Grist v Rural City of Murray Bridge No. Scgrg-97-1438 Judgment No. S6703

[1998] SASC 6703

GRIST v RURAL CITY OF MURRAY BRIDGE

Matheson J

The appellants Robert and Mirriam Grist are husband and wife, and the appellant Stephen Grist is their son. Crown Lease (Perpetual No 1155), being the whole of the land comprised and described in Certificate of Title Register Book Volume 1301 Folio 15, was transferred to the three of them as joint lessors on 13 August 1976 (“the property”). It comprises 6.880 hectares.  The lessee’s covenants included a covenant  to “enclose the land with cattle-proof fence” and another covenant to “personally reside on the land for nine months at least in every year”.  In fact, Mr and Mrs Grist have lived on the property ever since the lease was transferred to them, and they have complied with the fencing covenant.

By notice appearing in the South Australian Government Gazette dated 24 July 1997 at p216, the respondent (formerly the District Council of Murray Bridge), adopted the capital valuation of the Valuer General as the valuation that was to apply in its area for rating purposes for the 1997/1998 financial year, and declared differential general rates on rateable land within its area, which included:

"(a)..... 0.671 cents in the dollar of the capital value of rateable land of Category 1 (Residential) use;

(b) - (c)...

(d).... 0.535 cents in the dollar of the capital value of rateable land of Category 7 (Primary Production) use;

(e) - (f) ...” 

The references to categories of uses were those referred to in the Local Government (Land Use) Regulations 1989.

.................. By notice dated 1 August 1997, Mr and Mrs Grist were sent an account for rates for the year ending 30 June 1998.  Their assessment based on the differential general rate for residential use was $849.79 after a deduction was made of $150 allowed to them as a State Government subsidy for eligible pensioners.  On 14 August the appellants objected to the land use attribution to the property, and their letter was treated as an objection pursuant to s176 of the Local Government Act (“the Act”).  By letter dated 25 September the appellants were advised by the respondent that their objection had been considered, and that the land use classification of their assessment remained as residential.  They now appeal to this court.  They seek to rely on subs3 of s176, and allege that the land has more than one use, namely residential and horse-keeping, and they allege that horse-keeping is its predominant use.

.................. An affidavit sworn by the appellant Mr Robert Grist on 8 December 1997 and an affidavit jointly sworn by all the appellants on 18 December 1997 were admitted by consent.  In the former affidavit, Mr Grist deposed that prior to leasing the property, the District Council of Murray Bridge had suggested he move out of the town as he could no longer be allowed to keep and breed horses in the residential area.  He also gave evidence before me and was cross-examined. He was formerly an electrical fitter and then a pizza parlour operator. For twenty-five years he has had an owner/trainer’s permit issued by the South Australian Thoroughbred Racing Authority, pursuant to which he is authorised to train his own horse or horses subject to the rules of the Authority.  In the last twenty-five years he has bred twenty-seven horses, and currently he runs from six to eight horses on the property.  He does not earn fees for training horses and does not have horses on agistment.  During the last five years he has received about $9,000 from his horses’ race prize winnings, and has received $3,000 from selling one horse and $2,000 from selling another horse.  Those sums have been his sole income except for the old aged pension.  He said his expenses for such things as feed and transport for the horses are substantial, but they were not quantified in the evidence before me.  In their joint affidavit, the appellants deposed that they have never lodged taxation returns with the Australian Taxation Office in relation to the keeping or husbandry of horses, that they have never claimed expenses in relation thereto and that they have not derived any taxable income from the keeping or husbandry of horses in the last five years.

.................. I had a view of the appellant’s property.  It is situated about 4 kms downstream from Murray Bridge on the eastern side of the river and just above the river flats from which it is separated by the Long Flat Road.  The westernmost portion of the property is quite steep and rocky and unsuitable for anything.  The appellant’s house which is above the rise comprises a detached cottage, which has been substantially added to by Mr & Mrs Grist.  Nearby there are two wire-screened conservatories.  Some native shrubs have been planted around the house.  Outbuildings include stabling for three horses, a tack room, a silo,  a horse exercise yard and a horse crush for enclosing a horse while it is being examined by a vet. The property is divided into small paddocks, six of which Mr Grist describes as horse paddocks, and the others he says he uses for cropping and grazing.

.................. Section 174 of the Act, so far as is material, provides:

"174. (1) A council may, after considering and adopting its budget for a particular financial year -

(a).... declare a general rate on ratable land within its area for that financial year;

or

(b).... declare differential general rates on ratable land within its area for that financial year.

(2) - (3) ...”

.................. Section 175 of the Act, so far as is material, provides:

"175. (1) A council may declare a separate rate or differential separate rates on ratable land within a part of its area for the purpose of planning, carrying out, making available, maintaining or improving a project that is, or is intended to be, of particular benefit to the land, or the occupiers of the land, within that part of the area, or to persons who resort to that part of the area.

(2) ...”

Section 176 of the Act, so far as is material, provides:

"176.(1) Differential rates may vary -

(a)     according to the use of the land;

(b)     according to the locality of the land;

(c)     according to the locality of the land and its use;

or

(d)     on some other basis determined by the council.

(2)    ...

(3) Where land has more than one use, the use of the land will, for the purpose of rating, be taken to be its predominant use.

(4) A particular land use must not be used as a differentiating factor affecting the incidence of differential rates unless the land use is declared by the regulations to be a permissible differentiating factor.

(5) - (6)  ...

(7) Where a council declares differential rates, the council must, in each account for rates, specify the differentiating factor or combination of factors that governs the calculation of rates on the land to which the account relates.

(8) A change in the use of land after differential rates are declared does not affect the incidence of the rates.

(9) A ratepayer, if of the opinion that a particular land use has been wrongly attributed to the ratepayer’s land by the council for the purpose of levying differential rates, may object to the attribution of that land use to the land.

(10) ...

(11) The council may decide any such objection as it thinks fit and must notify the objector in writing of its decision.

(12) The objector, if dissatisfied with the council’s decision on the objection may, subject to the relevant rules of the Supreme Court, appeal against the decision to the Land and Valuation Court.

(13) - (15) ...”  (My emphasis.)

The phrase “differential rates” is not defined in the Act.

Regulation 4 of the Local Government (Land Use) Regulations provides:

"4....... For the purposes of Section 176 of the Act, the following categories of land use are prescribed as permissible differentiating factors:

1...... Residential comprising the use of land for a detached dwelling, group dwelling, multiple dwelling, residential flat building, row dwelling or semi-detached dwelling within the meaning of the Development Control Regulations.

2...... Commercial-Shop comprising the use of land for a shop within the meaning of the Development Control Regulations.

3...... Commercial-Office comprising the use of the land for an office within the meaning of the Development Control Regulations.

4...... Commercial-Other comprising any other commercial use of land not referred to in categories 2 or 3.

5...... Industry-Light comprising the use of land for a light industry within the meaning of the Development Control Regulations.

6...... Industry-Other comprising any other industrial use of land not referred to in category 5.

7...... Primary Production comprising -

(a).... farming within the meaning of the Development Control Regulations;

(b).... horticulture and commercial forestry within the meaning of the Development Control Regulations;

(c).... the use of land for horse keeping or intensive animal keeping within the meaning of the Development Control Regulations; and

(d).... in respect of a dairy situated on a farm - the use of land for a dairy within the meaning of the Development Control Regulations.

8...... Vacant land comprising the non-use of vacant land.

9...... Other comprising any other use of land not referred to in a previous category.”  (My emphasis.)

........................... Schedule 1 to the Development Control Regulations 1993 defines horse-keeping to mean “the keeping or husbandry of horses where more than one horse is kept per 3 hectares of land used for such purposes or where hand feeding of the horse is involved”. 

........................... Mr Tredrea, counsel for the respondent, referred me to Greenville v Commissioner of Land Tax NSW (1977) 7 ATR 278. In that case, an area of 168 acres used as a golf course went out of use on 22 December, and on 23 December 1.5 acres were ploughed and sown with pumpkin seed. The owner contended that the land was used for primary production as from midnight on 31 December. “Land used for primary production” was relevantly defined as meaning:

"... land used primarily for -

(a)...... the cultivation thereof for the purpose of selling the produce of such cultivation”  (My emphasis.)

.................. There were other categories, but they were not relevant in the case.  At p280, Helsham CJ said:

"          As counsel for the plaintiff conceded, whether land is being used for primary production within the meaning of the definition must be decided by an objective test - the inquiry is an inquiry into actual land use; it is not to be tested by the intention of the owner (cf Southern Estates Pty Ltd v FC of T (1967) 117 CLR 481; 10 AITR 525). And in applying that test one must adopt a broad approach and a commonsense one. For example, it would not be sufficient merely to look at the area actually under cultivation at the relevant time, if cultivation were being relied upon as the use, so as to ascertain whether for example more than half of the whole of the land was under cultivation - because of course, the part not under cultivation might be unusable or lying fallow, although in the latter instance fallow land might be regarded as passive use of land similar to the kind that was held to be a use in Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493; [1957] ALR 277, and akin to the kind of use to which Lord Denning referred when giving examples in his judgment on the appeal from that decision, reported in 100 CLR 1; [1959] 1 All ER 734. It would probably not be sufficient to look merely at the financial return from the cultivation; the fact that there was none would not of itself warrant a finding that the land was not used primarily for cultivation, nor would the existence of a more rewarding cottage industry carried on by the owner on the land at the same time. Likewise the quantity of produce of the cultivation taken from the land would not of itself be a determinant of its primary use. The matter will be one of degree in each case. To claim an exemption under the Act the owner must be able to point to an activity being conducted on the land that will give the land the character of being mainly used for that activity, or that will enable a person having to decide the matter to say that the land is, in substance and looked at as a whole, being used for an activity that gives rise to an exemption.”

......... His Honour held that the land was not being used at the relevant time for primary production.

......... Next, I was referred to Abbott v Commissioner of Land Tax (1978) 38 LGRA 417. In that case an area of 209 acres has been used as a dairy farm for many years, but the dairying use lost viability. Subsequently, eighty-three acres were developed as a golf course and leased to a golf club at a substantial rent. The remaining 126 acres were used for grazing and for raising vealers. The landowner claimed exemption from land tax as land “used for primary production”. The relevant definition of primary production in that case was “land or lands used primarily for ... the maintenance of animals or poultry thereon”. The landowner would have preferred to use the whole of the land for farming if that had been a viable financial proposition. The golf club rent was substantial, $13,000 in the first year, rising to $30,000 for the third, fourth, fifth and sixth years. The operation of raising vealers was a genuine and substantial activity, but it resulted in a net annual loss. At p420-421, Lush J said:

"... what is to be examined is the use of the land, and not the subjective attitude of the owner or other persons towards the land or the activities carried on on it.  In the present case, I have no doubt that to the appellant the use of the retained land for farming is the only use of the land which is of importance, the golfclub lease being an unwelcome development accepted only because it was necessary to enable the real use to continue.  Her attitude of mind in this respect, however, is not relevant to the decision which I have to make.”

His Honour then referred to a number of cases including Greenville’s case (supra), and at p422-423, he continued:

"In construing the word ‘primarily’ in its application to a case where a parcel of land is divided into two parts, one of which is devoted to an exempt use and one not, it must be remembered that the question is whether the whole of the parcel is primarily used for the exempt purpose.  In my opinion, it is not sufficient to inquire whether some difference can be discerned between the uses to justify classifying one as the main use or predominant use.  The predominance must be of such a degree as to impart a character to the parcel as a whole.  In this respect, Mr Smith’s submission was in my view correct.  Further, it is the uses of the land which have to be considered, not the reasons in the mind of the owner for adopting or permitting those uses.  For instance, as I have said, the appellant in the present case regards the golfcourse as a subordinate adjunct to the farm, and from her point of view she is right.  That, however, does not provide the basis on which the case is to be solved.

In the end, the only factor in the case which tells relevantly in the appellant’s favour is the difference in areas.  I am not able to make anything of a comparison of the ‘intensity’ of the two uses in the present case.  Much of the appellant’s evidence was directed to showing that the farming activities were genuine.  This I have accepted, but there is no evidence upon which I could say, assuming it to be relevant, that less work was done on the golfcourse.  The fact is that there are two substantial activities side by side, each appropriately conducted.  That the golfcourse was split off from the farm seems to me immaterial; of some significance is the fact that the land needed for the golfcourse in terms of position and area was allotted to it and the farming land is in some sense residual.

My opinion accordingly is that the farming activities in the relevant years could not be classed as predominant and were incapable of imparting to the whole parcel the necessary character”

I was also referred to the case of SANFL v City of Charles Sturt, an as yet unreported judgment of Debelle J No S6568 delivered on 27 February 1998.  It concerned three rate appeals in relation to assessments on three parcels of land which together form what is known as Football Park.  The Council had declared the category of land use of the three areas to be “Commercial - Other” within the meaning of Regulation 4 of the Local Government (Land Use) Regulations 1989, supra.  The Football League contended they should not have been so categorised, but merely categorised as “Other”.  His Honour upheld the Council’s decision in relation to all three parcels of land.  He did not need to consider the phrase “predominant use” in s176(3) of the Act.

I add a reference to Cecil E Mayo Pty Ltd v Sydney City Council 18 LGR (NSW) 152 at 153.9 and to Minister of Environment & Planning v DC Stirling (1990) 53 SASR 505 at 518.5.

I have derived some assistance from all these authorities.  They at least establish that the test of what is the predominant use is an objective one, and that neither the existence and size of any financial return nor the relative areas occupied by each use is necessarily conclusive. 

Mr Tredrea sought to rely on the fact that the property was subject to a remission of rates because it was used as a place of residence for an eligible pensioner. In my view, that matter cannot be relevant to the question I have to decide.  Mr Tredrea also sought to rely on the fact that the appellants did not derive any significant income from their use of the property.  It must, however, be remembered that the relevant definition of primary production is horse-keeping, not horse-breeding.  If the appellants were really using the property for commercial reasons, and not for the purpose of Mr Grist’s hobby, the use might well have come under the heading “4.  Commercial - Other”.   Hobby farms vary widely in character, and clearly, what their predominant use must be a question of fact and degree in each case, and as usual with such questions, opinions may differ.  I am bound to say that in considering this appeal my opinion has varied, but in the end I have concluded that notwithstanding that the property provides a home for Mr and Mrs Grist its character is such that horse-keeping is its predominant use.  The view fortified me in reaching that opinion.

I would allow the appeal, vary the assessment by substituting “Primary Production” for “Residential” as the Differentiating Land Use Code and make all consequential amendments to the assessment.