the former cattle yards. Noble Contracting also was engaged for spraying for weeds - in particular blackberry patches in all paddocks and in the eucalyptus forest. Part of the consideration for this work was to agree that Noble Contracting could cut and harvest the hay on the 3 lots and keep the ownership of the hay produced. * It suited me to do this as I was working in Coffs Harbour (about 700km away). It was difficult for me to drive the 10 hour trip every weekend to Parsland to make decisions on harvesting and supervise work. I was also severely grieving my father's death. I was taking leave from my job to deal with Parsland. My wife was carer for her bed ridden mother in Bellingen. * Storing hay in the shed after harvest was not feasible as the shed was infested with rats. From previous experience in storing hay in the shed, I knew that rats make their nests in the hay and the rats attract snakes. Snake infestation and aggression (brown and black) is a continuing late summer problem in the two culverts of Parsland Close and wet areas of Parsland itself. I wanted to get to the shed safely to access the newly purchased equipment. So my decision to allow Noble Contracting to remove the hay from the lots directly and store off site instead of storing it in the shed under cover was very useful for me. * Noble Contracting was also taking the risk of wet weather. * Noble Contracting was taking transfer of title to the hay before it was cut and as soon as the contract for its sale was agreed. There was no need for a written contract or any paperwork at all so far as I was concerned. I trusted Bruce Noble of Noble Contracting. * With hindsight if I had known that there was any risk of a land tax assessment on land that I was sure was exempt simply because I could not immediately produce an invoice or receipt or similar to the Respondent, I could easily have drafted a written contract. * On Monday 8 February 2010 I spoke by telephone to NRMA about farm building and contents insurance. I updated the insurance. * On Friday 12 February 2010 at 11:53 I ordered 32 tonne of soil from Highland Landscape for filling in the ruts in the paddocks. At the same time I also called Bruce Noble and he said to me words to the effect: "I will do the clean up next week". * I ordered Ecocover for weed protection of existing trees. On Friday 26 February 2010 I hired a van to deliver the Ecocover to Parsland and my wife and I laid it. We laid chipped mulch provided by Noble's chipper over the Ecocover. I used the van for other work on the paddocks. * During April and May 2010 I visited Parsland to do more work and purchased more gardening rakes and spreaders to better spread and compact the soil from Highland Landscape in the ruts by hand. * On 29 May 2010 I prepared Pa's memorial plaque and scattered his ashes under a golden cypress near the farmhouse next to the memorial plaque for Ma. * After the dedication while walking along Parsland Close I asked Warren words to the effect: "Are you still interested in co farming Parsland with me". I then explained the time taken to cut with the new mower and the hay harvesting process. He replied words to the effect: "No, I was once many years ago but not anymore". * In the lounge of the farmhouse I had a general discussion with Warren (in Sue's absence) about Parsland and Sue's inheritance. In the back of my mind was the Div 7A issue and the problem of dealing with Sue's behaviour. I had also asked K Barnsley for some plans to make renovations. I asked Warren: "What do you and Sue want to do about the house?" He replied with words to the effect: "How do we get some money for our retirement? Leave the house vacant for 2 years and see if Sue will use it. I have conferred with Haidee and Tim. Why did you suggest Haidee become involved? Aren't I part of the family?" * I asked Warren: "Can you help me in supervising work associated with Parsland? You live much closer. It is hard for me. " Warren later assisted in supervising the contractors for the concrete driveway and the external painting. * There later arose tensions between Haidee (acting under a power of attorney for Sue) and myself. I felt that somehow I had become cast as Sue's enemy. * The farmhouse was left vacant for some months. Sue had previously taken away all the furniture, bric a brac and so on and it was not returned. I was afraid to ask for it. * Accordingly, my wife and I sometimes used it to sleep on the floor overnight when working on Parsland. Other times, we would stay at the motel in Bundanoon. * To become reasonably habitable, the farmhouse had rising damp issues, general guttering repair, and painting and concrete driveway access to be solved. * To tackle the rising damp when the farmhouse was locked up, I purchased a dehumidifier from Harvey Norman set up to run continuously while the farmhouse was unoccupied. To the best of my recollection my last visit to the farmhouse before the incident on 29 June was on 31 May. I turned on the dehumidifier in the hallway before leaving. * At 9.14 on Tuesday 29 June 2010 I received a telephone call from Sue. At 11:00 I had a long telephone call with Warren. * In her call on 29 June 2010 Sue had become very agitated and in the coherent moments had made demands on me with words to the effect: "I want you to lay concrete pathways all around the house and garage to reduce the rising damp." Sue was very angry that I did not agree to the concreting (which I thought but did not say was useless). Sue screamed abusive swearwords at me over the telephone. She then screamed words to the effect: "I don't want you to change anything in my father's house." She then slammed down the telephone. * Sue suffers from a mental illness (I have been told and verily believe that it is schizophrenia) and angry outbursts from her are common in my telephone calls with her. In the years before Pa died, she has many times physically attacked me and broken furniture and damaged motor vehicles. One occasion Pa (he was aged about 80 years - not sure) had said to me at Ulladulla words to the effect: "Sue bashed me at the Exeter farmhouse. Can we have her institutionalised [for her own protection]?" * On 1 July 2010 the Local Environment Plan applied a zoning of "RU4 Rural Small Holdings". So far as I am concerned, this LEP did not materially change anything at Parsland and the land tax exemption for rural land still applied. If I had thought about it I could have applied for farmland rating from Wingecarribee Shire Council. I am not sure now if I was at all aware of the LEP or the possibility of a farmland rating. * On Wednesday 7 July 2010 I spoke to Sam Cassar, a local concreter, who I engaged to lay a driveway entrance from Parsland Close into lot 7's garage. As a result of that call I arranged to visit Parsland on 17 July. Sam had met Sue and Warren at Parsland and told me that he had been given certain directions by Sue which contradicted my instructions to him. I explained my understanding of the legal situation to Sam with words to the effect: "R&E Drafting is the owner and contracting party for your invoice and R&E Drafting Pty Ltd is paying the bills. I am in charge of the bank account and sign the cheques for R&E Drafting Pty Ltd. Sue does not make the decisions and pay the bills. She has a mental illness. She is not a director and has no authority to act. She will tell you all sorts of things but I must OK them." * On Friday 9 July 2010 Kate Johnson called me by telephone. Kate Johnson has a key and my consent to check on the farmhouse. She said words to the effect: "The house is flooded". As a result of that call I called NRMA to advise of a possible water damage claim to the carpet in the farmhouse. * After Sue had visited Parsland while I was away, I saw extensive water damage to the carpet in the farmhouse. The dehumidifier that I had placed in the centre of the hallway of the farmhouse had been left running but the water to be collected was running onto the carpet and had flooded most of the rooms. * I had difficulty in making a contents insurance damages claim because despite the premium being paid, NRMA wanted to allege that the farmhouse was 'unoccupied' in breach of its policy. * On Monday 16 August 2010 at 13:08 I received a call from Sue who said words to the effect: "I am at Exeter and saw the driveway. It looks OK. I want to plant trees along it." I said: "I would prefer to keep the driveway clear for easier mowing (or I may have used the word 'harvesting'). " She said "I will get variegated shrubs. You must lay pathways and paint the roof." I declined this demand. * I decided that it was too risky to leave the house and shed unguarded. * In my fiduciary relationship to Sue as trustee and executor it was not appropriate that I be seen to use the farmhouse while telling her to not use it too. * I also did not want issues arising from deemed dividends under Div 7A. 4328/8/2010 - farmhouse caretaker lease to Torpy * For the purpose of safe preservation of the farm and its fixtures plant and equipment the Applicant granted the lease to Mr and Mrs Torpy (refer copy attached to Kate Johnson affidavit). * The prospect of income from the lease actually did not play any part at all in my decision to let the farmhouse on behalf of the Applicant. However I would not have entered into the caretaker lease if I thought that it would or could trigger the subject land tax assessments. * For the Applicant's income stream the net rental is not dominant compared to its investment income (refer financial reports of the Applicant in s58 documents). * For the purpose of these proceedings to assist the Tribunal, I have prepared a net rental income statement for each land tax year (refer annexure E). The annexure also shows extracts from the cashbook that I keep for the Applicant. Comparison of expenditure shows that the farmhouse expenditure does not dominate. However, the subject land tax assessments effectively demolish the net rent received and turn it into a loss. * Historically, the capital expenditure on the farmhouse is minimal compared to the capital expenditure on the land (refer balance sheets of the Applicant in s58 documents). * It was an essential requirement in my instructions to Kate Johnson that the tenant occupying the farmhouse be properly vetted as caretakers and that the Applicant have unfettered access to the paddock and shed (refer to email attached to Kate Johnson affidavit) via the farmhouse enclosure. I also wanted to retain access to the enclosure for planting trees (see below and plans in annexure H). * I have inspected the paddocks on Lot 7 many times since the lease started entering via the farmhouse enclosure. Every time I saw that tenants, Torpys, were good caretakers. * The ongoing tensions with Haidee increased. As executor I thought it prudent to reduce my personal labour time at Parsland to paddock inspections and light clearing work. * After August 2010, I engaged Lloyd Bruce a neighbour to slash and report to me regularly on water levels and the general condition of the farm. Lloyd had done this work before. 442011 - second land tax year * The drought broke and there was no further market interest from purchasers of hay product from Parsland. Our rye grass and other grasses are summer grasses. * Probate was duly granted by the Supreme Court of New South Wales whereupon I was appointed sole executor of Pa's estate. I construed that the Will directs me to convert all Pa's assets into cash and distribute the cash. This means that I am required to convert Pa's shares in the Applicant into cash. The Will gives me power to delay conversion of the shares into cash as I see fit. * I began negotiations to sell the lots on the open market. Haidee intervened in the proposed sale. I then began negotiations with Haidee to transfer lots 3 and 5 to Sue in specie. * My powers both as director and executor allow me to continue to cultivate Parsland for the purpose of selling its product. At all material times, I continued to cultivate Parsland for the purpose of selling its product as previously described. * In June 2011 because of continual ongoing tensions with Haidee and in order to wind up Pa's affairs tax effectively I decided that the Applicant should be wound up. Haidee's lawyer had written to say that Sue wanted to acquire lots 3 and 5. I had said via my lawyer that I would acquire Lot 7. * Such a resolution of the sibling dispute would allow my wife and me to continue the farming at Parsland in our own names rather than as the Applicant being the landowner. * A winding up could separate the affairs of Sue from me and give me an enforceable release of my duties as executor. * It would enable my wife and me to occupy the farmhouse without Div 7A deeming dividends in our individual tax returns. * Accordingly, in July 2011 I applied for a tax ruling under Div 7A from the ATO. Such a ruling would be required by a liquidator as part of the usual income tax clearance on liquidation. The ATO delayed granting the ruling for almost a year. * Cultivation work continued on all lots but there was no market for hay. * Reports from Lloyd Bruce in late 2011 reported high water and moisture levels. 452012 - third land tax year * Reports from Lloyd Bruce reported high water and moisture levels in early 2012. * In late May 2012, the ATO issued a favourable ruling. This ruling cleared the way for the Applicant to be wound up provided that agreement could be reached with Haidee. * To prevent the Applicant continuing in business for another tax year, I hoped to appoint the liquidator to the Applicant on or before 30 June 2012 or very soon afterwards. * At that time, I intended to make an offer to Sue via Haidee's lawyer for my wife and me to buy all 3 lots from the liquidator of the Applicant. * Upon the ATO issuing the tax ruling and as part of the intended conveyancing process, in early June 2012 my wife and I applied for s47 certificates for all the 3 lots for our proposed offer to purchase all of the 3 lots from the liquidator. The Respondent issued clear certificates to my wife and I for the 3 lots (see annexure F). * In late July 2012, notwithstanding the issue of the clear certificates in June 2012, the Respondent posted a questionnaire to the Applicant which I allege in these proceedings is incorrectly based on s.10AA(2) - the business test exemption for residential land used for primary production. I replied to that questionnaire to the best of my ability (refer s.58 documents). * The Respondent then issued backdated assessments for 2010 and 2011 and an assessment for 2012 all of which are now the subject of these tribunal proceedings. * Reports from Lloyd Bruce reported high water and moisture levels. * In summer 2012 and March 2013 I asked Noble Contractors if they were interested in buying my hay or using my cut for silage. The reply was words to the effect: "We are only interested in baling for you. We do not want to buy any hay as all our haysheds are full from last year". 46Post tax year conduct of the Applicant * In March 2013 I telephoned Menzies Contractors to view Parsland to see if they were interested in cutting and buying a hay harvest for adding to silage. I am informed and verily believe that Geoff Menzies inspected the paddocks during the Easter break because he telephoned me from his ute. He said: "I am driving over your paddocks now. I'll talk to my brother. It might be cut as filler for silage". * After Easter 2013 I followed up the proposed sale with Geoff Menzies by telephone. Geoff Menzies said words to the effect: "Our customers are not interested at the present time". * I have purchased a sign "Parsland Hay and Silage For Sale Call 0410 616 170"to be hung on the fence of Cornwall Road as part of the Cornwall Road Signage to act as a silent salesman for my sales of hay and silage to the general public when this produce is available. The sign is to be stored in the shed until required. 47Purpose of the fence enclosure * I refer to the Affidavit of Expert Surveyor sworn by Ronald James Rengger for these proceedings and his reference to the fence enclosure which he states defines the current environs for the farmhouse being .375 hectares. * This meshed fence enclosure was erected at my direction and partly with my labour. The original enclosed environs using a post and rail fence were about half that size (say .18 hectares - refer photographic montage and sketch plans). * The meshed fence line on the Northern side follows the previous post and rail fence line from north-eastern corner to the western side of the garage. The mesh fence then traverses straight over the paddock to Parsland Close using the stringer posts and an old farm gate that were part of the former internal paddock fencing. It was cheaper and easier to do this (from a practical fencing perspective) than turn the fence at right angles along the garage as per the previous farmhouse post and rail fence. * The mesh fence line on the Western side follows the previous fence line from north-eastern corner to the Golden Cypress. The fence then traverses straight over the former holding paddock to Cornwall Road. I did not build the mesh fence to return at right angles to Parsland Close along the former holding paddock post and rail fence line (running parallel with Cornwall Road) as this was a much longer distance and so more expensive to build. * The purpose of the mesh fence for the Applicant was threefold. * First, it was to restrain farm guard dogs. For example, my third last dog, Banjo, (powerful medium Husky cross breed strongly spritzig) enjoyed roaming day and night outside the farmhouse without a kennel even in mid winter. This dog kept outdoors and free to roam within the enclosure 24 hours a day was my best known deterrent for snakes and thieves. * While Banjo was around, a sign advising strangers to "Beware of the Dog - for entry call 0410 616 170" was hung on the front fence near the lockable gate at Parsland Close. This sign is now stored in the cupboard in the shed and will be rehung after termination of the caretaker lease. * Regrettably, a snake killed Banjo in March 2010. * Second, the purpose of the fence was to create a physical barrier to deter snakes wandering into the farmhouse enclosure where I could reasonably expect the infant grandchildren of Sue and myself to play (the ages of my 4 grandchildren range from 1 to 3 years). * Third, the purpose of the fence was to prevent unsupervised children wandering into the paddocks to play - besides snakes there is an unfenced dam. * The purpose of the mesh fence was not to limit the area available for cultivation. * The purpose of the mesh fence was not to permanently set the size of the premises of the farmhouse lease. * The mesh fence does not prevent the Applicant limiting the size of the premises under the caretaker lease to only the farmhouse, the garage, the concrete driveway and a much smaller environs defined by say boundary markers placed wherever and whenever it suits the Applicant. All that needs occur is for the Applicant to give written notice to the Torpys as per the lease. * When the entrance was off Cornwall Road the farmhouse enclosure was much smaller (see annexure I). The farmhouse premises could be limited as I have set out in annexure I (see below). 48Future plantings extending the gum forest * While the mesh fence enclosure has 'doubled' the size of the environs of the farmhouse, and currently defines the boundary for the 'premises' under the caretaker lease, the mesh fence does not prevent the Applicant extending the gum forest lines over the former stockyard land and into the former holding paddock and beyond within the farmhouse enclosure (refer attached sketch in appendix I) without any notice to the Torpys. The arrangements for the lease permit this. * The extension of the gum tree forest into the former holding paddock part of the enclosure and beyond round the part formed by the intersection of Parsland Close and Cornwall Road is a logical continuing cultivation of this section of lot 7. It follows the preferred basalt ridge line (refer contour map in Rengger affidavit). * The existing gum forest is approaching a level of maturity where prunings of the branches could realistically be sold for high quality firewood. 49Winding up of the Applicant * It is possible that the Applicant will resolve to wind itself up voluntarily soon to facilitate distributions of capital to be made to Sue or I or both. * I do not see changes in ownership of the lots arising in or out of liquidation preventing continuing cultivation of the lots for the purpose of the sale of produce. * I expect that I will be appointed liquidator of the Applicant. * To properly perform my duties as liquidator, executor and trustee, I need to know the current and potential land tax exemption applicable to the lots. 50Plans and photographs supporting the Applicant * A photographic montage is exhibited to me at the time of swearing this affidavit and I have prepared a commentary on the same. Both a copy of the montage and my commentary are annexure H. * Sketch plans based on the SMEC URBAN survey (refer Rengger affidavit of expert surveyor) for the assistance of the Administrative Decisions Tribunal and prepared by me are annexure I. 51Summary (1)The only physical assets of the Applicant are: (a)lots 3, 5 and 7; (b)the farmhouse and shed fixtures on lot 7 which are fixtures associated with the cultivation of all the lots; and (c)plant and machinery associated solely with the cultivation of all the lots. (2)The Applicant does not have any other physical assets whereby produce from lots 3, 5 and 7 could be used for other purposes. (3)Parsland has never been used for beef, chicken, vegetable, fruit or other like produce for personal use of any person associated with the Applicant. (4)For the whole of its history since 1976 to date and, in particular, during the land tax years under review: (a)the Applicant has used Parsland only for primary production. (b)land making up Lots 3, 5 and 7 has been zoned rural. (c)The Applicant cultivated Lots 3, 5 and 7 for the sole purpose of selling the produce of the cultivation. (d)During the land tax years under review any hay produced from Lots 3, 5 and 7 arising from that cultivation has been sold for valuable consideration. (e)The Applicant actively considers and is working towards the selling options associated with cultivation of the land. (f)The lease to Torpy of the farmhouse supports and protects that cultivation and primary production on Parsland generally. (g)The lease to Torpy has not been a dominant use of all or any of Lots 3, 5 and 7 as a residential lease. (h)Prior to the issue of the assessments under objection in these proceedings Parsland has never before been the subject of assessment for land tax." PART D - THE CREDIBILITY OF MR ENNIS 52Before considering the factual issues to be determined, it is desirable (and opportune) to pause in order to consider the credibility of Mr. Ennis; this is so because the case for the Applicant rests squarely on his evidence as to the intentions of the Applicant for the properties in respect of the relevant years. 53The Chief Commissioner in clause 30 of RFS contends that the creditability of Mr. Ennis is open to considerable doubt for the reasons set out in that clause and which is set out in full in clause 28 below as follows: Based on the following matters, it is submitted that Mr. Ennis' evidence should not be accepted except to the extent it is corroborated (by a reliable witness or document) or is adverse to the Applicant's interests. Those matters are as follows: (a)Mr. Ennis's submissions to the Chief Commissioner and evidence before the Tribunal were inaccurate in a number of material respects, including the following as he accepted in cross-examination: (i)his statement in paragraph 1 of the Ennis affidavit (exhibit A11) that at all material times he was the sole director and shareholder of the Applicant when he was not (05/12/13 T41.10-T42.30); (ii)the objection at tab 4 of the s.58 documents contained a number of misstatements as was explored in the following cross-examination of Mr. Ennis (05/12/13 T59.12-47): Q. If you go to page 28 you say there, towards the bottom of the page, "hay is sometimes stored as silage"? A. Right. Q. You've never stored it as silage though have you? A. No I haven't. Q. That's incorrect? A. Yes. Q. And "hay is sometimes stored on site in hay sheds"? A. Not in the relevant years, that's true. Q. But not even for 13 years prior to you making that statement? A. Yeah, I guess that's true when I think about it, yes. Q. If you go further up the page you say "no receipts kept. Hay sold to contractors when there is demand"? A. That's right. Q. That's a reference to the one contractor in 2010 is it? A. That would be- Q. Mr. Noble? A. It would be, it would be certainly Mr. Noble, that's right. Q. It would have been more accurate to say that once in the relevant period sorry once in the period that I consider to be relevant- A. It's sold when there is demand. Yeah, when they ask me for hay then we do a deal. Q. But that's only happened twice? A. That I'm aware of, yes. Q. In 13 years? A. That I'm aware of yes. (and at 05/12/13 T61.1-31) Q. Mr. Ennis, let's assume that at the time you submitted this objection you believed that the relevant period was from the beginning of 2010. Let's assume that? A. Yes. That would be the case. That was my understanding. Q. That's what you understood this objection to relate to? A. Yeah, yeah. Q. And that time they'd been a barter with one contractor, Mr. Noble? A. Yes. Q. And the reference, the objection, to hay being sold to contractors plural was misleading wasn't it? A. If contractors approach me I will sell it to them. Q. Well that statement is a statement present tense isn't it. Its hay sold? A. I concede the point that you're trying to make I guess is that it's misleading but the fact is the policy was to sell it to contractors on demand. Q. Mr. Ennis, let's go to the next sentence. "Contractors" plural "sometimes have done work on the property in return for cutting hay and selling it to other graziers."? A. That's what I understand they did. Q. But as at this time even assuming that you had the relevant period wrong, there was only one contractor in that period wasn't there? A. Yes, that's true. Q. That's another example isn't it of you being prepared to present incorrect information in respect of this matter? A. Yes I accept that. (iii)in a similar vein, the application for exemption (tab 2 of the s.58 Documents): (a) stated "the balance [i.e. the land other than the part on which the eucalyptus forest stood] of rural land is used to bale hay", suggesting an ongoing practice which was not the case (05/12/13 T87.22-48); (iv)(b) listed the "hay shed" as a "farm improvement" notwithstanding it had not been used for that purpose for over 13 years and could only be used with an element of danger (05/12/13 T88.1-32); (a)listed a mower as farm equipment notwithstanding it had never been used to make hay (05/12/13 T88.34-45) (v)in response to a request by the Chief Commissioner (tab 6 page 39 of the s.58 Documents), during the objection process, for "evidence of sales from 2010 onwards" Mr. Ennis responded (tab 9 of the s.58 Documents) "there are no receipts for sales from 2010 onwards". That response was misleading because it created the impression there had been sales and did not bring to the Chief Commissioner's attention that in fact from 2010 onwards there had only been a single occasion on which the Applicant had parted with hay and that was by way of barter. After extensive cross-examination on this subject (05/12/13 T63.26-T67.6), Mr. Ennis ultimately conceded that his response was not sufficient to bring to the Chief Commissioner's attention the true position, although he refused to concede that he knew this at the time (05/12/13 T67.8-27). (b)Mr. Ennis made submissions that were not plausible. For example: (i)he submitted (undated "Submissions for the Applicant" at page 4) that the Applicant's has reacted to the oversupply and drop in demand in the hay market and sought to enter a substitute market, silage instead of hay". In cross-examination he conceded that he only made enquiries about a substitute market (he did not seek to enter into one) and that his conduct in this regard which was a single phone call to a Mr. Menzies in March 2013 (05/12/13 T50.11-29), being a time when Mr. Ennis was aware his product would be of no use for silage; (ii)he submitted (undated "Submissions for the Applicant" at page 4) that the Applicant's keeps cultivated grasses for later opportunities to sell", which was plainly incorrect although in cross-examination Mr. Ennis refused to accept it was incorrect (05/12/13 T62.27-T63.24); (iii)he submitted and gave evidence that the lease of the residence (which was in fact an ordinary residential tenancy at a market rent) was a caretaker role connected with what he says was the primary production use of the properties. His evidence on this topic was implausible and he made significant concessions about it in cross-examination although his evidence on the topic was obfuscatory: see 06/12/13 T24.17-T31.2); (c)Mr. Ennis also accepted that he, on behalf of the Applicant, had probably improperly claimed farm equipment as a tax deduction when he was not declaring the income (being the barter in 2010) and when asked how the Tribunal could be satisfied he was not improperly claiming an exemption now responded that that was a "good question" and a "fair question when I think about it" and left it at that (06/12/13 T33.43-T35.3); (d)Mr. Ennis drafted Ms Torpy's affidavit (Exhibit A8) in a manner that caused her to give incorrect evidence about the number of entrances to No 2 (10/09/13 T45.21-38) and about ability to view No's 42 and 45 from the house on No 2 (10/09/13 T45.50-T46.19). Ms Torpy conceded that it was possible there were other aspects of her affidavit evidence that had been drafted by Mr. Ennis that were incorrect and that ultimately the Tribunal could not rely on the accuracy of her affidavit (10/09/13 T46.21-27, T50.35-T51.6). Mr. Ennis knowingly caused Ms Torpy to give that incorrect evidence - indeed he conceded as much in respect of the number of entrances (05/12/13 T46.4-14; see also 05/12/13 T43.15-46.2 where this was otherwise denied); (e)Mr. Ennis prepared Mr. Noble's affidavit (Exhibit A9) by drafting it and then sending it to him and asking him to adopt it (10/09/13 T79.5-22). Although Mr. Ennis disputed that this was the way in which the affidavit had been prepared and asserted that he had first spoken with Mr. Noble about the matters that ultimately appeared in his affidavit, Mr. Ennis accepted that the way the conversation went was that Mr. Ennis said "do you remember" this or that such as "do you remember we met on such and such a date and that we had this conversation about you doing work in return for the hay", i.e. he suggested a version of events to Mr. Noble and asked him whether or not it was correct (05/12/13 T46.30-47). Although he did not accept that this was an inappropriate manner in which to prepare an affidavit, in light of the fact that Mr. Ennis was a solicitor for many years, whether or not his experience was in litigation, he must have known it was inappropriate (see 05/12/13 T46.44-T47.5). 54Having regard to the context of the preceding clause (and in respect of which the content has been checked against the s.58 documents and TS the Tribunal agrees that the credibility of Mr. Ennis is open to doubt. PART E - WAS THE PROPERTY USED FOR ANY OF THE PURPOSES LISTED IN SECTION 10AA (3)(a) TO (e) OF THE ACT? 55The Applicant contends that all of the parcels constituting the property were used for the purpose of cultivation of grasses for purposes of sale and in the case of No 2 cultivation of eucalyptus trees for purposes of sale as hardwood timber and firewood. 56The Chief Commissioner contends that there was no such purpose and in particular that the Applicant has not discharged the onus which it bears. The Chief Commissioner contends (correctly in the view of the Tribunal) that there was not in respect of the relevant year's cultivation within the Act of either grasses or eucalyptus trees. The Chief Commissioner contends having regard to authority cited earlier in these reasons that cultivation requires more than allowing grass and trees to grow on land; he contends moreover that labour and attention must be devoted to ensuring that this occurs; in addition the term "cultivation" involves a purposive element in that labour must be employed. The Tribunal agrees with these contentions which are supported by case authorities cited earlier in this decision. 57In this context also the Tribunal has drawn on RFS having satisfied itself as to the correctness of its content. 58Dealing first with the Applicant's contention that it cultivated grasses for hay making, the Chief Commissioner relies on the evidence of a fodder expert, Mr. Blackwood. AFS page 38 and following pages sets out various objections to Mr. Blackwood's report dated 29 August 2013 ("Blackwood report"), being exhibit R5, including that he did not have appropriate expertise, was not properly briefed and that his evidence was irrelevant. Mr. Blackwood's expertise is set out in his report. It is apparent from his report that he was both properly briefed and that the content of his report is relevant. From page 47 and following of AFS the Applicant asserted that the Blackwood report does not comply with NCAT Procedural Direction 3 (Expert Witnesses). That code was not in place at the time of the Blackwood report and is irrelevant. The Blackwood report acknowledges and complies with ADT Practice Note 14, which is to the same effect of NCAT Procedural Direction 3. There is also a submission from page 40 (and again from page 47, at page 58, from page 64, at page 84, at page 85, from page 86) of AFS that Mr. Blackwood was not independent but rather biased. The grounds relied upon do not make out that submission and, in any event, were not put to Mr. Blackwood in cross-examination. 59AFS from page 30 (and again at page 48) also seek to diminish the weight to be given to Mr. Blackwood's evidence on the basis that he was present during the whole of the hearing. That he was indeed present was appropriate because he was thereby able to observe and, to the extent necessary, take into account the evidence given by the Applicant's witnesses at the hearing; this was of particular relevance when one remembers that Mr. Ennis himself purported to be an expert in hay and led substantial amounts of new evidence at the hearing. In any event, his presence at the hearing can have no bearing on the weight to be given to his report (Ex R5) which was prepared prior to the hearing. Other objections to that report are raised in AFS; in the view of the Tribunal those objections are neither rational nor valid. 60Further, despite the Applicant's criticism of the Blackwood report, it is not apparent that there is any substantial disagreement between the Applicant and Mr. Blackwood. But to the extent there is disagreement, Mr. Blackwood's evidence is accepted because he is an expert in the subject matter and Mr. Ennis (despite his assertions to contrary) is not. 61Turning then to the content of the Blackwood report, Mr. Blackwood sets out in it the steps involved in making hay. He also sets out the process for making silage, which is essentially a wetter form of hay. Both involve the following steps (among others): (a)ensuring there is suitable pasture or crop (in this case grasses). Mr. Ennis agreed with this, although said that planting seed on a regular basis was not required (05/12/13 T98.48-T100.10); (b)preparing the land by spraying out weeds and fertilizing. It is noted here that Mr. Noble's (a rural contractor who also cuts and bales hay) evidence was that fertiliser was important "to make things grow" (10/09/13 T60.43-47), that if you were serious about growing grass for hay you'd fertilise (10/09/13 T70.27-29) and spray for weeds (10/09/13 T70.31-32) and Mr. Bruce (a local rural contractor who slashed the Applicant's paddocks) agreed that seed broadcasting and fertilizing were things that needed to be done regularly if one was going to get good pasture (10/09/13 T31.38-41). Mr. Ennis agreed that it was "conventional wisdom" to fertilize but said that it was not his point of view - he instead claims to have followed a "holistic approach to it based on well-established principles". This is despite the fact that when the properties were run as a cattle farm he and his father fertilised (05/12/13 T100.14-T101.12). Mr. Ennis also agreed that it was necessary to spray noxious weeds (he referred specifically to blackberry) annually - preferably in November before they flower (05/12/13 T102.1-29); (c)slashing (i.e. mulching and thereby destroying) the grasses to ensure rich growth and weed suppression. This is done in autumn. Mr. Ennis accepted that "if you wanted to look for a crop in the next summer... autumn is a good time", although he claimed this was due to a desire to set a level for the hay crop rather than to encourage growth (05/12/13 T101.14-49). Mr. Noble's evidence was that an alternative was to allow cattle to graze the land (10/09/13 69.9-33), which is not something the Applicant did so is not relevant; (d)cutting the hay using a mower. This is done between early flowering and late flowering, with the quality of the product declining with time; (e)allowing the cut grasses to dry out; (f)raking the cut grasses using a hay rake once dried to about 85% (35-40% in the case of silage); (g)baling the cut and dried grasses using a baling machine. There are different types of baling machine that can produce different bales of different sizes and shapes. It is noted that steps (d) to (g) are in line with those described by Mr. Noble (10/09/13 T59.12-36). 62The Chief Commissioner submits that at least steps (a) to (c) are steps that would form part of cultivation. However, there is no evidence that during the period 1 July 2010 to the present the Applicant has: (a)planted seed or otherwise improved the grasses; (b)sprayed for weeds, other than on a single occasion, being in December 2010. Importantly, this spraying took place in response to a Prior Notice of Weed Control Notice received by the Applicant from Wingecarribee Shire Council. Other than an occasion in 2009, this was the only time that Mr. Noble, the Applicant's contractor, had sprayed for weeds, although he gave some oral evidence that he had been onto the properties in 2012 but by the time he got there it was too wet and it was too late because the season had finished (10/09/13 T56.1-T57.12). Mr. Ennis could not point to any other occasion during the relevant period on which weeds were sprayed than the occasion in December 2010 (05/12/13 T102.31-T103.38; 06/12/13 T1.32-T2.35). It is noted that Ms Torpy could only recall one occasion on which weeds were sprayed (affidavit at [18] as qualified by 10/09/13 T47.23-25; see also 10/09/13 T41.3-6). She could not recall whether or not the incident she observed occurred in December 2010 (10/09/13 T47.37-45), but in light of Mr. Noble's evidence it must have been; or (c)fertilized. 63A convenient summary of Mr. Ennis' evidence on this topic is found at 06/12/13 T2.37-T3.27): Q. So just to recap Mr. Ennis, you weren't during the relevant period doing anything to plant any additional seeds in your pasture to improve it or to maintain it in that regard? A. We bought some seed and I spread it around in the bare patches but I didn't seed drill, that's for sure and I didn't broadcast seed. Q. And the spreading around of the seed you're referring to was back in the beginning of 2010? A. That would have been correct, yes. Q. So in the relevant period you didn't do any of those things? A. No, that's true. Q. You didn't fertilize at all? A. No, I haven't fertilized for some years. Q. You can only point to one particular instance where spraying of weeds took place? A. I thought I just said that I think there was at least two instances. Q. Well you're speculating aren't you? A. I can't say that I saw it done, no, that's true. Q. You didn't once during the period cut, rake, bale, sell or store hay, silage or silage filler? A. No. BLOCK: Could you just repeat that, I just want to note that. MITCHELL Q. You did not once in the relevant period cut, rake, bale, sell or store hay, silage or silage filler? A. That's correct. Q. Correct in that you did not do any of those things? A. That's correct. Q. What you were doing was slashing as in destroying the grass as often as that was required? A. Yes, that would be true. 64While it is accepted that the properties had been slashed at various times, it is Mr. Blackwood's opinion that slashing was not sufficiently regular and that it occurred at times not consistent with cultivation for production of hay. For example, in 2010 slashing of all three properties occurred in October; in 2011 slashing of all three properties occurred in January and November; in 2012 slashing of No 2 occurred in February and October. If grasses were being cultivated for use as hay, they should have been slashed in autumn then mowed (then raked and baled) in early to mid-summer not slashed. Further, it is apparent that the last time No's 42 and 45 were slashed was May 2012 and the last time No 2 was slashed was in October 2012. If the Applicant had intended to cultivate grass for production of hay on No's 42 and 45 for sale in summer 2013/2014 the properties should have been slashed in May 2013. Mr. Bruce acknowledged that they were able to be slashed at that time (10/09/13 T30.44-49). 65All of this raises the question as to why slashing took place when it did. The reason is that grass grows. It needs to be cut, whether simply to control it, for cosmetic purposes, to suppress weeds, to reduce a bushfire risk or for a multitude of other potential reasons. All of this is of marginal relevance given that the Tribunal accepts that slashing was not undertaken for reasons of cultivation. 66On this subject there is also evidence of Mr. Bruce. Until October 2012, he had been instructed by Mr. Ennis to slash (i.e. destroy and mulch the grass on) all three lots "whenever the grass got too long" (10/09/13 T15.8-11), i.e. in his discretion whenever he believed it needed slashing (10/09/13 T16.340T17.10); see also Mr. Ennis' evidence at 05/12/13 T73.4-14). His evidence was that slashing took place primarily for appearance sake, but also to reduce vermin and fire risk, not cultivation of hay. For example at 09/09/13 T77.28-78.11 (see also 10/09/13 T1.19-25, T16.19-30) he gave the following answers to questions from the Judicial Member: Q. What's the virtue, Mr. Bruce, of slashing? A. It - well number one it looks much neater and tidier, and it keeps vermin down and- Q. Is this same as me failing to mow the grass on my lawn? A. Yes. Q. It's just to make it look better and not quite to untidy? A. To a large extent yes, and to reduce fire hazards and- Q. But is there a commercial motive as well and that is to have some hay ready for sale? A. Yeah, well that's - as I said, that's not slashing, that's - if you want to make hay you have to mow the grass, you don't slash it. If you're not making hay Q. Sorry, I haven't followed. I think I'll leave this to Mr. Mitchell to clarify because you've now lost me. I thought in my naivety, Mr. Bruce that you slashed the grass in order to have piles of slashed grass which could be tied together and become hay. Is that not right? A. That is not correct, no. You mow the grass to - or you cut the grass, you cut the grass if you want to make it into hay. Q. I see, so slashing has got nothing to do with making hay, it's merely to make the property neater? Q. And reduce the fire hazard? A. The fire hazard. Q. Because as winter comes on and it gets dry, or whenever it does get dry, the taller the grass the bigger the fire hazard? A. That's right, and the grass - when I'm slashing it it's usually quite high so there's a - if a fire gets in there, grass fires are notoriously bad because they expand in 360 degree rate. 67The Applicant attempts to play down this evidence on page 201 of AFS by stating that Mr. Bruce has no expertise in sustainable cultivation or harvesting. But his evidence did not relate to sustainable cultivation or harvesting, but rather to the motive for his slashing the Applicant's land (something he also did for others in the area (09/09/13 T59.31-42)). Further, Mr. Ennis himself made some concessions to this effect (05/12/13 T74.4-31): Q. You wanted Mr. [Bruce] to slash regularly to among other things and make it look nice in all three lots? A. Well my purpose was cultivation. Q. Mr. Ennis, your purpose was to make it look nice, wasn't it? A. That's a side benefit I guess of slashing. Q. The other benefits, correct me if I'm wrong, were- A. To certain people. Not to me necessarily. Q. Reduce weed? A. Yes. Q. That was one of your purposes? A. Yes. Q. To avoid snakes, that was one of your purposes? A. Yes. Q. To avoid the risk of bush or grassfires? A. Well just one moment. To avoid snakes coming into the house. Snakes themselves I don't mind, they have a certain purpose to play. Q. So avoid snakes coming into the house, that was important on number 2? A. Yes. Q. And on the other ones, or all of them, to reduce the risk of a grass fire? A. Not so important. There's plenty of dams there for bushfire control. 68Further, although Mr. Ennis instructed Mr. Bruce by email on 16 October 2012 (Exhibit A7 p.31) not to slash No's 42 and 45 for the time being, the timing of that email is relevant. It comes shortly after the Applicant's application for an exemption was rejected on 24 September 2012 (tab 3 of the s.58 Documents). Mr. Ennis' communication with Mr. Bruce should be considered little more than an attempt to try and bolster the objection which the Applicant made on 30 October 2012 (tab 4 of the s.58 Documents), which objection (among other things) included photographs of long grass on No's 42 and 45. While Mr. Ennis denied this in cross-examination (05/12/13 T89.20-T90.36; T94.16-25), in light of the coincidence of timing and his lack of credibility (as addressed above), the Tribunal should not accept Mr. Ennis' evidence. The same may be said of Mr. Ennis' email to Mr. Bruce of 18 January 2013 (Exhibit A7 p.33), being toward the end of the hay harvesting period, wherein Mr. Bruce was told "At this stage I'll be letting the other lots grow for a while to allow hay baling". In respect of that email (which also stated "please keep doing 2 Parsland as need be") Mr. Ennis conceded that he had no intention to continue making hay on No 2 that year (05/12/13 T92.32-38). The following passage from the cross-examination of Mr. Ennis on this topic is of note (05/12/13 T92.44-93.11): Q. We're looking at 18 January 2013. The time for hay making was by the end of January wasn't it? A. Well, at that stage- Q. Wasn't it? A. Yeah, hay baling is normally done by the end of January, that's true. Q. And you knew that at the time. You knew it, didn't you? A. Yes. Q. And what you're doing here, Mr. Ennis, is creating a paper trail and creating an impression that you were generally farming hay? A. No. I had hoped that everything would be over that we'd - that Suzanne would have hers and I'd have mine. Q. And you don't even try and create that impression in respect of number 2, do you? A. No, by then I had decided that I weren't going to bale hay, that's true. 69It would therefore appear to be the case that: (a)to the extent any labour or attention (namely, one instance of weed spraying and some slashing at the wrong times of year) was bestowed upon the properties during the period relevant to the 2011 and 2012 tax years, i.e. 1 July 2010 to 30 June 2012, it was not labour designed to improve the grasses or promote their growth; (b)no labour or attention at all was bestowed upon No's 42 and 45 during the period relevant to the 2013 tax year, i.e. 1 July 2012 to 30 June 2013; (c)to the extent any labour or attention (namely, one instance of slashing at the wrong time of year, being the time when hay should have been cut) was bestowed upon No 2 during the period relevant to the 2013 tax year, it was not labour designed to improve or promote the growth of the grasses. 70In all the circumstances, it is accepted that no cultivation of grasses for hay within the meaning of s.10AA (3)(a) occurred during the relevant tax years. This could only be the case if the crop was one that would not benefit from regular labour and attention and if such abstinence was in accordance with accepted practices of husbandry applicable to that crop. In the case of cultivation of grass for hay, that is clearly not the case. The Tribunal considers also a respect of No 2 there is no evidence to support the assertion by the applicant as to the cultivation of trees. PART F - WAS THERE A PURPOSE OF SALE? 71The Tribunal is satisfied that the Applicant has not established that there was cultivation as required by the legislation in respect of the relevant years in respect of any of the properties. The content of this Part F is included as a matter of completeness and to the extent (if at all) that it is relevant. 72If the Tribunal is incorrect in its view that there was no cultivation in accordance with the Act during the relevant years, it is necessary to then consider whether such cultivation (if any) was for the purpose of selling the produce of the cultivation, this being the second limb which the Applicant must establish in order to obtain the benefit of the exemption in s.10AA(3)(a) of the Act. The Chief Commissioner submits that having regard to all the facts, even if there was cultivation it was not cultivation of a sort for the purpose of sale. 73The Act does not expressly state whether the purpose of sale must be the sole, dominant or only purpose of cultivation. However, the Chief Commissioner submits that the use of the word "the" before "purpose" in s.10AA (3)(a) clearly indicates that such purpose is intended to be at least the dominant purpose of the cultivation. Had parliament intended that a minor purpose would be sufficient it would have used the word "a" before "purpose". The point is academic given that on the evidence before it the Tribunal is satisfied that sale was not the purpose. 74Dealing first with cultivation of grasses for hay or silage, the Chief Commissioner submits (correctly in the view of the Tribunal) that the material facts are that during the period 1 July 2010 to 30 June 2013: (a)such cultivation as took place was minimal, not in accordance with accepted husbandry and not such as would promote a useful hay or silage crop; (b)no grasses were in fact cut, raked or baled for hay or silage on any property; (c)no hay or silage was sold (or bartered) by the Applicant; (d)no attempts were made by the Applicant to sell (or barter) hay or silage until after the present dispute with the Chief Commissioner had arisen; (e)For at least part of the relevant period, commencing early March 2011, each of the three lots were on the market for sale. The evidence suggests a decision was made as early as February 2011, at which time Mr. Ennis sent an email to the managing agent of No 2 stating (Respondent's Tender Bundle, being Exhibit R4, p.46): "It is likely that the decision will be to sell the investment. Could you arrange for the relevant sales manager at your office to call me to discuss the listing for sale and whether or not it is prudent that the tenancy be renewed." A notice of intention to sell was given to the tenant of number 2 on 25 February 2011 (Exhibit R4 p.64). It would have been obvious to the Applicant that if the properties were sold, the Applicant would not be able to sell any grasses on them. Mr. Ennis conceded in cross-examination that he knew that if the Applicant did sell the properties it would not get the benefit of any hay which might be harvested from them (05/12/13 T79.35-41). 75The Chief Commissioner accepts that actual cutting of grasses/baling of hay/silage or sale of hay or cut grasses in the relevant period is not of itself a prerequisite. However, the absence of any such activity is a factor which is relevant in determining whether the Applicant held the requisite intent to sell. In the present case, the absence of any satisfactory explanation for there being no such activity must have the result that it is a compelling factor against the Applicant holding the requisite intention. 76The Applicant relies on the historical use of the properties in the belief that it assists its case (although arguably it is more likely that it achieves the reverse). Mr. Ennis gave evidence about hay having been cut in about 2002 and again in about February 2010 (both being dates outside the relevant period). However, on both occasions this was as a result of opportunism rather than planning on the Applicant's part. In respect of the 2002 incident, the developer assisting the Applicant in the subdivision of the larger lot of which No's 2, 42 and 45 then formed a part, took the hay in reduction of its fee. Mr. Ennis acknowledged in cross-examination that "the only person who was interested in taking [the hay] was a person who was doing other work on the land" (05/12/13 T56.34-36). In respect of the February 2010 incident Mr. Noble was doing some clean-up work on No 2 for the Applicant. Mr. Noble's evidence was that that work included slashing, i.e. destroying, the grass on all lots (affidavit at [7] as qualified by 10/09/13 T75.23-30). A few days into the work he called Mr. Ennis and a conversation to the following effect occurred: Mr. Noble: There is quite a few bales on the paddocks. I can offset the price on the stockyards and forest if you will let us take the hay. Mr. Ennis: Yes, OK that would be good. Mr. Noble's son and father then proceeded to cut and rake the grasses and bale hay. Mr. Noble's oral evidence about this opportunism was as follows: (10/09/13 T78.46-50): Q. And what came about was by pure happenstance or opportunity you saw that there was some grass on the properties that could be used for hay, was only otherwise going to be slashed and destroyed by you and you asked if you could cut it and bale it? A. That's exactly right, yes. and (10/09/13 T75.45-T76.9): Q. In paragraph 13 you say a few days later I called- A. Oh 13, okay, I didn't hear you say 13 mate, sorry. Q. I didn't say 13. In 13 you say "a few days later I called Richard Ennis and said words to the effect 'there's quite a few bales on the paddocks I can off set the price on the stock yards and the forest if you let us take the hay'"? A. Yes. Q. So you were taking advantage of something that you saw was there is that a fair summary? A. That would be right, yes. Q. It was only going to go to waste otherwise when you slashed it? A. Obviously he had something there that he wanted to get rid of and he had something there that I wanted so I would have made the deal like that. 77Mr. Ennis acknowledged that Mr. Noble had come onto the properties to slash, i.e. destroy, the grass and any opportunity to make hay that year would therefore have been lost (05/12/13 T51.27-T52.47). He agreed that rather than let the grass go to waste Mr. Noble asked to take it off the Applicant's hands (05/12/13 T52.49-53.4). 78On both occasions (2002 and February 2010) the grass was there (as it had been since the time the land had been used for cattle farming), it was long (because grass grows), it was of utility to the contractor and not to the Applicant (who in fact would otherwise have had to pay to get rid of the long grass). This does not bespeak an intention to sell. Rather, at least in respect of the February 2010 incident, it is positive evidence that the Applicant did not have an intention to sell but rather to destroy what could have been sold. 79Mr. Ennis's affidavit evidence was that after February 2010 "The drought broke and there was no further market interest from purchasers of hay product" from the properties. His evidence in cross-examination resiled from that position. There is no evidence of the Applicant having endeavoured to sell its hay (or silage), other than Mr. Ennis' evidence that: (a)"In summer 2012 and March 2013 I asked Noble Contractors if they were interested in buying my hay or using my cut for silage. The reply was words to the effect: 'We are only interested in baling for you. We do not want to buy any hay as all our haysheds are full from last year'". That offer was not taken up by the Applicant and so the grass was not cut. Further, Mr. Noble (who in oral evidence could not recall this incident) said that in March 2013 it would have been too late to make hay and so he doubted that he did have a conversation to that effect (10/09/13 T76.11-28); (b)"In March 2013 I telephoned Menzies Contractors to view Parsland to see if they were interested in cutting and buying a hay harvest for adding to silage. I am informed and verily believe that Geoff Menzies inspected the paddocks during the Easter break because he telephoned me from his ute. He said: 'I am driving over your paddocks now. I'll talk to my brother. It might be cut as a filler for silage'. After Easter 2013 I followed up the proposed sale with Geoff Menzies by telephone. Geoff Menzies said words to the effect: 'Our customers are not interested at the present time'". The overwhelming inference is that the Applicant's grass was not of a marketable quality. Mr. Ennis accepted as much in cross-examination (05/12/13 T48.44-48): Q. Mr. Ennis, that question can be answered with a yes or no, can't it? The reason he wasn't interested in it as silage and raised the possibility as filling for silage or filler for silage is that the product or the grass was way past the stage, way too mature, to use it as silage? A. Yes that's correct, yes, yes. I accept that. (c)"I have purchased a sign 'Parsland Hay and Silage For Sale Call 0410 616 170' to be hung on the fence of Cornwall Road as part of the Cornwall Road Signage to act as a silent salesman for my sales of hay and silage to the general public when this produce is available. The sign is to be stored in the shed until required". This sign was not purchased until May 2013 and the following cross-examination of Mr. Ennis regarding it is of note (05/12/13 T97.3-32): Q. Mr. Ennis if you'd genuinely intended to sell these products you would have made these enquiries in the period October, November, December, January wouldn't you? A. No, if I'd wanted to build the case yes then I would have done it as soon as the land tax assessment arrived but I didn't do that. Q. Mr. Ennis that's the very reason, build a case why you went and bought- A. That's what you're insinuating. I mean that's what you're saying actually. Q. The very reason you went and bought a sign as you attest to in paragraph 179 which was in March or so of 2013 wasn't it? A. That's - it was in May I think I bought that sign. Q. May, was in an attempt to lend legitimacy to your case? A. Well no I'm sort of going to do that business anyway but not the silage part, definitely, I'll .(not transcribable).. hays going to continue. Q. Why buy the sign then and not in 2010 when you're apparently conducting a haymaking exercise, or in 2002? A. I suppose it had - yeah I suppose that's a fair comment, I don't know. Q. You then refer to it in your affidavit? A. Yeah. Q. As something that supports your position that the company was genuinely cultivating grasses for the purpose of hay and silage? A. Yeah, yeah. I had expected by then that I would be owner of Lot 7 of number 2 Parsland Close so the sign would hang on the corner or roadside of number 2 Parsland Close. 80The Chief Commissioner contends that the above did not represent genuine attempts to sell hay (or silage), but rather were merely token efforts to bolster the Applicant's attempt to obtain an exemption (while Mr. Ennis denied this in cross-examination, his explanation for why the Applicant did what it did was not at all compelling: see 05/12/13 T95.10-T97.32). Those token efforts only occurred in the tail end of the period relevant to the 2013 tax year, by which time the dispute with the Chief Commissioner was well underway - the objection had been disallowed in November 2012 and these proceedings were commenced in February 2013. Mr. Ennis' evidence on this topic should therefore be rejected. This is particularly so in circumstances where Mr. Blackwood gives evidence that the district practice in the Southern Tablelands (where Exeter is located) is to make hay in early to mid-summer when drying conditions are best and that even by that time forage quality is declining rapidly. Mr. Noble's evidence was that by March you would have a product that was unmarketable and by autumn you would have a product that was pretty much useless (10/09/13 T72.33-49). For silage harvest time would be October to early December. Therefore, by the time Mr. Ennis took the steps referred to previously in this decision it is likely that any hay that could be taken from the properties would be of very poor quality. Indeed, Mr. Ennis was aware of this timing (05/12/13 T49.31-42): Q. Mr. Ennis, just answer my question. You were aware, you are aware and you were aware at the time through the whole of the relevant period, the appropriate time to make silage in your neck of the woods is October November? A. That's correct. Q. And you were aware both now and at the time the appropriate time to make hay is November December January, weren't you? A. Yes that's the appropriate time. Q. January at the latest? A. January is the most usual time. 81This then raises the question - why were no steps taken earlier in the relevant period to cut or sell hay or silage? The Applicant in its submissions proffers three reasons: weather, market and natural sequence farming/sustainable cultivation philosophy (AFS at pages 456-457). The latter may be immediately disposed of - in cross-examination the only reasons proffered by Mr. Ennis were weather (which he identified as the "primary reason") and market (06/12/13 T9.37-40, T11.20-23). 82Dealing with weather, Mr. Ennis in substance resiled from this ground in cross-examination. Relevantly, he gave the following evidence (06/12/13 T9.42-T10.45): Q. Right, well let's just deal with the first one regarding weather, you accept that there was an opportunity each year during the relevant period to make hay or silage, don't you? Mr. Ennis you accept that proposition don't you? A. There could have been but I wouldn't necessarily know because I wasn't there. That's a bit of a problem. BLOCK Q. Sorry there could have been? A. There could have been an opportunity if I had been on the ground at the time. Q. There could have been an opportunity but I wasn't there? A. I wasn't there. MITCHELL Q. So another reason you didn't make hay was that you didn't care to monitor sufficiently closely what was going on? A. I monitored, Lloyd Bruce used to tell me what the ground was like, how wet it was and so on. Q. But he told you that periodically every couple of months or so, you weren't getting day to day reports? A. No, not day to day. Q. So you didn't make any real effort to ascertain what the conditions were like for making hay, did you? A. If Lloyd was- Q. Mr. Ennis can you answer my question, you didn't make any real effort to ascertain what the conditions were like for making hay, did you? Can I change real to concerted effort? A. No, I suppose that's true, I was busy with other things as well. Q. Mr. Ennis you've heard Mr. Noble's evidence the other day that he cut hay each year -sorry on the last occasion he cut hay each year in the area? A. Yes. Q. Do you accept that others were doing it every year? A. Yes. Q. Carmen's block for example? A. Yes. Q. So you accept don't you that there was in fact an opportunity for you to make hay or silage every year during the relevant periods, don't you? A. Other blocks may be more suitable, they may be larger, I don't know. BLOCK Q. The question is you accept that it was possible? A. It could have been possible, yes I do accept if I had been there and had the equipment and everything. (and at 06/12/13 T12.7-27): BLOCK Q. All I'm asking you is - let me phrase it more concisely. Are you saying to me that the weather during the summer in each of those three land tax years was such that hay was not feasible? A. No I'm not saying that. MITCHELL Q. The reason Mr. Ennis that you didn't - one of two reasons you didn't make hay was not the weather, it's the fact that you were not on the ground in Exeter able to manage the process, determining the appropriate time to make hay? A. That was certainly a difficulty. Q. That's the real reason, it's not the weather, it's that you weren't there? A. The weather is definitely a factor and the moisture that's on the ground is a much more important factor. The aquifers get full of water from the weather and then they keep the ground moist. Those two paddocks that my sister now owns are more or less drought proof paddocks because of the aquifers that they will continue to have springs of water come out of them and that will then go down to the flat area, it's the flood plain. 83This is consistent with the evidence of Mr. Bruce (10/09/13 T19.33-49) that other people in the region had started making hay again when the drought broke in about 2010 (i.e. about 3 years before the time of his oral evidence) and that other blocks in the area were cut for hay in summer 2012/2013. 84Turning next to the Applicant's other reason why hay/silage was not cut or sold, i.e. the absence of a market for hay, ultimately the Applicant does not appear to have disputed there was a market if appropriate steps were taken. As Mr. Noble (10/09/13 T77.1-10) and Mr. Bruce (10/09/13 T21.21-41) stated the way to sell hay was to make it during good times and sell it during bad times (i.e. drought). As Mr. Ennis and Mr. Bruce (10/09/13 T21.43-50) acknowledged, even if you did not have a shed to store hay or silage, wrapped silage could simply be store out in the field. 85Rather, what appeared from Mr. Ennis' evidence was that the Applicant simply took no genuine steps to try and sell cut grasses (whether as hay or silage) and that it did not have an intention to sell them. This is apparent from the following passages from Mr. Ennis' cross-examination (06/12/13 T12.29-T16.22): Q. Mr. Ennis you've heard Mr. Noble's evidence the other day and that was to the effect that on unirrigated property like yours in drought times the grass won't grow, do you disagree with that? A. Yes I do, well for those two lots that my sister has there is natural water, underground water aquifers. Q. That won't last forever if there's a proper drought, the grass won't grow? A. No it does give it a longer- Q. Do you accept that proposition? A. Won't last forever, no that's true. One of the things that will help it is to have long grass on the property. Q. If you keep the grass constantly long and woody you can't make hay? A. Well I don't agree with that. Q. Mr. Ennis you accept the proposition that long woody grass is not marketable as hay? A. No, I don't agree with that. Q. You weren't able to sell it were you in March of 2013, no one was interested were they? A. No they weren't interested in March 2013. Q. Because the cost in time involved of taking it off the property would not justify the amount you'd receive for the product? A. Bruce Noble was interested in February 2010. Q. That was once? A. No, he was interested and he took it. Q. And he was on the property wasn't he? A. He was there to do work on the property, that's true. Q. February wasn't March was it? A. No it's not March that's for sure, it's a different calendar month. Q. Now Mr. Ennis returning to your two reasons why you say hay was not made your position is that hay or silage is only saleable in times of drought? A. My position is that on that property it is best to sell hay or sell the grass for whatever purpose when someone asks - makes enquiries about it. It means they're BLOCK Q. Are you really saying that the only way you could sell hay is if somebody comes and enquires, it doesn't require any active steps on your part? A. That has been- Q. My understanding about how you sell any produce of any kind is that you test the market, you go round and maybe you place adverts, maybe you put notices in the local shops? A. Not necessarily. Q. Are you really saying that you wait for a stray passerby to come in, knock on your door and you're not even there to ask you whether hay is available, that's what you've been saying Mr. Ennis? A. People in the district know those paddocks, when they are short of grass they will come and ask me about it. MITCHELL Q. Mr. Ennis that has not happened in thirteen years? A. It hasn't happened in the relevant period. Q. It hasn't happened in thirteen years has it? On the first time- A. Sorry. Q. Has it happened in thirteen years? A. I've said that I can't speak for my father. Q. Well your father has not been responsible for this land for 13 years has he to your memory has it happened? A. Yes it has happened. Q. When did it happen? A. I can't depose to that exactly, it's what my father told me. Q. Right so some time long ago? A. About 2006. Q. Mr. Ennis yesterday you accepted that you had no recollection of any hay being taken during the relevant period? A. Because I don't know if it was taken. Q. You have no recollection of anything taken back in 2002? A. I don't know what my father did. Q. Right so someone- A. I can't depose to what my father did. Q. One occasion once you heard second hand through your father that someone might have enquired about taking some hay in about 2006, any other occasion? A. I can't say what my father did, he kept anything like that to himself. Q. Aside from that instance can you recall any other occasion in the last fifteen, twenty years where someone has come onto the property and requested to buy hay of their own volition? A. The requests have been more to agist horses or cattle on the property. Q. That's a completely different concept isn't it? A. Not necessarily because what you're trying to do is sell the grass, whether it's sold as agistment- Q. When you said no to those people about agisting their animals, did they ask to buy your hay? BLOCK Q. Did you say no to these people who wanted to agist? A. On some occasions yes. Q. Why? A. Because I didn't want them to agist. Q. What harm would it have done to have animals on the ground eating your grass? A. Well I think I've already mentioned that I don't permit cattle to graze on that land and there's been a history of why that has occurred because it runs down the land, I'm trying to cultivate. Q. What about horses? A. Horses are generally okay, I haven't got the same issue with horses as I have with cattle and horses are permitted on the land under the covenant. Q. In all of this rather confused evidence my understanding is this, we now know that during this period of three years which are the land tax years we're concerned with, there was one occasion and one occasion only when hay was taken and that was when somebody who was a contractor to you said "I see there's some hay, can I take it in reduction of what you owe me for work done"? A. That was before the relevant period. Q. That was before. That was during the relevant period it didn't happen at all? A. It didn't happen at all. MITCHELL Q. So Mr. Ennis just to return to the line of questioning I was pursuing, other than in about 2006 some incident that you've heard second hand through your father that someone might have inquired about hay can you point to another incidence in the last 20 years where someone has come along of their own volition and inquired about taking hay from your properties? A. Not taking hay, there's been inquiries about adjusting and using the grass for adjustment. Q. Right so your business plan if I might call it that was-? A. I don't have a business plan it's not a business. Q. But the way you say you intended to sell hay was that someone would come along and inquire of their own volition about whether or not they could take your hay? A. No it was probably more the situation of barter, where I approach a contractor, ask him to do some work and in return he might take some contra, something that I can give him, firewood or hay, grass, adjustment whatever. Q. Right so correct me if-? A. It's a barter system more than contracts for sale in writing, underseal. Q. So you never intended to sell this hay to anyone who came along, you intended according to you if the opportunity arose because you had someone on the ground doing work already to try and reduce the purchase price by offering them your hay? A. Yes the barter situation would be the general mode that I would have adopted in that period if I needed work to be done. Q. Well Mr. Ennis that right makes your inquiries in 2013 of people who might want to buy your hay rather disingenuous doesn't it? A. No because that was after cyclone Oswald as you know the hay was very long and, sorry not the hay I'm misspeaking the wrong words. The grass was very long, it needed to be cut with, in my view a scythe cutter rather than a slasher and people who take silage for chaff or whatever usually have scythe cutters available. Q. Was what you were looking for was someone who would effectively come and cut your grass for free and take it away? A. That would assist me at that time yes. Q. You weren't looking to sell it, you were looking to relieve yourself of a problem that you had which was long grass that you thought was better cut rather than slashed? A. Well the alternative is to pay someone to do it, so isn't it a benefit to me isn't it a transfer of consideration from one party to the other. Q. Mr. Ennis you weren't intending to sell it, you were trying to get rid of it weren't you, you were trying to get rid of a problem which was your long grass? A. Which is a benefit to me, I mean the alternative is to have it scythe cut and leave it on the ground as mulch. Q. In which case you have to pay someone? A. Exactly. (and at 06/12/13 T18.31-T24.15): Q. Mr. Ennis can you have a look at your submissions please, can you turn to page 4? A. The first set of submissions. Q. It's repeated on page 15 of your reply submissions, but page 4 of your original submissions will do? A. Yes. Q. Do you see the second last paragraph reference is made to the Applicant having kept the grass and timber for sale and acted as the seller in making marketing inquiries, this is the same passage you were taking to yesterday? BLOCK: Where are you? MITCHELL: Page 4 of Mr. Ennis' submissions. BLOCK: Yes the second last paragraph starts does it not 'turning to item 2 of the definition to deal in'. MITCHELL: Yes and then in the third sentence or the third line 'the Applicant has kept the grass and timber for sale and acted as a seller in making market'. I'll read the full paragraph: "Turning to item 2 of the definition to deal in, dealing Implies some sort of trading or barter. The evidence shows that the Applicant bartered his hay for contract work, the Applicant has kept the grass and timber for sale and acted as a seller in making market inquiries, has sought purchasers for the grass. He has considered the market conditions and the abundance of supply and acting according to the law of supply and demand. Turning to item 2 of the definition to keep for sale, the Applicant has kept the grass and timber for sale and acted as a seller in making market inquiries. He has reacted to the oversupply and drop in demand in the hay market and sought to enter a substitute market, silage instead of hay. He has sought purchasers for the hay and silage without success. He keeps his cultivated grass for later opportunities to sell. It has at all times kept the timber to mature for sale". Q. And so far as that concerns grass and hay and silage that is absolutely nonsense isn't it Mr. Ennis? A. No I spoke to Menzies and to Noble, it's in the affidavit. Q. Right so you're simply talking about the inquiries you made in 2013, late 2012, March 2013? A. That was the first time I spoke to Menzies yes. Q. That's the only time you'd made market inquiries isn't it? A. Yes I suppose if you put it that way that's probably true. Q. They weren't really market inquiries were they? A. I asked it if you want it. BLOCK Q. You told us a moment ago, you do see the inconsistency between your evidence and what you're saying here, what you have told us is this you don't go out and attempt to actively market hay or silage, you wait for somebody to come and ask you whether you've got some for sale? A. Yes. Q. Well that is directly different from what you say here you do see a difference don't you? A. But also I do, if I have work to be done on the property it is something that is in the back of my mind to ask. Q. Mr. Ennis you seem to be a pass master at avoiding direct questions, I put to you one thing and one thing only, the evidence you've given both today and on other occasions is that you didn't ever attempt to actively sell, you waited for somebody to approach you, to ask you whether you had hay for sale. That is different surely from what you say in your submissions. Do you accept that? That is so, yes or no? A. Yes I do, that is true. MITCHELL Q. And Mr. Ennis in so far as the so called 'market inquiries' of late 2012, early 2013, March 2013 go you weren't looking to sell it, you were looking for someone to come and take it off your hands for nothing? A. No I thought Menzies would pay me something to be honest. Q. Mr. Ennis that's not what you said a moment ago, you were happy for someone to come and cut it and take it away for free rather than having to pay Mr. Noble to slash it which might not be as good for the land? That was your concern? A. I would have been happy for that, but there was always an opportunity that they'd pay me money for it. BLOCK Q. But it is you who have emphasised that barter is a form of trade and that was what you were looking to do, basically what you waited to do was, when somebody did work for you, part payment for his services would be for you to let him take some of your hay but it didn't involve any money passing your way it involved money passing the other way, either in the form of cash? A. Yes. Q. Or hay, or both, isn't that right? A. Yes I did ask Menzies whether he wanted to buy it but he said no and then I asked him whether he wanted to cut it anyway and use it and he said 'no', so neither way worked. MITCHELL Q. Mr. Ennis can I deal with two things, the first thing is that in paragraph 177 of your affidavit, paragraph 178 where you deal with your conversation with Mr. Menzies? A. This is the first affidavit. Q. Yes? BLOCK: I think that's A11 isn't it, A11 paragraphs 1. MITCHELL: 177 and 178. Q. You there relay your conversations with Mr. Menzies and you talk about him cutting and buying a hay harvest, you don't make any mention there of what you have just recounted to us, of your asking him to take it for free and he's still saying 'no', do you? A. That's right he said "I'm not interested". Q. Well he said "I'm not interested" but what you don't put in your affidavit is "after I asked if he'd buy it and he said 'no', I said will you take it for free? and he still said no", you don't say that do you? A. No I don't. Q. And that would be an accurate recollection of what occurred wouldn't it? A. Probably would be yes. Q. And again you've been misleading by omission having you? A. If you put it that way yes. Q. Because you wanted this to look like a genuine effort to sell hay? A. It was a genuine effort to sell, I don't know about looking like it. Q. Mr. Ennis do you seriously maintain it was a genuine effort? A. I needed to get rid of that long grass, this was a way I thought it might work, it didn't work. Q. Now Mr. Ennis- BLOCK Q. I just want to note what you said "I needed to get rid of that long grass" and what did you say after that? A. I thought that it might work. Q. What work? A. Well approaching Menzies to use it as silage filler. Q. I thought that it might work? A. He was interested enough to drive out there and look it over. Q. To get Menzies to take it, and he wouldn't even take it as a gift? A. No. Q. Would it involve him cutting it? A. He just said his customers weren't interested at that time, so I assumed that he had an oversupply of filler or whatever, he just wasn't interested. He drove out and had a look at it, he was, if I can expand, as best I recall he was on his way, he had a job at Penrose and I asked him to have a look at it and see if he would buy it, I said I wasn't looking for much. MITCHELL Q. That's another matter you don't include in your affidavit do you Mr. Ennis? A. Well it's an end of the day, I'm typing all of this myself, it's a very long affidavit and I am already being criticised for putting in too much on the, in evidence so-. Q. Mr. Ennis what you've excluded is the relevant details and what you've included is the irrelevant details? A. What I'm trying to do now is tell you what I can remember of the conversation. Q. Mr. Ennis-? A. I remember for example there was something about him going out to Penrose and I remember him calling me because it was Easter, I think it was Easter Friday he said "I'm driving over the paddock". Q. We're looking at the end of March 2013? A. I don't recall when Easter was that year, or this year but I remember being annoyed that he was driving over the paddock, I never asked him to do that as I understood he was just going to look at it. Q. For your assistance Easter this year was 31 March? A. Was it thank you. Q. So your inquiries with Mr. Menzies were at the end of March? A. It would have been at the end of March then if that's the case, I just remember it was Easter I'm pretty sure it was an Easter Friday or Easter Saturday. Q. Mr. Ennis if you had a genuine intention to cultivate grass for the purposes of sale of hay, of silage sorry, what you would have done is you would have baled silage every year, cut and baled silage every year, you then would have wrapped it in large plastic bales and stacked them on the street frontage of one or other or all of your properties wouldn't you? A. Well I didn't actually think about silage until that conversation with Menzies. BLOCK: Couldn't you, sorry forgive me interrupting you, but couldn't he also have, he didn't necessarily have to make silage he might have made hay. MITCHELL: Well Mr. Ennis' evidence was that his haysheds were not suitable, his evidence flip flopped about this but it was that his haysheds were not ideal and sometimes not suitable. BLOCK: I see but in theory if his haysheds are suitable in order to market he could have converted the grass into either hay or silage and by one means or another let it be known that it was available for sale. MITCHELL: Can I explore this a little further. Q. Mr. Ennis silage that's wrapped in bales will survive outdoors won't it? A. Yes. Q. And it can survive for many years can't it? A. As long as it's not interfered with in any way and it's kept very still yeah. Q. And people in the district, as I think you addressed with Mr. Bruce, tend to stack their silage that they might want to sell by the roadside so people can see it? A. People with silage tend to stack it on their properties anywhere. It doesn't be by the roadside I would say. Q. But if you want to sell silage the best silent advertisement so to speak would be to stack it at your gate on your roadside? A. Well I guess that would be true. You could do that and put a sign up, yes. Q. And there was nothing to stop you- A. It would have to be a farm gate sale, yes. Q. There is nothing to stop you each year doing that was there? A. If I had thought about silage at that time I guess it would be true yes. Q. Now Mr. Ennis just return to what you said a moment ago, the only time you thought about silage was when you had that call with Mr. Menzies was it? A. That's when I took a serious view on silage. Q. Right so if you turn back to page 4 of your submissions and the last paragraph. A. Page 4. Q. Page 4, last paragraph where you talk about the definition of sale, you say the Applicant has kept sale and acted as a seller in making market inquiries. Then you say "it has reacted to the oversupply and drop in demand in the hay market and sought to enter a substitute market, silage instead of hay". A. That's right. Q. You did no such thing? A. Well at that stage there was an oversupply of hay. I asked Menzies about silage. Q. That's your reaction to the oversupply and seeking to enter a substitute market was to ask Mr. Menzies about silage? A. That's right. And we had a discussion. Q. But there was an oversupply of silage wasn't here as well? A. That's right. It's my view, I think there was. Q. Mr. Ennis you weren't reacting to the oversupply and drop in demand, you were reacting to the fact that at the end of March 2013 your grass was hopeless for hay, hopeless for silage and could only potentially be used as silage filler, correct? A. I don't say it was hopeless for hay. Q. Mr. Ennis, seriously? A. We cut for hay even now. Q. Mr. Ennis no-one was going to cut it for hay? A. Not at that time, no. Q. You were not reacting to an oversupply of drop in demand in the hay market were you? A. No-one was going to accept it for hay at that time, that's true. Q. Mr. Ennis that's another basis on which the final paragraph of page 4 of your submissions is misleading isn't it? A. It gives cultivated grass a later opportunity to sell. Q. Final paragraph, "It has reacted to the oversupply and drop in demand of the hay market and sought to enter a substitute market, silage instead of hay"? A. I see what you mean. Q. Right. "It has sought purchasers for the hay and silage without success". That is misleading isn't it? A. If you say so. It's what I thought was happening at the time. 86Mr. Ennis' evidence that he hoped the Applicant might be able to get a discount on work done on the lots by giving away its grasses to contractors who might (at some undefined time in the future) be retained to do work on the lots, even if accepted (albeit that it depends on Mr. Ennis' uncorroborated oral evidence and because it is inconsistent with the Applicant's practices on the properties and his attempts in 2013 to procure that Mr. Menzies took the grass without charge) does not establish an intention to cultivate grasses for the purpose of sale (even if sale includes barter). It establishes at best a willingness to part with grass which naturally occurs on the properties and which the Applicant would otherwise have to pay to get rid of. That willingness cannot found an intent to cultivate for the purpose of sale. It should here be borne in mind that: (a)the Applicant spent in the order of $1,000 on slashing each year ($412.50 in November 2010, $646.25 in February 2011, $591.25 in November 2011, $742.50 in June 2012 and $206.25 in January 2013); (b)that money could not have been spent with an intention of some possible future barter, particularly where the discount the Applicant might receive would not exceed $500 or $600 (being the approximate value of the offset work Mr. Noble did in February 2010 10/09/13 T77.31-47); (c)such an arrangement was also most unlikely to ever be repeated in light of the fact that in March of 2013 Mr. Ennis could not even find someone to take the grass off the Applicant's hands without charge; (d)Mr. Ennis did not give evidence that the Applicant intended to have any work done on any of the lots in the future which might give rise to the opportunity to obtain an offset. 87Further, the fact that the Applicant did not have an intention to sell receives support from Mr. Blackwood's evidence that at the time of his inspection of the properties on 21 August 2013 no steps had been taken to ready the properties for the production of hay in summer 2013/2014. In particular, No's 42 and 45 were at the time of his inspection covered in improved grass species of mature, rank growth and dead pasture commonly at 50cm in height. This was shading the young pasture and preventing the emergence of any ryegrass and legume species present. As a result, there would be no grasses suitable for hay-making this summer on No's 42 and 45. The Applicant takes issue with this in AFS at page 325 asserting that the long dead grasses cool the soil, prevent evaporation and protect the new grasses. This submission is not supported by the evidence and, in any event, cannot be accepted in the face of Mr. Blackwood's evidence in this context which was not challenged in cross-examination. Mr. Noble gave some evidence on this topic and suggested that the rank growth might rot away and allow new growth to be harvested for hay, but his evidence in this regard was unclear and he accepted that the rank growth might need to be slashed first in some circumstances: "it just depends how rank that is otherwise you would just leave it alone" (10/09/13 T68.34-T69.17). Ultimately Mr. Noble conceded that if you were serious about making hay for the purpose of sale and had 50cm or so of rank, mature growth you would slash it (10/09/13 T70.43-46, T72.18-24). Mr. Noble also accepted that while the rank grass was at 50cm or so it would take the ground a long time to dry out (10/09/13 T71.50-T72.16), something which is required if hay or silage is to be made. 88Taking each of the above matters into account, the Chief Commissioner contends (correctly) that the Applicant's assertion that grasses were cultivated with the purpose of selling them for hay (or silage) cannot be accepted. It is not necessary for the Tribunal to go further and determine what the Applicant's actual intention in undertaking the activities it did undertake, (namely slashing and on one occasion spraying for weeds), was. The simple fact is that grass, once established, grows. It needs to be cut, whether for amenity, appearance sake (a matter of particular importance when the properties were for sale on the market), to suppress weeds, to minimize bushfire risk or for some other reason. Each of those are compelling explanations for the Applicant's conduct. This is reflected in the following evidence given by Mr. Ennis in cross-examination (06/12/13 T35.5-22): Q. Now Mr. Ennis can I ask you one last question? Assume for a moment you did not have an intention to cultivate grass for the purpose of sale as hay or silage you wouldn't have done anything different on the land to what you in fact did would you? A. Assuming I didn't have any intention would I have done things differently? Q. Well you still would have slashed regularly? A. I see what you mean? Q. You still would have slashed regularly wouldn't you? A. I still would have weeded yes that's true. Q. Still would have sprayed for weeds on the one occasion you did? A. That's true, yes I would have done that, yes. It's hard to distinguish isn't it? Q. Each of the things you point to as being cultivation for the purpose of sale you still would have done wouldn't you if you had no purpose of sale? A. Yes. 89Moving then to cultivation of eucalyptus trees for hardwood and firewood, the Chief Commissioner submits that the material facts are that during the period 1 July 2010 to 30 June 2013: (a)the eucalypts were not tended to in any way; (b)no hardwood was sold and no steps were taken to attempt to sell it. The Applicant asserts that the trees were not sufficiently mature to harvest for hardwood, but leads no expert evidence to corroborate that assertion. While such evidence may not be required if the trees were only a couple of years old, the eucalypts on No 2 were planted in 1997 and 1999; (c)no firewood was sold and no steps were taken to attempt to sell it. 90Mr. Ennis' evidence on this topic in cross-examination is important, and in particular the fact that he recants from sale as firewood as being an intent held by the Applicant (06/12/13 T32.16-T33.41): Q. Mr. Ennis it's important to regularly prune each of the trees you've described isn't it to encourage growth of firewood and for primary hardwood? A. Not every year no. In fact if you do it too often in my view - I am not saying I am an expert in this but in my view you run a risk of introducing fungus attack into the timber. You see the timber bleeds when you cut it. You do get a secondary growth off that called epicormic growth. You often see it in bushfires and the tree is damaged from the bushfire. Little bits of green sprout out of the branch - out of the trunk and that epicormic growth eventually becomes part of the tree again after many, many years. With gum forests they are to a certain extent self-pruning. They drop smaller branches and sometimes larger branches without warning. And they tend to develop an area in their understory which is bare and barren because the tree itself has a natural poison that kills off everything in the understory. So after a while they tend to be sort of self-managing, unlike a deciduous tree such as hazel or walnut or oak or whatever which drops leaves in winter and the grass continues to grow under the tree and has to continue to maintain the grass or harvest it or whatever you want to do, slash it, harvest it as hay, whatever. That's a different sort of forest to a gum forest. If you cut a gum forest too often you will start to get fungus problems. That's my view. Q. Mr. Ennis in any event you would accept that at least in respect of the second of the two groups of trees that during the relevant period you could have taken firewood from it to sell? A. I could have harvested it in that period, parts of it, yes. Q. And not once did you? A. There would be trees in there that could be actually cut out all together and cut up as firewood. Q. Right, but not once did you do that? A. Not in the relevant period no. Q. Not once did you prune any tree in the relevant period? A. No. The last pruning was in February 2010. Q. And no hardwood was taken or sold for hardwood? A. No the trees aren't mature enough for that. They're not fit for logging yet. Q. Mr. Ennis the trees are little more than a hobby or an experiment for you are they? A. Hobby I'm not sure. It's not a commercial operation that's certain. Q. You had no real intent to sell them or any part of them? A. No, that's - based on what's happened this year now that I'm the owner of the property to be honest I'll probably knock all of them down and replace them with hazel and walnuts. That's what I'm looking at. I don't know whether I'll actually do it. I'm still considering that. Q. Mr. Ennis can you come back to my question. You had no intent during the relevant period to sell any of these? A. To sell any hardwood timber off them, no because they weren't ready. Q. You had no intent to do so in the future either, did you? As at the relevant period your state of mind in the relevant period you had no intent to sell- A. They were growing. Q. -firewood or hardwood at any time? A. Well not firewood, I would have sold firewood. But- Q. But you didn't sell firewood? A. No I didn't sell firewood. Q. And you had no intent to sell firewood? A. Well I can't say I didn't have no intent to sell firewood. Firewood was an option if I wanted to do it. Q. But you didn't want to do it? A. If I - well no I didn't' want to do it. I suppose that's true. Q. Instead you let it fall to the ground or some of it fall to the ground in either waste or be taken away by your tenant's father? A. He was free to take away what he wanted from the ground yes. But he wasn't instructed and asked to do any pruning that's for sure. No, I agree with you that that caretaker lease didn't extend to doing that but he was free to take away what he found on the ground in the forest and use it as he wished to get rid of some other timber that was there. 91Taking the above matters into account, the Chief Commissioner submits that the Applicant's assertion that eucalyptus trees were cultivated with the purpose of selling them for hardwood and firewood cannot be accepted, particularly in circumstances where it depends on the uncorroborated evidence of Mr. Ennis. Again, is not necessary for the Tribunal to go further and determine what the Applicant's actual intention was in relation to the trees. Trees, like grass, grow of their own accord. Their presence can be of assistance for shade, privacy and appearance, they can act as a windbreak, and Mr. Ennis' evidence is that they are also of assistance with the water table. PART G - No.2. THE RESIDENTIAL USE 92This part G is relevant only if it I am not correct in my view that in respect of No 2 there was some primary production use (however minimal) in respect of the eucalyptus trees. If this is so it is clear to me that the rental use was by far the dominant use of No. 2. In the result, it is only in respect of No 2 that this further consideration is relevant. Rental/Residential use of No 2 93During almost the whole of the relevant period, No 2 was rented by the Applicants to residential tenants. That lease commenced on 28 August 2002. Prior to that time, preparations were being made to rent it. It is still being rented by the same tenants. 94During the relevant tax years the Applicant received significant revenue from the investment uses - initially the rent w $360 per week but by 9 January 2012 it had increased to $370 per week. In January 2013 it went up to $375 per week The Applicant also made significant expenditure in relation to the residence. 95The Applicant's tax returns show the following in relation to the rental use on No 2: Financial year Revenue from rent Repairs and maintenance 2011 $15,955 $14,942 2012 $18,970 $3,062 96The Applicant's 2013 tax return and financial statements had not been prepared at the time of the hearing. But based on a rental of $370 per week for 26 weeks and $375 for 26 weeks, the revenue would be $19,370. 97As for the physical use, Ms Torpy's evidence is that: (a)she has lived in the residence with her husband and two children since 28 August 2010, i.e. there are four people permanently in occupation; (b)her husband often works from home - he works in his office in Sydney 3 days a week and the rest of the time from home; (c)she only works 4 days a week as a bookkeeper and often works from home; (d)she and her husband look after the plantings in the front yard and her husband mows the grass along the road boundaries along Cornwall Road and Parsland Close; (e)her husband picks up sticks in the paddock (being the paddock on which the Applicant alleges hay was cultivated) and around the eucalypt; (f)her father mows the grass along the outside edge of the wire enclosure to the residential block (which presumably means within the paddock), removes scrap timber from the paddock and has carried out some fence repair. 98Further, the Applicant procured landlord's insurance for the residence. The insured value of the building was: (a)$350,000 for the period 8 February 2010 to 8 February 2011; (b)$385,875 for the period 8 February 2012 to 8 February 2013; and $405,168 for the period 22 February 2013 to 8 February 2014. 99The Applicant attempted (and still attempts: pages 12, 153, 176, 186 and 451 of AFS) to play down the significance of the residential use by describing it as being of a "caretaker nature". However, the managing agent, Ms Johnson, acknowledged that the lease was a regular lease and in so far as she had referred in her affidavit (at [8]) to caretakers of the farmhouse she meant no more than having someone living there so that the house does not become dilapidated (05/12/13 T16.20-28). 100In Leda Manorstead v Chief Commissioner at [71], Gzell J stated: 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." (a)The unused land represents approximately 84.24% of the size of No 2 less a small deduction from this amount of say 10% to take account of the eucalyptus trees. (b)The rental/residential use dominates over the primary production use in terms of appearance - an objective observer viewing No 2 from the street and as a whole would draw the conclusion that the property is a residence. (c)The dwelling house (including garage and garden) on No 2 represents a significant physical improvement. While there is a small shed on the balance of the land, it is not used in connection with the Applicants' primary production activities. (d)The intensity of the rental/residential use is far greater than the alleged primary production uses. There are four people living in the residence, one of whom worked from home for part of the week, another of whom worked only four days a week (and sometimes from home) and two of whom were children. By contrast the primary production use was essentially passive. (e)The rental/residential use produces a source of significant revenue; the primary production use produces no revenue. 101The Tribunal thus concludes that in respect of No.2 primary production use (if relevant) did not predominate over the rental/residential use. In this regard, the present case is a far more obvious case than cases such as Romano v Chief Commissioner of State Revenue [2011] NSWADT 73 and Saliba v Chief Commissioner of State Revenue [2012] NSWADT 119 where the primary production activities in question involved cattle present on the land and producing actual revenue. In Romano at [45] Judicial Member S Frost concluded that "the renting out of residential premises is such a significant activity that it renders it impossible to conclude, in relation to the land tax years in question, that the dominant use of either of the properties was for primary production". Those observations are apt to the present case. Further, this conclusion is compounded if the only primary production use the Tribunal finds to exist is cultivation of eucalyptus trees. 102In the circumstances, the Applicants did not establish that the primary production use is the dominant use of No 2. PART H - MISCELLANEOUS 103The Applicant in AFS seeks an order for costs; it is clear that there is no basis whatever for such a claim. (It will be remembered that Mr. Ennis described himself as a retired solicitor and it clear that he did not represent the Applicant in a legal capacity; it follows that he must have done so either as a director of the Applicant or as its liquidator). 104The evidence before the Tribunal, (taking into account its credibility findings), establish that in respect of the relevant years, there was no cultivation as required by the Act. 105Putting it at its best for the Applicant the Tribunal finds that the Applicant has failed to discharge the onus on it. 106Accordingly the objection decision under review is affirmed. ********** 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: 06 June 2014