Australian Investment & Development Pty Ltd v Commissioner of State Revenue

[2025] VSCA 47

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2024  0017

AUSTRALIAN INVESTMENT & DEVELOPMENT PTY LTD (ACN 060 609 289)	Applicant
v
COMMISSIONER OF STATE REVENUE	Respondent

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JUDGES:	EMERTON P, BEACH JA and HARRIS AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	27 February 2025
DATE OF JUDGMENT:	26 March 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 47
JUDGMENT APPEALED FROM:	[2023] VSC 741 (Croft J)

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TAXATION – Land tax – Appeal – Appeal against assessments by Commissioner of State Revenue – Primary production exemption – Whether land was used primarily for business of primary production – Whether applicant’s main undertaking was primary production – Whether applicant’s sole shareholder normally engaged in substantially full-time capacity in business of primary production – Whether primary judge’s reasons vitiated by unattributed copying of respondent’s submissions – Primary production exemption not made out – Vitiating error not established – Application for leave to appeal from primary judge’s orders upholding Commissioner’s assessments refused.

WORDS AND PHRASES – Primary production – Business of primary production – Primarily for business of primary production – Principal business – Main undertaking.

Land Tax Act 2005, ss 7, 8, 36(1), 64(1) and 67.

Atanaskovic Hartnell Corporation Services Pty Ltd v Kelly [2024] FCAFC 137; Chief Commissioner of State Revenue v Metricon Qld Pty Ltd (2017) 105 ATR 11; Federal Commissioner of Taxation v Stone (2005) 222 CLR 289; Federal Commissioner of Taxation v JR Walker (1985) 16 ATR 331; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310; Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2) (2002) 6 VR 1; Hunter v Transport Accident Commission (2005) 43 MVR 130; Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493; King v Australian Securities and Investments Commission (2018) 134 ACSR 105; Li v Attorney-General for New South Wales (2019) 99 NSWLR 630; Lotus Oaks Pty Ltd v Commissioner of State Revenue (2021) 113 ATR 379; Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation (1980) 49 FLR 183; Porter v The Queen (2024) 21 ACTLR 122; Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338; Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 160 ALR 588; Thomas v Federal Commissioner of Taxation (1972) 46 ALJR 397; Top of the Cross Pty Ltd v Federal Commissioner of Taxation (1980) 50 FLR 19; Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598.

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Counsel
Applicant:		Mr DH Bloom KC with Mr TM Grace
Respondent:		Mr R Merkel SC with Mr DC Morgan
Solicitors
Applicant:	Madgwicks Lawyers
Respondent:	Solicitor to the Commissioner for State Revenue

EMERTON P
BEACH JA
HARRIS AJA:

1. Australian Investment & Development Pty Ltd (‘the applicant’) is, and was at all relevant times, the owner of land located at 2–180 Davis Road, Diggers Rest, being the land described in Certificate of Title Volume 10044, Folio 151 (‘Lot 1’) and Volume 7659, Folio 121 (‘Lot 4’) (together, ‘the Land’ or ‘the Property’).[1] Lot 1 consists of approximately 99.5 hectares of land, divided into 10 fenced paddocks (numbered 1 to 10);[2] and Lot 4 consists of approximately 69 hectares of land, divided into eight fenced paddocks (numbered 11 to 18).[3] Lot 1 is that part of the Land which is north of Davis Road, and Lot 4 is that part of the Land which is south of Davis Road.

   [1]But often referred to in the evidence given by the applicant’s witnesses as ‘the Farm’.

   [2]The paddock sizes vary, with the smallest being paddock 9, the area of which is 1.0 hectares; and the largest being paddock 2, the area of which is 23.6 hectares.

   [3]Again, the paddock sizes varied, with the smallest being paddocks 12 and 13, the area of each being 0.6 hectares; and the largest being paddock 16, the area of which is 35.1 hectares.

2. On 12 February 2016, the Commissioner of State Revenue (‘the respondent’ or ‘the Commissioner’) issued land tax assessments to the applicant for the 2014, 2015 and 2016 tax years in respect of its ownership of the land as at midnight on 31 December 2013, 31 December 2014 and 31 December 2015.[4] During the relevant period, David Apswoude was the sole shareholder of the applicant.

   [4]Section 36(1) of the Land Tax Act 2005 provides that land tax is assessed in respect of land owned by a taxpayer as at midnight on 31 December of the year preceding the tax year. The total of the three assessments made in conformity with s 36(1) amounted to a little over $2 million.

3. The applicant lodged objections to the respondent’s assessments on the basis that the Land was exempt under s 67, alternatively s 68, of the Land Tax Act 2005 (‘the LTA’) for each of the three years. The applicant’s objections were subsequently disallowed by the respondent. In response, pursuant to s 106 of the Taxation Administration Act 1997 (‘the TAA’), the applicant requested that its objections be treated as appeals and referred to the Supreme Court.

4. The applicant’s appeal against the three assessments was heard in the Trial Division by Croft J over three days in November 2023. On 23 January 2024, pursuant to reasons delivered on 13 December 2023,[5] his Honour dismissed the applicant’s appeal and ordered it to pay the respondent’s costs of the proceeding. In short, the judge rejected the applicant’s case under s 67 of the LTA, as well as its alternative case under s 68.

   [5]Australian Investment & Development Pty Ltd v Commissioner of State Revenue [2023] VSC 741 (‘Reasons’).

5. The applicant now seeks leave to appeal (and, if leave is granted, to appeal) from the judge’s orders on the following proposed grounds of appeal:

   1.The trial judge should have found that the requirements of the exemption in s 67 were satisfied in the 2014–16 years.

2.Had the trial judge paid due regard to the evidence and the relevant case law, and had he not peremptorily shunted aside or ignored evidence which was significant, he should have concluded the s 67 case in favour of the applicant.

The trial judge copied large portions of the submissions of the respondent without (or with minor) attribution and he failed to give proper consideration to the applicant’s submissions, the evidence before him, and relevant case law to which he had been referred, including judgments of the High Court, this Court and the NSW Court of Appeal.

3.The trial judge concluded that in the relevant period the applicant was carrying on the business of land development, and was using the land for land development, when there was no evidence to support either of these conclusions; and, indeed, where the conclusion was contrary to both the evidence and relevant case law.

4.In relation to the unchallenged corroborative evidence of Mr Tran (who was cross-examined), the trial judge indicated that his evidence must be treated with great caution, seemingly because he was a ‘family member’. In cross-examination, it was not suggested to him that his evidence was in any way untruthful or that he was giving the evidence he did in a manner which was affected by the fact that he was the brother-in-law of Mr Apswoude (who was the sole shareholder in the applicant).[6]

[6]During the course of the hearing, the applicant indicated that it would no longer pursue its claim under s 68 of the LTA, saying ‘Our attack is on s 67’. As a consequence, the applicant abandoned proposed ground 5 which had alleged that the judge erred in failing to conclude that the Commissioner’s discretion under s 68 of the LTA had miscarried.

Relevant statutory provisions

1. Section 7 of the LTA provides that land tax ‘is imposed in respect of each year on all taxable land in Victoria’. The word ‘year’ is defined in s 3(1) of the Act to mean ‘a calendar year’; the expression ‘taxable land’ is defined to mean ‘land that is not exempt land’; and the expression ‘exempt land’ is defined to mean ‘land that is declared by or under this Act to be exempt land’.

2. Section 8 of the LTA provides that it is the owner of taxable land who is liable to pay land tax on the land. While s 3(1) defines the word ‘owner’, and s 10 identifies persons who are owners of land for the purposes of the Act, it is not necessary to set out those sections as there is no dispute between the parties that, at all relevant times, the applicant was the owner of the Land.

3. As we have already observed, in objecting to the Commissioner’s assessments, the applicant contended that the Land was exempt land under s 67, alternatively s 68, of the LTA. Section 67 of the LTA relevantly provides:

67Exemption of primary production land in an urban zone in greater Melbourne

(1)Land is exempt land if the Commissioner determines that –

(a)the land comprises one parcel that is –

(i)wholly or partly in greater Melbourne; and

(ii)wholly or partly in an urban zone; and

(iii)used solely or primarily for the business of primary production; and

(b)the owner of the land is a person specified in subsection (2).

(2)The owner of the land must be –

(a)… ; or

(b)a proprietary company (not acting in the capacity of trustee of a trust) –

(i)in which all the shares are beneficially owned by natural persons; and

(ii)the principal business of which is primary production of the type carried on on the land; or

…

(3)For the purposes of subsection (2)(b)(ii), the principal business of a proprietary company is not primary production of the type carried on on the land unless –

(a)the main undertaking of the company is primary production of that type; and

(b)either –

(i)…; or

(ii)if no dividends were declared during the relevant period, ordinary shares representing more than 60% of the paid up capital of the company (excluding shares entitled to a fixed rate of dividend) have been beneficially owned for the relevant period by persons normally engaged in a substantially full‑time capacity in the business of primary production.

1. Section 68 of the LTA relevantly provided an exemption in respect of land being ‘prepared for use for primary production’. Given the applicant’s abandonment in this Court of its alternative s 68 claim,[7] it is not necessary to set out this provision.

   [7]See n 6 above.

2. The expression ‘primary production’, used in both s 67 and s 68, is defined in s 64(1) to mean:

   (a)cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or

   (b)the maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce; or

   (c)the keeping of bees for the purpose of selling their honey; or

   (d)commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or

   (e)the cultivation or propagation for sale of plants seedlings mushrooms or orchids.

Events leading up to the commencement of the appeal

1. In response to the Commissioner’s assessments, on 29 August 2016, the applicant lodged objections to the assessments, which were supplemented with supporting documents and submissions in June 2021. As we have already said, these objections were on the basis that the Land was exempt under s 67, alternatively s 68, of the LTA.

2. On 17 December 2021, the Commissioner disallowed the objections, and issued a notice of determination to that effect.

3. In rejecting the applicant’s claim that the Land was exempt under s 67, the Commissioner stated that he was not satisfied that the requirements of ss 67(1)(b), 67(2)(b) and 67(3) of the LTA had been met. In other words, the Commissioner was not satisfied that the applicant, as the owner of the Land, had satisfied the requirement that its principal business — being its main undertaking — was primary production of the type carried out on the Land.

4. On 11 February 2022, pursuant to s 106 of the TAA, the applicant requested that its objections be treated as appeals and referred to the Supreme Court.

5. On 11 April 2022, in response to the applicant’s request, the respondent filed a notice pursuant to r 7.05 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018, attaching the applicant’s notice of objection dated 18 June 2021.[8] In accordance with r 7.05(2), upon the filing of that notice, the objections were ‘set down as an appeal’.

   [8]The respondent also attached the applicant’s solicitors’ letter dated 18 June 2021 which had enclosed the notice of objections, together with a document headed ‘Factual submissions in support of notice of objection dated 18 June 2021’.

Issues to be determined by the judge on the appeal at first instance

1. The principal issue to be determined at first instance was whether the exemption under s 67 of the LTA applied to the Land for the 2014–16 tax years. It was common ground that this required the applicant to prove that, at the relevant time for each tax year:

   (a)the Land was used solely or primarily for the business of primary production;[9] and

   (b)the applicant’s principal business was primary production of the type carried on on the Land (being the cultivation of crops for sale);[10] and

   (c)Mr Apswoude (being the owner of more than 60% of the paid up capital of the applicant) was normally engaged in a substantially full-time capacity in the business of primary production.[11]

   [9]See s 67(1)(a)(iii) of the LTA.

   [10]See s 67(3)(a) of the LTA, noting that at first instance the parties conducted the case on the basis that this section of the LTA used the words ‘principal business’ — whereas, as the respondent (over the objection of the applicant) submitted in this Court, the actual words in s 67(3)(a) are ‘main undertaking’.

   [11]See s 67(3)(b)(ii) of the LTA.

2. Each of these requirements (all three of which had to be proved to engage the s 67 exemption in respect of each tax year) was the subject of dispute by the respondent before the primary judge.

3. In its outline of submissions filed approximately eight weeks prior to trial, the applicant sought orders that the Commissioner’s assessments be set aside, and re-assessments issued describing the Land as exempt. In response submissions filed a little over three weeks prior to trial, the Commissioner contended that the order that should be made was one confirming the assessments already made.

The proceeding at first instance

1. At the trial before the primary judge, the applicant called four witnesses: Mr Apswoude; Man Tran,[12] Mr Apswoude’s brother-in-law; Phillip John Larmer, a business consultant who commenced working on the land in March 2017, and was appointed as a director of the applicant in September 2021; and Brendan Kennelly, a planning and development consultant, who gave evidence about being engaged by the applicant in about 2012 to obtain a planning permit in relation to a proposed subdivision of part of Lot 4 and in three subsequent applications for planning permits made between 2014 and 2016. In addition to the oral evidence given by Mr Apswoude, Mr Tran, Mr Larmer and Mr Kennelly, various affidavits, witness statements and supplementary witness statements made by these witnesses were tendered at trial by the applicant.

   [12]In evidence, Mr Tran gave his full name as Man Tran. In his witness statement tendered at trial, however, his full name was set out as Man Tran Huu. In his evidence, Mr Tran explained that Huu was his middle name.

2. The applicant also tendered and relied upon affidavits exhibiting witness statements from five lay witnesses: Benjamin Rose, Paul Rogan, Tri Minh Duong, Allan Foley, and David Sidley. Additionally, the applicant relied upon the evidence of an expert ecological consultant, Karl Roger Just. Mr Just’s affidavit exhibited a witness statement completed by him, which in turn exhibited a report completed by him in which aspects of the cultivation and potential commercial uses of the plant, Cassinia sifton, were discussed.

3. A significant body of documentary evidence was tendered at trial, including financial statements, the result of a historical business name search, and a document described as an aide memoire prepared by the applicant and purporting to show a breakdown of the applicant’s invoices in relation to Cassinia sales totalling a little over $442,000 for the period between November 2016 and July 2023.

4. For completeness, we note that the applicant tendered at trial witness statements from two other witnesses (Mr Apswoude’s sister, Patricia Apswoude-Hardacre; and a Justin Taylor). Ultimately, however, the applicant did not rely on the evidence of either of these witnesses.[13] We mention them here because their evidence was the subject of some reference by the judge in the Reasons, and by the respondent in this Court.

   [13]Reasons, [25]–[32].

5. Finally, no evidence was led by the respondent before the primary judge.

The evidence concerning the working of the Land and the business of primary production

1. As we have said, a considerable body of evidence was led and tendered at trial. However, the principal witnesses, from whom evidence was given in relation to the alleged use of the Land for the business of primary production, the applicant’s alleged business of primary production on the Land, and Mr Apswoude’s alleged engagement in the business of primary production, were Mr Apswoude and Mr Tran.

Mr Apswoude’s evidence

1. Mr Apswoude gave evidence that the applicant purchased the Land in 2003. In January 2007, he applied for a permit in the hope that it would allow him to sell a 9.7 hectare block and reduce his debt. Subsequently, he made an alternative application to subdivide Lot 4 into four lots (A, B, C and D). Mr Apswoude’s evidence was that that subsequent application was granted in August 2014, and registered in May 2018.

2. Mr Apswoude gave evidence that his initial intention was to use the land to grow and harvest crops and run livestock for the purpose of selling both. In the 2014–2016 years, he said the applicant continued to allow some agisted cattle to graze up until 2015. He said that in about November 2015, the applicant purchased its own cattle.

3. Mr Apswoude gave evidence that, in 2007, he engaged Bill and Lisa Mollison to act as horticultural consultants and to explore, and advise on, various ‘permaculture practices and opportunities for the Farm’. After receiving their report (‘the Mollison report’), Mr Apswoude said that he came up with a strategic plan to cultivate and promote the growth of Cassinia on the Land using principles outlined in the report.

4. Mr Apswoude gave detailed evidence about the preparations he engaged in for the commencement of a business cultivating a Cassinia plantation. He also gave detailed evidence of the activities he engaged in on the land, saying that during the 2014–2016 years, he undertook the following activities in connection with Cassinia:

   •collecting seed from the Cassinia shrubs;

   •disbursing seed across the paddocks on the Farm;

   •allowing cattle to graze over the disbursed seed to push seed into the ground (more so in the 2016 year);

   •in June 2013, young seedlings to medium shrubs of Cassinia were dug up and planted into a garden bed to assess survivability;

   •in June 2013, Cassinia seeds were [sown] into pots of soil to assess take-up;

   •in June 2014, a second trial of Cassinia shrubs were planted in a garden bed that were grown from seed to assess viability;

   •trials were also undertaken where Cassinia shrubs were dipped in horticultural hormone gel and replanted [in] potting mix;

   •in 2014, the Cassinia shrubs were well established in paddocks 1, 2 and 3 of Lot 1;

   •in 2014, the Cassinia in paddocks 5, 9 and 10 of Lot 1 were younger plants — approximately 3 years old;

   •in 2014, the Cassinia in paddocks 15, 16, 17 and 18 of Lot 4 were shrubs, ranging from 1–2 years of age;

   •throughout 2014–2016, Cassinia seed was harvested and [he] sowed this extensively through paddocks 1, 2, 3 and 5 of Lot 1; and

   •throughout 2014 and up to June 2015, Cassinia seed was harvested and [he] sowed this extensively through paddocks 15 and 17 of Lot 4.

1. Mr Apswoude also gave evidence that during the same period (2014–2016) he performed the following ‘farming work’:

   •spraying herbicides, ploughing and sowing pulse in September to December 2015 after receiving advice from an agronomist;

   •improvement of paddocks through permaculture practices with the extensive planting of Cassinia, intended to be harvested and later sold in brush fencing;

   •maintaining and checking on livestock;

   •checking the condition of fences on the Farm;

   •fence maintenance and repairs with assistance from the labourer;

   •inspecting dams;

   •inspecting water capacity;

   •weed management;

   •rock removal in paddocks 6 and 8, and part of paddock 7 (using [a] Mitsubishi bulldozer);

   •surface levelling to fill holes created by the removal of rocks;

   •weekly spraying of weeds, using several 5–litre spray tanks and a 200–litre spray tank; and

   •all other activities in conjunction with the farm labourer and other casual staff and contractors on the Farm.

2. Mr Apswoude gave evidence summarising the farming activities conducted by the applicant on the Land in each of the three tax years in question. For example, in respect of the financial year ended 30 June 2014, his evidence was that the applicant’s farming activity on the Land was as follows:

Farming activity	Paddock numbers	Total area (hectares)	% of the total Farm used
Harvest of an established crop of Cassinia for sale	1, 2, 3	57.6 hectares	34.18%
Sowing and spreading seed to further encourage the growth of Cassinia for future harvest and sale	5, 9, 10, 15, 16, 17, 18	75.4 hectares	44.75%
Agistment of cattle for grazing of pastures on the Farm	4, 6, 7, 8, 11, 12, 13, 14	35.5 hectares	21.07%

1. Mr Apswoude gave evidence of similar levels of farming activity on the Land being engaged in by the applicant during the financial years ending on 30 June 2015 and 30 June 2016.

2. Mr Apswoude also gave evidence that, at all times during the period 1 July 2013 to 30 June 2016, the applicant operated a farming business on the Land, based on the cultivation of the Cassinia crop on the farm, with the objective of making future sales and a future profit from the future sale by the applicant of its Cassinia-based fencing products. Mr Apswoude also said that, during the same period, his involvement in the applicant’s farming business required him to travel to the Land most days of each week; and, for those times when he was not physically on the Land, he would be engaged in the management and administration of the Cassinia business being conducted from the Land.

3. Mr Apswoude was cross-examined extensively about the applicant’s use, and potential development of, the Land. Asked about a Precinct Structure Plan issued in respect of Diggers Rest (‘the PSP’), which came to his attention in 2011 or 2012, and which provided for a rezoning from rural to a higher use, Mr Apswoude said that it was ‘great that the Land was having some value added to it’, but that ‘[his] thought didn’t go to developing land’.

4. It was put to Mr Apswoude in cross-examination that he did not register the business name Australian Native Brush Fencing until March 2018 because, before that time, he did not intend to sell brush fencing made of Cassinia. Mr Apswoude denied that suggestion. He was then cross-examined about a business name, Davis Vineyard,[14] which he registered in 2014 in connection with the proposed production and sale of Cassinia. He said that it was just a coincidence that this was the brand name under which the applicant had more recently (in 2021–2023) been selling residential blocks of land.

   [14]Mr Apswoude agreed that the name Davis Vineyard was derived from the name of two roads which were quite close to the Land: Davis Road and Vineyard Road.

5. Mr Apswoude was cross-examined about the building which he described as a nursery and said he built in 2013/14, and which was the subject of an application for an electricity connection in 2015, which described the building as a ‘portable planning office’. It was suggested to him that connecting electricity to the nursery was inconsistent with the building being used in relation to Cassinia — noting that the building subsequently became a sales office for land sales from the Property. Mr Apswoude denied that there was any inconsistency between these matters and the fact that, at all relevant times, the Land was being used primarily for the business of primary production.

6. Mr Apswoude was cross-examined about the Mollison report. In the course of this cross-examination, Mr Apswoude was asked and answered the following questions:

   And then he [Mr Mollison] goes on to say what that way [being ‘the one way to go’] is. He says, “And that is to use salt remediation and extensive salt-tolerant tree planting to remove the salt and restore viability to the site”. It’s that advice, isn’t it, that led you to conclude that growing Cassinia on this property was the way to go?---This was the best part of Bill Mollison’s proposal. The swaling, which would naturally trap water on contour, was to actually drought proof the property, was going to cost tens of millions of dollars, unless I became a civil contractor and actually bought the equipment, and it would have been, you know, a median percentage of that. But this is the part of his report with regards to a deep-rooted plant will improve the soil immediately. As soon as rain comes, it will become productive again. So this is the best part of the report.

   And the practical way of achieving this was to plant such a tree planting, which turned out to be Cassinia?---In our instance, it was Cassinia.

7. A little later in the cross-examination, it was put to Mr Apswoude that he initially planted Cassinia for the purposes of reducing salinity and remediating the soil on the Land. He admitted that, while these were not the applicant’s objectives, they were ‘the first benefit’ of that planting. Mr Apswoude, however, denied the suggestion that when he ‘started wholesale planting of Cassinia’ he did not have in mind that he would use a Cassinia crop to make brush fencing and sell it.

8. Mr Apswoude was cross-examined at some length about the origins of three documents, headed as follows:

   •‘Cassinia Arcuata Business Plan 2008/2009’;

   •‘Business Plan DRAFT Diggers Rest Nursery (Reconstructed following fire on 6 May 2007)’; and

   •‘Lot 1 & 4 Davis Road Diggers Rest Reconstructed Business Plan from 2004’

   (collectively ‘the reconstructed business plan documents’).

9. It was put to Mr Apswoude that the reconstructed business plan documents and/or his descriptions of them and the circumstances in which they had come into existence, were misleading to the extent that they suggested (or that it had been suggested by him) that the documents were reconstructions of documents earlier in existence which had been destroyed by fire. While Mr Apswoude gave evidence that he had to correct one particular matter about the creation of one of the documents, he denied intentionally misleading the respondent or the Court in relation to what the documents purported to be and how they came into existence. Suffice to say, ultimately it was made clear that none of the documents were in fact a reconstruction of a single document which had set out a business plan but been destroyed by fire. Mr Apswoude rejected the proposition that, in creating these documents and providing them to the Commissioner, he was ‘trying to give the impression that [his alleged farming] operation was much more business-like’ than it was in fact.

10. Mr Apswoude was cross-examined about the business plan document for 2008/2009 which talked of the possibility of a gross income from the proposed Cassinia business of $172,000 per annum. It was put to him that this, without even allowing for the costs of producing the Cassinia, expected gross income of $172,000 was ‘a drop in the ocean’ compared to the applicant’s costs of holding the land (which by 2015, exceeded $2.4 million).[15] Mr Apswoude gave the following answer to the following question:

    So, it’s a wholly uneconomic proposition, isn’t it, that you would continue to own this land in order to grow Cassinia on it?---Until we disperse [sic] the debt and become debt free, I’d agree with that, yes.

    [15]As at 30 June 2015, the applicant’s borrowings in relation to the land exceeded $15.5 million.

11. The cross-examination of Mr Apswoude concluded with the following question and answer:

    I put it to you, Mr Apswoude, this was never a commercial operation to grow and sell Cassinia. The sale of Cassinia was simply a by-product to the fact that you’d planted it to improve the soil?---The income we’ve derived from a small percentage of the forest is hectare for hectare, acre for acre, paddock from paddock, a better income that (scil, than) could be derived both by [the applicant] at Davis Road or any of our neighbours. The Cassinia proportionately is producing a great outcome.

Mr Tran’s evidence

1. Mr Tran is the brother of Mr Apswoude’s partner, Ryna Tran. His evidence was that he came to Australia on 7 July 2014 from Vietnam, after deciding that he wished to study in Australia. He stayed in Australia until 30 January 2018, when he returned to Vietnam.

2. Between 7 July 2014 and 30 January 2018, Mr Tran said he worked as a farmhand for the applicant at the Farm. During this period, he would attend the Farm approximately 4–5 days each week, and sometimes also on weekends. Mr Tran’s evidence was that, at all times during his work on the Farm, he worked closely with Mr Apswoude, and regularly observed Mr Apswoude at the Farm. As to specific activities, Mr Tran said that he helped Mr Apswoude from July 2014 until January 2018 with the following activities at the farm:

   ·almost daily checking of the boundary fences established on each paddock on the Farm to make sure no animals had damaged the fences, or were trapped in a fence;

   ·fixing of boundary fences that were established on paddocks on the Farm, on an adhoc basis, such as those fences that had been damaged due to Kangaroos and other wildlife;

   ·spraying of weeds on the Farm (I cannot recall on which paddocks), and the mixing of chemicals required for the spraying of weeds;

   ·creation of fire breaks;

   ·water pool filling and checking water levels;

   ·with David's sister, Patricia Hardacre (‘Patricia’), searching for and replacing various farming equipment and tools required for activities at the Farm (for example, tools required to fix fences, chemicals required for weed spraying);

   ·creating spaces for Kangaroos to move between the forest of Cassinia and the fences;

   ·monitoring and maintaining the forest of Cassinia that was already established on Lot 1;

   ·identifying from the areas of the forest of Cassinia on Lot 1, any mature Cassinia that was ready for cutting, bundling and storage on the Farm (and ultimately to be used to make the Cassinia brush fencing);

   ·once I had identified any Cassinia that was ready for harvest, or at the direction of David, I would then cut, collect and bundle together the harvested Cassinia from Lot 1; and

   ·spreading of seeds of Cassinia on paddocks of the Farm (on both Lot 1, and on the part of the property South of Davis Road, which I understand is referred to as ‘Lot 4’), where Cassinia was not established, to encourage the further growth and spreading of Cassinia on those paddocks.

3. Mr Tran’s evidence was largely unchallenged in cross-examination. The only matter upon which he was challenged was in relation to an assertion in his witness statement that, from around July 2014 to 30 June 2016, he (Mr Tran) had required Mr Apswoude’s help on the farm on most days as he was still learning how to do certain activities. It was put to Mr Tran that, by 30 June 2016, he would not have needed Mr Apswoude’s assistance very often as by then he would have already known how to do most of the work. Mr Tran did not accept this proposition.

Other evidence of primary production activities relied upon by the applicant

1. In addition to Mr Apswoude and Mr Tran, the applicant relied upon a number of other witnesses who it said had given or produced corroborative evidence of the applicant’s primary production activities during the relevant tax years. Specifically, the applicant relied upon the following evidence of the following witnesses:

   (1)Mr Rose produced satellite photographs of the Land for each of the paddocks for each of the relevant years, which were said to provide contemporaneous proof that there were no development activities on the Land during those years.

   (2)Mr Foley, who first met Mr Apswoude in the mid-1990s, gave evidence that, at some time in the early 2000s, he learned that Mr Apswoude had purchased the Land through the applicant. Mr Foley’s unchallenged evidence was that, a couple of years later, Mr Apswoude told him that he was planting Cassinia trees, which could be used for brush fencing. Following that conversation, Mr Foley travelled regularly along Davis Road. Mr Foley said that, on those trips, he noticed ‘the forest of Cassinia growing on the parcel of land to the north of Davis Road’ and that, over the years, the forest had gradually increased in size.

   (3)Mr Duong gave evidence of volunteering and working on the Farm during periods from July to November 2017, June 2018 to March 2019, and from March 2019 onwards. Mr Duong said that, when volunteering in 2017, his activities ‘mainly revolved around the forest and plantation of Cassinia’. He said that, in the period from June 2018 until about October 2019, by which time he was working fulltime on the Farm, he worked with Mr Larmer and Mr Apswoude to identify all the streets and homes in Caroline Springs that had brush fencing — with a view to preparing a business case to put to the residents to replace their fencing, which was then almost 20 years old and well-worn. He said that, as a result of his work, he identified approximately 545 houses that required replacement brush fencing, and that this equated to approximately 12,953 lineal metres of brush fencing. He also said that, in the period 2019 to 2021, the forest of Cassinia on Lot 1 was rapidly maturing and many of the Cassinia plants had become ready for harvest.

   (4)Mr Larmer, who was appointed as a director of the applicant in September 2021, gave evidence of commencing work on the Farm in 2017. He gave evidence about a number of sales of Cassinia made by the applicant between 2017 and 2022. These included the sale of 1,080 metres of Cassinia brush fencing to a property developer for approximately $242,000, and the sale of 430 metres of Cassinia brush fencing to Western Water in 2021/2022 for approximately $140,000. Additionally, he gave evidence of being ‘involved in ongoing discussions for potential business opportunities in Caroline Springs’, where (in his words) ‘it is expected … that about 12,953 lineal metres of brush-fencing will require replacement in the near future’. Mr Larmer said that the applicant proposed to price its Cassinia at $320 per lineal metre for the Caroline Springs project if it was successful in winning the contracts for this work.

   (5)Mr Rogan, the accountant for the applicant and Mr Apswoude since 27 June 2014, produced the applicant’s financial statements for the financial years ended 30 June 2015 and 30 June 2016. The financial statements showed Cassinia as trading stock, whereas the Land was shown as a non-current asset.[16] In this regard, the applicant relied upon s 1305(1) of the Corporations Act 2001, which provides that ‘[a] book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book’.

   (6)Mr Just, who examined ‘the various aerial images of [the Land] in order to express his opinion about whether Cassinia would have been present on Lot 1 and Lot 4 as at 31 December 2013, 31 December 2014 and 31 December 2015, expressed the opinion that for all 18 paddocks, across all three dates, there was Cassinia ranging from ‘present but very sparse’ to ‘widespread’. For 31 December 2013 and 31 December 2014, seven paddocks were described as ‘widespread’;[17] and for 31 December 2015, six paddocks were described as ‘widespread’.[18]

   [16]In fact, in the financial statements for the years ended 30 June 2014, 2015 and 2016, Cassinia closing stock was recorded as $0, $5,890 and $8,760 respectively; whereas, in each of those years, property, plant and equipment (which included the Land as its main component) was recorded as a non-current asset in the amounts of  $12,203,118, $12,165, 429 and $12,323,459.

   [17]Paddocks 1 to 3, 5 and 10 on Lot 1; and paddocks 15 and 17 on Lot 4.

   [18]Being six of the seven paddocks for the two previous years, but with paddock 10 now being described as ‘scattered at low density’.

2. Additionally, the applicant relied upon video footage taken of the Land in November 2016 and June 2017, which showed a forest of Cassinia growing on the Land at that time;[19] as well as the evidence, to which we have earlier referred, of sales of Cassinia fencing which returned a little over $442,000 to the applicant for the period between November 2016 and July 2023.

   [19]The June 2017 video footage also showed a Cassinia brush-fence being constructed near the building described by Mr Apswoude as ‘the nursery’.

The evidence of the applicant’s planning applications in more detail

1. The evidence of the applicant’s applications for planning permits came from Mr Sidley (a licensed land surveyor), Mr Kennelly (a planning and development consultant), and Mr Apswoude. In summary, that evidence was as follows:

   (1)On 21 December 2012, the applicant applied for a planning permit (PA2012/3840) for a multi-lot subdivision on part of Lot 4, which part was later to become Lot B. Lot B was approximately 13 hectares, or 8% of the Land.

   (2)On 29 October 2013, the original planning permit PA2012/3840 was issued. This permit was amended on a number of occasions and issued as a final permit on 20 August 2019.

   (3)On 12 May 2014, an application was made for a planning permit to allow the subdivision of Lot 4 into Lots A, B, C and D (PA2014/4380). The areas of the proposed lots in Lot 4 were as follows:

   •Lot B on the proposed plan of subdivision, also known as ‘Precinct 1’, was 13.39 hectares;

   •Lot C, described as a potential school site, was 3 hectares;

   •Lot D, being the location of the farmhouse, was 0.49 hectares; and

   •Lot A, being the balance of Lot 4, was 52.86 hectares. Some of this land, south of the proposed Lot B, was also known as ‘Precinct 2’.

   (4)On 12 August 2014, planning permit PA 2014/4380 was issued; and on 18 May 2018, the plan of subdivision contemplated by this planning permit was registered.

   (5)On 11 August 2014, an application was made for a planning permit to allow the multi-lot subdivision of Precinct 2. On 11 April 2016, planning permit PA 2014/4497 was issued.[20] The plan of subdivision contemplated by this planning permit was certified on 30 September 2021, but has not yet been registered.

   (6)On 26 September 2017, an application was made for a planning permit to subdivide Lot A into Lots E and F. On 16 April 2018, the permit was issued and, on 7 June 2018, the plan of subdivision was registered.

   (7)On 25 June 2018, Lot E was sold to a third party. According to Mr Apswoude, Lot E was sold to enable the applicant ‘to pay down debt’. In his re-examination, Mr Apswoude said that the sale of Lot E permitted the applicant to pay off ‘well over $10 million’ of its debt.

   (8)On 12 January 2022, the plan of subdivision for the first stage of the multi-lot subdivision of Lot B contemplated by the final permit issued on 20 August 2019 was registered. On 8 February 2022, the second stage of that subdivision was registered.

   (9)None of these planning applications or subsequent permits related to the 99.5 hectares which formed Lot 1; and no development activities were undertaken on the Land in any event during the relevant tax years.

   [20]While the planning permit was dated 12 April 2016, the letter from the City of Melton in which it was enclosed was dated 11 April 2016.

The judge’s reasons

1. The judge commenced his reasons for judgment by noting that proceedings under which an exemption in s 67 of the LTA is being sought ‘are de novo proceedings and are not an appeal in the strict sense of that term’.[21] After setting out and describing the relevant statutory provisions, the judge identified the issues in dispute between the parties on the s 67 claim, with respect to each tax year, as follows:

   (a)whether the Land was used primarily for the business of primary production;

   (b)whether the Appellant's principal business was primary production of the type carried on on the Land;[22] and

   (c)whether the Appellant’s sole shareholder (and also sole director for the relevant years in dispute), Mr David Apswoude, was normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.[23]

   [21]Reasons, [4].

   [22]See n 10 above as to the replacement by the parties of the statutory words ‘main undertaking’ in s 67(3)(a) of the LTA with the words ‘principal business’.

   [23]Reasons, [11]–[12].

2. Under the heading ‘Evidentiary issues’, the judge dealt with the burden of proof and the credit of Mr Apswoude. The judge observed that there was no issue in respect of the standard of proof required of the applicant being other than the usual civil standard. His Honour went on to say, however:

   Nevertheless, it does not follow that a taxpayer’s evidence – which is, inherently, potentially self-serving – is not to be tested in the usual way; particularly with respect to consistency in itself and also with respect to other oral and documentary evidence.[24]

   [24]Ibid [14].

3. After observing that the principal witness in support of the applicant’s case was Mr Apswoude, the judge noted the respondent’s submissions that Mr Apswoude was not an impressive witness; and that he was unwilling to concede anything against his interests, even where his position ‘defied credulity’.[25] The judge then dealt with Mr Apswoude’s evidence about the reconstructed business plan documents. After noting the respondent’s submissions that Mr Apswoude’s evidence in relation to these documents reflected poorly on his credit, with the circumstances of their creation only becoming clear in cross-examination, the judge said:

   In my view, there is force in the Commissioner’s submissions with respect to Mr Apswoude’s evidence in relation to the creation of those documents. It was certainly not made clear in his evidence, without the need for cross-examination, that these documents were not a ‘reconstruction’ of any previous document in any sense but, at best, a compilation of his thought processes and plans for the Appellant’s business from time to time. As such, his evidence, particularly in cross-examination, does not reflect well on his credibility but, particularly as the Appellant does not seek to rely upon any of the business plans which may or may not have existed into which these ‘reconstructed’ documents may have been directed, [it] is not necessary to make any further findings in this respect. Moreover, it is not necessary to make any findings as to whether or not there was some intention to misrepresent matters to the Commissioner with respect to relevant tax years.[26]

   [25]Ibid [15].

   [26]Ibid [24] (footnote omitted).

4. After setting out this conclusion in relation to Mr Apswoude’s evidence, the judge then rejected submissions made by the respondent that he should draw a Jones v Dunkel[27] inference against the applicant in respect of its failure to call Ms Apswoude-Hardacre and Mr Taylor. The judge declined to draw any such inference, noting that, in any event, the evidence of these witnesses was not relied upon by the applicant.[28]

   [27](1959) 101 CLR 298.

   [28]Reasons, [32].

5. The judge then dealt with a number of specific topics in the following parts of his reasons for judgment:

   •primary production activities of the applicant on the Land (Reasons [33]–[42]);

   •land development activities undertaken by the applicant (Reasons [43]–[50]);

   •other activities undertaken by the applicant on the Land (Reasons [51]–[54]);

   •other activities undertaken by the applicant (Reasons [55]–[56]); and

   •financial matters (Reasons [57]–[63]).

6. Under the heading ‘Primary production activities on the Land’, the judge said that the evidence of primary production activities on the Land came almost entirely from Mr Apswoude and Mr Tran, ‘there being very little documentary or other corroborative evidence’.[29] In dealing with Mr Tran’s evidence, the judge said:

   Mr Tran was a family member who worked part-time on the Land while studying between July 2014 and January 2018. His activities are relevant only to the 2015 and 2016 years. He undertook some cassinia-related activities, but also general farm duties such as creating fire breaks, checking water levels, spraying weeds and fixing fences. His evidence does not, however, say how much of his time was spent on cassinia-related activities and how much on other activities at the Land. Mr Tran also gave evidence of two others who assisted at the Land, but not of their hours or which years they performed work. The Commissioner reiterates his criticism of Mr Apswoude's evidence, for the reasons discussed previously. On that basis, the Commissioner contends that Mr Tran’s evidence must be treated with considerable caution.[30]

   [29]Ibid [33].

   [30]Ibid [34].

7. We should immediately observe that the last sentence of this passage was not correct. In fact, it was the evidence of Mr Apswoude which the Commissioner contended ‘must be treated with considerable caution’.

8. After referring to Mr Apswoude’s evidence, the Mollison report, and Mr Foley’s unchallenged evidence of his conversation with Mr Apswoude about the planting of Cassinia on the Land, the judge said:

   [I]t is clearly one thing to have plans with respect to a property, yet it is another thing to actually be undertaking primary production activities on that particular property.[31]

   [31]Ibid [37].

9. After referring to the competing submissions made by the parties about the Mollison report (the applicant having submitted that the terms of the Mollison report showed that the applicant wished to farm Cassinia, with the respondent having submitted that its terms were indicative of the land being prepared for residential development), the judge said:

   In my view, however, the Mollison Report is equivocal in terms of the positions of the parties so that the position with respect to the Appellant’s purpose of growing cassinia on the property is actually wholly dependent on Mr Apswoude’s assertions in this respect, assertions which are not supported by any definitive documentary evidence. Also, as discussed further in these reasons, there is only a very modest record of commercial activity and exploitation with respect to the cassinia product which, on the evidence, does not appear to have produced sufficient income over the years of its said to be development which would go any distance to meeting costs associated with the Land, whether municipal rates or otherwise and financial holding costs.[32]

   [32]Ibid [41].

10. His Honour then said:

    In my view, another telling indication that no commercial cassinia business had been commenced at any relevant time is the absence of any business plans. True it is that the absence of a business plan with respect to a taxpayer’s business does not necessarily indicate the absence of a commercial business but in circumstances where there may be another, non-commercial or non-relevantly commercial, explanation for a claimed business activity, the absence of such a plan may be a critical piece in the balancing of the overall evidence on that issue. As indicated previously, there was, in these proceedings, controversy in relation to three ‘reconstructed’ business plans prepared by the Appellant and cross-examination by the Commissioner directed to their contemporaneousness or otherwise. In any event, the Appellant does not rely upon any business plans but relies wholly on what it says is other evidence, being evidence which goes to the issues in these proceedings. This is said to be the existence, or otherwise, of the primary production business by the Appellant in the 2014-2016 years and the extent to which the Land was used in the 2014-2016 years for that business activity.[33]

    [33]Ibid [42] (footnote omitted).

11. Under the heading ‘Land development activities’, the judge referred to the evidence of Mr Kennelly and Mr Larmer. The judge noted a statement by Mr Larmer in cross-examination that, ‘… [O]bviously … there will be some stage where the Land will go to development, because Melbourne’s just there, and obviously Blind Freddy will see that’s going to come, yes’, before saying:

    For the reasons which follow, and having regard to the state of the evidence as a whole, it is, as the Commissioner submits, very difficult to accept there was no intention on the part of Mr Apswoude ever to develop Lot 1 of the Land. In my view, and as considered further in the context of the Appellant’s submissions, the critical question is whether this was an intention during the relevant tax years.[34]

    [34]Ibid [43].

12. After noting the various applications made by the applicant ‘for planning permits over a substantial part of the Land’, the judge turned to Mr Apswoude’s evidence about the registration of the business names, Davis Vineyard and Australian Native Brush Fencing. The judge said that he could not accept Mr Apswoude’s evidence that Davis Vineyard (first registered in 2014) was registered for a proposed business selling Cassinia. Davis Vineyard was the name by which the housing estate was, by the time of the proceeding below, being marketed; and, when Cassinia sales were actually undertaken by the applicant, this was done under ‘the far more logical business name’ — initially unregistered, but later registered — of Australian Native Brush Fencing.[35]

    [35]Ibid [45].

13. The judge then said:

    Also telling against the Appellant’s position is that on 15 December 2015, it applied for an electricity supply to be provided to a building which had previously been constructed on the Land. The nature of this building was the subject of evidence from both Mr Apswoude and Mr Larmer. Mr Apswoude described it as a ‘nursery’ but it was never actually used as such. Mr Larmer rarely went into it and Mr Apswoude accepted that it was only ever used as a storage shed. It is currently used as a sales office for land sales on the Land and the contemporaneous video footage of it suggests that it was probably constructed for that purpose. At any event, the application for an electricity supply does, as the Commissioner submits, give the lie to the suggestion that it was ever a nursery as in that application it is described as a ‘portable planning office’.[36]

    [36]Ibid [46] (footnotes omitted).

14. The judge referred to the applicant’s reliance upon the decision of the New South Wales Court of Appeal in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd,[37] in support of the position that, even if the Land were held for future development use, holding land for a future use is not current use of the Land.[38] The judge, however, observed that Metricon did not answer the Commissioner’s position, which was that the steps taken by the applicant with respect to planning permissions supported an argument that the Land was not being used for ‘primary production’ in the relevant sense, without there being any requirement for the Commissioner to establish some other business activity. The judge then said:

    In any event, it does not follow that where a taxpayer has the onus of establishing a use of a piece of land for a particular purpose that it is necessary for the contradicting party to affirmatively establish some other purpose which is inconsistent, whether in whole or in part, with the purpose of which the taxpayer bears the onus of establishing. In the present circumstance, I am of the view that the evidence advanced by the Commissioner with respect to the steps taken by the Appellant in relation to subdivision and land development, such as they are, should be treated as part of the tapestry of evidence which goes to rendering the Appellant’s, mainly subjective, assertions as to its primary production exemption entitlement.[39]

    [37](2017) 105 ATR 11; [2017] NSWCA 11 (‘Metricon’).

    [38]Metricon, [71].

    [39]Ibid [49].

15. The judge concluded the section of his reasons for judgment dealing with land development activities by saying, ‘the evidence with respect to land development casts serious doubt on the largely subjective assertions on the part of [the applicant] with respect to use of the Land in the context of seeking to establish its primary production exemption’.[40]

    [40]Ibid [50].

16. In dealing with other activities on the Land, the judge noted that the Commissioner contended that there were at least two significant activities taking place on the Land during the course of the relevant tax years that were not primary production: namely, the agistment of cattle and land development. The judge said that other activities which did not fall within the definition of ‘primary production’ in s 64 of the LTA included mending fences, removing rocks and spraying weeds. The judge noted Mr Apswoude’s acknowledgement that these activities were not related to the cultivation of Cassinia.[41] The judge concluded this section of his reasons for judgment by saying that he was of the opinion that the evidence simply did not support the proposition that the mending of fences, removal of rocks or spraying of weeds was somehow incidental to Cassinia farming.[42]

    [41]Ibid [51].

    [42]Ibid [54].

17. Under the heading ‘Activities undertaken off the Land’, the judge referred to the applicant owning 11 Vespas valued at $668,450, and the fact that it had registered a business name, Vespa Museum. The judge referred to Mr Apswoude’s evidence in cross-examination that these related to a café business run by his wife for 18 months in St Kilda. The judge then said:

    As the Commissioner contends, quite why a café would own such a considerable number of valuable Vespas was not explained and regardless of who managed the café, that its business was run by the Appellant is undeniable when regard is had to the financial statements. The only answer the Appellant had to these submissions was that this evidence was of no relevance to these proceedings and that it is not a matter for the Court as to how a taxpayer should run its business and spend its money.[43] For the reasons which follow, 1 do not accept that evidence of these other business activities on the part of the Appellant is irrelevant. Rather, it does in my view, go to its entitlement to an exemption under the provisions of s 67 of the LTA, as discussed in the reasons which follow.[44]

    [43]Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1, at 7 (Williams J).

    [44]Reasons, [55] (footnote in original).

18. Next, the judge referred to the fact that Mr Apswoude was a director of a company named Home Real Estate Pty Ltd (‘HRE’). The judge accepted the Commissioner’s observation that the connection between the applicant and HRE ‘is unclear and was not properly explained by [the applicant]’.[45] After referring to the applicant’s financial statements in respect of the 2014 and 2015 financial years, the judge said that, as the evidence stands, the possibility that the applicant maintained significant business dealings with HRE in the relevant tax years had not been excluded. The judge said that this, again, ‘[went] to the application or otherwise of the provisions of s 67 of the LTA, for the reasons which follow’.[46]

    [45]Ibid [56].

    [46]Ibid.

19. Under the heading ‘Financial matters’, the judge observed that the Commissioner had identified two ‘key matters’ disclosed by the financial material which had been tendered: first, that during the relevant years, the applicant had derived no income from primary production; and secondly, Cassinia sales ‘were never going to amount to a profitable business’.[47]

    [47]Ibid [57].

20. The judge then referred to some of the detail in the 2014, 2015 and 2016 financial statements. In the course of doing so, the judge noted the Commissioner’s submission that it was instructive to compare these financial statements with the ‘Cassinia Arcuata Business Plan 2008/2009’. The judge said that, as observed by the Commissioner, even on the ‘hopeful’ annual gross income referred to in that document ($172,000), it was apparent that Cassinia was never going to be a profitable business on the Land.[48] The judge then referred to Mr Apswoude having said that the problem could be solved ‘if he could get rid of the debt, which he did in part when a parcel of land was sold after the years in question’.[49] Without expressly saying so, it would appear that the judge rejected Mr Apswoude’s evidence on this issue, saying:

    This, however, was never going to solve the problem. Even leaving aside the interest and borrowing costs, income from cassinia was never going to pay the rates and taxes, let alone the labour costs, equipment and other matters.[50]

    [48]Ibid [60].

    [49]Ibid.

    [50]Ibid.

21. Concluding his analysis of financial matters, the judge said that the applicant’s responses to the Commissioner’s contentions that the Cassinia business was never going to be profitable ‘could only, in light of the financial and other realities, be described as fanciful’.[51] The judge said that the well-known proposition articulated by Williams J in Tweddle v Federal Commissioner of Taxation[52] was ‘simply not to the point in the present context where the taxpayer has the onus of establishing the requirements for a primary production exemption under the provisions of s 67 of the LTA’.[53]

    [51]Ibid [63].

    [52](1942) 180 CLR 1, 7 (‘Tweddle’).

    [53]Reasons, [63].

22. Under the heading ‘Section 67 — the primary production exemption’, the judge then turned to consider specifically whether the Land was exempt from land tax under s 67 of the LTA in each of the three relevant tax years.

23. In relation to the issue of whether the Land was used solely or primarily for the business of primary production, the judge concluded that the Land was not used primarily for primary production, ‘but rather was used for a number of purposes, among which the cultivation of Cassinia was not the primary one’.[54] The judge said that, despite Cassinia being widespread on the Land, ‘it — or more particularly, its cultivation for the purpose of sale — did not give its character to the whole of the Land’.[55] The judge then elaborated on this conclusion, saying (amongst other things) that there was ‘scant evidence that [Cassinia] was being cultivated to the requisite degree, extent and intensity’; that ‘there were no sales of Cassinia in the relevant years’; and that the evidence also disclosed that the applicant ‘was engaged in a modest agistment business, a café business of unknown turnover …, and property development that involved applying for planning permits … [and that it] may have also had some business relationship with HRE’ — leading his Honour to conclude that when the cultivation of Cassinia was put alongside these other activities, ‘it simply could not be concluded that a Cassinia business was the primary use of the Land’.[56]

    [54]Ibid [72].

    [55]Ibid.

    [56]Ibid [74]–[76].

24. Turning to the question of whether the applicant’s principal business was primary production of the type carried on on the Land, the judge said:

    For the same reasons as discussed, with respect to the first aspect of the primary production exemption, the Appellant’s principal business was not primary production of the type carried on on the Land.[57]

    [57]Ibid [77].

1. The judge then said:

   As the Commissioner contends, even if there was a business of primary production carried on on the Land, it was only one of a number of businesses carried on by the Appellant. Other significant businesses were agistment, the café and there was also the development of the Land which, whether or not it might be characterised as a separate business, does, as indicated previously, detract from assertions that the Land was primarily used for the business of primary production or that production was the Appellant’s principal business. In any event, where a company conducts more than one business, the question of which, if any, is its principal business involves a consideration of factors including income, use of labour and deployment of capital.[58] As the Commissioner contends, each of those factors points against the cultivation of cassinia being the principal business of the Appellant, for the following reasons in the present context:

   (a)the income from sales of cassinia was never likely to be sufficient to sustain the Appellant. The only plausible commercial undertaking for the Appellant was to sell the land, thus recouping the significant other losses made;

   (b)the Appellant’s cassinia undertaking was conducted by its director/shareholder and a small number of family and friends. This is to be contrasted with the property development business which engaged professionals.

   (c)the Appellant’s capital consisted almost entirely of the Land. The development business involved the future sale of the Land and should properly be characterised as involving the devotion of the whole of the capital of the Appellant. Any cassinia business was incidental; and

   (d)there is no contemporaneous evidence of any business plan to sell cassinia and the Appellant’s own expert on cassinia had never previously heard of cassinia being cultivated for any commercial purpose.[59]

   Consequently, on the evidence, it is impossible to conclude that the Appellant’s principal business was primary production of the type carried on on the Property, namely the cultivation of cassinia.[60]

   [58]Lavender Rain Pty Ltd v Commissioner of State Revenue [2022] VCAT 1264 at [108].

   [59]CB1565.

   [60]Ibid [78] (footnotes in original).

2. On the issue of whether Mr Apswoude was normally engaged in a substantially full-time capacity in the business of primary production, the judge observed that the evidence of Mr Apswoude’s activities consisted almost entirely of his own statements. He then said that ‘non-contemporaneous, self-serving statements must be treated with caution’, before saying:

   In the present circumstances, I am of the opinion that statements of Mr Apswoude should be treated with a considerable degree of caution as they are self-serving and made in the absence of contemporaneous, corroborating evidence and also having regard to, what can fairly be described, as unforthcoming and unsatisfactory evidence in relation to the ‘reconstructed’ documents to which reference has been made previously.[61]

   [61]Ibid [80].

3. Ultimately, the judge concluded that Mr Apswoude was not normally engaged in a substantially full-time capacity in the business of primary production, as was required by s 67(3)(b)(ii) of the LTA.[62]

   [62]Ibid [64], [79]–[82].

4. Having determined that the applicant had not made out any of the three matters it was required to make out under s 67 of the LTA,[63] the judge concluded that the applicant had not established that the Land was exempt land in any of the 2014, 2015 or 2016 land tax years.[64]

   [63]Ibid [64]–[82].

   [64]Ibid [83].

Applicant’s submissions

1. In its written case in this Court, the applicant engaged in a root and branch attack, submitting that the Reasons ‘contained numerous legal errors, and reflected breaches of procedural fairness, having regard in particular to this Court’s decisions in Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2)[65] and Hunter v Transport Accident Commission’.[66]

   [65](2002) 6 VR 1 (Charles, Buchanan and Chernov JJA) (‘Fletcher’).

   [66](2005) 43 MVR 130; [2005] VSCA 1 (Batt, Vincent and Nettle JJA) (‘Hunter’).

2. Attacking the judge’s conclusion that there was ‘very little documentary or corroborative evidence’ of primary production activities by the applicant,[67] the applicant submitted that:

   Contrary to this conclusion, there was the following corroborative evidence: aerial satellite images of the Land for each of the paddocks for each of the years which provided contemporaneous proof that there were no development activities on the Land in these years; video footage of the Cassinia growing on the Land taken in November 2016; the unchallenged evidence of Mr Foley that Mr Apswoude had discussed with him in the early 2000’s the proposed cultivation of Cassinia on the Land; the financial statements of the Applicant showing Cassinia as trading stock; and the evidence of sales of Cassinia brush-fencing beginning in November 2016 and returning over $442,000 in income by July 2023. In addition to this, there was evidence of growing, sowing, spreading and harvesting Cassinia on the relevant paddocks and, ultimately, selling the produce of that cultivation in the form of brush-fencing; as well there was evidence in relation to the Caroline Springs fencing project which the trial judge failed to properly take into account.

   [67]Reasons, [33].

3. In oral argument, the applicant expanded this list of ‘corroborative evidence’ to include maps which were tendered at trial; Mr Tran’s evidence that he had no discussion with Mr Apswoude about developing the Land; and Mr Just’s second report, in which he set out tables describing the presence of Cassinia, as at 31 December 2013, 2014 and 2015, across the 18 paddocks of Lot 1 and Lot 4.[68]

   [68]Which descriptions, as we have already observed, ranged from ‘present but very sparse’ to ‘widespread’ for each paddock on all three dates.

4. Observing that Mr Tran was an important witness for the applicant, the applicant noted the judge’s error at Reasons [34] where his Honour said that the Commissioner had contended that Mr Tran’s evidence must be treated with considerable caution. As the applicant observed, no such submission was made by the Commissioner and, moreover, no grounds were identified by the judge for not accepting Mr Tran’s evidence.

5. The applicant contended that its evidence included objective evidence as to the undeveloped state of the Land, not only in the 2014–16 years, but also many years later. The applicant submitted that this objective evidence, along with other objective evidence, was, however, ‘peremptorily shunted aside’[69] by the judge — who concluded, contrary to the objective evidence, that there was no business of growing Cassinia and that the applicant was carrying out land development activities on the Land and also using the Land for land development.

   [69]Borrowing from the language used in Fletcher when this Court said, at [157], that ‘if evidence is significant, it is not to be peremptorily shunted aside or ignored’.

6. The applicant submitted that at various places in the Reasons the judge erred in concluding that, because the expenses of holding the Land in the 2014–16 years exceeded the business income for those years, the applicant could not have been carrying on a business of primary production in those years. In support of that submission, the applicant relied upon a number of decisions which were cited to the judge, which it said the judge failed to follow (or, in some case, even refer to), misunderstood, or misapplied. These included Tweddle, Metricon, Ferguson v Federal Commissioner of Taxation,[70] Federal Commissioner of Taxation v Stone,[71] Federal Commissioner of Taxation v JR Walker,[72] Inglis v Federal Commissioner of Taxation,[73] Lotus Oaks Pty Ltd v Commissioner of State Revenue,[74] Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation,[75] and Thomas v Federal Commissioner of Taxation.[76]

   [70](1979) 37 FLR 310 (‘Ferguson’).

   [71](2005) 222 CLR 289 (‘Stone’).

   [72](1985) 16 ATR 331 (‘Walker’).

   [73](1979) 10 ATR 493 (‘Inglis’).

   [74](2021) 113 ATR 379 (‘Lotus Oaks’).

   [75](1980) 49 FLR 183 (‘Magna Alloys’).

   [76](1972) 46 ALJR 397; 3 ATR 165 (‘Thomas’).

7. More specifically, the applicant relied upon Metricon as authority for the proposition that the making of applications for planning permits in relation to future use does not constitute a present use of the land in question.[77] The applicant submitted that the judge ‘failed to appreciate [this] persuasive authority of the New South Wales Court of Appeal … which had direct relevance to this case’.

   [77]Metricon (2017) 105 ATR 11, 31–32 [70]–[71] (Barrett AJA, with whom MacFarlan and Ward JJA agreed).

8. On the question of whether the taxpayer was a ‘primary producer’ for income tax purposes, the applicant relied upon passages in Thomas, Stone, Ferguson and Tweddle, which it said have been overlooked or not applied by the judge. Those passages were as follows:

   (1)In Thomas, Walsh J said:

   It is common ground that the appellant did not obtain any income from primary production before or in the tax year. No harvest has yet been obtained from any of the trees. But, in my opinion, that fact does not necessarily preclude a finding that the appellant was carrying on a business of primary production. … Trees had been planted and were growing, although they had not yet grown to an age at which they would yield marketable produce.[78]

   (2)In Stone, Gleeson CJ, Gummow, Hayne and Heydon JJ said:

   No doubt it is necessary to take account of the taxpayer’s statement that she did not throw javelins for money. … If a taxpayer has a view to profit, the conclusion that the taxpayer is engaged in business may easily be reached. If a taxpayer’s motives are idealistic rather than mercenary, the conclusion that the taxpayer is engaged in a business may still be reached. The ‘wide survey and exact scrutiny’ of a taxpayer’s activities that must be undertaken may reveal, as it does in this case, that the taxpayer’s activities constituted the carrying on of a business.[79]

   (3)In Tweddle, Williams J rejected a submission that it should be concluded that the taxpayer’s activities of breeding stud horses and livestock were not a business, solely because the evidence showed that the venture could never show a profit. In rejecting that submission, Williams J said that the Income Tax Assessment Act[80] ‘must operate upon the result of a taxpayer’s activities as it finds them’. His Honour found as a fact that in the relevant year the taxpayer in that case was engaged in the business of farming because he was satisfied that the taxpayer was seeking to establish himself ‘as a recognised breeder of high class stud stock, and that while he [was] prepared to make losses to achieve this ambition he [had] a genuine belief that he [would] be able eventually to make the business pay’.[81]

   (4)In Ferguson, Bowen CJ and Franki J said:

   However, an immediate purpose of profit-making in a particular income year does not appear to be essential. Certainly it may be held a person is carrying on business notwithstanding his profit is small or even where he is making a loss.[82]

   [78]Thomas (1972) 3 ATR 165, 169.

   [79]Stone (2005) 222 CLR 289, 305 [55].

   [80]Income Tax Assessment Act 1936 (Cth).

   [81]Tweddle (1942) 180 CLR 1, 7.

   [82]Ferguson (1979) 37 FLR 310, 314.

9. The applicant submitted that the judge peremptorily shunted aside critical evidence tendered by the applicant, including the objective evidence that the financial statements of the applicant did not treat the Land as trading stock, but did treat the Cassinia on the Land as trading stock. It was submitted that the judge ignored the effect of s 1305 of the Corporations Act 2001 (Cth), to which he was referred, and in circumstances where the accountant, Mr Rogan, who prepared the accounts, swore an affidavit to which the financial statements were exhibited, but was not required by the Commissioner for cross-examination.

10. Next, the applicant submitted that, of the 50 (scil, 51) substantive paragraphs in the Reasons (being Reasons, [33] to [83]), ‘37 were copied, or largely taken from the Commissioner’s Closing Submissions; and … 19 headings were appropriated as the headings in [the Reasons]’. Relying upon the decision of the Full Court of the Federal Court in Atanaskovic Hartnell Corporation Services Pty Ltd v Kelly,[83] the applicant submitted that in copying or taking this material from the Commissioner’s Closing Submissions (‘the CCS’), the judge failed to engage with the applicant’s arguments; failed to make an independent decision on the whole of the evidence and the law; and failed to provide adequate reasons for his decision.

    [83][2024] FCAFC 137 (Collier, Logan and Goodman JJ) (‘Atanaskovic’).

11. In summary, relying upon Atanaskovic and Fletcher, the applicant submitted that the judge failed to perform his judicial function:

    (a)‘by failing to have regard to the objective evidence led by the applicant’;

    (b)‘by failing to have regard to submissions made by the applicant based on that evidence’;

    (c)‘by accepting, without question or inquiry, submissions by the Commissioner that were either based on evidence that did not exist, or on inaccurate descriptions of the evidence, and then proceeding to make findings of fact on that basis’; and

    (d)‘by copying, as parts of his judgment, large slabs of the Commissioner’s submissions, while ignoring key submissions made by the applicant’.

12. The applicant commenced its oral submissions with the contention that the substance of its application was that ‘there has not yet been a determination of the [applicant’s] case upon a consideration of the real strength of the body of evidence it presented’. It then submitted that there ‘must be a new trial at which this consideration will be undertaken’. The following assertions were then made, namely:

    •the judge ‘failed to give adequate or sufficient reasons for his non-acceptance of the evidence of Mr Apswoude’;

    •the judge’s conclusions on credit were ‘confusing’ and ‘unclear’;

    •the judge ‘failed to give any or any adequate reasons for the rejection of ample corroborative evidence’;

    •the judge’s ‘unattributed copying of the submissions of the respondent … did not represent the independent assessment of the applicant’s case to which it was entitled’; and

    •the Reasons are ‘internally inconsistent in a number of respects’. In this regard, the applicant’s complaints included the judge referring to three businesses and, later, four businesses being carried out on the Land; and changes in descriptors said to have been used by the judge (‘modest’ to ‘significant’; and in respect of the land development business, at one stage, ‘main’).

13. In oral argument, the applicant again made complaint about the judge’s failure to refer to the New South Wales Court of Appeal decision in Metricon.[84] The applicant submitted that the principle of law for which Metricon stands is that ‘inactivity is not activity’. Put less delphically, the submission appeared to be that, as a matter of law, one could not engage in the business of land development ‘until the first clod of soil is turned’. It was thus submitted that, as no physical activity had taken place on the Land prior to 31 December 2015, the judge’s conclusion that the applicant engaged in the business of land development on the Land during the relevant tax years was wrong and could not be permitted by this Court to stand.

    [84]But see the judge’s references to Metricon at Reasons [49].

14. The applicant attacked the judge’s credit finding in relation to Mr Apswoude, making the following points:

    (1)Any adverse credit finding made by the judge was not justifiable, in circumstances where the cross-examination upon which it was based, when read in full, disclosed that there was a misunderstanding between Mr Apswoude and the cross-examiner. Properly analysed, there really was no proper basis for an adverse credit finding against Mr Apswoude, even in relation to his creation of the reconstructed business plan documents.

    (2)While the judge’s conclusions with respect to Mr Apswoude’s credit about the reconstructed business plan documents at Reasons [24] appears to be limited (alternatively, should have been limited) to Mr Apswoude’s evidence about those documents, in later passages in the Reasons, the judge appears to have rejected other parts of Mr Apswoude’s evidence on other topics. It was submitted that such an approach was in direct conflict with the High Court’s decision in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd.[85]

    [85](1999) 160 ALR 588; [1999] HCA 3 (Gaudron, Gummow, Kirby, Hayne and Callinan JJ) (‘State Rail’).

15. The balance of the applicant’s oral submissions in this Court consisted of taking the Court again to the evidence said to have been overlooked, shunted aside or ignored by the judge. In the course of these submissions, we were taken to many paragraphs in the Reasons, and individual criticisms were made of particular sentences and findings. Comparisons were also made between the text of the Reasons and the text of the CCS which, it was submitted, showed that the judge had failed to give independent consideration to the issues in dispute between the parties.

Respondent’s submissions

1. In answer to the applicant’s assertions that the judge failed to have regard to its submissions (including authorities relied on by the applicant) or to certain evidence (asserted by the applicant to have been ‘peremptorily shunted aside’), in his written case in this Court, relying upon the High Court’s decision in Whisprun Pty Ltd v Dixon,[86] the respondent submitted that the judge’s reasons were not required to mention every fact or argument relied on by the losing party. As the respondent observed, the plurality[87] in Whisprun warned that judgments of trial judges would soon become longer than they already are if a judge’s failure to mention particular facts and arguments ‘would be evidence that he or she had not properly considered the losing party’s case’.[88] The respondent submitted that the sorts of facts and arguments that a trial judge need not mention include: (1) evidence that is of little probative value because, for example, it concerns events outside the relevant time period; (2) evidence or submissions that concern a particular line of argument that is foreclosed by the judge’s finding or holding on another issue; and (3) evidence that only corroborates and does not significantly add to other evidence.

   [86](2003) 77 ALJR 1598, 1610 [62] (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ) (‘Whisprun’).

   [87]Gleeson CJ, McHugh and Gummow JJ.

   [88]Whisprun (2003) 77 ALJR 1598, 1610 [62].

2. The respondent noted that the applicant alleges that the judge made many errors in the nature of ‘peremptorily shunting aside’ certain evidence it (the applicant) relied upon. The respondent contended that the examples given by the applicant were, however, not made out. The respondent submitted that the judge was careful to set out in detail the submissions made by the parties on the evidence. It contended that in Reasons [33]–[63], the judge set out the parties’ submissions ‘one after the other, and then analysed the evidence’. Having undertaken that task, at Reasons [64]–[83], his Honour then applied his conclusions on the evidence to the statutory questions raised by s 67 of the LTA. As the respondent put it, this section (Reasons, [64]–[83]) ‘does not deal in detail with all of the evidence, because that task had already been undertaken in the earlier section’.[89]

   [89]Namely, at Reasons [33]–[63].

1. Moreover, we also reject as fatuous the submission made in reply by the applicant that somehow it could be inferred that the judge failed to give independent consideration to the matter before him because the trial concluded on 30 November 2023 and judgment was delivered on 13 December 2023 — described by the applicant as being ‘eight business days later’.[139]

   [139]The relevance of this descriptor is illusive, unless it contained some implicit assertion that judges only give independent consideration to relevant matters on business days to the exclusion of non-business days.

2. Extensive copying of the winning party’s submissions into reasons for judgment has the propensity to cause a losing party to think that their submissions, and the issues in dispute, have not been given a fully independent consideration by the presiding judicial officer. Such a concern may even be heightened in circumstances where the judicial officer appears to adopt, as his or her own words, the precise words of the winning party’s submissions — rather than setting them out in a quote and then explaining why submissions in those terms have been accepted. For that reason, a judicial officer is generally on safer ground taking the latter approach (quoting the words used in the winning party’s submission and then giving reasons for accepting that submission) if, after giving independent consideration to the issues, he or she concludes that one party’s submissions should be accepted almost (if not wholly) in their entirety.

3. That said, a fair reading of the Reasons in this case leads us to conclude that there is no substance in the applicant’s contentions that the judge failed to have regard to any relevant evidence and/or failed to give independent consideration to the evidence tendered and the submissions made by the parties. To the contrary, read as a whole, the Reasons disclose that the judge well and truly understood the ambit and relevance of the evidence tendered before him and the competing submissions of the parties, save for his Honour’s reference to there being a submission made by the Commissioner that Mr Tran’s evidence had to be treated ‘with considerable caution’. We will address that issue when dealing with the question of whether the judge erred in concluding that the applicant had not made out its case under s 67 of the LTA. Otherwise, for the reasons given above, the applicant’s complaints about copying and shunting aside evidence must be rejected.

Applicant’s complaints about internal inconsistencies in the Reasons

1. As we have already observed, the applicant submitted that the Reasons were internally inconsistent in several respects. In particular, it submitted that there was ‘a conclusion that there were three businesses being carried out on the Land, then there [was] a conclusion that there were four’, and that a ‘description changed from modest to significant’, and the Land development business was also held (at one stage) to be ‘main’. The applicant did not direct us to the paragraphs of the Reasons which it said gave rise to these alleged inconsistencies, nevertheless, we will endeavour to deal with each of them in turn.

Inconsistency of business number

1. There is no reference in the Reasons to ‘three businesses’[140] or ‘four businesses’ in those terms. At Reasons [68], dealing with ‘the competing uses of the Land’, the judge noted the Commissioner’s submission ‘to be some agistment of cattle, the growing of Cassinia and also land development’. After referring to Crockett J’s judgment in Abbott v Commissioner of Land Tax,[141] the judge noted the Commissioner’s submission that the reasoning in Abbott (dealing with a case where there are two uses that are substantial) applied a fortiori where there are ‘three uses’.[142]

   [140]Save for a reference not relevant to the present issue at Reasons, [56] where his Honour referred to three businesses (the applicant, HRE and ‘Vespa’ in an invoice sent by Ms Apswoude-Hardacre to HRE).

   [141][1985] VR 164, 166 (‘Abbott’).

   [142]Reasons, [69].

2. Reasons [68] and [69] (which deal with the Commissioner’s contentions there were three businesses being conducted on the Land) are in that part of the Reasons dealing with the first matter which the applicant was required to establish under s 67 of the LTA — namely, whether the Land was used solely or primarily for the business of primary production. The judge then turned to consider the second matter the applicant was required to establish, namely, whether its principal business was primary production of the type carried on on the Land. In the course of considering that issue, the judge said at Reasons [78]:

   As the Commissioner contends, even if there was a business of primary production carried on on the Land, it was only one of a number of businesses carried on by the Appellant. Other significant businesses were agistment, the café and there was also the development of the Land which, whether or not it might be characterised as a separate business, does, as indicated previously, detract from assertions that the Land was primarily used for the business of primary production or that production was the Appellant’s principal business.

3. Read fairly, what his Honour said in this passage was not that there were four businesses being conducted on the Land, but rather that there were four businesses being carried on by the applicant — the issue then under consideration being whether the applicant’s principal business was primary production of the type carried out on the Land. At no stage in the Reasons did the judge say that the café (being the fourth business) was a business carried on on the Land. To the contrary, as is made plain in the Reasons,[143] the café was a business which was run in St Kilda.

   [143]See in particular Reasons, [55].

4. It follows that, while the judge referred to three businesses being carried on by the applicant on the Land, and four businesses being carried on by the applicant, he did not refer to four businesses being carried out on the Land. There is thus no substance in the applicant’s first alleged inconsistency.

The applicant’s complaint about the change from ‘modest’ to ‘significant’

1. The word ‘modest’ appears four times in the Reasons: at Reasons [41], referring to ‘a very modest record of commercial activity and exploitation with respect to the Cassinia product’; at Reasons [70], referring to ‘a modest income from selling Cassinia at some point in the future’; at Reasons [74], referring to the ‘modest income from agistment’; and at Reasons [76], referring to ‘a modest agistment business’.

2. The word ‘significant’ appears many more times in the Reasons. Relevantly for present purposes:

   (a)at Reasons [51], the judge records the Commissioner’s contention that there were ‘at least two significant activities taking place on the Land’ — namely, the agistment of cattle and land development;

   (b)at Reasons [68], the judge refers to ‘a significant aspect of the activities done on and in respect of the Land [being] directed to future development’ and to planning permits being obtained ‘in respect of a significant part of the land’;

   (c)at Reasons [74], the judge refers to ‘a significant amount of cassinia growing on the Land … [but] scant evidence that it was being cultivated to the requisite degree, extent and intensity’; and

   (d)at Reasons [78], the judge refers to ‘[o]ther significant businesses …’ as being ‘agistment, the café and there was also the development of the Land’.

3. In our view, there is nothing internally inconsistent in these references. Specifically, a reference to the agistment business being ‘modest’ does not preclude that business being described as ‘significant’ for the purpose of determining whether the applicant’s principal business was primary production of the type carried on on the Land as required by s 67(3)(a) of the LTA. We understand the reference to ‘significant’ to be in the sense of significant or material to the analysis of what the primary business was, in the context of more than one business being conducted. When one reads the Reasons fairly, and looks at the context in which the judge used the words ‘modest’ and ‘significant’, one sees that there is no substance in the applicant’s second alleged inconsistency.

The applicant’s complaint about the judge’s description of the land development business as ‘main’

1. At Reasons [87], the judge holds that any business of primary production which the applicant was preparing to conduct could only have ever been secondary to ‘the main business of property development’. At earlier points in the Reasons, the judge refers to land development activities conducted by the applicant on or in respect of the Land as being ‘significant’.[144]

   [144]See, for example, Reasons [51].

2. In our view, there is nothing inconsistent in describing activities, which might constitute a business, as significant, and at the same time holding that that business is a person’s ‘main business’. Again, read in context, we see nothing inconsistent in the various descriptions given by the judge to the applicant’s land development activities as significant and its business of land development being its main business. There is thus no substance in the third of the applicant’s alleged inconsistencies.

The judge’s treatment of Mr Apswoude’s credit

1. At the risk of repetition, the judge concluded that the evidence Mr Apswoude gave about the reconstructed business plan documents did not reflect well on his credibility. However, his Honour did not find it necessary to make any findings about whether or not there was some intention to misrepresent matters to the Commissioner.[145] Nevertheless, the applicant submitted that, in truth, the judge made adverse findings about Mr Apswoude’s credit, which he then used, contrary to the High Court’s decision in State Rail,[146] to reject the applicant’s case in the face of the body of objective and corroborative evidence tendered by it at trial, and on which it relied (both before the judge and in this Court).

   [145]Reasons, [24].

   [146](1999) 160 ALR 588.

2. State Rail involved a claim by the appellant, the State Rail Authority of New South Wales (‘SRA’) that it made payments to two of its contractors in reliance upon work dockets containing materially false entries. The trial judge made adverse findings of credibility against SRA’s principal witness, and rejected the bulk of SRA’s claims. An appeal by SRA to the Court of Appeal was dismissed. The High Court subsequently allowed SRA’s appeal. In allowing the appeal, the plurality[147] said:

   It is true that the trial judge, in determining whether to accept the evidence of Mrs Page, was heavily swayed by his impression of her whilst giving oral evidence. However, this circumstance does not preclude a court of appeal from concluding that, in light of other evidence, a primary judge had too fragile a base to support a finding that a witness was unreliable. The documentary evidence in this case, comprising unchallenged affidavit material of Mrs Meek and Ms Packham, the wage records and related documents of Earthline and Nuline, the list of plant (at least in relation to machine No 59) and the analysis of Coopers & Lybrand (in respect of the duplicity claims), provides significant support to the allegations made by Mrs Page.

   As Kirby J and Callinan J point out in their reasons for judgment, these were matters to which weight was not given either by the trial judge or the Court of Appeal. The substance of the matter is that there has not yet been a determination of the SRA’s case upon a consideration of the real strength of the body of evidence it presented. There must be a new trial at which this consideration will be undertaken.[148]

   [147]Gaudron, Gummow and Hayne JJ.

   [148]State Rail, (1999) 160 ALR 588, 607 [63]–[64] (citations omitted).

3. In his judgment, Kirby J said:

   Yet even when the trial judge has expressed conclusions as to the credibility of a particular witness, that does not represent the end of analysis by the appellate court. It is only the beginning of a particular analysis which is then required. In many appeals, such a credibility finding will be far from conclusive of the proper outcome of the entire trial, and hence of the appeal.[149]

   His Honour then proceeded to give a number of examples of cases where an adverse credibility finding would not relieve a trial judge or an appellate court from conducting further analysis with a view to determining whether a particular finding should be made notwithstanding the adverse credit finding.[150]

   [149]Ibid 620 [93].

   [150]See further, Callinan J’s judgment at 636 [154].

4. In our view, there was no error in the judge’s analysis of Mr Apswoude’s credit, nor in the way in which his Honour used the credit findings he made. When one reads the entirety of Mr Apswoude’s cross-examination, one sees that he was a difficult witness. At times he did not answer questions. At times he made speeches. And at times he resisted making appropriate concessions. The judge was entitled to conclude that his cross-examination on the reconstructed business plan documents did not reflect well on his credit;[151] and then to treat with some caution Mr Apswoude’s evidence about the extent of the applicant’s primary production business (relevantly being the cultivation of Cassinia for the purpose of selling) during the relevant tax years.

   [151]Reasons, [63].

5. In the present case, the judge did not dismiss the applicant’s claims merely because of some conclusion he had made that Mr Apswoude was an unreliable witness. He dismissed the applicant’s claims having analysed all of the evidence — including that described by the applicant as the objective and corroborative evidence that had allegedly been ‘shunted aside’. State Rail was a different case, decided on a very different factual matrix. There is no basis for attributing to the judge in the present case the errors identified by the High Court in State Rail. The judge’s reasoning in the present case, involving as it did a detailed analysis of the evidence and submissions, cannot be characterised as one where his Honour rejected the primary witness’s evidence and then failed to conduct the necessary analysis of the balance of the evidence in order to determine the proper outcome of the proceeding. Again, a fair reading of the Reasons discloses to the contrary.

6. For the above reasons, the applicant’s complaints about the judge’s credit finding and his consequential treatment of the applicant’s evidence must be rejected.

The applicant’s complaints about the judge’s failure to refer to relevant authorities

1. As we have already observed, the applicant made complaint about the judge’s failure to refer to a number of decisions, including Ferguson,[152] Stone,[153] Walker,[154] Inglis,[155] Magna Alloys,[156] and Thomas.[157] Additionally, while the judge referred to Tweddle,[158] as we have also observed, the applicant contended that the judge misapplied this decision.

   [152](1979) 37 FLR 310.

   [153](2005) 222 CLR 289.

   [154](1985) 16 ATR 331.

   [155](1979) 10 ATR 493.

   [156](1980) 49 FLR 183.

   [157](1972) 46 ALJR 397.

   [158](1942) 180 CLR 1.

2. There is no substance in any of these submissions. Each of these cases involved statutory provisions different from s 67 of the LTA. Specifically, what was in issue in those cases was whether the taxpayer engaged in a particular business — not whether the land owned by the taxpayer ‘was used solely or primarily for the business of primary production’.[159] In the present case, the judge was prepared to accept that the Land was ‘used for a number of purposes, among which the cultivation of Cassinia was not the primary one’.[160] As a result of that conclusion, there was no necessity for his Honour to refer specifically to the judgments in Ferguson, Stone, Walker, Inglis, Magna Alloys and Thomas. Similarly, as the judge correctly observed, the judgment of Williams J in Tweddle,[161] was not to the point on the question of whether the Land was used solely or primarily for the business of primary production.

   [159]See s 67(1)(a)(iii) of the LTA.

   [160]Reasons, [72].

   [161](1942) 180 CLR 1, 7.

3. Different considerations apply in relation to the applicant’s submissions about the judge’s treatment of the decision of the New South Wales Court of Appeal in Metricon.[162] The first point to be made is that, contrary to the applicant’s assertion that the judge failed to refer to Metricon, the judge in fact dealt with the decision, and the applicant’s submissions in respect of it, at Reasons [49].[163]

   [162](2017) 105 ATR 11; [2017] NSWCA 11.

   [163]See paragraph [61] above.

4. Secondly, and consistently with the judge’s conclusion at Reasons [46] that the ‘nursery’ which the applicant built on the Land was probably constructed for the purpose of being used as a sales office for land sales on the Land, Metricon (where no physical work associated with land development had then been performed on the land the subject of that case) can be distinguished from the present case.

5. Thirdly, and in any event, even if it could be said that the judge should have concluded that Metricon stood against a finding that the Land was used for the business of land development,[164] for the reasons given by the judge, the applicant would not have established that its principal business (or, if one were to use the words of s 67(3)(a) of the LTA, ‘main undertaking’)[165] was primary production of the type carried on on the Land. That is because, whether or not the land development business was carried on on the Land, the existence of the applicant’s land development business as found by the judge would have weighed against such a finding.

   [164]Section 67(1)(a)(iii) of the LTA.

   [165]But noting that the applicant objects to the Commissioner now being allowed for the first time in this Court to make any submissions about the words ‘main undertaking’, having not made any such submissions before the judge.

6. Putting to one side the question of whether Mr Apswoude was normally engaged in a substantially full-time capacity in the business of primary production, the central issues for the judge in this case were whether the Land was used solely or primarily for the business of primary production, and whether the applicant’s principal business was primary production of the type carried on on the Land; not whether the Land was merely used for the business of primary production, nor whether the applicant was merely engaged to some extent in the business of primary production. Once that distinction is borne in mind, it becomes readily apparent that the authorities relied upon by the applicant, in which other taxpayers were found merely to have engaged in a particular business, offer little assistance in the resolution of the present case.

7. In those circumstances, there could hardly be any criticism of the judge for failing to specifically refer to those authorities. Moreover, the one authority that was potentially relevant (although distinguishable on the facts) — Metricon — was in fact dealt with by the judge.

8. For the reasons given above, there is no substance in the applicant’s complaints about the way the judge dealt with the authorities upon which it relied in the court below.

Did the judge err in failing to find that the Land was exempt under s 67?

1. At the risk of repetition, in order for the applicant to succeed under s 67 of the LTA, it had to show that the Land was used solely or primarily for the business of primary production; and that the applicant’s main undertaking (or, to use the words used at trial, ‘principal business’) was primary production of the type carried on on the Land; and that Mr Apswoude was normally engaged in a substantially full-time capacity in the business of primary production. In the circumstances of this case, the business of primary production which the applicant had to establish was the cultivation of Cassinia for the purpose of sale (not land remediation or any other purpose).[166] The applicant had to establish all three elements of s 67 — failing to establish any one of these elements being necessarily fatal to the applicant’s claim.

   [166]See, for example, the evidence of Mr Apswoude, given in cross-examination, and set out in paragraph [36] above, about the ‘best part of Bill Mollinson’s proposal’ being that the planting of a ‘deep-rooted plant [Cassinia]’ would ‘improve the soil immediately’, ‘making the Land productive again’ and obviating the need to spend ‘tens of millions of dollars’ to remediate the Land.

1. Having conducted a real review of the evidence for ourselves,[167] we are unable to see any error in the judge’s conclusions that none of the three elements of the s 67 exemption were made out by the applicant. In arriving at that conclusion, we would observe the following:

   (1)The question of the taxable status of the Land fell to be determined as at the assessment date for each of the relevant tax years, namely, 31 December 2013, 31 December 2014 and 31 December 2015.[168] As such, evidence of what was occurring on the assessment dates was significantly more probative than evidence of activities that may have occurred in the months and years following the last of the assessment dates (31 December 2015).

   (2)While the decisions of Ferguson,[169] Stone,[170] Walker,[171] Inglis,[172] Magna Alloys[173] and Thomas[174] (which were relied upon by the applicant) may have provided support for the proposition that the applicant was engaged in the business of primary production on the Land during the relevant tax years, those decisions said nothing about whether a particular business might be regarded as the primary or principal business or main undertaking of the taxpayer — these being the critical issues which fell for determination under s 67 of the LTA in this case.

   (3)The question of whether a business exists, and the extent of any such business, is a matter of fact and degree. While no one factor is necessarily determinative, the existence and extent of a business (whether it is an entity’s primary or principal business) will depend on a number of indicia which must be considered in combination and as a whole. These include the existence of a profit-making purpose; the scale of activities; the commercial character of the transactions; and whether the activities are systematic and organised and/or carried out in a business-like manner.[175]

   (4)While the parties conducted this case at first instance as if the second element of s 67 of the LTA required the applicant to show that its principal business was primary production of the type carried on on the Land, as we have already observed, s 67(3)(a) provides that the taxpayer company’s ‘principal business’ is not primary production of the type carried on on the land unless the ‘main undertaking’ of the company is primary production of that type. The word ‘undertaking’ is not defined in the LTA. However, it has been held ‘to embrace the property which is used in connection with the undertaking as well as the debts and liabilities which have arisen in relation thereto’.[176] On any view, what is encompassed by the ‘undertaking’ of an entity must be at least as wide as what might be encompassed by the descriptor or concept of the ‘business’ of that entity. Having regard to the way the case was conducted at first instance, we will proceed on the basis that what is encompassed by the expression ‘main undertaking’ is no more or less than what is encompassed by the expression ‘principal business’.

   (5)During the three relevant tax years, the taxable value of the Land exceeded $30 million; the applicant’s borrowing costs on amounts borrowed against the value of the Land ranged from a little over $1 million in 2014 to a little over $2 million in 2016; Cassinia closing stock recorded in the financial statements ranged from $0 to $8,760; no Cassinia was sold by the applicant; and significant work was done by the applicant in relation to the obtaining of planning permits for the development of the Land.

   [167]See Lee v Lee (2019) 266 CLR 129, 148–149 [55] (Bell, Gageler, Nettle and Edelman JJ).

   [168]See s 36(1) of the LTA and Rainn [2016] VSCA 338, [15].

   [169](1979) 37 FLR 310.

   [170](2005) 222 CLR 289.

   [171](1985) 16 ATR 331.

   [172](1979) 10 ATR 493.

   [173](1980) 49 FLR 183.

   [174](1972) 46 ALJR 397.

   [175]See Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1, 19–20 [59] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ).

   [176]Top of the Cross Pty Ltd v Federal Commissioner of Taxation (1980) 50 FLR 19, 36 (Woodward J).

2. When one examines the whole of the evidence, one is driven to the conclusion that whatever business of primary production the applicant was undertaking during the relevant tax years, the applicant did not establish at trial that this was its principal business or main undertaking. That conclusion alone disposes of the applicant’s contention that the Land should have been held to be exempt under s 67 of the LTA. That said, we see no reason to disagree with the judge’s conclusions that the applicant also failed to establish that the Land was used primarily for the business of primary production, or that Mr Apswoude was normally engaged in a substantially full-time capacity in the business of primary production.

3. In supplementary written submissions, the applicant submitted that the Court should not entertain the respondent’s argument that the cultivation of Cassinia for sale was not the applicant’s ‘main undertaking’, as the respondent’s case below was at no stage based on the proposition that the applicant’s ‘main undertaking’ did not satisfy s 67(3)(a). While we observe that the respondent disallowed the applicant’s objections to the assessments on the basis that he did not consider that s 67(3)(a) had been satisfied, we accept that the applicant’s principal business and its main undertaking were effectively treated as one in the proceeding below. We have done likewise. The legislation effectively demands that we do so.

4. In treating the applicant’s principal business and main undertaking as the same thing, we have identified no error in the judge’s conclusion, based on the evidence before him, that the cultivation of Cassinia for sale was not the applicant’s principal business or main undertaking for the purposes of assessments carried out on 31 December in each of 2013, 2014 and 2015. The evidence of sales of Cassinia during the relevant years was seriously deficient (indeed, there were no sales of Cassinia until November 2016, according to the aide memoire provided), and the meagre amounts of Cassinia stock recorded in the accounts did very little to improve the position. As the respondents pointed out in oral submissions, even the vespas were worth considerably more than the stocks of Cassinia recorded in the accounts.

5. We reject the contention that reference to the applicant’s ‘main undertaking’ involves a new argument that the Court is precluded from considering. The Court is bound to carry out its appellate function by applying the law. Section 67(3)(a) of the Act determines whether the exemption in s 67 is to apply where the owner of the land is a proprietary company.

6. We do not accept that in determining whether the cultivation of Cassinia for the purpose of sale was the applicant’s principal business or main undertaking the relevant years, the value of the Land was irrelevant. The assets of the applicant that were available to it to generate income and meet its debts were relevant to determining what was its principal business or main undertaking on the assessment dates for the purposes of s 67 of the Act. Viewed objectively, and in the context of the steps that were actively being taken in the relevant years to secure the Land for residential subdivision, the Land was a valuable asset forming part of the applicant’s business undertaking.

7. There remains one issue to be considered — the judge’s incorrect assertion that the Commissioner had submitted that Mr Tran’s evidence had to be treated with considerable caution.[177] In our view, this error was of no consequence so far as the ultimate outcome of the proceeding was concerned. Mr Tran’s evidence was mainly concerned with the extent of Cassinia cultivation on the Land between July 2014 and January 2018. Acceptance of his evidence in its entirety would not (when coupled with the rest of the evidence) justify a conclusion that during the relevant tax years the applicant’s principal business (main undertaking) was primary production of the type carried on on the Land.

   [177]Reasons, [34].

Conclusion

1. For the reasons given above, we are not satisfied that the applicant’s appeal has a real prospect of success. Accordingly, leave to appeal must be refused.

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