Ferella as Executor of the Estate of the late Gustavo Ferella v Chief Commissioner of State Revenue

1. [1]

   HER HONOUR: The plaintiff is the owner of a property in Box Hill, New South Wales (the Property). The defendant, the Chief Commissioner of State Revenue, issued land tax assessment notices in respect of the Property under the Land Tax Management Act 1956 (NSW), for the 2019 and 2020 land tax years. The Ferellas claimed that the Property was exempt from land tax in those years on the basis that it was used for primary production. They applied to the New South Wales Civil and Administrative Tribunal (Tribunal) for review of the two land tax assessment notices. The Tribunal confirmed the defendant’s notices. The Appeal Panel dismissed an appeal from the Tribunal’s decision.

2. [2]

   The decision of the Appeal Panel is an “appealable decision” within the meaning of s 82(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act), but s 83(1) of the CAT Act provides that an appeal from an internal appeal is only available with leave, and “on a question of law”. The plaintiff has applied to this Court for that leave, filing a Summons that contains eight grounds of appeal, with a ninth ground setting out the orders sought. The plaintiff requires an extension of time to file the Summons as it was filed outside the 28-day period prescribed in r 50.12 of the Uniform Civil Procedure Rules 2005 (NSW), pursuant to s 84(2)(a) of the CAT Act.

3. [3]

   For the reasons set out below, I extend time to file the Summons but I decline to grant leave to appeal. Most of the grounds in the Summons do not satisfy the requirement for an appeal on a question of law; and to the extent that some could be so characterised they do not raise a question of principle or general importance, or an injustice going beyond what was merely arguable. It follows that the Summons will be dismissed.

Background to the Summons

1. [4]

   The plaintiff is the executor of the Estate of Gustavo Ferella, to whom she was married and with whom she was a joint owner of the Property. On 5 February 2019 and 22 January 2020 respectively, the defendant issued land tax assessment notices for the Property for the land tax years 2019 and 2020 respectively, pursuant to s 7 of the Land Tax Management Act, which provides:

2. [5]

   The Ferellas lodged objections to the two notices, claiming that the Property was exempt from taxation in 2019 and 2020. They relied on s 10AA of the Land Tax Management Act, which relevantly provides:

3. [6]

   The Ferellas accepted that the Property was not “rural land” (which was defined in s 10AA(4)), and that s 10AA(1) did not apply. However, they contended that the Property satisfied s 10AA(2), read with s 10AA(3)(b), on the basis that the Property was used for breeding horses. The defendant disallowed the objections. The Ferellas applied to the Tribunal for review of the notices pursuant to s 96 of the Taxation Administration Act 1996 (NSW) and s 63 of the Administrative Decisions Review Act 1997 (NSW). On 18 May 2022, the Tribunal confirmed the land tax assessments: Ferella v Chief Commissioner of State Revenue [2022] NSWCATAD 154.

4. [7]

   On 7 July 2022, some 50 days after the Tribunal’s decision, the plaintiff, both in her personal capacity and, by that time, as executor for the estate of her late husband, lodged an internal appeal from the decision of the Tribunal, with such an appeal being “as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds”: CAT Act, s 80(2)(b). On 29 July 2022, the Appeal Panel made an order extending time for the filing of the internal appeal. On 20 February 2023, the Appeal Panel made orders refusing leave to appeal on the merits and otherwise dismissing the appeal: Ferella v Chief Commissioner of State Revenue [2023] NSWCATAP 50.

The reasons of the Tribunal

1. [8]

   The Tribunal noted that consistently with s 100(3) of the Taxation Administration Act, the Ferellas bore the onus of proving their case for an exemption in respect of the Property: at [12]. The Tribunal identified s 10AA of the Land Tax Management Act as relevantly involving the following three elements (at [20]):

2. [9]

   In considering whether the Ferellas had discharged their onus of satisfying it as to these three elements, the Tribunal had regard to evidence of relevant activities on the Property during the 2019 and 2020 years, and in the six months before and after those two years: at [12]-[13]. The Tribunal had before it in this respect two affidavits of Mr Angelo Ferella, the son of the Ferellas, which were read without objection; and a bundle of documents filed by the defendant pursuant to s 58 of the Administrative Decisions Review Act (the s 58 bundle): at [22]-[26].

3. [10]

   The Tribunal found on the basis of the evidence that the greatest number of horses on the Property either shortly before, during or shortly after the relevant period was seven: at [33]. It otherwise described both the evidence and the facts as “quite limited”, noting the following (at [34]):

4. [11]

   On the basis of those facts and that evidence, the Tribunal made the following findings (at [35]):

5. [12]

   The Tribunal accepted that there was evidence before it “to permit the conclusion that, in the relevant years, the [Property] was used for the dominant purpose of maintaining seven horses”: at [41]. However, it considered that “something more” was required than evidence of the maintenance of animals, stating at [41]:

6. [13]

   The Tribunal considered that the Ferellas had demonstrated only that horses were maintained on the Property, and not that their maintenance “was for the dominant purpose of primary production – specifically the selling of those animals or their natural increase”: at [42]-[43]. The evidence fell short of objectively demonstrating that the purpose to which s 10AA(3) referred was met, even accounting for the length of time it may take from covering a brood mare to obtaining a live foal and then selling it: at [43].

7. [14]

   The Tribunal also concluded that the use of the Property did not have a significant and substantial commercial purpose or character: at [45]. Accepting that there were seven horses and some evidence of breeding and attempted sales, the Tribunal described the scale of the activity undertaken on the Property in the relevant years and in the periods before and after those years as “small” (at [46]), and the evidence concerning the commercial purpose and character for that same period as “limited”: at [47]. The Tribunal concluded that there was “no characterisation of the facts in this case which could reasonably lead to the conclusion that the use of the land identified by the Applicants is significant or that it has a significant and substantial commercial purpose…”: at [49]. The Tribunal noted in this context that having regard to the reply submissions filed on the Ferellas’ behalf, the Ferellas appeared to consider it unnecessary to demonstrate the existence of a commercial purpose by evidence: at [51]-[52].

8. [15]

   The Tribunal also concluded that the Ferella’s evidence was “wanting” in relation to the use of the Property for the purpose of profit on a continuous or repetitive basis: at [57]. Although the Ferellas submitted that the Tribunal could rely on the value of the horses and their potential sale to realise reasonable returns, the limited evidence of sale activity did not assist them in circumstances where there was no evidence that the assets were capable of being realised, or what their realisable value was: at [56]. The Ferellas also had not filed any financial reports, business plans or strategic documents which may have allowed the Tribunal to determine whether the use of the land had a commercial purpose or character: at [57].

9. [16]

   In concluding that the Ferellas had failed to discharge the onus of demonstrating that the decisions under review should be set aside, and that the assessments should be confirmed, the Tribunal emphasised that it had determined the following (at [59]):

The decision of the Appeal Panel

1. [17]

   Before the Appeal Panel, the plaintiff took issue with the Tribunal’s conclusion as to dominant purpose in the face of its findings that: (i) the Ferellas were not required to sell horses in each year to meet the definition in s 10AA(3); (ii) three of the horses on the Property were brood mares; (iii) there was no other use to which the Property was put; and (iv) it may take more than 11 months from covering a brood mare to obtain a live foal and even longer to sell the progeny. The plaintiff relied on what she alleged was an inconsistency between item (iii) in the previous sentence and a statement that the Tribunal made in its reasons, in [40], that there was no evidence in the proceedings about the extent to which the Ferellas used the Property for maintaining horses and the extent to which the Property was unused: at [18]-[19]. The plaintiff also alleged that the Tribunal had failed to take into account the Ferellas’ intention regarding the present use of the Property: at [20].

2. [18]

   In dismissing the appeal, the Appeal Panel made the point that land which is used for the purpose of agisting horses, or simply maintaining horses on land (for example to train them, or as a hobby), will not satisfy the primary production requirements of s 10AA(3)(b) of the Land Tax Management Act “because while the land is used for the dominant purpose of maintaining horses, it is not done for the purpose of selling those animals or their natural increase or bodily produce”: at [23]. The Appeal Panel referred to what Payne J said in this context in Young v Chief Commissioner of State Revenue [2020] NSWSC 330 (“Young”) at [144]:

3. [19]

   Noting that the question of dominant use was a question of fact and degree (at [24], citing Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (2010) 79 NSWLR 724; [2010] NSWSC 867 (“Leda Manorstead”) at [70]), the Appeal Panel considered that the Tribunal had reached its decision based on its own conclusions of fact with respect to the materials before it: at [28]. Rejecting the plaintiff’s submission that the Tribunal’s reference to the extent to which the land was unused indicated that it had reached its conclusion on a basis for which there was no evidence, the Appeal Panel considered that the member had “based her conclusions on an objective assessment of the evidence that was actually before her with respect to the use of the land”: at [28]. The Appeal Panel further concluded that the decision was open to the Tribunal on the material before it and on the findings of fact: at [32].

4. [20]

   The Appeal Panel also rejected the plaintiff’s submission that the Tribunal had failed to consider evidence of intention, stating at [33]-[34]:

5. [21]

   As to the criteria in s 10AA(2), the Appeal Panel concluded that given the plaintiff’s failure to establish the use of the Property for the purpose of selling the horses or their natural increase, the attempt to satisfy the commerciality test in subsection (2) was “bound to fail”: at [37]. The Appeal Panel held that there was no error of law in the Tribunal’s conclusion that the plaintiff had failed to satisfy s 10AA(2): at [42]-[44].

6. [22]

   Finally, the Appeal Panel saw no basis to grant leave to appeal on the merits, describing the Tribunal’s fact finding process as orthodox, properly taking into account and implementing s 100(3) of the Taxation Administration Act on onus of proof, and reaching conclusions that were clearly open on the material before it: at [47].

The application to this Court

1. [23]

   The date of the Appeal Panel’s decision and orders was 20 February 2023. On 17 March 2023, Angelo Ferella filed a Notice of Intention to Appeal on behalf of the plaintiff, indicating her intention to commence appeal proceedings on or before 22 May 2023, being three months after the material date. The plaintiff ultimately accepted, by her counsel in the hearing, that the notice of intention to appeal procedure did not apply to appeals under s 83 of the CAT Act. Counsel for the plaintiff relied on the filing of the notice of intention to appeal as indicating on its face an erroneous view of the appeal process, and submitted that the error should not preclude the plaintiff from bringing the application for leave to appeal under s 83 of the CAT Act.

2. [24]

   In considering an application to extend time, four factors of general relevance are the length of the delay and reason for it, whether the applicant has a fairly arguable case, and the extent of any prejudice suffered by the respondent to the application: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55] (Basten JA, Hodgson and Ipp JJA agreeing). In the present case, for the reasons to which I will come shortly regarding leave I do not consider the case to be strong. However, the plaintiff, who was not legally represented at the time, did invoke an appeal process within 28 days of the Appeal Panel’s decision, albeit by incorrectly filing a notice of intention to appeal from the decision; and the Summons was filed within days of the expiry of the three-month period that applies to such a notice. Apart from the prejudice to the finality of the proceedings, which is, of course, a significant consideration, the defendant did not identify particular prejudice to it in the proceedings being filed out of time. There was material before me indicating that the defendant’s solicitors were informed that the notice of intention to appeal had been filed. Accordingly, I would extend time for the plaintiff to file the Summons.

3. [25]

   What is determinative in the present case is the view I have reached on the application for leave to appeal, noting the constraints on appeals of this nature in s 83(1) of the CAT Act. It is well settled that in order to obtain a grant of leave to appeal under s 83(1) of the CAT Act, an applicant “must demonstrate something more than that the impugned decision of the Appeal Panel is arguably wrong”: Targeted Property Investments Pty Ltd v Look Up Technologies Pty Ltd (No 2) [2023] NSWSC 416 (“Targeted Property Investments”) at [38] (Griffiths AJ). A grant of leave to appeal ordinarily requires a matter involving issues of principle, questions of general public importance, or an injustice that is reasonably clear in the sense of going beyond what is merely arguable: Jaycar Pty Limited v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38].

4. [26]

   The parties both relied on the decision of Griffiths AJ in Targeted Property Investments at [33], in which his Honour summarised a number of important points regarding s 83, which I have extracted in full below:

5. [27]

   Grounds 1 to 8 of the plaintiff’s Summons were as follows:

6. [28]

   Grounds 1, 3, 5 and 7 are in virtually identical terms to grounds 1 to 5 inclusive of the Amended Grounds of Appeal that were filed in the Appeal Panel (ground 1 in this Court incorporates grounds 1 and 2 of the grounds before the Appeal Panel). The challenge in those grounds to the decision of the Tribunal runs into the difficulty that Griffiths AJ identified in the tenth of his points about s 83. In Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41 at [10], Basten JA examined the drafting of ss 82 and 83 of the CAT Act and concluded that the right of appeal in respect of an internal appeal in s 83(1) of the CAT Act is confined to the decision of the Appeal Panel. Leeming JA agreed with this part of Basten JA’s reasons (at [61]), and Gleeson JA agreed with the reasons of Leeming JA (at [37]). It follows that grounds 1, 3, 5 and 7 cannot be considered independently of the grounds that follow each of them (grounds 2, 4, 6 and 8), in which the plaintiff alleges, without more, that the error of the Appeal Panel was “failing to so hold”.

7. [29]

   In response to the defendant’s submission that none of the grounds involved a question of law, in oral submissions counsel for the plaintiff emphasised ground 5 of the Summons (which alleged error in the decision of the Tribunal) and the Appeal Panel’s error in rejecting what the plaintiff had submitted before it in this regard. Grounds 5 and 6 rested on the premise that in reaching its conclusion the Tribunal relied, in [40], on an absence of evidence about the extent to which the Ferellas used the Property for maintaining horses and the extent to which it was unused. Relying on Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; [2010] HCA 32 (“Kostas”), the plaintiff submitted that the Tribunal had engaged in speculation, and reached its conclusion on use, on the basis of an absence of evidence.

8. [30]

   The plaintiff’s reliance on Kostas is misplaced. The decision is authority for the proposition that whether a factual finding is made without evidence to support it is a question of law, not a question of fact: at [91] (Hayne, Heydon, Crennan and Kiefel JJ). However, in [40] of its reasons, the Tribunal did not make any finding about use of the Property, doing no more than making a comment on the state of the evidence. Its ultimate conclusion regarding use rested on the Ferellas not having discharged the onus of establishing that the dominant use of the Property was for the purpose of maintaining the horses for the purpose of selling them or their natural increase. The Appeal Panel correctly concluded that this did not rest on an absence of evidence.

9. [31]

   When counsel for the plaintiff was asked whether the plaintiff was pressing only ground 5, counsel submitted that all grounds were pressed on the basis that they identified questions of law. I do not accept that submission. Both grounds 1 and 2, and grounds 3 and 4, take issue with the characterisation of the use of the Property for the purposes of s 10AA(3) of the Land Tax Management Act. The plaintiff submitted, relying on Leda Manorstead at [69], that in circumstances where there was no other use to which the Property was put, the Tribunal (and Appeal Panel) erred in concluding that the horses were not maintained on the Box Hill Property for the dominant purpose of natural increase or sale.

10. [32]

    As Kirk JA observed in Chief Commissioner of State Revenue v Godolphin Australia Pty Ltd [2023] NSWCA 44 ("Godolphin”) at [33], characterising an activity as falling within or without a legal category is a familiar exercise, and “[a]s is regularly stated with such characterisation exercises, it is a matter of fact and degree taking account of all the circumstances”. Although the High Court has granted special leave to appeal from the Court of Appeal’s decision in Godolphin, the general observation to which I have just referred is not the subject of contest. In the present case, the plaintiff’s submissions do not address the difficulty that on the facts found by the Tribunal on the evidence, which the Appeal Panel did not disturb, the plaintiff had not established, as a matter of fact, that its use of the Property satisfied the statutory description in s 10AA(3).

11. [33]

    The present case is not one of the marginal of cases to which Glass JA referred in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 157, in which no other conclusion was reasonably open, on the facts as found, than that the statutory definition was satisfied. As is apparent from the passage of Payne J’s reasons in Young at [144], extracted above, it does not follow from evidence of the maintenance of horses on land that they are maintained on land for the purposes of sale: “[t]hat must be established by proof.” The plaintiff did not satisfy the Tribunal that she had that proof, and the Appeal Panel did not find any legal error in the Tribunal reaching that conclusion.

12. [34]

    The plaintiff’s recourse to the intention and purpose of the taxpayer, relying on Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7 (“Saville”) at 12, highlights both the factual nature of the plaintiff’s challenge and her misunderstanding of the basis for the Tribunal’s conclusions. The passage from Saville on which the plaintiff relied was as follows:

13. [35]

    As I have already explained, it is apparent from the reasons of the Tribunal, properly understood by the Appeal Panel, that it did not treat the present case as one involving a choice of characterisation between a particular use and non-use. Further and in any event, accepting for present purposes some ongoing applicability of what Roden J said in Saville (as to which see Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 (“Metricon”) at [48] (Barrett AJA, Macfarlan and Ward JJA agreeing)), the Ferellas did not lead any evidence of subjective intention, as the Appeal Panel noted. To the extent that subjective intention is relevant in cases of this kind (see Metricon at [60]), the Appeal Panel rejected the plaintiff’s submission that intention was necessarily “implicit” in the evidence led in the Tribunal. No question of law attends the rejection of that submission.

14. [36]

    The same difficulties as I have identified for grounds 1 to 4 attends the error that the plaintiff asserted with the Tribunal’s conclusion, which the Appeal Panel confirmed, in relation to s 10AA(2) of the Land Tax Management Act, which is the subject of grounds 7 and 8. The essentially factual nature of the challenge to the Appeal Panel’s conclusions on s 10AA(2) is relevant to the question of leave, noting that in order to obtain the relief she seeks the plaintiff would have to establish error in the conclusion of the Appeal Panel both as to s 10AA(3) and s 10AA(2).

15. [37]

    The plaintiff also advanced a submission in relation to the Tribunal’s conclusion on s 10AA(2), that it had “failed to pay any regard to the principles as to use and intention that were enunciated by Roden J in Saville’s Case”. For the reasons I have already set out at [34], the plaintiff’s submissions misunderstood the reasoning of the Tribunal (by contrast with Appeal Panel, which well understood that reasoning) and do not account for the absence of any evidence of their subjective intention.

16. [38]

    Counsel for the plaintiff submitted that consideration of the effect of Saville constituted an issue of principle, and raised a question of general public importance. Counsel described the latter in terms of the interest of persons on whom land tax is levied in understanding “how non-use is to be married up to or compared against particular use”. For the reasons I have set out above I do not accept that the present case raises that issue.

Conclusion

1. [39]

   Having regard to all of the matters I have identified above, including the plaintiff’s misplaced reliance on Kostas and Saville, and the otherwise largely factual nature of the questions that the plaintiff sought to raise, I refuse to grant leave to appeal. The defendant sought costs in the written submissions and I consider that it is appropriate to make that order.

2. [40]

   Accordingly, I make the following orders:

   1. (1)

      Time to be extended to 29 May 2023 for the applicant to file the Summons.

   2. (2)

      The Summons is dismissed with costs.