Godolphin Australia Pty Ltd ACN 093921021 v Chief Commissioner of State Revenue [2024] HCATrans 11 (5 March 2024)

Last Updated: 5 March 2024

[2024] HCATrans 011

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S130 of 2023

B e t w e e n -

GODOLPHIN AUSTRALIA PTY LTD ACN 093921021

Appellant

and

CHIEF COMMISSIONER OF STATE REVENUE

Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 5 MARCH 2024, AT 9.59 AM

Copyright in the High Court of Australia
MR B.W. WALKER, SC: May it please the Court, I appear with my learned friends MR J.S. EMMETT, SC and MS D. LEVI for the appellant. (instructed by Johnson Winter Slattery)

MR J.T. GLEESON, SC: May it please the Court, I appear with MR S. KANAGARATNAM and MS C.G. WINNETT for the respondent. (instructed by Crown Solicitor (NSW))

GAGELER CJ: Thank you. Mr Walker.

MR WALKER: Please the Court. The appellant’s operations to which it pointed, in relation to the application to of the land tax legislation, are operations which concern the maintenance of racehorses. Racehorses are so called because they are for racing, and racehorses, as your Honours know, belong to a tradition in which two words – “thoroughbred” and “bloodstock” – dominate concerning the entry into the racing lists of the animals in question. Namely, they must be of a certain pedigree, and they must be bred in a particular way; they must be also be recorded. It is a highly organised and special market, but, as I say, it is a market which is concerned with the production, maintenance and sale of horses for racing.

As your Honours know, at the heart of the dispute between the parties concerns the significance, if any, that an available description of the operation in question as one which is integrated. That is not a term of art. It describes conclusions that might be drawn and may be so described from the facts to which I am going to come in just one moment which are, in very large measure, apart from ultimate conclusions, not the subject of contest in this Court or, indeed, in the Court of Appeal. The integration in question describes a relation, or presents an opinion about a relation, between operations, which are “breeding”, in the biological sense, and are “racing”, in the sense of a contest with other horses usually for money, and often, of course, involving related but irrelevant markets in betting.

The integration involves the significant way in which success in racing unsurprisingly is an advertising feature of the effort to sell horses, and more significantly to sell the stud services of stallions whose progeny or blood relations might have succeeded on the track. In particular, we submit, it is significant that there are three ways of looking at aspects of the operation, all of which are manifestly integrated – to use an ordinary English word, not a specialist legal term. That is, one needs to breed in order to have younger horses to sell. The operations of this stud involves in the main selling after there has been some experience of that particular animal’s racing potential. In particular, those matters feed back into the desirability to the market for stallion services of those particular bloodlines.

Racing, of course, can earn stakes. Your Honours have seen the revenue figures to which I did not need to go in detail, but it suffices to say that, as one would expect, with more or less success on the track, stakes increase, and obviously the size of individual stakes will have a particular effect on annual results.

GAGELER CJ: Mr Walker, your point is one of construction, is it not?

MR WALKER: Absolutely.

GAGELER CJ: Your do not contend, as I understand it, that you can win by reference to the facts.

MR WALKER: No, no, no.

GAGELER CJ: That is Justice Kirk’s construction, as adopted.

MR WALKER: Your Honour, the facts are really not in contest. There are characterisations that are significant to my argument of law concerning the interpretation of the taxing statute. The significance, however, is that whether one calls this an integrated operation or not, as a matter of fact – common to the parties as we see it and certainly involved in the way Justice Kirk looks at it – there is a self‑evident relation – call it “integration”, if you like – between success on the tracks, success in covering services, success in selling young horses. That is the point with which I wanted to start.

In light of what the Chief Justice has said, may I just jump ahead a little bit? I call in aid, draw to attention and emphasise the facts that we have set out in paragraphs 10 to 17 of our written submissions. I do not think I need to take your Honours to the particular passages in the respective judgments. For convenience, I can go to first instance – it not being a matter which, so far as the facts are concerned, was departed from in the Court of Appeal. In the appeal book, it is at page 73. Your Honours are familiar with it – paragraph 272, her Honour’s conclusions.

I want to stress that the fact that her Honour chooses to use the expression “an integrated stud operation” is not one which, with respect, is meant to be technical or could be read as technical. It is a fair use of English to describe the evident relation between the aspects of the business for which this land was used. That brings me immediately, of course, to the provision in question, which, as the Chief Justice says, is the point of our argument. The statute in question as it now exists creates the scheme of taxation and the correlative exemptions, starting in the authorities book at page 22 – that is the Land Tax Management Act 1956 in its current iteration. In section 7, one sees there the basic proposition that tax:

is to be levied and paid on the taxable value of all land . . . (other than land which is exempt –

Section 8 says that it is to be charged annually. Section 9 again repeats the concept that:

Land tax is payable . . . on the taxable value of all the land . . . which is not exempt from taxation –

The provisions concerning exemption commence in section 10, and as your Honours know, it was in 2005, by the Amendment Act of that year, that the provision with which we are principally concerned, section 10AA, was removed from its previous guise as 10(1)(p) and put in its own provision.

I want to draw to attention in section 10 that there is not a standard use of verbal formulae but that there are in places references to “use” and “purpose” as well as to ownership – ownership, of course, being the principal criterion. But for exemption one might see, for example, in 10(1)(a) where there is the carrying on of a society for certain purposes. In 10(1)(f) you have land used and occupied solely by certain persons, not being land of which any part is used for the purpose, so that use of the word “use” and the use of the word “purpose” combined appears there.

In paragraph 10(1)(g), land used solely, a description of the quality of use “for”, a word that normally indicates purpose or dedication. In 10(1)(h) you have the introduction of other words of quality – “primarily and principally for the purposes” – that is used, “primarily and principally for the purposes”. In (l) you have “principally” with a negative, “not used for a commercial purpose”, et cetera. There is no uniformity among those provisions and, as your Honours know – as you would expect from exemption provisions in the taxing statute – that they have, over the years, a patchwork appearance.

So, we come to 10AA which, as I say, is the current version, altered slightly, as I shall show, from its previous iteration. But in 10AA as it now exists, subsection (1) deals with rural land; we are rural land. Subsection (2) simply says of it that it is:

exempt from taxation if it is land used for primary production –

We may, and should, immediately go then to subsection (3), which stipulates that:

land used for primary production means land the dominant use of which is for –

and we are concerned with paragraph (b):

the maintenance of animals . . . whether wild . . . for the purpose of selling them or their natural increase or bodily produce –

In this case, as your Honours know from the facts, to which I have made a compendious reference, the operations on this land include selling horses, include those horses being natural increase of horses that are maintained on the land, and it also includes selling, by means of the covering service, the semen of stallions. So far as facts are concerned, there cannot be any question but that selling horses, natural increase and bodily produce occurs. Now the question is: how does that fit within the exempting language?

There can also be no doubt your Honours will recall the references to the cattle which are incidentally grazed, that is, not dominant. So, there is no question on the findings of all judges that the dominant use concerns the maintenance of horses, racehorses. It means that the interpretation question that arises is whether, that being the dominant use, there is nonetheless a failure by us to make out the exemption because there is racing as an object of the maintenance of these horses, as well as selling them, selling their natural increase, or selling bodily produce, and in our ‑ ‑ ‑

GORDON J: Could I ask a question about the intersection between subsection (2) and (3)?

MR WALKER: Yes. I am going to come to subsection (2), perhaps I can do it directly. Subsections (1) and (2) are plainly intended to produce a dichotomy. There is rural land, dealt with in a particular way, and there is land that is not rural land, dealt with in a particular way. Your Honours have seen – I do not need to labour the point in terms of detail – the explanation of how, legislatively, that is to be explained.

It would appear, in particular, that the concern was with land not of a kind which would ordinarily be expected, either in planning or social terms, to be used for primary production, being used in a way that might be calculated to attract the exemption for land used for primary production, and an extra or more demanding criterion being added in order to ensure that the exemption fits what might be regarded as the evident policy of the legislature.

GAGELER CJ: It takes out hobby farms, does it?

MR WALKER: I think that it would not just be hobby farms, it might be land use which is even more dilettante than that, or cynical. So, it is not just a hobby farm, which may have no cynicism about it at all, until you come to claim a land tax exemption. But when it comes to land that is not rural land there is what might be called a qualification required that you really are a primary producer, rather than someone who can point to a particular use of land, whether raising rabbits for the table or whatever. There is this evaluative criterion of:

significant and substantial commercial purpose or character –

and there is, in particular, something that is redolent of old partnership law:

engaged in for the purpose of profit –

Even if not always successful, but in the way that would be designed to catch adventitious uses, namely it has to be “continuous or repetitive”. Now, those are words which, obviously, are not to be rendered supererogatory by an understanding of subsection (1), because subsection (1) says a:

rural land . . . if it is land used for primary production –

A question of characterisation, but essentially factual, and in this case emphatically answered affirmatively. This is rural land which is used for primary production, and that proposition (4) is obviously purposive, although the word “purpose” appearing later in the provision, perhaps one should avoid glossing it in that fashion – it is land used for primary production, there can be no dispute about that.

STEWARD J: Mr Walker, can I ask you a question about what ultimately happens to the horses. It may not be a finding that can be pointed to, but of the horses that are being maintained on both properties, is there a category of horse that is not ultimately sold? We have the findings that 70 per cent of the thoroughbred horses get sold, substantial majority of the foal crop gets sold, but are there any that are not sold?

MR WALKER: Your Honour, it may be that time will tell how many champion racehorses turned great stallions are buried on the site under a headstone as opposed – I raise that deliberately because that would not indicate that sale was not the purpose of maintaining the animals.

STEWARD J: No, it may be that their pathway went in a different direction, but the real question is that we have to be satisfied for you to get the exemption that the horses are being maintained enough for the purposes of their sale or their bodily produce.

MR WALKER: Yes, selling them or their natural increase. So, a broodmare does not have to be sold so long as her foals are.

STEWARD J: But would you put to us, at least, that the greater majority will be sold, or their bodily produce?

MR WALKER: And plainly from the figures, that are not in question, I think it is 70 per cent are sold, which includes those which are kept back in the hope that they will add to the racing glory of the stable, which, as we say, immediately feeds into the sale prospects of the natural increase.

GORDON J: Sorry, I am a bit lost, Mr Walker. I had understood that there was a distinction between what might be called internal sales and external sales.

MR WALKER: I would not use those expressions, your Honour.

GORDON J: I will put it more directly. I had understood there was a distinction drawn between sales to third parties and what might be called sales internally within the Godolphin group.

MR WALKER: There is a difference, but it is not one which bears upon the satisfaction of the exemption criteria in this case.

GORDON J: I see.

MR WALKER: Your Honours, I think in answer to Justice Steward, I can simply draw to attention ‑ ‑ ‑

STEWARD J: There are the findings at 127 and 129 of the primary judge.

MR WALKER: Exactly, and the 70 per cent you will see at 127, and then there is the reference to the death of a horse, which, of course, whether by accident or after long and splendid service, is not something that gainsays the evident purpose of maintaining the horses for the purpose of selling them, or their natural increase, or their bodily produce.

STEWARD J: Can I ask a related question – and you may not be able to answer this – did the Commissioner ever put a case that the entire operation was for the glory and attractiveness of winning horse races, and thus the owner was prepared to run the business at a loss?

MR WALKER: The “sport of kings” notion, yes.

STEWARD J: The “sport of kings”, or what was called in Tweddle’s Case the “foible” of breeding cattle. Was that ever put?

MR WALKER: Your Honour, I want to be careful of how I answer that. The word “prestige” is to be found in Justice Simpson’s reasons – and I would not want to suggest that that was not apropos an argument put. However, in our submission, the findings of fact – in fact, by all four judges there are huge degrees of overlap, commonality – make it difficult to maintain the proposition which, as an answer to a claim for exemption, would, we think, be novel in this case – in this argument – that the reason why we could not make out the exemption is that there is insufficient existence of a purpose of selling anything – rather, the whole maintenance of the animals is for the “prestige” , if that be the right word, or the “thrill”, if that be another, of the “satisfaction” in a non‑financial way of producing excellence in bloodstock.

So, those are ways in which I might try to capture what Justice Steward has asked me about. No, we do not see that this case has been fought on a this has nothing to do with selling at all – that you cannot find a purpose of selling even though there is selling; even though there is a business plan; even though there is, for customers, something in the nature of a prospectus, regularly published.

STEWARD J: You would say that the thrill and prestige of horseracing is not inconsistent with satisfying the criteria.

MR WALKER: Absolutely. That is why I started off by saying, this is about racehorses. I will probably offend some people behind me in what I am about to say. Racehorses are a very artificial breed. They are supposed to stem from a handful of Arab stallions. They are required to be produced by means that are now lagging at least a century behind the technology of animal increase – no artificial insemination, for example; no ovum transplants, for example.

GORDON J: I know you were dealing with the question of construction, Mr Walker, but now we are getting into this. At some point, I think you might just need to address what Justice Kirk had to say, at paragraph 98 about the broader motivations at play which seem to be – at least some suggestion there and appears later in – I accept Justice Simpson’s judgment. It may not affect, but I think that there are aspects, at least, about the broader considerations at play.

MR WALKER: Your Honour, my answer is ‑ ‑ ‑

GORDON J: The same.

MR WALKER: ‑ ‑ ‑ what I was saying to Justice Steward – that is, to produce horses which are racehorses to participate in this artificial milieu where the purpose to which the animals are intended is for racing, and where racing is about winning, and where winners feel better than those who are not winners, it would be quite impossible to suggest that this is not an industry – if you like, a business – that has as one of the attractions for many of its customers who may come in to own horses, the thrill of owning a horse that wins. But if you are a stud operation producing the bloodstock from bloodstock – being desirable racehorses, by reference to the track success of their ancestors and fellow progeny from that stud – then it is absolutely no contradiction of the purpose that we say answers the description in 10AA(3)(b), that the animals in question are in a market for which you cannot separate the prestige, thrill, excitement, non‑financial return for owners of participation in the “sport of kings”.

There is nothing in the text of the exemption in relation, in particular, to selling – “for the purpose of selling” – that suggests that that cannot be into a market which is actuated by other than a purely rational, cold, investment decision‑making. I do not know how many people would claim their purchase of blood stock for racing – that is, as racehorse owners – answers the description of a cold investment decision, but it does not mean it is any less a market in which there is selling.

Indeed, to take advantage – I do not mean in a sinister way, but simply appreciating the pros and cons of buying decisions – as a seller of the so‑called prestige or thrill of the “sport of kings” in which only thoroughbreds with proper pedigree can compete, is simply to take account of a condition of that market. This is not a statute that says the only selling in question can be selling for the purpose, say, of human nutrition – that is, cattle and beef. It is for those reasons that there being really no available doubt that the land is used for the maintenance of animals – as it happens, dominantly horses; no one bothered about the cattle which were part and parcel of the horse operation, and no one wondered about the plant life, the lucerne, which was also part and parcel of the horse operation – the only question then comes as to whether there is a necessary quality, as a matter of interpretation of paragraph (b), of the purpose which is described as the “purpose of selling them or their natural increase or bodily produce”.

It is at that point that we rely, again, upon the facts to which we have referred in our written submissions, and which are, in truth, common ground. Namely, that the racing which the split decision against us finds “dominated” – Justice Kirk – or was in “equipoise” – Justice Simpson – is an activity which should never have been regarded, in our submission, as standing outside the notion of the purpose of selling the horses or their natural increase or bodily produce, because these are racehorses. In our submission – though, fortunately, we do not do it with our edible beef – it is as if entry into culinary and exhibition contests of carcasses were to be seen as somehow contrary to, alien from, standing apart or, to use a phrase that you see in the reasons against us, separate and distinct from the purpose of selling the beef for human nutrition.

So, the fact that you show the beef in order to attract a gold trophy for best wagyu 2024 is, in our submission, obviously part and parcel of the purpose of selling those beef or, as to their stud parents, their natural increase. It is no doubt a very different kind of exhibition and demonstration of saleability – that is, market virtues – to racehorses. But if they are racehorses then, in our submission, showing they are not only fit for purpose but likely to enjoy relative success is not merely incidental to but absolutely fundamental to the project of selling them.

In our submission, the use of the land – here, unquestionably being for the maintenance of animals – simply presents as a matter of interpretation whether the fact that some of these animals, those not involved in reproduction – stallions and the broodmares – those not involved in looking after the foals – the nannies, et cetera – the fact that most of those are sold after they have shown their mettle on the track, in our submission, very plainly demonstrates that racing permits selling in a way that feeding the horses well and training them appropriately permits them to be sold.

When one thinks about training there is, as you have seen in the evidence, perhaps two levels or ways in which one might regard it for racehorses. There is what used to be called breaking, now education, which is necessary for any horse for which it will be safe for humans to be in close proximity, then there is that training which is for racehorses, as opposed to, say, draught horses. In our submission, it could hardly be said that it does not fall within the description, or the qualification, the maintenance of racehorses for the purpose of selling them. It can hardly be said that either the education or specialist training of the young horses somehow puts them apart from those obvious activities such as feeding them and watering them, looking after their veterinary needs and stabling them.

GAGELER CJ: Mr Walker, in the judgment under appeal at paragraph 8(1), Justice Kirk in a sentence really crystallises what he understood to be the question of construction to be decided. Does that remain the question here? Is that what it boils down to?

MR WALKER: Yes. It is a very good location of the matter which divides us, and by way of convenient label, the hyphenated compound that his Honours uses there and elsewhere through the reasons is, in our submission, a misreading of the provisions of the Act, and, in particular, produces the anomalous result that one transposes the requisite epithet “dominant” to the purpose, shifting it away from the inquiry which has to do with activities, physical deployment of the land, which is use.

The problem of about shifting “dominant” to purpose is that you then shift to what are called human intentions. You can have all sorts of purposes when you conduct activities which are indistinguishable from your neighbours’ activities of the same kind on his or her land. You may have recreation as your main purpose, he or she may have eking out a living as his or her main purpose, but exactly the same activity – obviously, milking cows would be an example of that – would be involved.

JAGOT J: Purpose is never subjective, though, in this sense. Purpose is always objective, is it?

MR WALKER: Is not merely subjective, I entirely agree.

JAGOT J: Is it at all subjective?

MR WALKER: It involves ‑ ‑ ‑

JAGOT J: Does it not manifest from the use, an end to ‑ ‑ ‑

MR WALKER: A “purpose” is objective in the sense that you can attribute it to a use, but it will always be described in what I might call human terms. Selling is a human activity, and it is for those reasons that there is sense in the two different words being used. To put it another way, they are not an example of draughting redundancy. And when one comes to describe a quality in the quantitative sense, such as the word “dominant”, here there cannot be any doubt that it describes that which is requisite of the use.

JAGOT J: The physical activity.

MR WALKER: The physical activities, the deployment, if you like, of activities on the land. Now, that familiarly raises questions about the appropriate level of generality, but because we are talking about something at a fine term which uses the expression “primary production”, it is fairly plain that we are talking about things with which the legislators and we are familiar: the use of land for certain purposes. The use, however, could be described as growing plants or maintaining animals. In each case, for the exemption, the question as to use is whether that use – growing plants or raising animals – is the dominant use.

GORDON J: So, you would have it read, I think, on your construction, that land is exempt from taxation if the dominant use of the land is for the maintenance of animals ‑ ‑ ‑

MR WALKER: Yes, for the purpose ‑ ‑ ‑

GORDON J: ‑ ‑ ‑ where a non‑dominant purpose or use is selling A, B, or C.

MR WALKER: No. The first part, yes; not the second part. Yes, we say a straightforward reading of the language for our case is, our land, being rural land, is exempt from taxation because it is land, the dominant use of which is for the maintenance of animals for the purpose of selling them, their natural increase, or bodily produce.

GORDON J: Yes, and that use, that second bit, does not have to be dominant. It is non‑dominant. It just has to be for one of those ‑ ‑ ‑

MR WALKER: It is characterisation question, which is why we volunteer that, of course, if there were an operation – let me take an example – a menagerie where the return from maintaining the animals is selling tickets to see them. Of course, if you incidentally, rarely, by co‑operation with your colleagues in the menagerie business internationally, did a swap by way of a sale of one of your lemurs for one of their pandas, et cetera, that would be de minimis with respect to understanding the purpose of the dominant use.

In our case, the reason we failed in, as I say, the split decision – so Justice Kirk finding in fact that racing was dominant, Justice Simpson saying it was in equipoise with what I will call selling, et cetera, we failed because there was a particular view taken of the separateness and distinctness of racing from the maintenance for selling of racehorses.

STEWARD J: So, your point, I think, is that as long as you can characterise the maintenance of animals being for the purpose of sale, it will not matter if it is also for the purpose of racing horses ‑ ‑ ‑

MR WALKER: That is right.

STEWARD J: ‑ ‑ ‑ and it may not even matter if that is the dominant purpose, as long as you can meet the characterisation – your point – that at least one of the purposes – and it is not an insubstantial or insignificant purpose, but one of them is selling horses.

MR WALKER: Yes, that is right.

STEWARD J: Because most of them get sold, that must be your case.

MR WALKER: One has to be careful in these, as I say, patchwork statutes, but there was obviously nearby a precedent for using words like “solely”, and it does not appear. In answer to the question, outside a courtroom, are these racehorses being maintained for the purpose of selling them, you would need only look at a glossy brochure on the table at the stable door to know yes, in fact, here are the prices, or here are the prices at the last sales. So, yes, it is for the purpose of selling them.

There may be other matters in question and the way in which factually they are characterised may actually produce, as a legal decision, that they are not being maintained for the purpose of selling them but rather for the purpose of something else. That something else in this case was only racing, which, as I say, had this effect, beneficial and favourable, to the prospects of selling, which was not merely incidental, it was, as your Honours have seen from the discussion of the facts, part and parcel of a model. It was deliberate that horses would be kept until there was some racing potential to be seen from their early years. Those horses are raced, but they are raced in order to render them saleable. They and others are raced in order to cast, if fortune be kind, glory on the stallion that threw them, or, for that matter, the broodmare that bore them.

In our submission, when one looks at the figures – as your Honours have seen – the detail of which is really beside the point. When one looks at the figures, it is plain that if you combine sale of progeny with sale of semen – that is, the covering services – it is impossible to escape the conclusion that the racing permits that success. It is for those reasons that, to adapt somewhat what Justice Steward has put to me, it is absolutely not to the point that there is also money made from racing stakes in the event of success.

GAGELER CJ: Mr Walker, would this capture your submission that section 10AA(3)(b) is satisfied where, one, the dominant use is for the maintenance of animals and, two, the maintenance of animals is for a purpose of sale?

MR WALKER: I would not adopt the shift from definite to indefinite article because, in our submission, as a matter of language:

for the purpose of selling them –

et cetera, is as well satisfied if you can posit some other purpose as if there is no other purpose – you are still maintaining for the purpose of selling them if that is one of your purposes.

GORDON J: Can I just test that? It means I can have maintenance of animals as my dominant purpose, I can have multiple uses, so what ‑ ‑ ‑

MR WALKER: So long as ‑ ‑ ‑

GORDON J: I have said “maintenance of animals”, “multiple uses” – and as long as I can identify one non‑trivial use which falls within one of the three identified activities, I am exempt.

MR WALKER: No, we would not put it that way. Your Honour asked about multiple uses. It does not matter whether there are multiple uses – many of these properties will have residences for staff, for example – what matters is that one can find in favour of the taxpayer – or the landowner, I should say – the dominant use is the maintenance of animals. That is not sufficient but that is necessary. Once you have found that the dominant use is the maintenance of animals then, in order to obtain the exemption – maintenance for its own sake not having attracted legislative favour – you have to find – there is an evident social or economic rationale to this – that they are being maintained for the purpose of entering certain markets – different markets as it happens – selling them, or their natural increase, or their bodily produce.

STEWARD J: In relation to that characterisation, the selling purpose, do you call in aid of that the fact that it does not have to be a selling purpose, it has a:

significant and substantial commercial purpose or character –

for the purpose of subsection (2), or be:

engaged in for the purpose of profit on a continuous or repetitive basis –

MR WALKER: It would be if strangely we had some stud in Wahroonga, yes, but not where do we have this stud.

STEWARD J: I see.

MR WALKER: Now, it may be, of course, that the same facts that would plainly rebut:

significant and substantial commercial purpose –

or:

engaged in for the purpose of profit on a continuous or repetitive basis –

would inform under subsection (1), as opposed to subsection (2), the factual characterisation that the animals were not being maintained for the purpose of selling them.

The notion of selling surplus because you do not have room, for example, is one way in which one might say these animals are not being maintained for the purpose of selling them, they are being maintained and selling them is for the purpose of permitting the animals still to be maintained in appropriate conditions. That is not this case either.

There is no doubt this is a breeding operation that is aimed at producing increase. There is no doubt it is an operation which, for breeding purposes, also sells the services – thus, the semen of the stallions – and there is no doubt that the great bulk of the horses – those not kept in‑house to enhance the racing record of the stud – are sold to persons whose evident intention as purchasers is to participate in whatever prospects each of those horses will have as a result of their pedigree and, one might add as well, their education and training.

So, as I say, it would be absurd to suppose that the activities – which are considerable – of educating and training young horses, because they are racehorses and the education and training is conducive to that end for each of those animals, that that is somehow outside the purpose of selling them. It is in order to prepare them to be saleable. The same is true for the racing, the initial racing, of most of them. As to the others, their racing is in order to add to the aura, the glamour, the prospect of participating in winning stakes and backing your horse, et cetera, as a racehorse owner.

GORDON J: Can I ask two further things about the construction question, by reference to the statute, which you may want to address later, but I would be grateful to hear what you have to say about that. The first is section 10A and how that impacts upon the construction you are putting. The second is how the construction you are putting – and I know you do it by reference to the facts in this case, but how that sits with the evident purpose of what the provision is trying to achieve.

MR WALKER: Yes. I will perhaps do it in that order ‑ ‑ ‑

GORDON J: You do not need to, Mr Walker, I would just be grateful, before you end ‑ ‑ ‑

MR WALKER: If your Honours do not mind, I will come directly to that, though it steps slightly out of my order – but I am not going to go in detail to all the matters which we cite for the propositions in our outline, in light of the way in which your Honours have, as it were, cleared the decks.

Can I say this about 10A. As your Honours know, historically it was enacted just before, a year before the 2005 amendments that took out the old 10(1)(p) in order to become the new 10AA. It was described, as we have drawn to attention in our written submissions, under that rather coy phrase “statute law revision”, which, at least in my experience, is an expression used in order to comfort members that they need not think about a substantive change in the law being accomplished. Of course, that does not always succeed as a matter of prediction. But it is clear, as we have drawn to attention, that there was no sign whatever in the legislative history of 10A that any significant substantive change was being made to the way in which the owners of rural land may obtain the exemption from land tax that had long been intended.

I will take your Honours soon to the original form which we submit tries – or is part of my attempt to answer Justice Gordon’s question about what might be called the evident intent. But 10A itself has this idea of land being used for more than one purpose. Now, that literally must include where it has been determined that there is a dominant use of the land. It would be odd to call a sole use of the land dominant. All sole uses will be, if you had to answer the question, dominant, hence sole uses will obviously answer the description in 10AA(3)(b). But it need not be a sole use in order to make that out; a dominant use will suffice.

So, 10A(1), enacted at a time when the word was “primary” rather than “dominant” in 10AA – that is, the old 10(1)(p) – describes in general terms a case where there is more than one purpose and then says – we would say permissively – that if each of those is exempt:

the land is exempt from taxation.

That is a general provision about all exemptions. Section 10AA, of course, is a special provision about exemption for land use for primary production and nowhere in it is there any reference to a non‑dominant use or non‑dominant uses, if there be more than one of them, being required also to be exempt, in order for the land, being rural land, to be exempt by reason of its dominant use for primary production. That would be absurd. It is in that way that we submit that whatever purpose apart from what the Minister blithely called clarification when 10A was being introduced, whatever it means, it does not detract from that which is both necessary and sufficient under 10AA to receive the exemption that 10AA deals with.

One need only contemplate the obvious knowledge of the world that the legislators have with respect to residential purposes on relatively remote rural land which is being used in popular parlance for primary production to understand that it would be absurd if residences not in themselves being exempt – and that would be a question of the law from time to time, particularly if they were not primary residences – would then mean that there would be no exemption whatever for a property, activities on which are utterly and convincingly characterised by, for example, being a beef cattle operation. So 10A simply, in our submission, says nothing about the specific case of dominant use with which 10AA is concerned. As to evident purpose, it may be of significance to see the statute as it was originally enacted. Page 106 of the authorities book is the relevant definition at a time when a quite different statutory device was used.

GAGELER CJ: What section is it?

MR WALKER: Sorry, it is the Land Tax Management Act 1956, section 3 – the definition section. Those are the expressions I want to come back to in detail. But, to remind your Honours, under section 9, which starts at page 109 of the book, a different approach was taken to primary production exemption in those days. It was not an exemption, in terms. It was a reduction in the taxable value. I will not take your Honours through what section 9 does, by some algorithms to serve the evident social policy of lending some encouragement to primary producers, if I may say so, but not the very rich – not the very, very, rich.

That was a different approach. So, it was still liable, but the tax would be calculated by a divisive reducing, for certain persons, the value upon which the tax would then be levied. Your Honours see that in section 9(3)(a), the case in question is:

Where all the land owned by a person is land used for primary production –

The next one is:

Where none of the land . . . is used for primary production –

And:

Where part only of the land . . . is used for primary production –

And there are more or less precise algorithms expressed so as to produce what is called the “deduction”. The deduction in question being a way of suppressing the amount, the numerical expression, of the value upon which the tax was then calculated.

So, under that different device, nonetheless, the familiar phrase “land use for primary production” is defined – and you see that at page 106. The language is different, but query how significantly. It means land used primarily. That could be seen as a sensible and somewhat similar precursor to what we have now. Paragraph (b) replicates familiar notions for this case, used primarily for:

the maintenance of animals . . . for the purpose of selling them –

et cetera. In our submission, it can hardly be said that those are words which lent themselves to a transposition of the word “primarily” from where it is found and used primarily for the maintenance, et cetera, and neither – if I may say so, with respect to Justice Kirk – is there any call to conceptualise matters signified by the use of multiple hyphens.

I think – picking up something that I was trying to supply in answer to Justice Gordon – it is evident from this use of language, and from ordinary concepts, about the difference and relation between use on the one hand and purpose on the other, that one can have more than one use – the provision requires the one in question to be dominant – and it would follow that one could have more than one purpose, so long as the purpose of selling, et cetera, appears to be the case.

In this case, there can be, really, no doubt about that. Even Justice Kirk, who ruled against us on the antecedent dominance question, did so by reference to comparing the significance of purposes rather than use. He did not identify a use rival to maintenance. Rather, he identified that racing was a rival for selling. I have said what I want to say about the fallacy in that, but, as a matter of interpretation, the fault in that approach is not to appreciate that once a dominant use is established in the land tax statute, one would think that, in ordinary purposive understanding of the taxing statute, the legislative policy is well‑served.

That is, the use of land having a certain character which will attract an exemption which is designed to have some ultimate social effect. Where a use has to be dominant and where the use also has to have specified purpose, in our submission, only complication is produced by inserting, by way of gloss, the notion of dominance, any more than one might have inserted in previous iterations the notion of primacy, primarily, into the purpose for which the dominant use is carried out.

Now, in this case, we try to have it both ways, of course. We urge, for the reasons we have written, that the better view is that the dominant use being for the maintenance of animals – and the animals being racehorses with the relation between their market and racing success being as integral, organic, as it is – then it cannot have been to posit something separate and distinct as a purpose, to posit the maintenance of animals for the purpose of racing them as contraindicating the availability of the exemption. That is our first point; racing, part and parcel of selling them, their natural increase, or their bodily produce.

We also say, but if one had to regard maintenance for the purpose of racing them as separate and distinct, even for those who were raced in order to make them attractive for selling, then, in our submission, it cannot be said that that ousts, to any degree whatever, the existence of the purpose of selling, alongside the supposedly separate and distinct purpose of racing. It will still be true; the purpose of selling will still be true.

STEWARD J: Mr Walker, do you say that the word “maintenance” here includes education and training of horses for racing?

MR WALKER: Yes.

STEWARD J: Are there any activities for which the horses are used on the properties which are not maintenance of them?

MR WALKER: I cannot think, on these properties, what else one does other than maintain the racehorses.

STEWARD J: In that broader sense, though.

MR WALKER: In, we would say, a literal sense. There is no non‑literal breadth or vagueness added by what we are saying. You maintain a horse, for example, by treating it properly so that it can grow and flourish. You do not maintain the horse by getting the RSPCA on your back by simply having it in a back corner of a paddock. And so, everything, from veterinarians, to farriers, to grooms, all are part of the maintenance of horses.

STEWARD J: In contradistinction to neglect.

MR WALKER: Quite.

STEWARD J: Yes, I see.

MR WALKER: So it is, to use other language, looking after them. Now, these are racehorses, and so looking after them means, obviously, avoiding things which would prevent them from running well, such as colliding with inappropriate fences, as well as doing those things which are calculated to help them run well. I, from the Bar table, cannot tell you anything more specific about that except that it obviously involves something in the nature of running them, but also having them checked by vets, et cetera, et cetera, et cetera.

None of that, in our submission, is puzzling, and it, in this case, is framed, we submit, in a way that is counterintuitive, namely that because some of these horses are raced – albeit most of them sold by reference to their early racing achievements – the maintenance is not for the purpose of selling them, but rather for the purpose of racing them, and it assumes its own conclusion as to whether racing is by being, in a non‑statutory atextual sense, described as separate and distinct from selling, it assumes that the existence of that purpose, which it may be accepted as a matter of English, is true. The purpose of a racehorse is to race, so the purpose of maintaining a racehorse is, ultimately, to race them. But we do that by selling to people, for as high a price as we can get, horses that my not, in themselves, represent some cold‑blooded investment.

It is for those reasons that, when one looks back at the way in which the favourable tax treatment by a different approach, but still using the same concept of land used for primary production, going back to the original enactment, can be seen, in our submission, to be continued in a way that reflects the notion you will not find in any of the legislative history an indication that there was to be some means of depriving people of exemptions – that is, of depriving them of favourable tax treatment, notwithstanding evident dominant use for the maintenance of animals, which were sold – or their increase or produce sold – because it could be said there was, concurrently, a supposed separate and distinct other purpose or purposes.

GAGELER CJ: Mr Walker, as I understand the respondent’s submissions, paragraph 54 and footnote 29, it is said that when you look at the case law that dealt with the definition of land used for primary production in the original 1956 Act, up until the time of the amending in 2005, you see a consistent approach being taken by courts that the qualifier primarily governed the entirety of the maintenance for the purpose. Do you say that that is a misreading of the case law?

MR WALKER: No, it is not a misreading of a number of the dicta. However, they do not, with respect, show a concern to transpose – in those days “primarily”, nowadays we would say “dominant” – away from its concern with use. It is a compound notion, there is no doubt about that. To say that land is used for a purpose is going to be, ultimately, one characterisation, factually‑informed exercise. We do not doubt that, but it is an exercise which requires you to identify – as Justice Barrett put it, in the passage we have cited – the dominant use, to see whether that answers the description of “maintenance”, et cetera, and if it does, to ensure that the maintenance is for the stipulated purpose.

And the old cases; your Honours did not turn on differences which insisted that though “primarily” plainly, syntactically, is concerned with use, it also has to be a concern separately, or subsequently, with purpose. Of course there is a compound notion; with great respect, Justice Kirk was, in a familiar way, employing hyphens to try and identify that in the same way as one will see in certain philosophical treatises. Of course it is a composite, but that does not mean that it is a composite in which the factual inquiry concerning “use” on the one hand and “purpose”, which is different from “use” though related to “use”, on the other hand.

That is why, in our submission, it can be seen that none of the later case law assists where, in particular, one can see extremely different “uses” or “purposes”: land developer on the one hand, grazing on the other; those are not cases that provide any assistance whatever for the present case. This, on our research, is the only case that has made so much of the question whether the stipulated purpose need to be dominant, to use the statutory expression, as opposed to the use for that purpose being the dominant one.

EDELMAN J: Part of the difficulty may be the slipperiness in the word “purpose”.

MR WALKER: No doubt, your Honour.

EDELMAN J: Is your submission, in part at least, that “purpose” needs to be understood separately from motive, and perhaps more in the sense of an end, rather than a means to an end – that the purpose is the desired end, or the objectively desired end?

MR WALKER: It would be tempting to say objective because then I could say that it needs to be objectively the objective, but yes, we do mean it is the objective aim; its purpose, in that sense. We are not talking about an individuated psychological inquiry, to return to what I responded to Justice Jagot. No, it is not that, but it is nonetheless human. The objective of selling is something to do with social intercourse, and that emphasises rather than detracts from the conceptual difference between identifying a use and seeing whether it is a use for one of the stipulated or the stipulated purpose.

Many a use can, without any ingenuity, be imagined as being possibly for one or more different purposes. It is a level of generality question. The use here is, at a pretty high level of generality, maintenance of animals. Purpose ‑ ‑ ‑

GORDON J: There is no distinction drawn between the parcels on the lots of the land, is there? I say that for this reason ‑ ‑ ‑

MR WALKER: That is not significant in this case, no.

GORDON J: No, because I know that from the beginning of Justice Kirk’s judgment he identifies that some portions of at least one of the relevant areas has already been treated by the Commissioner as exempt.

MR WALKER: There is nothing to be made of that in this case now, your Honour, when there is other land as well.

JAGOT J: Is one way of putting your case that you simply just do not read “sole” or “principal” before the word “purpose” – not to over‑simplify it?

MR WALKER: Rhetorically, that is a way of making my point, yes.

JAGOT J: So, you are reading the “the purpose” in one sense as “a purpose” in one sense? “The purpose” means provided it is used for that purpose as opposed to but not requiring that use, maintenance of animals, to be the sole or principal purpose.

MR WALKER: That is right. So, if there are, incidentally, school visits which might generate cost recovery, come and see a stud in question, I mean, it might be a very long‑range recruitment tactic ‑ ‑ ‑

JAGOT J: Well, that is too insignificant to worry about either way.

MR WALKER: It might well be. On the other hand, if there were ‑ ‑ ‑

JAGOT J: Weddings, commercial wedding venue occasions.

MR WALKER: You call it wedding, it is a stud, but, yes, I suppose that is right, your Honour.

JAGOT J: Each to their own. Can I just ask this question. Do you say 10A(1) has any capacity at all to apply to 10AA(3), at all?

MR WALKER: No.

JAGOT J: None?

MR WALKER: No, because the specific provisions talk about dominant use and the idea that though you have a dominant use that answers all that description ‑ ‑ ‑

JAGOT J: It answers – then would the same reasoning apply if you go back to, say, just an example, 10(1)(h) has got a “primarily and principally for the purposes” descriptor and you compare that, say, to (j) which has got “for the purpose of”, would your position be that 10A(1) could apply, for example, to (j) because you could own something that is used for agricultural shows 50 days of the year and another 100 days of the year it is used for, I do not know, commercial whatever?

MR WALKER: Yes.

JAGOT J: So you could apply 10A(1) to (j), reasoning as you would for 10AA(3). You could not use it for (h) because once you are “primarily and principally” that is it, you get a tick, there is no room for another purpose.

MR WALKER: There is room for another purpose, but there is no stipulation added by 10A that will deny you that exemption.

JAGOT J: Yes, it would not deny you that because you are within (h).

MR WALKER: The only thing that denies you that exemption – (h) is a good example because there is a specific provision in it for what will disqualify you:

not used for the pecuniary profit –

JAGOT J: Yes, “not used”.

MR WALKER: So, it would be odd to read 10A as adding another thing and not being accompanied by a purpose which is not exempt.

JAGOT J: Yes. You say you do not read it that way?

MR WALKER: No.

JAGOT J: Okay, (h) is then in the same category for you as 10AA(3).

MR WALKER: Because it is a specific provision.

JAGOT J: Yes.

MR WALKER: If I am correct, it would be because it is a principle that is being employed, and the principle we would employ is a specific provision. It is not derogated from by something as general as 10A, and your Honours appreciate that there are others to which 10A will never apply in 10, such as those which stipulate for exemption for sole use. I am not going to be able to give a politically convincing justification for the existence of 10A, but no doubt my friend can. The history certainly does not make it transparent.

GAGELER CJ: We will take the mourning adjournment.

AT 11.14 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.28 AM:

MR WALKER: Your Honours, could I return to the matter that Justice Gordon raised with me, in particular concerning paragraph 98 of Justice Kirk’s reasons at page 115 of the book. The suggestion in that paragraph – see his Honour’s phrasing:

it may also be inferred that there may have been broader motivations –

et cetera, is, in our submission, to introduce an element that will not assist in answering the relevant questions for the exemption criteria, in turn, dominant use, and second, maintenance for the purpose of selling, et cetera.

Motivations for being in a market might ordinarily be understood as involving what might be called continuous and repetitive profit. But just as in partnership law, you do not cease to be partners because you are having a run of lean years. Particularly in this country with rural pursuits, that would be absurd. It is recognised by the discrimination in practice between sections 10AA(1) and 10AA(2), but for rural land, that is not a motivation – to use the word used by Justice Kirk in 98 – that is going to be a talisman one way or the other.

So, whether one calls it in modern parlance lifestyle, or personal preference, or the happy enjoyment of a private income, will not affect, on rural land, the question whether the dominant use of the land is for a stipulated purpose – in this case, the maintenance of animals for the purpose of selling them, et cetera. The fact that there may be that consolation of non‑financial psychological spurs to a particular course of action involving business decisions as to the use of land is, in our submission, utterly irrelevant, and one would not expect to find them in a taxing statute where clarity is at a premium. In particular, where there is no shortage of words by which, as 10AA(2) illustrates, the actual degree of business success and seriousness of purpose could be brought into account, there is no call for it to be inserted interstitially in subsection (1).

Now, it is for those reasons, in our submission, that the observation at the foot of 98 concerning “running at substantial losses” is really not to the point. It cannot be said that the selling, which – your Honours have seen the figures, it is lots of dollars. It cannot be seen that the selling is in any sense de minimis or, so to speak, a mere accident, happy or otherwise.

Can I then come back to a question the Chief Justice asked me concerning the calling in aid of older cases – and them being older is not relevant for my argument – with respect to what I will call the notion of a composite concept of dominant use for a stipulated purpose. Now, as I say, in this case the dominant use is maintenance of animals. That seems to be common ground. The issue is whether it is for a stipulated purpose.

None of the cases that our friends adumbrate in their written submissions had the distinction between dominant use for a stipulated purpose, an exempting purpose, as raising as a crux upon which the outcome of the case would turn, whether you can or should transpose – in those days primarily, in these days dominant – from use to purpose or to repeat it for purpose. That is because in most cases the singular factual inquiry, once satisfied of the dominant use, will rather simply resolve itself into whether that use can be described as being for the purpose of selling, et cetera, and there is no need, except at the risk of complication, to ask a second time about quantitative questions, having produced a qualitative difference, that is, the notion of dominance or, as the reasoning in some of the judgments in this case employ, predominant purpose.

The example that our friends seek to obtain from the decision in Sonter (1976) 7 ATR 30 – I will not take your Honours to it – the passage at 34 cited by our friends is not a passage which shows that there was in play as a contest to decide the case this question of transposition. Simply to paraphrase the then‑statutory provision as requiring to be answered the question whether the use was primarily for a purpose does not indicate that the courts were indicating that there is error in first looking to what was then the primary use of the land.

That is why it is significant to note the difference of levels of generality then, as now, in the formula that happens to obtain in our case, namely, maintenance for the purpose of. Maintenance is at a higher level of generality than the specified purposes that follow. You may maintain animals for more than those purposes or for other than those purposes. Maintaining animals is something which is general to a range of activities, only some of which will be characterised as being for one of the stipulated purposes.

GORDON J: Can I ask you about that, because I think you rejected something I put to you, and it may be that I was being inarticulate. But does that mean then that, so long as the dominant use of the land is for the maintenance of animals and that you have one of the three uses which is non‑trivial, that is sufficient?

MR WALKER: Yes, that is right. So, if you can ‑ ‑ ‑

GORDON J: Sorry, just let me finish.

MR WALKER: I am so sorry.

GORDON J: That is your construction of the way in which the section would work?

MR WALKER: Yes.

GORDON J: Thank you.

MR WALKER: When I say, so long as it is non‑trivial, too much should not be made of that. It is a question whether, as a question of characterisation – we do not need to include the non‑trivial, at this point –in the case before the Court, or before the Commissioner, the maintenance of the animals is, on the facts, to be regarded as being for one or more of the stipulated purposes. We know it does not have to be for all of them. In this case, it is for all of them. Non‑trivial only comes in to guard against the notion that something which is – to quote Mr Justice Helsham – not common sense. So, the tiny corner of pumpkins in the abandoned golf club, et cetera.

STEWARD J: Is another way of putting it – paying regard to what was said in the second reading speech – that the purpose refers to a real purpose, as distinct from an artificial purpose?

MR WALKER: That is right. That is right. So, we are not talking about artifices; we are not talking about mere appearances; it is not a Potemkin stud, if you like. It has to be a real stud; it is a real stud. We draw to attention the laws traditional, unconcerned with trivialities, only to emphasise that whenever a characterisation is in question, no regard should be paid to that which is, in theory, available but which, as a matter of the evident intention of the statute, could not suffice to make out the satisfaction of a relevant criterion.

GORDON J: So that means – just so I am clear – you would read, “for the purpose of selling them” consistent with acceptance, as I understand it, that the dominant use is for the maintenance of animals – you would read, for a non‑trivial purpose of selling one – A, B or C.

MR WALKER: That is, again, one way of expressing our point. We do not urge that there is a mandatory paraphrase to understand the meaning of those words. We merely point out that you could not characterise the purpose of something by reference to matters which are not realistic.

EDELMAN J: You have an alternative case, though, anyway, do you not? Even before you get to your notice of contention, your alternative is that even if “dominant” only qualifies maintenance – sorry, if “dominant” qualifies both, then you say that the ultimate aim, purpose, is sale, rather than racing.

MR WALKER: That is right. That is right. You could, in a non‑legal way, ask questions: is this an operation where sales subsidise racing, or is this an operation where racing informs, promotes sale? I do not suggest that either of those is a priori to be preferred. It depends upon the facts. Without rehearsing, they are all thoroughly canvassed in both the reasons below, at both levels, and in the written submissions before your Honours. It is plain to demonstration that there is an evident and earnest attempt to call in aid racing for the purposes of selling.

JAGOT J: If this section said land, the dominant use of which is for the purpose of selling animals there ‑ ‑ ‑

MR WALKER: That would be to elide the important ‑ ‑ ‑

JAGOT J: No, no – I know. But if it literally said that; if it did not have the maintenance of animals, then ‑ ‑ ‑

MR WALKER: We would say, we still win.

JAGOT J: You would say you still win?

MR WALKER: For the reasons I have put.

JAGOT J: Right.

MR WALKER: Yes, yes.

JAGOT J: But the maintenance of animals helps you, you say?

MR WALKER: Yes. May it please your Honours.

GAGELER CJ: Thank you, Mr Walker. Mr Gleeson.

MR GLEESON: Your Honours, in the light of what has passed this morning, I unfortunately have to deal with the anterior question of what is
before you, because much of what you have heard, including the answer to your Honour Justice Edelman’s question, is not before you, and we oppose the factual arguments. So, can I just explain why that is so.

If your Honours have the notice of appeal, plus paragraphs 2 and 3 of the appellant’s written submissions, that is what the Court granted leave on, which was a pure question of construction where error ‑ ‑ ‑

GAGELER CJ: Which I think Mr Walker said, at the opening of his argument in answer to me, his case turns on your question of construction.

MR GLEESON: Yes, and he also said in answer to you that if he is wrong on the question of construction, then he is not otherwise asserting error in Justice Kirk’s application of the construction to the facts. Now, much of what he has said, in fact, does seek to do that. So, I would just like to make clear, the Commissioner’s position is, your Honours should remain with the issue upon which you granted leave, and if the construction argument is wrong, the appeal should be dismissed. Now, if your Honours have missed the appellant’s written submissions – and your Honours asked a number of times this morning, what was the construction argument – this is the construction argument, at paragraph 2 and 3. Breaking it down, there are three steps to the argument.

The first step is you ask whether the dominant use of the land involves the maintenance of animals. That is question 1, or step 1. So, at that point, if you compare that to the text of section 10AA(3)(b), the Court is being invited to atomise or break up the exercise into an initial inquiry: is the dominant use for the maintenance of animals? If the answer is no, that is the end of the exemption.

The second step of the inquiry is: can you “find two or more” purposes which satisfy a test of relationship or complementarity. Now, that language is just nowhere in the section, but that is stage 2 of it, and that is designed to get the integration argument off the ground. The argument is not dealing with every case of multiple purposes, it is dealing, supposedly, with cases where they satisfy this test for which there is no text in the statute and no guide.

Then the third step is, if you have satisfied the second step, provided one of the purposes is an exempt purpose, then it does not matter that the maintenance is being carried out for some other purpose which is not exempt, provided – and here, again, we get to words not in the statute – it satisfies a test of non‑triviality or realism.

Now, that is the argument that was rejected by Justice Kirk and Justice Simpson; Justice Griffiths did not need to be troubled by it – he acted on the same construction as all the other judges – and Justice Ward, I think, was not given the benefit of this argument. So, to the extent it has been addressed, it is addressed by Justice Kirk at the paragraphs which are in ground 2 of the notice of appeal: 20 to 22, 31 to 32, and 40, which we embrace as correct. It is addressed by Justice Simpson at the paragraph noted, which is 132, but also in more detail at 157 to 159 of Justice Simpson.

Your Honours, in the light of that introduction, and coming to our oral outline, what I proposed to do was move immediately, if it is convenient, to paragraphs 5 to 14, which are solely about construction, and then, depending on what your Honours consider is left in the appeal, I will come back to the facts, if I might. Our starting point is a non‑controversial one that not only does the taxpayer bear the onus of proof that the exemption is satisfied in respect to a given land tax year, but, as your Honour Justice Gordon raised, the question is asked on a parcel‑by‑parcel basis. So, we are looking at things done on particular parcels of land in particular years to see whether they satisfy the ultimate characterisation exercise posed by the exemption, with the onus at all times being on the taxpayer both to prove the primary facts and to satisfy the court of the characterisation issue.

In a number of the old cases, to which I will come, it was the failure of the taxpayer to satisfy the court of that onus on characterisation that was important. What that means, just pausing there, is – one question your Honour Justice Steward raised was a factual one, namely, what are the findings as to how many of these horses get sold at some point in the future? When I come to the facts, I will show you there is no direct finding on that, but the question, with respect, opens the ‑ ‑ ‑

STEWARD J: You say it is irrelevant?

MR GLEESON: Irrelevant.

STEWARD J: Yes, I understand.

MR GLEESON: It opens the frame too broadly. The fact that the poor stallion, who has worked hard for 19 years, might be sold or left to die many years into the future is not answering the character that this land has by reason of the physical deployment of it in the tax year. That is our paragraph 5.

In paragraph 6 – and while your Honours are very familiar with these cases from the planning context, the Aboriginal land rights context, the land tax context, it is important that the cases we cite in paragraph 6 and in our written submissions are all emphasising the inquiry requires close factual attention to the activities actually and deliberately being conducted, or not conducted, on the land, which involves a deployment of the land for a purpose.

To speak at a very high level of generality, whether racehorses might have interconnections, much of which you have heard this morning, it is too high a level. We have to be looking more closely, as Justice Kirk did, on the activities actually and deliberately conducted on the land and the purpose for which those activities are being conducted. Now, your Honours, of the cases there referred to, Royal Newcastle Hospital, which is at volume 3, tab 10, the passage is at 231 of the book or paragraph 508 of the Commonwealth Law Reports, Justice Kitto’s famous short explanation of what “use” means, and the other ‑ ‑ ‑

STEWARD J: Sorry, Mr Gleeson, what page in the Commonwealth ‑ ‑ ‑

MR GLEESON: It is page 508 of the CLR – 231 of the core book – and to like effect, in Minister v NSW Aboriginal Land Council, which is at tab 12, paragraph 69 of the CLR, in 296 of the book – the Court emphasised, that when one is speaking about “use”, one must give precise attention to:

the acts, facts, matters and circumstances which are said to –

either give the land or:

deprive the land of the –

relevant character of “use”. Over the page, the observations of President Mason in the court below were adopted, that:

“use” is a protean word.

And the Court then went on to say:

recurring physical acts on the land, by which the land is made to serve some purpose –

citing Justice Kitto in Newcastle City Hospital:

will usually constitute a use –

So, it is that type of close analysis of, what are you doing on the land, what purpose are you making the land serve, or, as some of the cases describe it, what character are you giving to the land, by reason of the things that you have done on it. Your Honours, in volume 4, in the authorities not from this Court, at tab 27 in the decision of Christie at page 695 of the book, the relevant paragraph between E and F contains the same focus on what is the use of the land in a physical sense, and what is the purpose that is thereby being imparted to the land.

The decision in Metricon is an important decision of the New South Wales Court of Appeal.

GORDON J: Sorry, does Christie add anything?

MR GLEESON: Only a further emphasis that ‑ ‑ ‑

GORDON J: It is the purpose to which land is put.

MR GLEESON: Yes.

GORDON J: I see. Thank you.

MR GLEESON: So, a key difference between the parties is the appellant says, we can separate “use”, which is just a physical deployment, and then we have “purpose” over here; and therefore, when we have a statutory phrase governed by dominant use, we can break up “maintenance”, and then we can leave “purpose” as a different creature, whereas this is showing the unity between these concepts.

Next, if I could take your Honours to Justice Barrett’s decision in the Court of Appeal in Metricon, which is at tab 25, the whole of the discussion between 45 through to 61 is a valuable one, we would submit.

GORDON J: Do you mean paragraph 45?

MR GLEESON: Paragraph 45 on page 667 through to paragraph 63 is valuable so I just, without reading it, reference in particular 45 and 46. Paragraph 48 is important for what is going to be our proposition 8 which is dominant use, because the approach that Justice Barrett has enunciated on a question very close to what is before this Court this morning is that:

The expression “dominant use” has regard to the quantification of uses within paras (a) to (f) as against uses that are not within those paragraphs. Where the whole of the relevant land is obviously used, the inquiry . . . is whether that land is used “for” any of the activities or purposes listed in paras (a) to (f) and, if so, whether it is also used “for” an activity or purpose not within those paragraphs.

If it is used for both:

it is necessary to weigh the respective uses against one another in order to ascertain which is the “dominant use”.

Now, that construction, which we embrace, if correct, is the end of the appellant’s construction argument.

GORDON J: Do you embrace the last sentence of 48 as well?

MR GLEESON: Yes. So, if – as this case was always conducted until this morning – we have a racing use or purpose and a sale use or purpose on the land, racing is not an exempt purpose. That is the decision of Parliament. One has to weigh and quantify those two uses, and it is only if the sale use dominates – in the sense of being controlling or governing – the racing use that the exemption is made out.

Now, 52 is important because Justice Barrett, as well as a number of the other authorities, have cited with approval the Queensland Land Court in Thomason in 1995 which gives guidance on how one does the dominant use exercise. One considers:

the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to –

what is an exempt purpose:

the extent to which land is used for purpose which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose . . . one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole.

So, Justice Kirk correctly went through each of these factors and looked closely at what was actually happening on Woodside – Woodlands and Kelvinside – and found that the dominant use test had not been satisfied. Then, finally, Justice Barrett brings his propositions together in paragraph 61. Use involves a physical deployment of what Justice Isaacs described as the “concrete physical mass” of land:

in pursuance of a particular purpose of obtaining present benefit or advantage from it –

That is the timing issue:

with deployment understood as including not only activity but also inactivity deliberately . . . and with purpose understood –

as your Honour Justice Jagot put in argument:

as objectively ascertained purpose.

So, we would submit that this is a very valuable judgment which has drawn together the learning of this Court and the other courts from planning, from the Aboriginal land rights cases, from land tax valuation cases, and it is the approach Justice Kirk took and it is one which the Court should not disturb.

GORDON J: In 54 and 55, Justice Barrett, after formulating and adopting the approach of method in Thomason, identifies some of the difficulties that one faces, and then in 55, having identified what the difficulties are, sort of goes on to apply it. Is that still applicable here?

MR GLEESON: Yes, his Honour dealt with the difficult situation, you have lessor/lessee, who do you look at to ascertain whose activities are in question and whose purpose is being imparted to the land, and his Honour said you would look at the lessee because it is the physical concept of the land that is the subject of the inquiry. So, we would embrace those paragraphs as well.

Your Honours, that is our proposition 6. Our proposition 7 I have now made, that any use will be undertaken for purpose, and Justice Kirk’s analysis of the connection between use and purpose, we submit, is sound. Then, in paragraphs 8 and 9, we would submit that on an ordinary reading of this statute which poses a dominant use inquiry, if there are more than one activities being conducted on the land, the first step will be to ascertain whether they constitute multiple uses: is it a single use or multiple uses?

If there is only one use, it is, by definition, the dominant use and you go on and test that use against the six paragraphs. However, if you find multiple uses – which was the way the case was run until this morning – one of which falls within the paragraph and others do not, then what one does is compare the uses in a qualitative and quantitative sense to ascertain whether the exempt use is the dominant use, which is Justice Barrett’s method.

Now, your Honours, on that proposition, there is one additional decision I wish to go to, which is Justice White’s decision at first instance in Leppington, which is in volume 4 at tab 34, in particular, paragraphs 152 to 158, which commences on page 782. What Justice White has drawn out at 153 to 156 is that the change in the statutory language from primary use to dominant use, having regard to the ordinary meaning of those two words, was designed to tighten the scope of this exemption. A dominant use, if one thinks of the Latin, paragraph 156, is not merely the:

chief use or most influential use –

but it is:

a ruling, governing or commanding use.

That is what is required, we submit, by this exemption. Then the method that Justice White adopts to compare the competing uses – some exempt, some non‑exempt – in 157 and 158, we embrace that is Justice Barrett’s method.

Your Honours will see that same approach taken by Justice Kirk, particularly at paragraph 38 of his judgment – 38 to 40 – where he first cited Justice Meagher’s discussion in Baulkham Hills Shire Council – the example of the book publisher with a printing business but also deciding to sell some books. The selling of books in the context there discussed would be regarded as an independent use even though it was ancillary, just as a convenience store and a petrol station might be independent uses, even though one is ancillary to the other.

The way his Honour framed the question at paragraph 40, we submit, is correct, which is because it is recognised that there are two potentially competing uses – one of racing and one of sale – one would first ask if the purpose of racing was merely ancillary or:

subservient to the dominant use of the properties for the sales purpose or was rather an independent use‑for‑a‑purpose in its own right. If it was an independent use –

which is what Justice Kirk found on the facts, that is the end of the exemption, unless one could find that the sale purpose dominated over it, which his Honour found it did not.

EDELMAN J: How does the notion of dominance work where one use – to use your expression – is a means to an end and the other use is the end?

MR GLEESON: If one was in a case – which this is not on the fact findings – where the means was wholly subsumed within the end to be really part of it – if they were the fact findings you got, then you might say, in that case we have a single purpose. That is the type of inquiry that Justice Kirk has identified as needing to be carried out: was the racing purpose so ancillary to, so subsumed by sale, sale, sale, sale, sale, that all we really have here is a sale purpose? If that is not the situation we are in because of the fact findings, we then have use for racing, use for sale, and then the onus squarely fell on the appellant to show that the sale purpose was the governing or controlling reason explaining everything happening on this land.

Your Honours, there is one other authority that we wish to refer the Court to on this question. We have hopefully sent the Court a copy of Justice Sugerman’s decision in 1958 in Scott’s Provision Stores v Sydney City Council, which is in volume 3 of the Local Government Reports at page 191. At 195, commencing at point 6 with a discussion of Hazell v Parramatta City Council, over to point 2 on page 196, Justice Sugerman grappled with this type of problem in a planning context and at the foot of 195 said that:

Some of their incidental activities are so commingled in time, place or circumstances with the actual exercise or carrying on –

the relevant use:

that in a practical sense one cannot conceive of the one being carried on without the other.

Then, on the other side of the line, there are activities which may or may not be “associated” but can truly be seen as different activities and different purposes. So, yes, that type of inquiry can arise in an appropriate case; here it has been answered in our favour on the facts.

Another authority on that question of your Honour, which Justice Kirk cited, is at paragraph 37 of the judgment, and that is the articulation that Justice Glass gave in the Court of Appeal in Foodbarn, and we rely upon that. Can I add to that that Chief Justice Gibbs of this Court approved Justice Glass’ statements in Lizzio v Ryde Municipal Council (1983) 155 CLR 211 at 216 to 217. That brings me to paragraph 12 of our outline and to the statutory provision itself.

STEWARD J: Mr Gleeson, you refer often to the onus on the taxpayer. Obviously, it has to prove the facts, but when you get to characterisation, does it help to talk about onus? I mean, other than in a persuasive way.

MR GLEESON: It does, your Honour, as I will show you in Sonter, that what the judge said at the end of the day was you have to prove the facts, but ultimately, I am left with a characterisation exercise. You have to prove primacy or dominance; if the material that is before me does not leave me satisfied that the correct characterisation is the exempt purpose, you fail. It goes that far, no further, but characterisation is, in some cases, a difficult exercise, and it has to be surmounted by the taxpayer.

It certainly applies at the facts stage, your Honour, and, of course, here one of the issues was – well, I will come to the facts later – to the extent the accounts mattered, there were no accounts drawn referable to each parcel of land that was in issue. What there were, were accounts for Godolphin as a whole. There was therefore considerable room for debate between Justice Kirk and Justice Griffiths what you drew from accounts, which were not the best evidence of that question. And to the extent Justice Kirk went one way, Justice Simpson said, look, I just cannot draw anything persuasively from the accounts because of that. That is an example of the onus having real work to do.

STEWARD J: Can you remind me, what is the language of the Taxation Administration Act (NSW)?

MR GLEESON: Yes. It is ‑ ‑ ‑

STEWARD J: Is it excessiveness?

MR GLEESON: The language – it is in volume 2 of the book, page 175, it is section 100(3) of the Taxation Administration Act 1996, and the language is:

The applicant has the onus of proving the applicant’s case in an application for review.

So, the onus covers the entirety of the case, and the case, under the earlier provisions, requires the identification of the error in the Commissioner’s assessment. So, if your Honours have, then, section 10AA, we would read it this way. Subsection (1) confers the exemption. If it is rural land, it is exempt if it is used for primary production. “For”, as Mr Walker said, connotes a purpose, an end, of primary production, and immediately one goes to subsection (3), which one can read into subsection (1) as the more fulsome definition of when land is used for primary production. That is not to overlook subsection (2) as context, I will come back to that. But within subsection (3), we have:

land the dominant use of which is for –

So, we again see the word “for”, and that is connoting a purpose or an end. The purpose or end is then specified in six paragraphs, each of which must be treated as a composite paragraph and should not be atomised. However, what follows, for a number of them – let us take paragraph (a) – the “dominant use” is “for”:

cultivation, for the purpose of selling the produce of the cultivation –

“Cultivation” is the genus of the purpose, and the species, which you also require, is the “selling the produce of the cultivation”. Now, a difference between the parties in the written submissions is that in places the appellant says that the word “cultivation” or, in the next provision, “the maintenance of animals” is simply looking at the physical deployment of the land with no purposive element in it, and then the only purposive element comes in in the phrase that follows. We would submit differently, that “cultivation” is of itself a characterisation term.

There are things you are doing on the land: you are digging up the ground, you are putting fertiliser in, you are spraying the land. They are the things that you are doing on the land by way of deployment. “Cultivation” is the end or the characterisation which can be given to those activities, but you then need to also satisfy the species for the purpose of selling produce. Applying that same approach to paragraph (b): “the maintenance of animals”, that is the genus of the end, or the purpose, of your dominant use, but then it must also satisfy the more specific species that it is maintenance for the purpose of selling them or their natural increase or their bodily produce.

Read in that sense, the dominant use has to be satisfied in respect to the whole of what is in paragraph (b), and the result of that is that the word “the purpose” of selling them means the purpose of selling them. It does not mean a purpose of selling them or a non‑trivial purpose of selling them. Thus, Justice Kirk was correct when he said that dominance attaches to the whole of the expression that follows in (a), (b), (c), (d), (e) or (f).

JAGOT J: So, you would read (a) as: land the dominant use of which is for the purpose of selling the produce of the cultivation of the land. Something like that?

MR GLEESON: That would be another way of doing it.

JAGOT J: You say there is no difference ‑ ‑ ‑

MR GLEESON: No difference.

JAGOT J: ‑ ‑ ‑ between what is said and that.

MR GLEESON: Yes. So, you need to say, I look at all the things that are being done on this land in the tax year, physically. Do they bespeak the land being conferred a character of cultivation? Is this land under cultivation? Would the objective observer come and say that is land under cultivation? If you do that, you have got to stage one of the exercise. If you have got that far, you then have to ask the further question: am I cultivating this land for a purpose of selling the produce of the land or am I cultivating the land for some other purpose?

So, with paragraph (b), am I maintaining animals on this land? That may be relatively easy to establish in many cases. What is the purpose for which I am maintaining them? If it is for racing horses, that has not been given an exemption and, therefore, even if there is a sale purpose, unless the sale purpose satisfies the dominants test, the exemption is not available, and that applies to each of them.

STEWARD J: Did you say it is a binary choice here; the horse is either being maintained for racing or for sale?

MR GLEESON: No, it is not binary, not on the findings of fact.

STEWARD J: No.

MR GLEESON: The horses here are being maintained and there is sufficient evidence – on the findings of all judges – that a substantial purpose is racing those horses, which includes: training them for racing; spelling them; racing them in the racetrack; winning the money at the racetrack, which, yes, may have ultimate incidental benefits back in a loop that people might pay more for your nomination services, but that is a purpose – a substantial purpose – of what is happening here. There is a separate substantial purpose here which is sale, and the sale, really, has two features – I will come to it on the facts – but the first feature, the most evident feature, is the nomination fees. That is, a purpose being advanced on a small part of the land. The second purpose – which is, in many senses, more indefinite and deferred – is the sale of surplus horses. So, they are the two aspects of sale going on.

STEWARD J: So, does that mean for your case it is important that we accept that it has to be a ruling, prevailing or predominant purpose, and if a taxpayer cannot show that, bad luck?

MR GLEESON: Yes. One has to show that the exempt purpose ‑ ‑ ‑

STEWARD J: You accept that selling is a substantial purpose, but it just does not go far enough.

MR GLEESON: It does not go far enough, on the findings and for the reasons Justice Kirk exposed error in the learned primary judge’s judgment.

GORDON J: Can I just pick you up on that? At a couple of places, I think the Court of Appeal – and by that I mean, I think, Justice Kirk, and then picking up Justice Simpson as well – say that the purpose of sale of horses or semen was not – at least it was not the dominant purpose.

MR GLEESON: Yes.

GORDON J: And that is a finding upon which you rely?

MR GLEESON: Yes. Justice Simpson’s conclusion is sufficient for the appellant to lose, provided our construction is correct.

GORDON J: I see. Because of that finding?

MR GLEESON: Yes. Having looked at all that material, it was not established that the sale purpose was the governing and controlling purpose which subsumed racing within it. Justice Kirk went ‑ ‑ ‑

GORDON J: I think – sorry to be pedantic, but at 122, paragraph 125, Justice Kirk says:

Godolphin established that a significant use of the two properties was animal maintenance for the purpose of selling animal produce and progeny. But it did not establish that that should be characterised as the dominant use.

MR GLEESON: Yes, had the paragraph ended there, that is sufficient for our purposes on the correct construction, and that is effectively where Justice Simpson ended. Where Justice Kirk went further, which does not hurt on our construction but was not strictly necessary, was to say he was positively persuaded that:

animal maintenance for the purpose of racing –

was a more significant use than the other purpose.

GORDON J: Thank you.

MR GLEESON: And, indeed, he concludes in the final sentence:

The activities in pursuit of the racing purpose –

in fact:

constituted the dominant use –

So, it was unnecessary to go that far, but his first three sentences are sufficient and Justice ‑ ‑ ‑

GORDON J: The reason why I ask that is because in the way in which Mr Walker, I think, ultimately put the submission, he would say on his construction that the opening sentence is sufficient if he is right on the construction.

MR GLEESON: I think that is correct, your Honour.

GORDON J: Yes, so, in a sense, where driven. But if one takes 125 as, in a sense, the relevant conclusions of findings, which are not challenged by either of you, then you really are driven to the question of construction.

MR GLEESON: Yes. Now, can I then turn to ‑ ‑ ‑

STEWARD J: Can I ask you a question in that context? Will you explain to us your views on subsection (2) and how it might affect that constructional choice that Justice Gordon has indicated?

MR GLEESON: Our short submission is you do not get anything from subsection (2) that bears upon the construction issue under subsection (3). What occurred, as your Honours know from the legislative history, was that the two changes were made at the same time as two different ways of attacking what was perceived to be an exemption that was too generous. In the second reading material, which is in volume 5 at tab 46, page 922 – and we do not suggest that this material is decisive on any construction questions; it is rather general in its terms. The relevant paragraphs are the last paragraph on 922 and the first paragraph on 923. What happens on the foot of 922, is, Mr Costa says, in the middle:

Land tax for rural lands for genuine farm purposes is important.

Not for any purpose, it is “genuine farm purposes”. Then identifies a particular loophole that Mr Walker alluded to, and that was seen to be a particular problem where the developer could, working backwards, keep exemptions for as long as possible over some of the land as it developed other parts. Then, on the next page, there is a discussion about the amendments, and this paragraph seems to cover both subsection (3), by saying:

The amendments will require that the dominant use of the land is primary production. This will allow the portion of the revenue generated from the land from sale of subdivided lots compared to the revenue generated from the sale of animals to be taken into account.

So, the amendment to go from primary to dominant use was seen, inter alia, to be one way of dealing with the perceived mischief. But then the next sentence appears to be alluding to subsection (2), and then there is the statement:

Running a few head of cattle or sheep to attract a land tax exemption rather than to make profits will no longer suffice.

So, it seemed that they were grappling with two problems at the same time. One of them was that non‑rural land was being exploited through an exemption that was not sufficiently tight, and the second one was for all land, whether rural on non‑rural, they wanted “primary” tightened up into “dominant”, and so we would urge your Honours not to read anything from subsection (2) that alters Justice Kirk’s view of subsection (3).

Can I then go to the context in the legislative history, and your Honour Justice Jagot’s question in particular about the role of section 10A. We would take the exact opposite view of that provision to Mr Walker. It does apply across the whole of the various exemptions that come earlier, including in particular 10AA(3). To say how it works, it is this: if you look at 10AA(3)(a), let us assume that some of the land you are cultivating for the purpose of sale, and then, under 10AA(3)(b), other parts of the land you are maintaining animals for sale. In that situation, section 10A(2) applies.

If land were used solely for each of those purposes it would be exempt, and therefore subsection (1) applies – because each of those purposes is exempt, the land as a whole is exempt. What it then means, in this particular context, is you do not have to go through any dominant use exercise, you achieve the purpose, which is each of your uses is exempt and so the whole of your land is treated as exempt. What that means is that the exempt purpose referred to in section 10A(2) is a reference to the language of each of the six purposes in 10AA(3), that is the “purpose”, rather than, as Mr Walker would have it, that the “purpose” has, built in, the earlier language of “dominant use”.

GORDON J: Does that assist your argument on the need to link “maintenance” and “use” by reference to the word “dominant”?

MR GLEESON: Yes. We then submit, if that be the correct construction, it is a very strong indicator that what the Parliament has said is if you are maintaining the animals it must be for the purpose of sale, and if you cannot get a finding that it is for the purpose of sale, the one thing you cannot do is to say, I have a purpose of sale but I also happen to be doing a whole lot of other things on the land, whether related or not related, which Parliament has chosen not to give the exemption to.

EDELMAN J: Why would that approach to section 10A not also work on the appellant’s construction? So, to use your example, if part of the land is used for the maintenance of animals, assuming a construction that says that all that is required is the dominant purpose being the maintenance of animals, and part of the land is also used for cultivation, then one does not need to go through the exercise of working out which of those two is dominant.

MR GLEESON: That might be so, but what it does not work with is where Mr Walker wants to go, which is provided part of the land is used for maintenance for sale, and the other use that I am seeing is a non‑exempt use. That is the circumstance in which he is saying he gets the exemption, and 10A does seem to count against that because what it is saying is each of the purposes that you see on the land, if exempt, allow you to treat the land as a whole as exempt, so it seems to run rather contrary to the idea that merely an exempt purpose is enough even if they are rather non‑exempt purposes that are also on the land.

Now, can I come to the cases, and your Honour the Chief Justice’s question. We adhere to our submission that they are informative because they take the approach that Justice Kirk and Justice Barrett took, save in respect to the different language of primary and, indeed, the two best cases are Sonter, which is in volume 4 at tab 41, and Jones, which is in volume 4 at tab 30.

In Sonter, which was Justice Rath in 1976, the facts are not dissimilar to the present in that there were two activities being conducted on the land of note. One was horse breeding for the purpose of sale and the second was a riding school, and, importantly, as your Honours see at the foot of page 876, at lines 45 to 50, to a large extent it was the same horses being used in the breeding for sale program as well as being used in the riding school program, so it is a case where one has a degree of relationship or complementarity between the uses. The way Justice Rath proceeded on page 877 in the second paragraph is he was first:

satisfied that a substantial use is made of the Minto property for horse and cattle breeding, and for the maintenance of horses and cattle for sale of them and their progeny.

Stopping there, that is effectively the finding in the first sentence of paragraph 125 of Justice Kirk. Can I just pause to observe you do not satisfy the exemption just because you are engaged in breeding, it has to be maintenance of the animals for the sale of them or their progeny. Ignore the foxhound breeding, that is minor. Then come to the riding school activities, and there is a discussion about the income derived from them and their importance to the viability of the venture. Then, in the next paragraph, very reminiscent of the appellant’s arguments about integration, Justice Rath says:

There is no clear cut distinction between the riding school activities and the activities of maintaining and breeding horses. Horses are bought, sold and used for breeding; but with the exception of the stallions, the same horses that are bought, and are to be sold, or used for breeding, are also used in the riding school. In this case therefore I am concerned with mixed uses . . . in the sense of the maintenance of the same animals for different purposes, some of which are purposes of primary production and some are not.

So, on the appellant’s argument, they should have got the exemption because they had established a substantial purpose is the exempt one but, no, what the analysis does is to go and examine all of the facts to ascertain the comparative extent of the use of the land. The next sentence is important for our facts:

It is readily conceivable that where there are a number of uses of the same land it may be the least profitable use that is the most intense one, either in its demands on the land, or upon the labour to maintain it, or both.

Now, that is reminiscent of our facts, because the purpose of racing and winning prize money is less profitable than the nominations business for the very reason that it needs so many employees to run the business. That does not make it a less dominant use or a subsumed use. In fact, it is the employees being used in the racing business that are making the most intense demands on the land and therefore it actually points in the opposite direction. His Honour says correctly, a bit further down, financial considerations will not necessarily be decisive:

Here all the uses . . . are substantial. All of those uses that fall within the that description –

The exempt description:

must be together compared with the uses that do not fall within that description.

Then this is the onus point I referred to, Justice Steward:

I have found that, in attempting to make this comparison, I am unable to achieve any degree of satisfaction as to whether the primary use of this land is for the defined exempt purposes. I suspect that the plaintiff’s activities on the land are distinctly oriented towards the riding school, but I do not think that the evidence would permit such an inference properly to be drawn.

Over the page, about line 5:

The word “primarily”, as applied to the case, means that those uses are to be weighed and evaluated.

That is, both the exempt uses and the non‑exempt uses:

There is no particular touchstone that can be used; all circumstances bearing on the degree, extent and intensity of the uses as land uses are to be considered.

And the conclusion is at line 25. So, it is a case where there are two uses, each substantial. The two uses are interrelated or complementary in the sense that it is largely the same horses being used for the two different purposes. The two uses are compared in all the circumstances, including the degree, extent and intensity, and if the court cannot reach the satisfaction that the exempt purpose is the primary use, the taxpayer fails. So, that is the method that was the law, and all that Parliament did was tighten “primary” to “dominant” use.

The second authority is Jones which is volume 4 at tab 30. Again, the facts are not terribly far removed from the present case. There were two uses on the land. You will pick that up in the headnote at about point 5 on page 710. There was:

horse‑breeding . . . carried on . . . on a relatively small scale. The property was used not only for breeding but accommodating race horses and for agistment.

So, we have horse breeding for sale, which would be an exempt purpose. We have accommodation of race horses – one thinks of the present case – spelling racehorses, training racehorses. They are the two purposes. One would see on page 711, at line 30, the argument you have heard from Mr Walker this morning on the facts:

It is necessary to have horses which have raced to establish their validity as breeding stock. It is important to establish the racing capacity of horses so that a breeding programme can progress.

Or commence. Then, as to the timing point – coming back to your Honour Justice Steward’s question – there was close attention that the foals had not yet been sold. That was because of their youth. And it was:

usual and good breeding practice to keep –

them:

in a good bloodline in order to establish a good female line.

So, in assessing the sale purpose, one is taking into account what is happening now, not that which might happen in the future. But, importantly, we thus have two purposes: we have breeding, said to be for sale, and we have accommodation of racehorses. On page 712, at about line 6, there is another echo of the appellant’s argument here:

The evidence given by the plaintiff as to the advantages of racing fillies before breeding from them and establishing a performance of successful runs was supported by –

other evidence, which:

I accept –

So, this type of argument has been run.

GORDON J: Where was that?

MR GLEESON: It is about point 6 on page 712 of the book.

GORDON J: Thank you.

MR GLEESON: It was run 44 years ago. The dispositive reasoning is at the foot of the page:

Because of the definition contained in the Act of the words “land used for primary production” they must be read in the circumstances as land used primarily for primary production and can, in the circumstances –

that is, the facts of the case:

relate only to the breeding of horses but not to racing or agistment of horses . . . the section refers to land “used” and not land which is being prepared for use –

And then over on 713, on line 5:

The predominant use must be of such a degree that that use can be attributed as the character of the parcel as a whole.

Now, your Honour Justice Edelman’s question. That is how, we submit, one deals with the incidental or the subsumed use: one is looking at it and saying – it is interesting that he has used the language “predominant” – is the primary, or now the dominant use, of such a degree that the use can be attributed as the character of the parcel as a whole?

GORDON J: That was Justice Lush, was it not?

MR GLEESON: Yes. And Justice Lush is then set out. The particular language is at line 21, and the conclusion is then at line 27, that applying that test, the predominant use was not shown to be for primary production, i.e., maintenance for sale. And so, the accommodation or the racing of the horses is something that was not subsumed in the sale purpose, it is not an exempt purpose in its own right, and the plaintiff failed to establish that the sale purpose predominated over the racing purpose. So, the very methodology of Justice Kirk and Justice Barrett has been applied for a long time in New South Wales and in other States.

So, concluding our paragraph 13, in terms of your Honour Justice Gordon’s question about statutory purpose, our answer would be twofold. The purpose is to carry through the established approach of the earlier cases but under a tighter test of “dominant use” rather than “primary use”. Secondly, it would run contrary to Parliament’s purpose to say, as long as you have an exempt purpose, you can be doing one or more other things, even if related, as long as they are non‑trivial, and you get the benefit of the exemption.

One only needs to think about the racing purpose. The racing purpose is to win races; win prize money; win fame, win prestige; query, improve breeding. The New South Wales Parliament fairly clearly has said, we are not, via the land tax exemption provisions, promoting racing businesses. This, in substantial part, is a racing business. It would be contrary to that purpose to say you get the exemption just because you are maintaining some horses for sale.

Your Honour, as to our point 14, which concludes construction, it may follow from what I have put that we would first contend the appellant’s construction is quite uncertain and represents a rewriting of the provision, because one has to insert these concepts of relation and complementarity and concepts of non‑trivial purpose. If one is speaking of judicial gloss, this is a very large judicial gloss being urged by the appellant. It is difficult to understand how it is intended to work, and it is extremely difficult to understand how it is intended to sit with the appellant’s acceptance that the other two properties are not exempt.

Now, Mr Walker was asked about that this morning. These are the properties the primary judge discussed at paragraphs 26 and 27. At 26, Crown Lodge. That is the main property for training racehorses. At 27, Osborne Park, a:

training facility for horses that have commenced their racing –

There is also some spelling going on there. Now, on the appellant’s argument, a substantial use of all of its properties is said to be maintaining horses for sale because either they are selling horse semen or all horses, or some horses, are going to end up being sold later in their life, and as long as they have that purpose, then it is said it does not matter that there are other purposes such as racing purposes. So, if that argument is right, then these two properties should never have been exempt.

That is also true of Mr Walker’s fact argument. His fact argument is that all racing is part and parcel of sale. If that is right, Crown Lodge and Osborne Park are part of the sale purpose and they should have been exempt. But these were difficulties that emerge on their construction and they are ones which the Court should not accept.

Now, your Honours, I next wanted to deal with the notice of contention, which is our paragraphs 18 to 20, just to explain where it fits into the argument. Although it is not pellucidly clear, on our reading of Justice Kirk at paragraph 125, consistent with the way in which he had set up the question at paragraph 40 that I have been to, there were two uses on the land – one was racing, one was sale. You see, about four lines from the bottom of that paragraph:

the racing purpose was not merely incidental and subservient to the sales purpose.

So, he has two independent uses and purposes. He has then done the weighing exercise and decided that the sale purpose is not the dominant one; indeed, the dominant one is the racing purpose. So, if that is the correct way to read those paragraphs, this is a case where there were two uses, and the appellant failed in establishing that sales dominated racing. If the way of reading this paragraph, and perhaps Justice Simpson, is that there was a single, dominant use, but within that use, the sales did not dominate the racing, one reaches the same conclusion. So, that is all we wish to say on the notice of contention.

Your Honours, that leaves me only with the facts. I feel I do need to say something on them, because Mr Walker has, in effect, purported to orally amend his notice of appeal, and your Honours have asked some questions about the facts, so unless the facts are not in the appeal, that is what I will have to do at 2.15.

GAGELER CJ: Mr Walker, does your case turn solely on the construction point?

MR WALKER: That for which we were granted special leave turns on the construction point, as I answered your Honour at the outset of address, but the construction point, properly understood – that is, on the proper interpretation – requires characterisation by reference to the findings of fact. Now, I do not know whether that helps my friend, but of course one has to look at the facts because to interpret the statute requires then its application.

GAGELER CJ: We will hear Mr Gleeson, at 2.15, on the facts.

MR WALKER: I am not suggesting he has to address them – I am happy for him not to.

GAGELER CJ: He wants to, and he is entitled to ‑ ‑ ‑

MR WALKER: If it please, your Honour. Yes, of course.

GAGELER CJ: ‑ ‑ ‑ and he will do it briefly at 2.15.

MR WALKER: May it please the Court.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

GAGELER CJ: Mr Gleeson.

MR GLEESON: Your Honours, just before the facts, your Honour Justice Jagot, I gave our submission on section 10A. In case I did not make it clear, the approach that we urge as to how it operates applies across all of the earlier provisions, including ones that have the word “primarily” built in it because it is the purpose.

JAGOT J: Yes, I understood that.

MR GLEESON: Thank you. Your Honours, there are four factual matters I want to address. The first, which is the shortest, is simply paragraph 109 of Justice Kirk is one of many places that makes clear that it was accepted by Godolphin below that there were two distinct purposes – the racing purpose and the sale purpose. That is the way the case was run. It reflected the practice in the industry, it was reflected in Godolphin’s own management accounts, and that is why Godolphin did not seek the exemption for the other two properties. There is no finding, as sought by Mr Walker, that racing is part and parcel of sale, and the Court should not permit that case to be run.

The second matter is to submit that the approach of Justice Kirk to the facts is supported, amongst other things, by some critical documents in the book of further materials – if I could just show you a couple of the key ones. If you start at page 5, that is the map of Woodlands, which has two parcels. If you ask what activities are being conducted on Woodlands, the findings – which we have annotated in paragraph 1 of our outline – are that breeding mares are kept there; foals are born, weaned and trained; and they commence their education and development there. Foals grow to yearlings and after about 18 months, they move to Kelvinside.

So, focus on what is happening there – it is the breeding and the early stages of development of foals and then yearlings. Critically, the findings are that there were very few sales of foals or yearlings as such. So, it is difficult to see any strong sales purpose, let alone a dominating sales purpose on at least Woodlands, in the tax year.

STEWARD J: But if you had two blocks of land – one of which – and you are devoted solely to selling horses, and use one for the early development and the other for sale, surely both blocks would be exempt.

MR GLEESON: The selling block would be exempt. The other block – if I take your Honour’s assumption correctly, that everything you were doing on that land is devoted to the purpose of putting them in the condition where they will be sold ‑ ‑ ‑

STEWARD J: Yes, yes.

MR GLEESON: ‑ ‑ ‑ then that may allow that character to flow over to the second parcel of land. My point on these two parcels is, if you look at what is happening there, it is not sale in the tax year, other than at the de minimis margins, because you do not cull the foals or the yearlings. But if you take the next step, and say, what is going to happen to ‑ ‑ ‑

STEWARD J: Do you say that the sale purpose has to be one that is exercised within the relevant exigible year?

MR GLEESON: It has to be either exercised, or at least it has to sufficiently stamp the activities which are being carried on in the year. It cannot be a simply in futuro purpose; it has to characterise what is happening in the year. But just so I am being clear, your Honour, I am not ruling out, that, in characterising that map at page 5, it could be relevant to ask the question: where are they going to go when they get to 18 months, and why?

STEWARD J: It is just at paragraph 125 of Justice Kirk, there is an acceptance, I think, you said earlier, that “breeding” and “sales” is a substantial purpose. That is not one that is denied for Woodlands but accepted for the other property; it cuts across.

MR GLEESON: With respect, your Honour is correct. That paragraph is framed as to both. But what I am showing you on page 5 is, if you ask, what is the substantial purpose of sale on page 5, in the light of the findings of fact, it is certainly not going to be a dominant one, because what is actually happening here is breeding. And then, if you ask the question – and there is an immediacy element to this – what is to happen to the ones that reach 18 months? The answer to that is page 4, which takes us to Kelvinside. On Kelvinside, there are the four parcels in different colours. The stallions are in the top left‑hand corner of the blue parcel.

JAGOT J: I do not have colour. I am just not looking at colours.

MR GLEESON: Sorry, do your Honours have the colours?

GAGELER CJ: No.

MR GLEESON: Can we rectify that after the hearing, your Honour?

EDELMAN J: It is on the electronic version.

MR GLEESON: I see.

JAGOT J: We can find it.

GAGELER CJ: We can get it in colour, do not worry, Mr Gleeson.

MR GLEESON: The colours help to follow what I am trying to put as short as I can, that the large irregular shape blue parcel has in its top left‑hand corner where you see quite a few little dots, that is the stallion area; that is the stud. That is the area which is said to be 10 percent of the blue parcel and the activity that is being carried on on Kelvinside that has the strongest sale purpose to it is that stud, because that is the sale of the horse semen and the nomination fee.

JAGOT J: Sorry, is that the whole blue parcel?

MR GLEESON: No, it is just that top left‑hand corner where you see lots of dots, which are the horse stables.

JAGOT J: I see.

GORDON J: So, it is above the pink.

MR GLEESON: Yes.

GORDON J: Above the road, on the right. At the moment we have this.

MR GLEESON: Yes, that is it, your Honour. So, that is 10 percent of one of four parcels. Then recall that the stallion services are being provided not only to third parties to earn nomination fees, but they are the stallions which are breeding the Godolphin mares.

So, the mares have come here. That is the stallion area. The rest of the blue parcel, the 90 per cent you see on the bottom of it, the circular track, that is the training track for the yearlings when they have arrived. The rest of the blue parcel, save unless a stallion is exercising, is devoted to two purposes. One is it is the yearlings being given their introductory education and training on the track and starting to learn how to race, and the rest of the blue parcel are the racing horses from Osborne Park and the fourth property being spelled here.

So, the activities actually occurring on the ground, save for the 10 per cent, are the training of young horses to enter the racing program and the spelling of horses which are in the racing program. Then if you ask what is happening on yellow, pink and orange, the answer is the same as I have just given you, which is spelling and training of young horses with sale, as we know, of the horses being deferred until at least after the third year when their racing potential has been assessed. In addition, if the Court goes to page 29 of this book, one sees that the sales of the horses by private sale are very few and by public auction they are very few at the two‑year age. They start to increase at the three‑year age, but the bulk of them were in the period up until 2014 or, perhaps, 2015.

In the last three tax years there were very few sales of horses, even up to six years. Now, they are changes made in the course of business of the years – how much to sell. The 70 per cent figure was only an approximation, and it appears to relate more to the earlier years, or at least to horses that are at least six years old. Now, while your Honours have that bundle – this is the sort of material that Justice Kirk analysed in great detail – if you go to the document at page 30, which is the Flying Start Document for 2018, and you look at page 34, which is Godolphin’s description of its own operation, it emphasised that it is breeding “to race”. It says at that stage it has 176 “Mares bred to stallions”.

So, that breeding would occur on Kelvinside, but they would then be brought back to Woodlands. You have “Live Foals produced” – that is happening on Woodlands. The “Homebreds to enter racing program” – that is happening on Kelvinside. It is described as a breeding and racing operation funded by three sources of income. The first is the nomination fees, the second is the prize money and the third are the sale of the surplus mares, weanlings and racehorses.

So, there are three substantial sources of income that fund the operation and the sales of the mares, weanlings and racehorses are described accurately as surplus, that is because they are surplus to the racing objective. The mares are either at the end of their racing career – six years old – the weanlings only if surplus, the racehorses after three years at the earliest and perhaps later.

Just finally, in that document, if you go to page 35, Justice Kirk placed reliance upon the fact that in the key performance indicators, indicators 1, 2, 3, 5 and 6 were all about winning races and winning prize money.

STEWARD J: What about the first paragraph on that page?

MR GLEESON: Yes. The first paragraph says an objective is to be an integrated operation:

to enhance the residual value of its bloodstock holdings by achieving success on the racetrack at the highest levels.

All of that paragraph can be taken – you see the last sentence:

Continued racetrack success will enhance the . . . commercial programme and provide an opportunity to create an operation that is self sustainable.

Godolphin will capitalise on its . . . advantage (best Stallions, best Broodmares, best Racehorses) –

So that is what they mean by “enhance the residual value”. They want to try and have the best stallions, the best broodmares and the best racehorses. That is the capital account, in a sense the document is speaking about, but in terms of the revenue account, that is to lead to the four things immediately below that, the second and third of which, in particular – the second is commercial revenues from the stallion loss but the third is to grow the prize money from racing.

So, the objective of having the best stallions, broodmares and racehorses is to lead to, inter alia, as a very substantial purpose, growing the prize money from racing which, in turn, means winning all those horses. One can see paragraph 125 of Justice Kirk is well‑supported by this document. Can I go then next, your Honours, to the accounts which are at page 7? There are no accounts per se for Kelvinside or Woodlands. Instead, one can only draw inferences from the overall accounts. Justice Kirk’s summary findings on these are at paragraph 95, and we embrace that paragraph.

Can I emphasise this: there are five separate cost or revenues centres being dealt with in this document on the revenue account. The first is the stallions, and that may be taken to be the sale revenue from the horse semen which is indicative of a sale purpose – that is undoubted – and it is also a substantial revenue earner and a substantial profit earner. However, if your Honours could note the figures that are there stated – which Justice Griffiths placed reliance upon – are for the whole of Kelvinside, and as Justice Kirk found at paragraph 82, if you eliminate the Victorian horses, the average figures here reduce by $5.7 million a year. So, that brings down the differentials in the document.

The second group of numbers are breeding operations, and this is a cost centre, not directly recording revenue. You see the heavy staffing costs at line I. So, this is giving us some indication of the costs and the activities that might be occurring on Woodlands where that early part of the breeding is occurring, and it is indicative of substantial costs being devoted to the activities on the land to produce that breeding.

The racing operations are the third item, and one sees that the racing winnings, line L, are very substantial. They are not as great as line A, but the difference is reduced once you take into account the 5.7 million. The critical item is O, the staffing costs. That is what drives the losses from the racing operations. As per the authorities I took you to this morning, this is where it counts by way of showing expenses can indicate the activities on the land – namely, lots of staff engaged in the racing operations. Where is that happening? It is happening, presumably, at the other two properties but it is also, presumably, including activities on Kelvinside where the spelling is occurring and where the training of the young yearlings is occurring.

So, that is indicative of substantial activities being devoted to racing operations and, of course, this is one of the documents Justice Kirk had in mind to say, even Godolphin recognises differences between racing and sale purposes. Line S is the support. You will see that is very substantial ‑ ‑ ‑

STEWARD J: What is that?

MR GLEESON: That is head office.

STEWARD J: It is head office.

MR GLEESON: Yes.

STEWARD J: What is the net horse income at line M?

GORDON J: I had assumed it was fees paid to train horses.

MR GLEESON: It is, presumably, line L, minus fees paid to train horses, or other immediate direct costs which are taken into account before one gets to N, O and P.

GAGELER CJ: What purpose is being served by getting into this level of detail?

MR GLEESON: The primary submission I made – which was my second point – was that the findings of Justice Kirk, including his evaluative conclusion at paragraph 125, are well‑supported by the material that was before him and this Court should not be entertaining any of this material. But, to the extent you are tolerating the argument put this morning – that, at a very high level, the whole of racing is part and parcel of sales, when one actually looks at the way they conduct their business, one sees that is not so. One can see interconnections but what one sees is the Godolphin recognising that racing operations are worthy of their own very substantial employee and other costs, and treated as a separate item within an overall business that may have a degree of integration.

Therefore, when one looks, for instance, at row R – which is racing net loss – a superficial reading might say, this shows you you are not racing your horses for the purpose of winning the prize money because you are using it all up in your costs; you must be doing it in order to earn stallion fees or to earn sale fees – and Justice Ward made some observations to that effect – but what this is actually telling you, in terms of “use of land”, is that the activities on the land are substantially these employees conducting this very large racing operation which has a purpose of racing.

Your Honours, I am just about to finish the document. As to rows T to V, your Honour Justice Gordon asked about external horse sales. This document records external horse sales and purchases that is outside the group. The table which Justice Griffith referred to at paragraph 203, table 1, which appears to have significantly higher sales figures, includes internal sales within the group. The evidence on that topic is in the supplementary book of materials that we gave the Court this morning. It came out in cross-examination. That is what explains the difference.

In terms of the issues before your Honour, if you get to this document, we would submit that row T is the best indicator of the horse sales, and one sees that they are significantly less than the income from the racing operation. So, that is what I wish to say about the accounts, your Honour. In terms of sales, we have given you the references in paragraph 3 of our outline to indicate that they are, essentially, of the surplus.

Your Honours, the third topic was the question of integration. There was an argument made this morning about integration, and this somehow assisting the characterisation argument. We would direct you to paragraphs 56 and 101 of Justice Kirk, which shows it is perfectly possible to conduct these operations without making the integration choices that Godolphin does. A rival breeder does not make those choices, and is, in fact, more successful in doing so.

Your Honours, unless you have questions on the facts, the last point I want to come to is the questions raised this morning about the prestige factor. Your Honour Justice Steward asked, how was the case run. The case was never run to say the sole reason you are doing this is to win the Melbourne Cup, and you are therefore prepared to tolerate any losses that you may suffer on the way. That was not the case, but what was the case, was that part of the explanation for being prepared to tolerate the losses that you see at paragraph 88 of Justice Kirk – a substantial part of why they would be prepared to tolerate losses in the hundreds of millions of dollars and a negative net asset position of 614 million lies in the matter in paragraph 98, which is the long‑term pursuit of racing prizes such as the Melbourne Cup.

So, what that is telling you within the inquiry is: should the sale purpose be treated as governing and controlling the racing purpose? One of the reasons it should not, is that an essential part of the use of the land was to suffer very large losses in the pursuit of racing prizes. While none of that is surprising – if your Honours still have the book of further materials at page 62, the substantial objective of winning the big races, and the very big races, is here recorded under the heading “Drought Breaker”, where this is said:

Kevin McEvoy and Cross Counter lead home on an English 1‑2‑3 at a rain‑soaked Flemington as Sheikh Mohammed finally wins the Melbourne Cup after 30 years of trying.

So, a substantial purpose of this business is to pursue racing success. That purpose is not an exempt purpose.

STEWARD J: Was that put to any witness?

MR GLEESON: I will check, your Honour, whether that put to Mr Cox, who was the managing director at the time.

STEWARD J: Thank you.

MR GLEESON: Unfortunately, we do not have the full transcript here.

STEWARD J: That is all right. Thank you.

MR GLEESON: If we can find an answer to that, I will seek to give it to your Honour. Your Honour the Chief Justice, do you wish us to file colour copies of the book of further materials?

GAGELER CJ: No, thank you.

MR GLEESON: May it please the Court.

MR WALKER: Your Honours, there is something collateral, at best, to the argument of our friends in introducing the surely subjective notion of pursuing the glory of holding the Melbourne Cup as the winner. One is reminded of the distinction that Parliament obviously intended between endeavours on rural land and endeavours on non‑rural land, about which the parties have addressed you. Your Honours would not be engaging in unwarranted speculation to say that employment and enterprise in rural areas has a value, politically, to be favoured by tax policies that might not be reflected with respect to non‑rural land.

In any event, it is plain that expending very considerable money in a considerable business that does not make a profit, does not disqualify from the exemption from land tax under 10AA(1) as understood in light 10AA(3). That is the first thing. The second thing is that with respect to this notion of net horse trading – an aspect, we gather, of some uneconomic character intended by the respondent to be called in aid in their defence of the decision below.

As Justice Ward noted with respect to that argumentative document – that submission document – in her Honour’s paragraph 241, that I do not need to take you to, that was an artefact of argument which, in our submission, neither serves to objectively characterise purpose of a dominant use, neither does it admissibly introduce anything subjective, presumably along the lines of, this is a person controlling this corporation, he can afford to lose a lot of money – that is neither here nor there. When I say lose a lot of money, perhaps a more accurate way would be to say to spend a lot of money on employing people.

Your Honours, with respect to the detail that my friend took you to recently concerning the materials, colour‑coded or not, in the respondent’s book of further materials – just using, by way of an example, the description verbally on page 34 to which you were taken, the reference to revenue from stallions covering mares, the reference to revenue from sales, is surely enough to put flesh on the bones of the slogan “breeding to race and racing to breed” as being the kind of integrated exercise to which we have referred.

With respect to the sales, in reply we say this in relation to our friend’s response to Justice Steward. It is, we think, not the respondent’s position that you do not have a purpose for sale if you neither consummate the transaction nor indeed bring it into eminence within the year of account – in tax terms, the exigible year. That would be entirely without textual purpose in any event, and it would be at odds with any basic understanding being brought to any legislation concerning rural endeavours, bearing in mind seasonality and cycles not obeying the law of annual accounts.

In our submission, the notion of use of land, which is the physical deployment that the parties have pressed upon you in their various ways, for a purpose of selling is, as a matter of ordinary English, not something which is available only if sales are accomplished in the particular accounting period.

With respect to the objection to our addressing upon questions of characterisation, which obviously depend upon found facts, not facts that we ask this Court to find for the first time, it is to be borne in mind that the notion of a single composite purpose, that is the fact that racing is not alien to selling – and indeed, vice versa – can be seen in the passage immediately following paragraph 109 in Justice Kirk’s reasons, to which my friend took you. In paragraph 110, his Honour notes the argument in exactly those terms that we put. This is not novel or being introduced without a foundation in the way in which the proceedings were framed.

Could I then come, briefly, to return to the question of section 10A. Section 10A’s purpose evidently is to ensure that what might be called exempting reasons that turn upon sole use or exempting reasons, for that matter, that depend upon dominant use are not to be defeated because there is more than one purpose, but all of the purposes in question – be it for one use or more than one use – would, if that were the sole purpose, represent an exemption.

That is, evidently, a beneficial clarification, as the Minister put it, or extension, perhaps, as it really was in order to avoid what might be called nonsensical results where all the uses in question are for purposes all of which would entitle the landowner to an exemption. That, with respect, has nothing to say about the simple application of 10AA(1) and in light of 10AA(3)(b), bearing in mind that the insistence there is that you find a dominant use, which obviously contemplates there may be another use or other uses, and that you require the characterisation of that dominant use by the words that follow, namely, “for the purpose of selling” et cetera.

The function of the fiction, or what might be called the thought experiment that you see in subsection (2) of section 10A is quite different from that and proceeds upon, as I say, the acceptance of two uses, both of which, had their purpose been the sole purpose, would have led to an exemption. For the reasons we put in‑chief, that simply will not touch the question of the applicability of a 10AA exemption.

We submit that, contrary to the way in which my learned friend has explained the reasoning – it is of Justice Kirk alone, really, upon which the respondent depends – we submit that the staged or stepped exercise that Justice Barrett has explained is one which proceeds in the following way, when there is the kind of interdependent, mutually supportive set of purposes as was the case here – as is the case here.

One first of all asks whether the dominant use was for the maintenance of animals, and there is a permanent tick in that box. But next, you ask whether that maintenance of animals – that use is for the purpose of selling, et cetera, then one gets perhaps a provisional tick in that box. I mean, yes, factually – to use Justice Kirk’s expression – that is a significant purpose. So, it is for those purposes.

Next, one might ask whether another purpose – if racing is another purpose – is such that it contradicts the existence in reality as a matter of common sense that the purpose of the dominant use is selling, et cetera. And that will be that which we are not re‑visiting the facts, because the facts as found – the facts as found in all the reasons below produce the integration by which racing informs the prospects of selling – I do not want to repeat myself.

Another way of framing that is there had been nothing alien or discordant or, really, truly separate between the racing and the selling on the facts as found in the decision below. There is, thus, what might be called an integrated set of purposes not pulling in opposite directions and not conflicting – not competing, in order to provide the characterisation of the use of the land, which, on any view of it, is for the maintenance of animals.

That, in our submission, is the proper way of proceeding, more or less in accordance with the way Justice Griffiths approached it, and certainly the way in which the trial judge approached it. In our submission, the error in Justice Simpson is to have looked for a dominance as between purposes, and the error, quite obviously – as we have identified it in Justice Kirk’s reasons – is to transpose the epithet and qualification dominant from “use” to “purpose”, with the effects that we have argued.

May it please the Court.

GAGELER CJ: Thank you, Mr Walker. Yes, Mr Gleeson.

MR GLEESON: Justice Steward asked me that question, the answer is yes, it was put in cross‑examination, and, in fact, the first sentence in paragraph 98 of Justice Kirk is a summary of what Mr Cox accepted in cross‑examination. It is at pages 131 to 132 of the transcript, and we will seek to provide those pages to your Honour’s associate. Could I link that up with paragraph 112 of Justice Kirk, because that question and answer is on page 132 of the transcript, so it will be on the material that we give you. That was the final question that was put, and you see the answer at 112.

May it please the Court.

GAGELER CJ: Thank you. The Court will consider its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 2.52 PM THE MATTER WAS ADJOURNED