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SUPREME COURT OF NEW SOUTH WALES

SONTER v COMMISSIONER OF LAND TAX (NSW)

RATH J

25 August, 2 December 1976 -

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Rath J    The plaintiff, Kenneth William Sonter, claims an order that the Commissioner of Land Tax is in error in deciding that the plaintiff's land, situate at Minto Road, Minto, and subject to assessment No 52348 (1972-73) and assessment No 37614 (1974) is not primary production land, and is not exempt from land tax; and an order that the objections lodged against the assessments, which were disallowed by the Commissioner, be allowed.

   Section 10(1)(p) of the Land Tax Management Act 1956 provides that land used for primary production shall be exempt from taxation under the Act (with certain exceptions not material in the present case). In s 3 the expression "land used for primary production" is defined as meaning "land used primarily for" certain purposes, the only relevant one being: "the maintenance of animals or poultry thereon for the purpose of selling them or their natural increase or bodily produce".

   Notice of assessment No 52348 relates to the tax year 1972/73, and is a notice of assessment on land owned at 31 October 1972. Notice of assessment No 37614 relates to the tax year 1974, and is a notice of assessment on land owned at 31 December 1973. Section 8 of the Act, as amended by Act No 70, 1973 provides:-

   "Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied.

   

"In this section 'year' means the period of twelve months commencing on the first day of January."

   Prior to the amendment, the wording of the section was the same, except that "October" appeared where "December" now appears, and "November" where "January" now appears.

   Any taxpayer who is dissatisfied with an assessment made by the Commissioner may lodge with the Commissioner an objection in writing against the assessment ( s 35(1)). A taxpayer who is dissatisfied with the decision of the Commissioner on the objection may in writing request the Commissioner to treat his objection as an appeal and to forward it to the Supreme Court. This procedure does not appear to have been strictly followed, but the matter was conducted before me as if it was an appeal under the Act (see also: s 38 and Supreme Court Rules Pt 51A r 13(1)). Section 37(4) provides: "On the hearing of the appeal, the Court may make such order as it thinks fit, and may reduce, increase or vary the assessment." The costs of the appeal shall be in the discretion of the court ( s 37(6)).

   The plaintiff acquired the land at Minto (which is the land the subject of the two assessments) and other land at Oakville in 1967. The Minto land has an area of 23 acres and 16 perches, and the plaintiff resides with his family in the house on the property. The Oakville land has an area of 25 acres 3 roods and 26 perches. The two properties are run in conjunction in connection with a business of breeding and selling cattle and horses. The Minto property is also used for breeding foxhounds, and as a riding school. It is the riding school use which has caused the Commissioner to assess it to land tax, because in his view the land is not used primarily for the maintenance of animals for the purpose of selling them or their natural increase.

   Documents were admitted in evidence certified by the Commissioner of Land Tax as true copies of the assessments. Section 18 provides that the production of any document under the hand of the Commissioner purporting to be a copy of an assessment "shall-

   (a) be conclusive evidence of the due making of the assessment; and (b) be conclusive evidence that the amount and all the particulars of the assessment are correct, except in proceedings on appeal against the assessment, when it shall be prima facie evidence only."

   There was no submission that the documents were conclusive evidence; and, consistently with the parties' treatment of the proceedings as a duly constituted appeal, I shall regard these documents as prima facie evidence only that the amount and particulars of the assessments are correct. There is accordingly an onus on the plaintiff to establish that the Minto land is land used for primary production, as that expression is defined in the Act.

   The plaintiff filed an affidavit of 26 May 1976. The following description of his activities is taken from this affidavit. Upon acquiring the land at Minto he owned five Australian Illawarra shorthorn heifers and a bull which he intended to use for stud purposes. He registered the property with the Royal Agricultural Society as the Minto Illawarra Shorthorn Stud. Since that date he has maintained these animals and added to their number by purchase as well as by breeding. At the date of his affidavit he owned approximately 60 cattle. He then maintained about 30 cattle on the property at Minto at any one time and the balance were grazed from time to time on his Oakville property, and also on leased properties near Bardwell Park and at Campbelltown. The cattle were returned to Minto for calving. He sold the calves as heifers for milking, as vealers for meat and for stud bulls.

   The affidavit states that the two properties at Minto and Oakville are run in conjunction, although the property at Minto is the property where the plaintiff keeps his stables and sheds, so that any animals requiring particular attention can be close to his home. It then proceeds to deal with the horsebreeding activities. At the time the plaintiff acquired the Minto land he was the owner of approximately 40 cross-bred Arab horses consisting of mares, geldings, colts and fillies, and a pure bred stallion. As he intended to breed horses for sale he registered the property with the Royal Agricultural Society for the purpose of breeding part-bred Arab horses as the "Kenbriley Stud". He was also interested in breeding Australian bred ponies and over the years he has acquired ponies for this purpose. He subsequently registered the property with the Royal Agricultural Society as the "Kenbriley Australian Bred Ponies Stud". The plaintiff has since conducted both these horse studs and maintained the animals for the purpose of selling them or their natural increase. At the date of his affidavit he had approximately 50 horses at the Minto property including three registered Australian bred ponies and ten registered part-bred Arab horses.

   The plaintiff has also established and registered with the Royal Agricultural Society a stud for the purpose of breeding pure bred English foxhounds on the land at Minto. As at the date of his Affidavit he had 36 pure-bred English foxhounds. The stud is registered and known as the "Kenbriley Fox Hound Stud". He hires this pack of hounds out to the Sydney Hunt Club. This affords him the opportunity of bringing the hounds to the attention of prospective buyers. He maintains the foxhounds for the purpose of selling them or their natural increase. He has sold hounds to people in various parts of New South Wales, and to interstate buyers and has exported hounds to Noumea and New Caledonia.

   The plaintiff also conducts a riding school on the Minto property on Saturdays, Sundays and public holidays. This gives him an opportunity of bringing his horses to the attention of prospective purchasers.

   The affidavit concludes by asserting that the land at Minto was being similarly used as at midnight on 31 October 1972, 31 December 1973, 31 December 1974 and 31 December 1975. I am concerned with only the first two of these dates.

   The plaintiff was called as a witness, and his accounts for the years ending 30 June 1972, 1973 and 1974 were produced. It clearly emerged from his evidence and the accounts that the riding school, and associated activities, constituted a substantial use of the land at Minto, and were the main source of the plaintiff's income.

   The land at Bardwell Park, referred to in the affidavit, consists of approximately 10 acres held under lease. The area of land at Campbelltown did not appear, but, from the context in which reference was made to it, it would appear that it would not be large. Both parcels were used for grazing cows. The cows are brought to the Minto property to get them in calf, and they are kept there sometimes for 2 or 3 months at a time.

   As at the date of giving evidence (25 August 1976), the plaintiff had about 75 horses. He had about 30 brood mares of various breeds, 20 geldings and about 20 foals. He still had the pure bred Arab stallion. The numbers have not varied greatly. He keeps just as many as he can handle, and does not overstock. He did not dispute, however, that in the three years ending 30 June 1972, 1973 and 1974 there was not much breeding of horses. The following question and answer establish this fact, and the reason for it:-

   Q-So that, so far as the 3 years ending 30 June 1972, 1973 and 1974 are concerned, there was not much breeding of horses in those years, was there? A-Owing to the fact that I had a heart attack in early 1969, I was unable to carry on as vigorously as I would have hoped to, and my wife and my son had to keep it down to, everything down to a bare minimum of work, because that amount of horses and cattle and hounds is a fair bit for any two bods to look after.

   For each of the 3 years ending 30 June 1972, 1973 and 1974 the plaintiff's accounts (which were prepared for him by an accountant) consisted of a document called "Trading Account" ann another document called "Trading and Profit and Loss Account". The first showed purchases, sales, natural increases and deaths of horses and cattle. It also showed purchases and sales of equipment. The equipment would appear to consist of saddles and other riding equipment. He has an advertisement on the property to the effect that harnesses and saddlery are bought and sold. The accounts refer expressly to sale of dogs in the year 1972, and the amount is only $110. The other document transfers the profits from the trading accounts, and has an additional item "Sales and Takings". The plaintiff agreed that this would represent substantially the takings from the riding school. These accounts were carefully analysed by counsel in argument, but it is sufficient to compare the gross returns from horse, cattle and equipment sales, and the figures for "Sales and Takings" in order to make the point that the primary source of the plaintiff's income is the riding school, and its associated activity, the equipment business. The gross horse sales were: 1972, $2430; 1973, $3687; 1974, $6328. The gross cattle sales were: 1972, $330; 1973, nil; 1974, $1200. The gross equipment sales were: 1972, $1626; 1973, $856; 1974, $2819. Under the heading "Sales and Takings" the figures are: 1972, $11,372; 1973, $15,142; 1974, $15,719.

   There is a sign on the Minto property, advertising it as the "Riverina Riding School". The school is conducted only on Saturdays, Sundays and public holidays; there are no mid-week activities, even in school holiday periods, with one exception that I would regard as immaterial. On every second Wednesday the horses are saddled for sub-normal children, free of charge, and the plaintiff's wife tries to assist them to ride. People are taught to ride wholly within the property. There are a number of made up obstacles and natural hazards which are used for teaching jumping.

   In the riding school mares and geldings are used, but not stallions. As I understood the plaintiff's evidence the geldings, although used in the riding school, are also for sale, and numbers are in fact sold. Mares, on the other hand, would be sold only if defective. All the mares are available for use, at various times, in the riding school, but they were also used for breeding. When in foal, they are not used for riding for about 2 months before foaling, and are not so used for about 4 or 5 months after the birth of a foal.

   The figures in the accounts show little natural increase in the horses for the years 1972, 1973 and 1974. The figures are respectively 1, 2 and 4. Deaths for these years were 4, 3 and 12. For cattle, the natural increase was 2, 5 and 6. There were no deaths in 1972, but there were 2 in 1973 and 15 in 1974. Horse purchases for 1972, 1973 and 1974 were 24, 24 and 27; and sales were 18, 22 and 15. Cattle purchases in those years were 15, 10 and 27. In 1972 there was one sale, and 22 cattle were destroyed and sold for dog's meat. In 1973 there were no sales. In 1974 9 cattle were sold.

   I am satisfied that a substantial use is made of the Minto property for horse and cattle breeding, and for the maintenance of horses and cattle for sale of them and their progeny. Foxhound breeding, and sale of foxhounds, is a comparatively minor activity, and the kennels are maintained largely at least for the hire of the pack to the Sydney Hunt Club (which pays the plaintiff a "gratuity" of $600 a year). The riding school activities are the principal source of income, and the whole venture would not be viable without that income. Though the actual riding and teaching take place only on Saturdays, Sundays and public holidays, the totality of associated activities is not confined to those days. There was no detailed evidence of day to day activities, but the riding school horses had to be kept fed and generally looked after. In my view the riding school activities must be looked upon as extending over the whole week.

   There is no clear cut distinction between the riding school activities and the activities of maintaining and breeding horses. Horses are bought, sold and used for breeding; but with the exception of the stallions, the same horses that are bought, and are to be sold, or used for breeding, are also used in the riding school. In this case therefore I am concerned with mixed uses, not only in the sense of distinct uses on the same land, such as horse and cattle breeding, but also in the sense of the maintenance of the same animals for different purposes, some of which are purposes of primary production and some are not. In these circumstances the financial gain from the various activities is some indication of the comparative intensity of the activities. The economics of various aspects of the business conducted on land do not necessarily reflect the comparative extent of the use of the land. It is readily conceivable that where there are a number of uses of the same land it may be the least profitable use that is the most intense one, either in its demands on the land, or upon the labour to maintain it, or both. But where, as here, animals are being maintained on land for two business purposes, the problem as to whether the use of the land is primarily for the one purpose or the other will receive some clarification from the financial considerations involved. But I do not regard the financial considerations as necessarily decisive, at all events in this case. All the uses of the land must be considered. Here all the uses, even the maintenance of the foxhound pack and the breeding of foxhounds, are substantial. All of those uses that fall within the description of "the maintenance of animals … for the purpose of selling them or their natural increase" must be together compared with the uses that do not fall within that description. I have found that, in attempting to make this comparison, I am unable to achieve any degree of satisfaction as to whether the primary use of this land is for the defined exempt purposes. I suspect that the plaintiff's activities on the land are distinctly orientated towards the riding school, but I do not think that the evidence would permit such an inference properly to be drawn.

   I am not concerned in this case with any problem that may arise in other cases where different parts of land are differently used, or where the use claimed to attract the exemption is of a minor character (as might be the case where land was substantially not used at all). If there is any problem in such cases, it is not one that arises in this case. No refined consideration here is required of what is involved in the concept of "use" of land; as I have said, the land is plainly used in a number of ways, and all the uses are substantial. The word "primarily", as applied to the case, means that those uses are to be weighed and evaluated. There is no particular touchstone that can be used; all circumstances bearing on the degree, extent and intensity of the uses as land uses are to be considered. The question is one of fact and degree, and one to be approached on a broad, commonsense basis.

   The researches of counsel did not result in the discovery of any authority that would assist the court either on the construction of the definition, or on its application in the present case. Two reported cases were referred to, namely London Co-op Society Ltd v Southern Essex Assessment Committee [1941] 3 All ER 252 and Simmonds Aerocessories (Western) Ltd v Pontypridd Area Assessment Committee [1944] 1 All ER 264. It was not suggested that I would derive any real assistance from these cases. In my view they do not in fact assist on the matters I am called upon to decide. Reference was also made to M Collins & Son Pty Ltd v Bankstown Municipal Council (1958) 3 LGRA 216 (a case on s 118(2) of the Local Government Act 1919). The problem there was not the same as in this case. There is a discussion of the meaning of "use" of land in Newcastle City Council v Royal Newcastle Hospital (1957) 96 CLR 493 - esp at 515; (1959 100 CLR 1); but that discussion is not relevant in the present case.

   As I have said, I do not think that evidence is such as to warrant the inference that the primary use of this land is for an exempt purpose. The plaintiff has accordingly failed to displace the prima facie correctness of the assessment, and the appeal must be dismissed.