A and a Palk v Chief Commissioner of State Revenue
[2012] NSWADT 94
•18 May 2012
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: A & A Palk v Chief Commissioner of State Revenue [2012] NSWADT 94 Hearing dates: 10 February 2012 and 3 March 2012 Decision date: 18 May 2012 Jurisdiction: Revenue Division Before: A Verick, Judicial Member Decision: The assessment for the land tax year 2009 is confirmed.
Catchwords: Land tax - whether land exempt as land used for primary production - breeding bees in hives on land - significant use of land for residential purposes - whether the dominant use was "use for the maintenance of animals" - whether applicants failed the dominant use test Legislation Cited: Land Tax Management Act 1956
Administrative Decisions Tribunal Act 1997
Taxation Administration Act 1996
Interpretation Act 1987 (NSW)Cases Cited: Kearry v Pattinson [1939] 1 All E R 65
Stormer v Ingram (1978) 21 SASR 93
Babaniaris v Luton Fashion Pty Ltd (1987) 71 ALR 225
Project Blue Sky v ABA (1998) 194 CLR 355
Cooper Brooks (Wollongong) Pty Ltd v FCT (1981) 35 ALR 151
Burnside & Marrakai Limited v Federal Commissioner of Taxation (1955-1959) 11 ATD 181
R v Philbey 48 SJ 216
Reysson Pty Ltd v Chief Commissioner of State Revenue (RD) [2009] NSWADTAP 17
Greenville Pty Limited v Commissioner of Land Tax (NSW) 7 ATR 30
Saville v Commissioner of Land Tax (1980) 81 ATC 4373
Stephen v Federal Commissioner of Land Tax (1930) 45 CLR 122
Randwick Corporation v Rutledge (1959) 2 CLR 54
Pizzitola v Galverston County Central Appraisal District 808 S.W. 2nd 244 (Tex. App.-Houstan [1st Dist.] 1991)
Tutton and others v A D Walter Ltd (1985) 3 All ER 757
Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867
Cornish Group Pty Limited & Anor v Chief Commissioner of State Revenue [2009] NSWADT 191
Hope v Bathurst City Council (No 2) (1983) 52 LGRA 79
Hope v Bathurst City Council (1986) 7 NSWLR 669
Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286
Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366Category: Principal judgment Parties: Allan and Angela Palk (Applicants)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
N Bilinsky, (Applicants)
AH Rider, (Respondent)
B Bilinsky (Applicants)
Crown Solicitor (Respondent)
File Number(s): 096100
REasons for decision
The applicants seek a review of a land tax assessment issued by the Chief Commissioner to assess land situated at Hanging Rock Road, Sutton Forest ("the Land") for the 2009 land tax year. The issue in dispute is whether the Land was exempt from land tax in the 2009 land tax year under s 10AA(3)(b) of the Land Tax Management Act 1956 ("the Act"). The applicants claim that breeding of bees on the Land for sale is a primary production activity and that the applicants are entitled to the exemption in respect of the Land.
Two questions arise for determination in this matter. Firstly, is the activity of merely breeding bees for sale a primary production activity within the terms of s 10AA(3)(b) of the Act. Secondly, and more importantly, whether the activity of bee breeding could be characterised as the dominant use of the Land in the 2009 land tax year under review. The second question only arises if the answer to the first question is in the affirmative.
Legislative provisions
Under s 7 of the Act, land tax is levied and payable on the taxable value of all land in New South Wales, except land, which is exempted from taxation under the Act. Land tax is charged on land as owned at midnight on 31 December in the preceding year: s 8.
For the 2009 land tax year, s 10AA was in the following terms:
Exemption for land used for primary production
(1)Land that is rural land is exempt from taxation if it is land used for primary production.
(2)Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land:
(a)has a significant and substantial commercial purpose or character, and
(b)is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
(3)For the purposes of this section, "land used for primary production" means land the dominant use of which is for:
(a)cultivation, for the purpose of selling the produce of the cultivation, or
(b)the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or
(c)commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or
(d)the keeping of bees, for the purpose of selling their honey, or
(e)a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or
(f)the propagation for sale of mushrooms, orchids or flowers.
(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.
Factual Background
During the course of the hearing when this matter first came before the Tribunal, the Tribunal noted that it lacked jurisdiction to review the application in the absence of a proper objection decision. Under s 96 of the Taxation Administration Act 1996 an application to the Tribunal for review of a decision of the Chief Commissioner can only be made if the decision has been the subject of an objection. The matter was adjourned sine die to allow parties to "fast track" the objection process in this matter. The present application for review has been the subject of an objection. The parties also agreed that all evidence and submissions produced at the first hearing should be adopted for purposes of the present application.
The applicants' version of the factual background was set out in four affidavits filed by Mr. Palk. The applicants did not attend the hearing nor make themselves available for any cross-examination. In that sense the applicants' evidence is unchallenged evidence.
In his first affidavit sworn on 6 July 2010 Mr. Palk set out the factual background as follows (annexures omitted):
1.In or about December 2004 my wife and I purchased from a Mr. Nick Joannou a property known as "Olive Grove" being Lot 4 in Deposited Plan 239391 at Hanging Rock in the Shire of Wingecarribee Parish of Murrimba and County of Camden and situated at Hanging Rock Road, Sutton Forest. The property was subsequently named by us to "Springwood". The Transfer of the property to us was registered on 12 January 2005
2.The property was purchased by us for the purpose of extracting from it subterranean drinking water, the area being well known for its high quality potable water. The land, which has an area of 42 hectares, is otherwise of poor quality. It was once a sand mine but sand mining has been prohibited in the area and no permits will issue for this activity. The land is not suitable for either the growing of crops or for the running of stock. It was even unsuitable for the growing of olives.
3.Following the purchase of "Springwood", my wife and I applied to the Department of Water and Energy (then called the Department of Natural Resources) to have reissued to us a licence in respect of two bores sunk on the property. The licence was originally numbered 10BL116811.
4.Following the application and considerable correspondence between us and the Department of Water and Energy, the Department issued a Licence No. 10BL165798 but, subsequently withdrew the licence. In the meantime, the State Government made an Order pursuant to Section 113A of the Water Act 1912 which placed an embargo on the issuing of new water licences. Accordingly, a new licence to extract subterranean water was not issued to us thus rendering the property virtually useless.
5.In about April 2006 my wife and I purchased a property to be used as our residence at 80 Greenwell Point Road, Greenwell Point and relocated to that property. This property has, since its purchase, been our principal place of residence.
6.After giving consideration as to what "Springwood" could be used for, we found that the only possible and viable use to which the property was a limited form of primary production. As I was well acquainted with the bee farming industry, we resolved to commence a business of breeding and farming bees. We had, in fact, over the previous ten years been involved, to a lesser extent, with the breeding of bees on other properties.
The land is zoned as Zone E4 Environmental Living under Wingecarribee Local Environmental Plan 2010, which, essentially, limits the use of the land to agriculture and extensive agriculture. Extensive agriculture may be carried on without development consent and is defined as the production of crops or fodder, the grazing of livestock or bee keeping for commercial purposes.
7.On 14 November 2007 the Department of Water and Energy rejected our application for a bore licence, which would permit the extraction, in commercial quantities of potable water. Following that rejection, we commenced using "Springwood" for the purposes of breeding bees and the subsequent sale of bees in new hives. We appointed an old friend, Richard Orr, to be the Manager of "Springwood" and to carry out the bee breeding activities. Our reason for asking Richard Orr to act as our Manager was due to the fact that he had been involved with the breeding of bees for more than 20 years and was very well acquainted with the bee farming industry.
8.For the past 2 1/2 years we have used "Springwood" for the purpose of breeding bees and the sale of bees in new hives. The property supports at least 50 hives all year round. The number of hives on the property varies from time to time. At the time of swearing this affidavit there were approximately 80 hives on the property. There have been occasions when we have had more than 100 hives on the property and the number is capable of being increased to 150 hives.
9.Our primary production takes the form of splitting old hives, which usually comprise of twelve frames, into two hives of six frames each. Within a period of two to four weeks, depending on the weather, each hive is capable of being bred up to a total of twelve frames. These new hives with bees are then sold by us. The honey produced by these hives is extracted and stored for the purpose of providing feed to the breeding bees during the winter months. The honey is collected during the summer months.
Paragraphs 10 to 12 of the affidavit have not been produced. They speak of some future plans and are thus not relevant in determining the issues in this matter.
In his second affidavit, sworn on 15 July 2010, Mr. Palk provided information about his installation of irrigation systems business, which ceased on 30 June 2005 due to his health. He added that:
8.The machinery used by Illawarra Irrigation had little resale value. When my wife and I acquired "Springwood" in December 2004, some of the machinery was used to clean up the property. One of the reasons for acquiring "Springwood" was that it had a number of sheds, which were capable of storing the machinery retained by me. The sheds were subsequently repaired but no additional buildings added to the property since we acquired it. The machinery is no longer used except, occasionally, around the property. As stated in paragraph 2 of my affidavit of 6 July 2010, "Springwood" was originally acquired with a view to obtaining a licence to extract subterranean drinking water from it.
9.At present, "Springwood" is occupied by Mr. Richard Orr. There is an additional cottage on the property which is occupied by one of my sons who suffered a near fatal accident on 27 January 2009. While riding a motorcycle at night., he was hit by a kangaroo. He has suffered brain damage and is recovering slowly. Once he has recovered, he proposes to move to Moss Vale and continue his employment as a chef.
In his third affidavit sworn on 9 September 2010, Mr. Palk explained that he and Mr. Orr, his nephew, have "experience and familiarity with bee breeding" over a number of years. Mr. Palk also responded to certain aerial pictures of the property taken by the Chief Commissioner and the Chief Commissioner's written submissions.
In Mr. Palk's fourth affidavit, sworn on 15 September 2010, explained with pictures "the topography of the northern part of the property, in particular the area of the disused sand quarry". He stated as follows:
The area that once was a quarry is not used for that purpose (it being prohibited) but it nonetheless provides a useful source of water for the forager bees and for the hives, which are usually located on the edge of the old quarry.
... The bushland vegetation includes an abundant amount of iron bark, stringy bark, scribbly bark, varieties of Banksia, wattle and more, all of which provides nectar for the bees at different times of the year from spring through to the autumn months. These varieties of trees and shrubs are spread the length and breadth of the property and over the back of the property for a hundred metres or more (well beyond the old quarry). The Paterson's Curse, which also provides sustenance and nectar and/or pollen for the bees, typically blooms in summer and is found in the grasses and cleared areas, including at the front of the property.
Additional factual background, necessary for the determination of the issues, was usefully set out in the Chief Commissioner's written submissions, as follows (without reference to the footnotes as to the source of the information):
10.During the period relevant to the Tax Year:
the Applicants were the sole registered proprietors of the Land;
the land was zoned "Rural (1a)" and was "rural land" for the purpose of the PPL exemption;
the Land was partly used for residential, equipment and machinery storage and bee breeding purposes (see below); and
the Land was partly unused (see below).
Residential use of the Land
11.During the period relevant to the Tax Year, the Land was partly used and occupied for residential purposes. In particular:
the house at the front of the Land was used and occupied for residential purposes by the Applicants' son and his family; and
the house in the middle of the Land was used and occupied for residential purposes by Mr. Orr.
12.Each of the houses was surrounded by significant cleared areas.
13.The house occupied by Mr. Orr was surrounded by a number of substantial structures, including a large carport and garage and various large sheds.
14.Based on his view of the Land on 27 May 2010, the Respondent estimates that the combined area occupied by the houses and surrounding cleared areas comprised in total about 25% of the Land.
15.Neither the Applicants' son nor his family, nor Mr. Orr, was an "owner" of the Land during the period relevant to the Tax Year for the purposes of the Act.
Storage use of the Land
16.During the period relevant to the Tax Year, the Land was partly used to store various items of equipment and machinery, some of which had been used in the Applicants' former business known as "Illawarra Irrigation". In particular:
some of the large sheds near the house occupied by Mr. Orr housed various items of equipment and machinery, including motor vehicles and tractors;
a significant amount of equipment and machinery of various types was stored in an area adjacent occupied by Mr. Orr; and
an undercover area near the house occupied by Mr. Orr housed, among other things, about ten empty beehives and a forklift used to move the hives.
17.Based on his view of the Land on 27 May 2010, the Respondent estimates that about 5% of the Land by area was used for storage.
Bee breeding use of the Land
18.During the period relevant to the Tax Year, the Land was partly used for bee breeding activities.
19.Generally, the Land houses at least 50 beehives all year round. This appeared to be the number of hives the Respondent observed when he viewed the Land on 27 May 2010. However, it is not clear from the Applicants' evidence how many beehives were housed on the Land during the period relevant to the Tax Year.
20.Based on his view of the Land, the Respondent estimates that the beehives on the Land as at 27 May 2010 occupied an area not exceeding 50m (i.e. substantially less than 1% of the Land by area.
...
Unused areas of the Land
24.About 25% of the Land by area comprises a disused sand quarry.
The Chief Commissioner also relied heavily on the expert evidence of Dr. Douglas Somerville. Dr Somerville is employed by the New South Wales Department of Primary Industries in the position of Technical Specialist Honey Bees (Principal Apiary Officer). On the instructions of the Crown Solicitor, he produced a very comprehensive written report, which was tendered by the Chief Commissioner. In addition, Mr. Rider, counsel for the Chief Commissioner, asked Dr. Somerville at the hearing further questions to clarify and expand points made in his written report. Dr. Somerville was also subject to cross-examination by counsel for the applicants. In reaching his views, Dr. Somerville had the advantage of an inspection of the Land on 23 June 2011.
Dr. Somerville, in his written report and oral evidence, made several general observations of the behaviour of bees. In particular, that where and when bees forage depends on a number of factors and variables, depending on the size of the colony, i.e. number of hives.
The outside temperature affects bees. When the temperature is below 12° or above 35°, little or no foraging occurs. The ideal temperature for foraging is between 18° and 35°. Bees do not forage at night and foraging activity increases when the day warms up. Cloud cover and rain also reduces the foraging activity of bees.
The availability and attractiveness of floral rewards, nectar and pollen, also determines the foraging range which is not restricted to the boundaries of the land on which the hives are situated. The Australian eucalypts are the dominant nectar source in this country. Dr. Somerville in his report considered the suitability of flora on the Land for bees to forage. He noted that there were scribbly gum around the sand mine of the Land, which in his opinion "flowers quite regularly, but is considered of minor value for honey production". He also observed Sydney peppermint species "on the lower slopes to the north of the gully", which flowers in December and January "but is considered to be of minor importance as a honey producer". Further up the slope north of the gully, Dr. Somerville observed White stringy bark and Gum trees which, in his opinion, are "favoured with a surplus of nectar and producing a honey crop plus good supplies of pollen". Along the ridge to the north of the property he observed Silvertop ash and Hairpin banksia trees growing, both regarded of "minor importance for pollen".
Dr. Somerville also observed several species of Acacia (Wattles) "scattered across the property" which he considers provide "a supporting role for the management of honey bee nutritional requirements". There are several species of tea trees on the Land, which he considers "as a minor source of nectar and pollen". In addition, Dr. Somerville observed Flatweed (herbs) and Black thistle (weed) growing in the front paddock, which are "a useful source of nectar and pollen". He also observed a few young Stinging nettle plants and pine trees scattered through the property, both of "low importance to managed bees".
Dr. Somerville did not observe any ironbark or Paterson's curse on the property in his inspection of the property. Dr. Somerville also did not observe any bees foraging on the flora on the applicants' land when he inspected the property on 23 June 2011.
In his report, Dr. Somerville dealt with a number of questions that were put to him in the brief by the Crown Solicitor. I will deal with them very briefly, because it will become apparent in my grounds of decision that these questions were essentially hypothetical for purposes of this application. Dr. Somerville only inspected the property some years after the land tax year in issue.
Dr. Somerville was asked to provide his opinion on the following matters:
(1) How much of the subject land is covered by flora that is suitable for bees to forage (approximate percentage)?
Dr. Somerville was not able to provide any percentage other than express his view that the "area of the property of no value to honey bees include bare ground around the quarry, areas occupied by buildings, roads and grassed areas".
(2) The flowering times of flora found on the property
Dr. Somerville was "unable to state whether one or more eucalypt species flowered during the period 1 July 2008 to 30 June 2009" but went on the make the observation:
The shrub and herbage plants including hairpin banksia, wattles, tea tree, flatweed, thistles and stinging nettle on the property would have, in all probability, flowered. There is likely to be something for bees to forage on at any time of year, in any year. The abundance of flowering plants and the rewards they offer (pollen and nectar) will vary extremely.
(3) Are certain types of flora only suitable for bees in some years?
Dr. Somerville's short response was yes and further stated:
In some years I would expect the property to be very useful floral resource for honey bees. I am not able to comment on the conditions on offer to the bees between 1 July 2008 and 30 June 2009.
(4) Bee hive stocking rates for the property
It was feasible for the applicants to keep 50 hives with supplementary feeding. But difficult to keep 100 hives and impossible to keep 150 hives.
(5) Water resources on the subject land
Dr.Somerville's response was:
On inspection of the property, several areas containing water were observed. These would be ideal for water gathering bees to visit. One dam in the proximity of the old mine had sedge species growing around its edge, indicating that this impoundment of water was likely to be reasonably permanent during dry summer periods. I am not able to comment on the water availability between 1 July 2008 and 30 June 2009.
Is the breeding of bees a primary production activity within s 10AA(3)(b)?
Submissions
The preliminary issue raised by the Chief Commissioner requires a careful examination of the provisions set out in s 10AA of the Act and in the context of any policy that is reflected by the whole Act.
The applicants in this matter have based their claim to the exemption under s 10AA(3)(b) because the bees were not bred for the purpose of selling their honey. They were bred to sell to other beekeepers who presumably use the bees for the production of honey. The preliminary issue thus raises the question whether bees bred for sale come within the exemption found in s 10AA(3)(b). In short, can it be said that breeding of bees for sale constitutes in terms of that provision "the maintenance of animals ... for the purpose of selling them".
The Chief Commissioner's submissions, by way of summary, were that -
s. 10AA(3)(b) does not apply to bees because the human activity of "maintenance" requires control over animals (and bees cannot be controlled beyond the hive), or if it does apply, the relevant land is restricted to the footprint where the hives are located (i.e. being the only place where humans have control over the bees); and
s.10AA(3)(b) does not apply to bees because s. 10AA(3)(d) covers the field as far as bees are concerned (i.e. otherwise s. 10AA(3)(d) would have no work to do, because s. 10AA(3)(b) could arguably cover the keeping of bees for the purpose of selling their honey).
The Chief Commissioner expanded his submissions as follows:
12.First, under the ejusdem generis rule (general matters are constrained by reference to specific matters), the general reference to "animals (including birds)" in s. 10AA(3)(b) is limited to those animals (including birds) that humans can "maintain". In this regard, the Respondent repeats his previous submission that "maintenance" involves the controlled provision of food, water and shelter by humans to animals. Further, contrary to the Applicants' contentions, such an interpretation does not involve a narrow construction of the exemption. Rather, the types of animals that humans can "maintain" in this fashion is extremely wide and includes all terrestrial animals (such as cows, sheep, and flightless birds, including chicken, turkeys, quails, emus and ostriches) and birds of flight (such as ducks and pigeons), because humans can control the location and type of feed the animals consume (e.g. by providing feeding troughs) and the animals' location (e.g. through fences, nets, cages or clipping the birds' wings).
13.However, humans cannot "maintain" bees in this fashion (except when they are in the hives), because they cannot control the location and type of feed that the bees consume nor their location. Thus, as the primary production exemption critically depends upon human control over prescribed activities on land, and humans cannot control bees beyond the hive, the exemption under s. 10AA(3)(b) either does not apply to bees at all, or only relates to the immediate land where the beehives are located. In this latter case, unless the area of the land occupied by the beehives and the economic benefit produced was dominant over other uses or non-uses of the land, the exemption under s. 10AA(3)(b) would not apply to the land.
14.Second, under the generalia specialibus non derogant rule (where there is conflict between general and specific provisions, the specific provisions prevail), the general provision in s. 10AA(3)(b) (which is wide enough to cover the production of honey, being the bodily produce of bees) should give way to the specific provision in s. 10AA(3)(d) for the keeping of bees for the purpose of selling their honey. To construe the Act otherwise would render the specific provision in s.10AA(3)(d) nugatory, because its work could be done by the general provision in s. 10AA(3)(b). Thus, the Act makes specific provision for bees, but only in respect of their honey production. On this basis, the general provision in s. 10AA(3)(b) does not cover bees, because s. 10AA(3)(d) covers the field as far as bees are concerned.
The applicants' case was essentially that "there is no warrant for construing the provision so narrowly as to exclude bees from calculation". In particular, the applicants' submitted that the respondent's argument for a narrow construction of s 10AA(3)(b) should be rejected for the following reasons:
6.On any reasonable classification of genus, bees are animals. (Under Roman law, the historical bedrock of our present day legal system, bees were regarded as animals and specifically classified as wild by nature (ferae naturae): see Institutes 14&15, Book II, Tit. 1 De Rerum Divisione. That bees are animals ferae naturae (but become the qualified property of the person who hives them) has also been recognised by the common law: see Kearry v Pattinson [1939] 1 KB 471 and Stormer v Ingram (1978) 21 SASR 93.)
7.Similarly, to limit the animals covered by the provision to those subject to active control by humans is also unduly restrictive. This ignores the fact that not all animals are alike and arbitrarily assumes that the maintenance of animals as part of primary production will be attended by human control in every instance. This is, of course, not always the case.
8.Bees, like other animals of flight with natural homing instincts, such as pigeons, doves, peacocks and various specifies of raptors, are "maintained", not by human control or captivity, but by their ability to roam and range at will. (This was specifically recognised under Roman law. Like doves and peacocks, bees were regarded as wild animals (ferae) but possessed of a habit of flying away and returning to the hive. The Institutes recognised the quintessential 'wildness' of these creatures and regarded them as capable of being owned by humans but equally capable of resistance to human control or ownership by virtue of their inherent nature: § 14&15, Book II, Tit. I De Rerum Divisione. Tame animals (mansuetae) were considered differently. This historical classification between wild and tame animals (interestingly also picked up in the language of section 3(b)) is apt in the present case as the Court should be slow to conflate distinctions which exist in nature and slow to apply the measure of human control to the notion of animal maintenance.)
Counsel for the applicants further submitted "that the primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of the statute" and that all other rules of construction are subordinate to this fundamental rule. Reliance was placed on the statement made by Mason J in Babaniaris v Luton Fashion Pty Ltd (1987) 71 ALR 225 at 232:
The fundamental responsibility of a Court when it interprets a statute is to give effect to the legislative intention as it is expressed in the statute.
It was also submitted that the Tribunal should take "a purposive approach to construction" as suggested by the High Court in Project Blue Sky v ABA (1998) 194 CLR 355 at 355 and "given statutory recognition in section 33 of the Interpretation Act 1987 (NSW)". And that "the common law rules of construction are no more than aids of secondary significance, which are constrained by the need to ascertain the legislative intention" and "importantly, they are not rules of law: see Cooper Brooks (Wollongong) Pty Ltd v FCT (1981) 35 ALR 151 at 169 per Mason and Wilson JJ".
Consideration
In order to answer the preliminary question, it is necessary to give the words "the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce" some proper meaning. The meaning and scope of these words was considered by McTiernan J in the High Court in Burnside & Marrakai Limited v Federal Commissioner of Taxation (1955-1959) 11 ATD 181. His Honour at 182 provides useful guidance:
The words "the maintenance of animals for the purpose of selling them, or their bodily produce including natural increase", necessarily involves that the primary producer has the ownership or possession of the animals or is the keeper thereof.
His Honour, McTiernan J went on to make the following further relevant observations:
The law as to the ownership and possession of animals ferae naturae has some peculiar features. Such features make in applicable the analogy of unbranded cattle depasturing on unfenced country. Domestic animals are the subject of absolute property, and that is not lost by the owner if they stray or are lost. But nobody has possession or full ownership of animals ferae naturae until they are taken.
In this case, the taxpayer, a resident of Northern Territory obtained hides from wild buffalo shot on the taxpayer's large property and claimed that income from sale of the hides was derived directly from primary production and exempt from tax. His Honour in dismissing the appeal held that in "the absence of proof that the appellant acquired the ownership or possession of the herd of buffaloes which included those which were shot and skinned, it must be held that it has not discharged the onus of proving that it was engaged in any activity in the nature of the maintenance or keeping of animals".
His Honour also noted that the term "animals" was not defined in the Act before him. It was submitted by the taxpayer that the court should use the general definition set out in the Halsbury's Laws of England - "The term 'animals' may be said to include all beasts, birds, reptiles, fishes and insects". But, in the context of the law before the court, his Honour took the view that the term "animals" did not extend to include animals ferae naturae.
I should, however, note that although the term "animals" is not defined in s.10AA(3)(b), the provision in any case applies to all animals, "whether wild or domesticated". The provision thus applies to animals 'ferae naturae'. I should also add that there is no dispute that bees, being insects, are animals.
Courts have held that a wild animal loses its character of being ferae naturae when its owner or possessor has such "power over the wild animal that it is always under some form of restraint and cannot follow its natural propensities completely" (R v Philbey 48 SJ 216 per Wright J).
In the context of s 10AA(3)(b), the exemption applies to land the dominant use of which is the maintenance of animals and would only extend to animals in the possession of the owner. Thus the exemption applies to animals 'ferae naturae' when in possession of the owner.
In Kearry v Pattinson (Slesser, Clauson and Goddard LJJ), the ownership of bees was considered in a claim for damages by the plaintiff, a bee-keeper, against the defendant, his neighbour. In this case, the plaintiff's bees swarmed and settled in the garden of the defendant. The plaintiff sought to recover his bees but the neighbour initially refused to give the plaintiff permission to enter his property. But on the next day, the neighbour gave permission to the beekeeper to enter his property. But the bees had flown. The court dismissed the claim. Slesser LJ handed down the principal judgment and held:
There is no doubt in this case that these bees had been hived by the plaintiff. Therefore, before they swarmed, they were his property, and I think that the bees, when they swarmed, so long as they were in his sight, and so long as he had power to pursue them, would remain his property. ... To that extent he has power to pursue, but I cannot think that he has a legal right to go on to the land of another in order to pursue them. Bees are ferae naturae before being hived. When hived, they are taken into the disposition of the owner, and become his property. They remain his property while they are swarming only so long as they are in his sight, and he has lawful power to pursue them. That is how I read the authorities. Whether the point is right or not, I think that, as a matter of legal principle, it is clear that, once it is established that he has no right to follow the bees, they cannot, the moment his right to follow ceases, be considered his or anybody's chattels until they are hived again. For that reason, I think that this action is misconceived, because the bees had ceased altogether to be in the disposition of the plaintiff.
In passing I should also mention that foraging bees have certain rights as highlighted by the decision of the English High Court in Tutton and others v A D Walter Ltd [1985] 3 All ER 757. In that case the plaintiffs kept bees in hives near a field on which the defendant grew oilseed rape, which was very attractive to foraging bees when in full flower. The defendant used a pesticide known to be harmful to bees and resulting in the plaintiffs' bees dying. The plaintiffs' succeeded in a negligence claim against the defendant. The outcome is usefully set out in the headnote to the decision:
An owner of land who knew that bees were kept within foraging range of his land owed a duty of care to the beekeeper not negligently to carry out on his land activities which, although wholly carried out on his land and otherwise lawful, he knew or ought reasonably to have foreseen would be harmful to the bees.
I should also shortly refer to the decision of Legoe J in Stormer and Another v Ingram (1978) 21 SASR 93. The plaintiffs in this case were seeking an interlocutory injunction against the defendant who was a beekeeper. Some of the bees had entered on to the plaintiffs' property requiring cleaning of the plaintiffs' fishponds, and the bees also stung the plaintiff and their children including their pets. His Honour observed that bees were not ferae nature in South Australia and the principle of scienter did not apply to them unless the propensity of the bees could indicate otherwise. But, in a peculiar outcome, his Honour was unable to grant the injunction sought because he held that "bees commit suicide on their first and only sting". The plaintiffs made no claim in negligence.
On a proper statutory construction, the exemption set out in s 10AA(3)(b), in my opinion, applies to land used for breeding bees for sale of bees. But the exemption would only apply to bees in a hive or where bees are in the owner's sight, and the owner has a lawful power to pursue them. The exemption does not extend to bees out of sight of the owner and freely foraging away from their hive.
I do not think there is any conflict between the operation of s 10AA(3)(b) with the provisions of s 10AA(3)(d) as submitted by counsel for the Chief Commissioner. The wider interpretation of s 10AA(3)(b) does not affect the operation of s 10AA(3)(d). Both provisions can operate independently. There are also no policy reasons to construe s 10AA(3)(b) narrowly as suggested by the Chief Commissioner. I must therefore reject that contention.
Whether the applicants' bee breeding operations can be characterised as the dominant use to which the land was being put to in the 2009 land tax year?
Submissions
The applicants' case was that "although only a proportion of the Land is actually covered with beehives, this does not lead to the inference that the dominant use of the Land is not for primary production. The decision in Reysson Pty Ltd v Chief Commissioner of State Revenue (RD) [2009] NSWADTAP 17 clearly supports the conclusion that the dominant use of land can be the keeping of bees even though a very small proportion of the actual land is covered by hives".
It was further submitted "that the length and breadth of the Land is covered with an abundant supply of native trees" and "the Tribunal must apply common sense approach to the evidence and be satisfied, on the balance of probabilities, that the bees effectively use the whole of the land during the course of the year".
As to the "visibility and intensity" of the bee operations, it was submitted:
35.In assessing the visibility of the bee-breeding use the respondent submits that to an objective observer standing at the front of the property the property presents as a residential one (because there is a cottage facing the road). It is submitted that an observer would not see any beehives, as the hives would be confined to an area well inside the property. This submission again gives primacy to the idea of use (rejected by the Appeal Tribunal in Reysson) firstly being confined to the area of the hives and secondly, being sufficiently visible.
36.This argument should not be accepted as it runs contrary to Reysson but also the Royal Newcastle Hospital case (1959) 100 CLR 1, which stands for the proposition that there is no need for a wide-ranging use of the land to be visible to a passerby. Just because a passerby wouldn't be able to see hives at a casual glance, let alone appreciate the real activity of the bees that fly around the Land to support the hive, doesn't mean that the enterprise of bee-breeding fails as a competing physical use.
The applicants' further submitted that in "relation to the bee-breeding use and the residential use, which compete for primacy" to "assert that the whole of the Land is available for the pleasure of residential occupation is exaggerated". And that "in relation to the cottage in the middle of the property, which was in 2009 (and still is) used infrequently for temporary comings and goings, it cannot be said that the purpose of the use is as a residential domicile" because to "ascribe a residential use to this building would be to convey a significant degree of permanency of habitation or occupancy to the dwelling, which it does not in reality have".
In terms of economic considerations relevant to assessing the dominant use, it was submitted that the rental potential of the residences suggested by the Chief Commissioner "goes no where on legal grounds" because "the authorities continually emphasise that the inquiry should be directed to the actual use to which the land was being used, not to the intentions of the owner (see Greenville's case and Saville's case) or the use to which it theoretically could be put (see Stephen v Federal Commissioner of Land Tax (1930) 45 CLR 122 at 140 per Dixon J; Randwick Corporation v Rutledge (1959) 2 CLR 54 at 88 Windeyer J)".
Finally it was submitted that:
48.In both Sonter and Greenville the Court stressed the need to evaluate the dominant use in a commonsense way. As Rath J said in Sonter at p35:
"The question is one of fact and degree and one to be approached in a broad, commonsense basis".
49.In the applicant's submission, the evidence before the Tribunal as to the manner in which bees use the Land can be easily assessed for what it is and evaluated using broad commonsense. Using commonsense, the Tribunal can readily conclude on the evidence before it that the bees are maintained by their immediate environment, in the sense of using the trees, plants and water, which are spread all over the property, to sustain themselves and grow the hive.
The Chief Commissioner's case was essentially that the "dominant use of the Applicants' land for the 2009 land tax year was for residential purposes".
It was contended that the applicants' "evidence about the presence of flowering plants and water on their land does not prove that the dominant use of the land was for bee breeding" because specifically, "such evidence does not prove that bees foraged over the land or if they did, to what extent and for what period". And the applicants' case "fails to address the many and unpredictable variables which determine where the bees may have foraged from time to time during the period relevant to the Tax Year".
It was submitted that there was no evidence produced by the applicants to show the area of land on which food plants grew and during what period during the relevant year provided nectar or pollen. The area of the land being only 40 hectares and "bees had a foraging range of three kilometres" the land "represented only about 1.4% of the total area over which the bees could forage". The Chief Commissioner also pointed to the fact that "bees only forage during daylight hours and are therefore confined to the hive at least 50% of the time" and that "bees only leave the hive to forage during warm, dry weather and that the cool climate of the Southern Highlands (where the land is located), particularly the long, cold winter, is not conducive to bees foraging between May and August each year".
Alternatively, the Chief Commissioner submitted that "the total area of the Applicants' land is 393,325m and the area foraged by bees at a range of two kilometres from the hives is 12,566,370m (i.e. area of Applicants' land/area foraged at a range of two kilometres = 3%)".
The Chief Commissioner also placed reliance on the decision of the Court of Appeals of Texas (the equivalent of the Supreme Court in New South Wales) in Pizzitola v Galverston County Central Appraisal District, 808 S.W.2d 244 (Tex. App.- Houstan [1st Dist.] 1991). It was submitted that this decision supported the view "that land 'used' (by humans) to maintain bees is restricted to the land actually covered by beehives (i.e. being the only place where humans can exert control over bees) and does not extend to land 'for foraging use by bees' (i.e. because humans cannot control bees beyond the hive)".
In relation to the Appeal Panel's decision in Reysson it was submitted that the decision "does not apply (i.e. because it considered a different exemption) and/or it was wrongly decided". It was also pointed out that "the Appeal Panel was never taken to the decision in Pizzitola" and that even "if Reysson is correct (which is denied), the Applicants have not discharged their onus as to the extent to which bees foraged on their land".
On the basis of the relevant considerations in determining the "dominant" use of land suggested by the court in Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 [69]-[76], it was submitted:
The Applicants' evidence about the presence of flowering plants and water on their land does not prove that the dominant use of the land was for bee breeding. Specifically, such evidence does not prove that bees foraged over the land or if they did, to what extent and for what period.
The Applicants' case fails to address the many and unpredictable variables which determine where the bees may have foraged from time to time during the period relevant to the Tax Year, including:
the actual climatic conditions (e.g. daily temperature, hours of sunshine, cloud cover and wind speed) affecting the land and surrounding land both before and during the period relevant to the Tax Year;
the actual occurrence, including timing and duration, of flowering events of food plants that grew on the land and surrounding land;
the actual nectar yields of food plants growing on the land and surrounding land;
the nature and extent of supplementary feeding of the bees when natural food sources were not available; and
the movement of hives on and off the land, including the numbers of hives at particular times.
The Applicants have failed to produce any evidence as to:
the actual area of the land on which food plants grew;
the actual length of time that the plants provided food;
the actual length of time that food sources on the land lasted before being exhausted;
the actual area of the land over which bees foraged; and
the actual length of time that the bees foraged over the land and other land.
The Chief Commissioner also directed attention to "aerial photographs of the land and its surrounds clearly show that there was extensive vegetation and water available beyond the boundaries of the land within the bees' foraging range" and that "on the basis that the bees had a foraging range of three kilometres the total area of their range was about 2,827 hectares - however, the land, being only about 40 hectares in area, represented only about 1.4% of the total area over which the bees could forage".
It was further pointed out that, "because no part of the land was leased, the whole of the land was available for use by the residents". And in determining "the nature and intensity of the residential use of the land and the time, labour and resources spent in using the land for residential purposes" regard should be given to the following matters:
the land had two residences erected on it, one of which was continuously occupied by the Applicants' son and his family and the other being occupied weekly by the Applicants and every two to three weeks by Mr. Orr;
the various houses and sheds on the land comprised substantial and permanent improvements. The Applicants' tax depreciation schedule for the year ended 30 June 2009 indicates that these structures had a value for tax purposes of approximately $280,000; and
the residents of the houses would have attended to daily household chores, such as cooking, cleaning, washing and maintenance, and consumed electricity, gas and water in household quantities.
The Chief Commissioner in determining the dominant use of the land placed reliance on two other cases:
95.In Cornish Group Pty Limited & Anor v Chief Commissioner of State Revenue [2009] NSWADT 191, a case involving land with mixed primary and non-primary production uses, the Tribunal held at [42]:
"... it is therefore necessary ... "to consider and compare the nature and intensity of the various uses of the Land in both physical and economic sense in order to determine its dominant use"."
96.In Ball v Chief Commissioner of State Revenue [2010] NSWADT 114, in considering the "dominant" use of land, the Tribunal held at [66]:
"It is appropriate to weigh all the factors ... that is, the nature and intensity of the various uses, the physical areas over which they extended, and the time and labour spent in conducting them."
The Chief Commissioner concluded with the submission that when the "various uses and non-uses of the Land are weighed up and compared, it becomes apparent that the dominant use of the Land for the period relevant to the Tax Year was for residential purposes because:
the residential use occupied a significant area of the Land and involved the highest economic benefit;
the storage use occupied a relatively small area of the Land and did not involve any material economic benefit;
the bee breeding use occupied a nominal area of the Land (there being no evidence of cultivation of the land to provide nectar or pollen producing plants for the bees to feed on or evidence that the bees otherwise foraged on any material area of the Land) and there is no evidence as to the economic benefit involved; and
the disused sand quarry occupied a significant area of the Land but did not involve any economic benefit
Consideration
Dominant use test
I should first make the observation that, whilst the information provided by Dr. Somerville about bee behaviour and management is very accurate and informative, it provides very little assistance to determine the real issue in this matter.
The issue in this matter was not whether bee-breeding operations were viable in the year in question. The real question that needs to be addressed is whether the actual bee breeding operations conducted on the Land could be properly characterised as the dominant use to which the land was being put to in the 2009 land tax year. Some of the observations made by Dr. Somerville would have been useful if the Tribunal was required to determine if the Land was not rural, under s 10AA(2). But that is not the task before the Tribunal.
The dominant use test was recently considered by Gzell J in Leda Manorstead. His Honour first made the following preliminary observations:
69Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use.
70That 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.
His Honour went on to examine a number of cases, which provide useful guidance in determining dominant use of land. By way of summary, the cases suggest the following further considerations:
The dominant use must not only prevail over any competing use but also be sufficiently substantial to prevail over the competing use. (Saville v Commissioner of Land Tax (1980) 12 ATR 7, Roden J at 10)
What was called for where land is put to a number of uses, was the weighing of the evidence relating to various uses to which land was put, including, but not limited to, the nature and intensity of such uses, the physical areas over which they extended, and the time and labour spent in conducting them. (Hope v Bathurst City Council (No 2) (1983) 52 LGRA 79, Perrignon J at 84)
The test does not relate solely to the quantum of area used for relevant purposes but related to the end to be achieved by the use. (Hope v Bathurst City Council (1986) 7 NSWLR 669 (NSW Court of Appeal))
When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole. (Thomson v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286, Ambrose J at 303)
Another decision relevant to the present matter, is Sheppard J's judgment in Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656. In this case, the court was considering the exemption under the old s 10(1)(p)(a) and (b), in terms similar to s 10AA(a) and (b). The taxpayer owned two lots in the Gosford area and claimed that both lots were used for primary production. His Honour set out the relevant facts as follows:
In summary,12 acres of the 22 acres making up Lot 1, were not useable directly for the purpose of primary production because they comprise rain forest. About 1 1/2 to 2 acres were under cultivation for the purposes of growing passionfruit or citrus. A further half an acre, or a little more, was occupied by the cottage and packing sheds. That left about 7 1/2 acres or a little more of the land unused for any purpose.
At the time the plaintiff took possession of Lot 2 approximately 20 acres had been cleared. ...
As at 31 December 1974, no agricultural or pastoral use was being made of Lot 2 in the sense that there were not at that date, or in the vicinity thereof, either depastured on the land any stock nor growing upon the land any crop.
...
The income earned from the property, that is Lots 1 and 2, in the years that the plaintiff has had it has been comparatively small as is shown by the accounts which have been tendered. For the year ended 30 June 1975, the income was but $220 - $200 of which came from the sale of timber in June 1975. Thus the income from the sale of fruit, presumably the citrus, was $20. That was the year, of course, during which the passionfruit vines failed.
His Honour was "not persuaded that the whole of the land, that is to say the whole 69 acres comprised of Lots 1 and 2, was used primarily for one or more of the purposes specified in the relevant definition in s 3 of the Act". In dismissing the appeal, his Honour made the following observations in relation to land occupied by rainforest:
Notwithstanding the fact that about one third of the property could not be put to direct use because it comprised the rain forest to which I have referred, the use to which the property was being put during what I may describe as the relevant period was, so far as primary production was concerned, minimal, two acres or thereabouts being devoted to the cultivation of land for the production of citrus and passionfruit and a further half acre for the ancillary purposes of a cottage and packing sheds. It is right to say that the land was used for the cultivation thereof for the purpose of selling the produce of such cultivation; but was that its primary use? The fact that there was no use of the remaining land does not, in my opinion, mean that I must answer that question favourably to the plaintiff. That was the view of Helsham CJ in Eq in Greenville's case. His Honour said at the page to which I have already referred: "I think the only question to be decided here is this: Can it be said that land most of which is not being used primarily for the cultivation of it for the purpose of selling the produce of that cultivation if a very small part of it is under cultivation? Another way of putting the question I suppose, is when does land which is not being used at all become land used primarily for cultivation?" Later on the same page his Honour said: "I do not think the question: what is the main use of the land, is to be answered by pointing to the only activity going on the land. An activity going on on the land does not necessarily characterise the use of the land taken as a whole, so that one can say the land is used primarily for that activity. That is evidently a correct proposition if there is more than one activity going on on the land; it does not cease to be correct where portion of the land is not put to any use. It may follow that one activity being conducted on land means that the land is used primarily for that activity; but it does not necessarily follow. And for the plaintiff to succeed here, it must necessarily follow".
The last sentence of what his Honour has said in the passage just cited is as apt for this case as it was for the one before him. I do agree that the plaintiff's task in the present case may be an easier one that it would have been if there had been more than one use to which the property was being put.
In the present matter the Land was used for residential, storage and for bee breeding. The part of the Land, which constituted the old sand quarry, and all the land covered with native trees, shrubs and other free growing plants was land not used for any purpose.
In determining the various uses it is necessary to consider and compare the nature, scale and intensity of the various uses of the Land in both a physical and economic sense.
The applicants' placed a great deal of reliance on the decision of the Appeal Panel in Reyssson. I think there are several grounds available to the Chief Commissioner to distinguish this matter from the case before the Appeal Panel.
The Appeal Panel was not considering the exemption provided by s 10AA(3)(b) and did not have the benefit of the various cases dealing with ownership and possession, elements necessary in establishing that land was used for the maintenance of animals. And to the decision in Longford that held that land covered by native forest was land not used for any purpose. It was not necessary to refer to the Panel the decisions, which have considered the ownership and possession of bees when foraging because the Panel was merely considering the exemption in s 10AA(3)(d) - the keeping of bees, for the purpose of selling their honey.
The Appeal Panel was also influenced by the expert evidence that foraging took place over the land in question, which was merely a question of fact. In this matter the applicants have merely made the assertion that the bees in question did forage over the Land. No evidence was given by the applicants' manager/beekeeper of their bee-breeding operations, Richard Orr, who was described in Mr. Palk's first affidavit as his "old friend" and in his third affidavit as "his nephew".
The Appeal Panel was not required to consider that land covered by a native forest was for purposes of determining the dominant use test, land that was not used for any purpose as highlighted in Longford. The use must be direct physical use of the land that is in issue. More recently the Court of Appeal in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 in affirming this view adopted what was said by the High Court in NSW Aboriginal Land Council v Minister Administering the Crown Lands Act [2007] NSWCA 281:
... use of land involves utilisation, exploitation or employment and it requires actual physical use, not some notional or future or contemplated use. (emphasis added)
The decision of the Court of Appeals of Texas in Pizzitola, which was not brought to the attention of the Appeal Panel in Reysson, considered the activities that are required to establish direct use of land for foraging.
In Pizzitola only a three-acre tract was used for the bee hives and the court made the observation that the rest of land could not be said to be put to agricultural use because the taxpayer "did not plant tallow trees or other pollen-bearing vegetation" on the 63.17 acre portion of the property, but such vegetation and trees grew naturally on the property. The court held:
The agricultural use of the three-acre tract did not extend to benefit the surrounding 63.17 acres. The 63.17 acres of the Property were used only by bees to gather pollen and nectar from native plants and trees, the Pizzitolas took no action to improve it, cultivate it, or maintain it for beekeeping operations.
In this matter, the native trees were also growing naturally on the property and no evidence was produced that the applicants took any "action to improve it, cultivate it, or maintain it for beekeeping operations". In any case, unless native trees and plants are specifically planted and maintained, foraging over trees and plants is not an activity that constitutes a direct use of the land as required by the exemption nor can it be said to be an activity involving the "maintenance of animals" within the provisions of s 10AA(3)(b).
The applicants did not provide any percentages of the various uses and non-uses of the land. The Chief Commissioner has made some helpful estimates. The residential use of the land in terms of the two residences and cleared areas for residential use occupy about 25% of the land. It was estimated that the disused sand quarry made up another 25% of the land. The area where the hives were located amounted to about 1% of the land and another 5% was made up by the storage use of the land. The native trees and vegetation constituted the rest, about 44% of the land.
Having taken the view that foraging of bees over the Land did not constitute use of the Land for the required purpose under s 10AA(3)(b), only the actual area used for the hives for the bee breeding operations is relevant. In terms of area of land use, the residential land use clearly predominates over the nominal area (less than 1% of the Land by area) the subject of the bee breeding operations. But that is not sufficient to conclude in favour of the Chief Commissioner. It is also necessary to consider other matters as suggested by the cases.
In economic use sense, the bee operations earned a small amount in the year in question. On the other hand, the residential properties, including the sheds, for purposes of the applicants' tax depreciation schedule for the year ended 30 June 2009, had a value for tax purposes of approximately $280,000. The disused sand quarry and the land occupied by native vegetation both occupied a significant area (about 69%) of the Land but did not involve any economic benefit to the owners. Only the residential buildings and sheds added any value to the Land. I should also add that the Land was zoned as "Zone E4 Environmental Living" under the local council plan and which according to Mr. Palk's first affidavit "essentially limits the use of the land".
The intensity of the bee breeding operations was not significant. There were 50 hives on the Land in the relevant year. The beehives were only on the property for certain months of the year. The hives were taken to other places for climatic reasons. The beekeeper only visited the Land every few weeks and, as suggested by the Chief Commissioner's written submissions, "only nominal time, labour and resources were spent in using the Land for bee breeding". No proper accounts were produced to indicate the level of profits made from the breeding. There was some suggestion that there was a real prospect of significant profits in future years. But that did not help to establish intensity of the activity in the year in question.
In this matter when all the various uses and non-uses are weighed up and compared, it is difficult not to conclude that the dominant use of the land was essentially for residential purposes.
Pursuant to s 101(1)(a) of the Taxation Administration Act 1996, I confirm the assessment issued to the applicants for the 2009 land tax year.
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Decision last updated: 18 May 2012
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