Chief Executive, Department of Lands v KW Whackett; Chief Executive, Department of Lands v KW and MR Whackett [1995] QLAC 5 (1994-1995) 15 QLCR 311

LAND APPEAL COURT BRISBANE Re: Appeals against determinations of unimproved value by the Land Court. Valuation of Land Act 1944. AV93-163 and AV93-164. Chief Executive, Department of Lands v. K W Whackett Chief Executive, Department of Lands v. K W and M R Whackett J U D G M E N T O F M A J O R I T Y Delivered this third day of March 1995. These two cases raise squarely for consideration the meaning and operation of section 17 of the Valuation of Land Act 1944 (the "Act"). The section provides among other things that, where land has potential for subdivision or some other use than farming but the land is exclusively used for purposes of farming, then any enhancement in the unimproved value of the land attributable to its potential for subdivision, or other more valuable use, shall be disregarded. The cases involve the determination of the unimproved value of two adjacent parcels of land at Cedar Creek, about 15 kilometres south of Beenleigh. As at 31 March 1992 the Chief Executive valued each parcel as a rural residential site. The parcel which is the subject of AV93-163 (Lot 2 on RP 47469 referred to hereafter as Parcel A) was valued at $220,000 and the AV93-164 parcel (Lot 2 on RP 144905 referred to hereafter as Parcel B) was valued at $205,000. The owners appealed to the Land Court where the learned member concluded that the subject lands were "exclusively used for purposes of farming" and so came within an exception created by section 11(9) of the Act, subsequently reprinted as section 17(1). Accordingly, the valuations of the Chief Executive were set aside and the unimproved values of the subject blocks were determined to be (in the case of Parcel A) $60,000 and (in the case of Parcel B) $56,000. The Chief Executive has appealed to the Land Appeal Court, contending that section 17(1) does not apply to the land and that the Chief Executive's valuation should [1995] QLAC 5 -- 1 of 21 -- 2 be restored. The owners contend that the decision of the Land Court was correct and that, alternatively, if the decision was incorrect in law, the parcels should be valued as rural residential land with the unimproved values of $66,000 (Parcel A) and $120,000 (Parcel B) respectively. To deal with the appeal it is necessary to consider, first, the nature and use of the subject land, then the terms and operation of section 17 of the Act. It will be necessary to consider evidence relating to the value of the blocks for rural residential purposes only if section 17 does not apply to the valuation of the subject land at the relevant date of valuation. The nature and use of the subject land Parcel A has an area of 54.8 hectares and Parcel B has an area of 51.03 hectares. Each is zoned "Rural C" in the Town Planning Scheme for the Shire of Albert effective at the date of valuation. The separate lots were valued on the basis of what was said to be their respective potential as zoned. Each lot was described in the Valuer's Report prepared by Mr IL Hawley, a valuer employed by the Department of Lands, as consisting of "moderate to steep sloping forest/scrub country" which is "used for grazing beef cattle". Parcel A was purchased by Mr KW Whackett in 1969 specifically for grazing use. He fenced the land and did some clearing and ran cattle on it soon after purchase. The contiguous 51.03 hectare lot, Parcel B, was purchased jointly in 1980, extending that grazing operation. Until some time subsequent to the relevant date of valuation, there was no dwelling on either lot. The appellants live on a property nearby. The aggregation is boundary fenced and cattle move freely between the two parcels of the subject land. The land is divided internally into paddocks and is serviced by a substantial set of yards, loading ramps, sheds and a molasses dump for feeding cattle in dry weather. Mr FL Olsen, a retired valuer, presented the Whacketts' cases in the Land Court and the Land Appeal Court. He described the difficult access to the land and its steep topography. In his opinion, 80 per cent of the total area is steep to very steep and the balance has easier slopes. Some of the land is subject to land slips. He said the land has always been used by Mr Whackett solely for the breeding and grazing of cattle for sale, and said the carrying capacity of the total area was about 70 head of mixed cattle. Mr Whackett gave evidence to the Land Court about the development of the land, its exclusive use for grazing, but its poor quality and relatively low carrying capacity. He confirmed that about 70 mixed head of cattle are carried on a -- 2 of 21 -- 3 year-to-year basis. In the three years 1990 to 1992 he sold approximately 25 head of cattle each year, the varying sales depending on the breeding programme and the seasons. He estimated the average recent gross return to have been in the order of $5,000 per annum, although the income depended on the numbers sold, the state of the market and the seasons. Mr Whackett works the cattle, and most of the income from the sale of cattle is spent on machinery and other expenses connected with the enterprise. The terms of section 17 of the Valuation of Land Act The parts of section 17 that are relevant to these proceedings are as follows: "Exclusive use for single dwelling house or farming 17.(1) In making a valuation of the unimproved value of land exclusively used .... for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made. (2) In subsection (1) - ... 'farming' means - (a)the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or (b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock; if the business or industry represents the dominant use of the land, and - (c)has a significant and substantial commercial purpose or character; and (d)is engaged in for the purpose of profit on a continuous or repetitive basis. " The question in each case is whether, at the relevant date of valuation, each subject block was "exclusively used ... for purposes of farming". Legislative history These cases are among the first involving section 17 to come to the Land Appeal Court. The section is similar but not the same as section 11(i)(vii) which it replaced. The law relating to the operation of section 11(1)(vii) was developed in a series of -- 3 of 21 -- 4 decisions of the Land Court and the Land Appeal Court. To assist in ascertaining the meaning and operation of section 17, it is useful to consider its legislative antecedents. The following discussion of the history of the section draws on the judgment of the Land Court in Taylor v. Chief Executive, Department of Lands ((1993) 14 QLCR 477) and the judgment of the Land Appeal Court in Thomason v. The Valuer-General (AV93-347, unreported decision dated 3 April 1992). Before 1971, there was no protection for land used for a primary production enterprise and such land was required to be valued on the basis of its highest and best use. If that land had a potential for a higher use, then it was valued on the basis of that potential and its existing use was ignored. However, in the 1971 amendments to the Act, Section 11(1)(vii) was inserted, the relevant parts of which were - "In making, pursuant to this subsection, the valuation of the unimproved value of land exclusively used ... for purposes of the business of primary production, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded ... In this paragraph - .... `the business of primary production' means the business of agriculture, pasturage, horticulture, viticulture, apiculture, forestry (including the planting or tending in a plantation or forest of trees intended for felling), poultry farming, dairy farming or any other business consisting of the cultivation of soils, the gathering in of crops or the rearing of livestock." As the Land Appeal Court has noted previously: "The provisions of section 11(1)(vii) are concessionary - they constitute an exception to one of the cardinal principles of valuation, namely, that potential forms part of the unimproved value. In terms of the section, if a parcel of land is being exclusively used for the business of primary production any enhancement in the value thereof because of a higher potential use is to be disregarded." (WH Bowden v. The Valuer-General (1980) 7 QLCR 138, at 148.) The purpose of section 11(1)(vii) can be gleaned from a statement by the Honourable WAR Rae (then the Minister for Local Government and Electricity) to the Legislative Assembly on 1 December 1971 when moving that a Bill be introduced to amend the Valuation of Land Act 1944-1970. The Minister stated: "The Bill also provides that land used exclusively for primary production in a potentially higher-use area is to be valued without regard to the potential. ... The provision -- 4 of 21 -- 5 regarding primary production has been inserted to ensure that a primary producer caught up in urban development is not valued on the potential until he ceases using the land for primary production. This will enable a primary producer to carry on economically for as long as possible, and is parallel to the single-unit residential owner in a higher use zone." (Parliamentary Debates, Legislative Assembly, 1 December 1971 at 2401-2.) The purpose of the provision was more fully explained by the then President of the Land Court in TR Groom v. The Valuer-General, an explanation that was quoted with approval by the Land Appeal Court in Walker v. The Valuer-General (1978) 5 QLCR 347 as follows: "One of the objects of the Valuation of Land Act is to achieve relativity in the incidence of rates. It does this by assuming that all land in Queensland is held as fee simple and for purposes of valuation is regarded as if it remained in its unimproved or natural state. The normal principle of valuation requiring that land must be valued for its highest and best use has been judicially held to be generally applicable. Section 11(1)(vii) was introduced as an exception to the general application of this principle. As far as primary producing land is concerned its aim appears to be to give a rating concession to those lands exclusively used for the business of primary production which are in localities where lands in the course of progress have come to have a potential for some other use. The most common example is, perhaps, that of lands in actual use for substantial cultivation or dairying on the outskirts of developing towns. By virtue of their situation these lands would command a market as accommodation or subdivisional land. The section patently protects such lands from the incidence of the higher rate burden which would apply to accommodation or subdivisional land." (at p.353) The application of the provisions of section 11(1)(vii) to a particular case is not a mechanical one. An assessment of the facts in some cases may indicate that there is room for argument about whether the concession applies. The passage from the Walkers' case just quoted continued: "The difficulty is how far the Legislature intended this concession to extend. Like many statutory concepts, the concept in itself and its purpose are easily appreciated but the application of the concept to the facts of particular cases causes problems and difficulties" (p.353). In the Walkers' case, the Land Appeal Court pointed out that not all activities of a primary producing nature constitute a "business", and set out the requirements in the following terms: "Profit or lack of profit is not in itself the deciding criterion ... There must, in my opinion, be continuity, diligence and repetition of actions constituting the activities and, -- 5 of 21 -- 6 moreover, the operations must have some significant commercial purpose or character - a degree of substantiality or viability although not necessarily always profitable. Alternatively, the actions or operations in train at the relevant date of valuation must be such that given favourable seasons and conditions they are of such magnitude that they will, in the fullness of time, by maturity or further activity reasonably be expected to develop into a viable venture. In short, I cannot accept that the scale of operations or activities are not a significant factor in determining whether or not they are to be classed as a business." (at p.354). Thereafter this passage became the test of whether a primary production activity qualified as a "business" and has been applied by the Land Court and the Land Appeal Court on numerous occasions. For example, in Tobin v. The Valuer-General (1986-87) 11 Q.L.C.R. 29, the Land Appeal Court applied the test in respect of about 30 hectares of land in the Gympie area which ran 20 to 25 head of cattle, with annual gross returns of up to $4,500, while profits were of the order of $1,000 to $1,200 per annum. There was evidence that a fully developed carrying capacity would be up to 40 head. After discussing the Walkers' case, the Land Appeal Court said: "Viewing the totality of the evidence concerning the nature of the primary production activities carried out on the subject lands, we cannot find that they conform to the test of Walker's case. Although they possess some of the necessary elements of a business, they lack a significance of commercial purpose or character, a degree of substantiality or viability." (at p.32). In Crawford v. The Valuer-General (1990-91) 13 Q.L.C.R. 138, the Land Appeal Court again considered the provisions of Section 11(1)(vii), this time in relation to the valuation of 4 hectares of land in the Brisbane suburb of Chandler. This land had been used for the growing of small crops, mainly strawberries and tomatoes, for about 30 years. The land owner had extensive plant and equipment which were used in the small-crop enterprise. His income from the sale of crops for the three years prior to the hearing, was $5,184, $4,667 and $10,247. However, his expenditure in production for those three years was $3,686, $10,963 and $9,050, resulting in a profit of -- 6 of 21 -- 7 $1,498 for the tax year 1986, a loss of $6,296 for the tax year 1987 and a profit of $1,197 for the tax year 1988. In the Land Court it had been acknowledged that the activity carried out by the appellant possessed all the ingredients of continuity, diligence and repetition of actions constituting the activity, but it was considered that it did not possess the degree of substantiality or viability necessary to bring the activity within the requirements of the Walker test as a "business" of primary production. The Land Appeal Court at p.142 found that "an artificial and unwarranted gloss had developed in the determination of eligibility for the benefit of Section 11(1)(vii)" and considered it desirable that the cases be re-examined. It found that a tendency had developed to include the element of "scale of operations" in the Walker test as an end in itself in determining whether or not an activity is a "business" of primary production, to give it a greater level of importance than was intended. The Court went on to discuss the judgments of members of the High Court in Hope v. Council of the City of Bathurst (1979-80) 144 C.L.R. 1, where it was explained that the requirement for the use of land to have "a significant commercial purpose or character" arose from "an unwarranted interpretation of the statement by Walsh J in Thomas v F.C.T. (1972) A.T.C. 4094, 4100 in which His Honour used that phrase." The Land Appeal Court said: "The remarks by Mason J at pp.9-10 are destructive of the notion that an enterprise may qualify as a business according to notions whether the activities are `significant', `real', `important', `genuine' or `weighty'." (at p.145) After referring to the facts relied on by Mason J in concluding that the appellant's activities in that case amounted to a business, the Land Appeal Court said: "His Honour's remarks do not suggest any magnitude or size of the activities as being necessary to constitute a business, and indeed they underline the fact that a business may be small and that concentration upon the size or significance of the business is prone to lead to error." (at p.147) The Land Appeal Court went on to consider Ferguson v. F.C.T. (1979) 79 -- 7 of 21 -- 8 A.T.C. 4261, Fennell v. Wyong Shire Council 31 L.G.R.A. 64 and F.C.T. v. Walker (1985) 16 A.T.R. 331, before concluding: "In the light of the above analysis the passage in Walker v. The Valuer-General (at p.354) which has earlier been set out should not be read as placing emphasis upon scale or size as a significant factor in the ultimate determination. In particular, the final sentence in that passage - (`In short, I cannot accept that the scale of the operations or activities are not a significant factor in determining whether or not they are to be classed as a business') seems to have been used as the justification by means of which small genuine activities designed to make a profit had been denied the status of a business. In truth it is impossible to pose a simple test which will give the correct answer to the great variety of personal enterprises undertaken from place to place. It is true that the volume of operations needs to be understood and that it is relevant to an understanding of the enterprise as a whole. Its smallness may in the end help in leading to a conclusion that it is not a bona fide commercial exercise, just as its largeness may help to place it clearly beyond characterisation as a hobby and assist in the conclusion that it is a business. Alternatively, its size when considered with other factors may show that it could never be reasonably capable of commercial viability, in which case it will fail the test. But there must be no preconceptions against little enterprises. Familiarity with the tests recognised in the above cases and in particular those applied in Thomas, Hope, Ferguson and F.C.T. v. Walker, and the above passage in Fennell v. Wyong Shire Council, subject to the comment we have made in relation to it, should provide the relevant guidance. Our intent in reviewing the authorities has been to remove any undue emphasis that might otherwise be given to the words we have underlined at p.6 in the short statement of the Walker test. Where then does the present case stand? It is an example of a reasonably substantial production but of small profit and occasional loss at least according to taxation accounting. Even so it is an activity that has been ongoing for nearly 30 years and involves significant work, continuous application, diligence and repetition. It from time to time makes a profit, and it has inherent in it the less obvious but nonetheless real benefits to the appellant to which we have earlier adverted. The appellant is plainly bona fide engaged in primary production, and this much is common ground between the parties. The activity is such that it would be absurd to characterise it as a hobby. He competes in a market and his relevant activities bear a commercial character. Had the appropriate tests been applied the only reasonable conclusion was that he was using his land exclusively for the purposes of the business of primary production. It is we think a clear case of a bona fide small business." (at 149-50) The provisions of section 11(1)(vii) were amended by the Lands Legislation Amendment Act 1991, which recast the terms of the exception in subsections (9) and -- 8 of 21 -- 9 (10) of section 11 of the Act. Those subsections have since been reprinted as section 17(1) and (2) of the Act, quoted earlier in these reasons for decision. The definition of "farming" in section 17(2) of the Act contains a number of similarities to the Walker test, although expressed somewhat differently. Although the Land Appeal Court in Crawford's case was at pains to remove any emphasis upon the scale of operations or its significance, the Legislature has now included in the definition requirements of "significant and substantial commercial purpose or character". The requirements of section 17 If land is to be valued under section 17(1) on the basis that the land is "exclusively used ... for purposes of farming", each of the following questions must be answered in the affirmative: 1.Is the land used for the purposes of: (a)the business or industry of a type specified (namely, grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry); or (b)any other business or industry involving an activity of a type specified (namely, the cultivation of soils, the gathering in of crops or the rearing of livestock)? 2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land? 3.Does the use of the land for the purposes of that business or industry have: (a)a significant and substantial commercial purpose; or (b)a significant and substantial commercial character? 4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on: (a)a continuous basis; or (b)a repetitive basis? -- 9 of 21 -- 10 (a) The relevant business or industry The Act defines farming in terms of the "business or industry" of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry, or any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock. The words "business" and "industry" have a range of meanings. The Australian Concise Oxford Dictionary includes among the definitions of "business", "habitual occupation, profession, trade" and "buying and selling, trade". The Macquarie Dictionary includes: "n. 1. one's occupation, profession, or trade. 2. Econ. the purchase and sale of goods in an attempt to make a profit. 3. ... an established or going enterprise or concern: to be in business. 4. volume of trade; patronage. ... 6. that with which one is principally and seriously concerned." Although many cases have described "business" in terms such as "anything which occupies the time and attention and labour of a man, for the purpose of profit" (Smith v. Anderson (1879) 15 Ch.D. 247 at 258 per Jessel MR), there are contexts in which "business" is a very much larger word than trade, and the word is employed in order to include occupations which would not strictly come within the word trade (Rolls v. Miller (1884) 53 LJ Ch 99 at 101 per Pearson J.) In some specific statutory contexts, farming has been held to be a business (Lloyd v Brassy [1969] 2 QB 98; Re Ogilby, Ogilby v. Wentworth-Stanley [1942] Ch 288, Harris v. Amery LR 1 CP 148). It is clear from the numerous cases in which the meaning of "business" has been considered, that the word is "of large and indefinite import" (Re Condon and City of Winnipeg (1975) 65 DLR (3d) 568 at 571 per Wilson J), "has and has long had a wide and flexible meaning" (Grieve v. Inland Revenue Commissioner [1984] 1 NZLR 101 at 106 per Richardson J) and that it may mean "almost anything which is an occupation, as distinguished from a pleasure". Accordingly the term must be construed according to its context (see Rolls v. Miller (1884) 27 Ch D 71 at 88 per Lindley LJ; also Halsbury's Laws of England, 4th edn, volume 47 para 2). In McClelland v. Goulburn City Council (1976) 35 LGRA 1, Rath J described the expression "businesses or industries", used in the definition of rural land in section 118 of the Local Government Act 1919, as "a composite one". In the listed activities, there did not appear some to which the word "business" would be more appropriate than "industry" and vice versa. In that context he accepted that the dictionary definitions of "industry" as "systematic work or labour" and "business" as "a commercial -- 10 of 21 -- 11 enterprise as a going concern" suited the statutory context (at p.6). He also accepted that the object of the provision was to relieve persons "who were really engaged in rural pursuits of the classes indicated from having to pay rates" (at p.7 quoting Mason v. Young Municipal Council (1935) 12 LGR (NSW) 111 at 112 per Pike J). In his view, the object may be partially achieved by "construing the expression 'businesses or industries' as requiring, as a general rule, that the designated activities be carried on systematically, as a commercial venture organized for profit". He thought it was not necessary that the business should be a large one, or even presently making a profit (Dolus Pty Ltd v. Wyong Shire Council (1975) 31 LGRA 58 at 60). But the venture must have a significant commercial purpose or character (Fennell's case (1975) 31 LGRA 164 at 167; cf Thomas v. Commissioner of Taxation (1972) 46 ALJR 397 at 401). In Hope v. Bathurst Municipal Council (1980) 144 CLR 1, Mason J (with whom the other members of the High Court agreed) observed that, although it was common ground that "business" is used in its ordinary meaning in section 118(1), the lower courts had refrained from saying what that meaning was. In his view that was understandable because the dictionary showed that the word has many meanings. He accepted that "business" as used in that subsection "has the ordinary or popular meaning which it would be given in the expression 'carrying on the business of grazing'. It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis." (at pp 8-9) It is only necessary to quote that passage to see, first, that the definition of "farming" in section 17(2) takes up concepts and language used by Mason J and, second, that if the word "business" in section 17(2) had that meaning then paragraphs (c) and (d) of the definition would be rendered otiose. A broad reading of "business" is sensible and appropriate in the context of the definition of "farming" because paragraphs (c) and (d) of the definition provide the qualifications that the business must have a significant and substantial commercial purpose or character and that the business must be engaged in for the purpose of profit on a continuous or repetitive basis. The net result is that, although a wide meaning is to be given to the word "business" in paragraph (a), the type of business which comes within the definition of "farming" is circumscribed by other parts of the definition. Read together, the indices of "farming" for the purposes of section 17(1) of the Act will have the effect of excluding such things as activities which are really not in the nature of commercial enterprises. -- 11 of 21 -- 12 A similar conclusion is reached in interpreting the word "industry" in this context. Dictionary definitions include such meanings as "habitual employment in useful work" (Australian Concise Oxford Dictionary) and "5. systematic work or labour. 6. assiduous activity at any work or task" (Macquarie Dictionary). Such meanings are appropriate in this definition of "farming". In these cases, the owners contend that the subject blocks are exclusively used for purposes of grazing. "Grazing" is one of the categories of farming listed in the definition of "farming" in section 17(2) of the Act. It is clear that the subject land in the present appeals is being used for the business or industry of grazing. (b) The dominant use of the land Although section 17(1) of the Act refers to land "exclusively used" for purposes of a single dwelling house or for purposes of farming, the definition of "farming" expressly provides that the relevant business must represent the "dominant use" of the land. Two questions arise. The first is whether the dominant use of the land for a specified purpose can satisfy the test that land is "exclusively used" for those purposes. If the answer to that question is yes, the question arises whether land which is exclusively used for a specified purpose is excluded from the relief offered by section 17(1). This matter was considered by this Court in Thomason v. Chief Executive, Department of Lands (AV93-103) the judgment in which was delivered on the same day as this judgment and it is unnecessary to repeat the discussion. On the reasoning adopted in that case, it is clear that, at the relevant date of valuation, the subject land was being used solely for the business or industry of grazing. (c) Significant and substantial commercial purpose or character To be characterised as farming, the relevant business or industry must have a "significant and substantial purpose or character". Having regard to the legislative history of section 17(2), it would appear that the reference to "a significant commercial purpose or character" derives from the judgment of Walsh J in Thomas v. Commissioner of Taxation (1972) 46 ALJR 397 at 401, which has been described as "the well known test used in this area of law" to determine whether activities constitute a business (Hope v. Bathurst City Council [1979] 2 NSWLR 471 at 474 per Reynolds JA, see also 476-7 per Samuels JA). Among the ordinary English meanings of "commercial" are "of, engaged in, bearing on, commerce; interested in financial return rather than artistry" (Australian Concise Oxford Dictionary and Macquarie Dictionary) and "capable of returning a profit; ... preoccupied with profits or immediate gains" (Macquarie Dictionary). "Commerce" -- 12 of 21 -- 13 includes the interchange of goods or commodities or services, especially on a large scale, and trade or business. The relevant "purpose" is the "object to be attained, thing intended" (Australian Concise Oxford Dictionary) or, in other words "the object for which anything ... is done, ... an intended or desired result; end or aim" (Macquarie Dictionary). In this context (and by contrast with "character") the word "purpose" seems to be subjective in nature or at least have a subjective component. So for the business or industry to have a commercial purpose there must be some intention or desire on behalf of those engaged in the business or industry to pursue commercial goals rather than merely to be engaged in the enterprise for recreational or some other purpose. By way of comparison, we note that the same meaning has been adopted in some State statutory definitions of "commercial purpose" or "commercial purposes". The Fishing Industry Organization and Marketing Act 1962 defines "commercial purpose" in relation to fish to mean "the purpose of sale or trade of fish for gain or reward". The Financial Institutions Code 1992 defines "commercial purposes" in general terms to mean "purposes connected with a business conducted or to be conducted" by certain persons. In the context of a Canadian taxing statute, the expression "used for any commercial purpose" was given "its ordinary rather than its more extended meaning, that is, used for a purpose relating to trade and the buying, selling and exchange of commodities for profit" (Re Ashley Colter (1961) Ltd and Minister of Municipal Affairs (1970) 10 DLR (3d) 502 at 505 per Hughes JA). The word "character" has a more objective connotation, being "the aggregate of qualities that distinguish one person or thing from others" (Macquarie Dictionary). The commercial character of a business or industry could be ascertained by reference to a range of criteria, quite independently of the intention or desire of those engaged in the business or industry or their goals. The commercial purpose or character must be both "significant" and "substantial". Each word is imprecise. The dictionary definitions of "significant" include "noteworthy, of considerable amount or effect or importance" (Australian Concise Oxford Dictionary) and "important; of consequence" (Macquarie Dictionary). In Hope v. Bathurst City Council [1979] 2 NSWLR 471 at 477, Samuels JA suggested that, although the word "significant" as used in the expression "significant commercial purpose" is "perhaps inadequate for the work here required of it", it is intended to mean "important", or "real", or "genuine', or "weighty" (see also Hope v. Bathurst City Council (1980) 144 CLR 1 at 9 per Mason J). -- 13 of 21 -- 14 The word "substantial" has been judicially described as "not a word of fixed meaning in all contexts" (Terry's Motors Ltd v. Rinder [1948] SASR 167 at 180 per Mayo J) and as a word that "is not only susceptible of ambiguity" but that is "calculated to conceal a lack of precision" (Tillmanns Butcheries Pty Ltd v. Australasian Meat Industry Employees Union (1979) 42 FLR 331 at 348 per Deane J). In the present context, it would seem to connote something of real importance, worth or value and of considerable amount which pertains to the essence of the purpose or character (see Australian Concise Oxford Dictionary, Macquarie Dictionary). It is difficult, and unnecessary, to state a precise and compendious meaning of the expression "significant and substantial commercial purpose" and "significant and substantial commercial character". Bearing in mind the various connotations of the words "significant" and "substantial" it is perhaps sufficient for present purposes to say that for section 17(1) of the Act to apply to the subject land there must be evidence that: (a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or (b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit. For so long as the subject land has been owned by Mr Whackett, or by Mr and Mrs Whackett, it has been used solely for the business or industry of grazing. There was evidence before the Land Court that the subject land has similar features to that of neighbours who also run cattle. Although the enterprise is not a hobby or a recreational pursuit, Mr Whackett said that he would never make a big profit because the area is not big enough. The maximum carrying capacity of the land is about 70 head of cattle. In Mr Whackett's opinion, it would be necessary to run more cattle to make any profit. On occasions he has had to buy in feed to supplement the grass available on the subject land. In order to earn a living, Mr Whackett works a 5 day fortnight on the subject land and a 9 day fortnight as an employee of the Council. Counsel for the Chief Executive placed some reliance on a decision of the Land Court in Taylor v. Chief Executive, Department of Lands ((1993) 14 QLCR 477) in which (as noted earlier in this judgment) the legislative history of section 17 was considered in detail. The Court concluded that "the purpose of the amendment would seem to be to avoid the effect of the Land Appeal Court in Crawford's case by making more stringent the requirements for land to qualify for valuation under the protective provisions as being used for purposes of farming". In the Taylor decision it was said that each of the words used in the phrase "significant and substantial commercial -- 14 of 21 -- 15 purpose or character" are capable of a number of meanings but in combination they appeared to require a trading or business activity of important or considerable size. "If the purpose of the amendment is to avoid the consequences of the Crawford case, then that interpretation makes sense and indicates that the intention of the Legislature is to provide protection only to those enterprises which come within the definition." Importantly it was also stated that "it will still be necessary to consider each case on its own merits and it is still not possible to pose a simple test in this regard ... Each enterprise is different and it is not possible to set numerical or financial requirements which would be applicable for all or any of them." We agree with that observation, and with the learned member whose decision is under appeal in this case that there can be no artificial base for determining the scale of any particular activity which will satisfy the criterion in paragraph (c) of the definition. In Taylor's case the appellants owned a block having an area of 20.3 hectares approximately 6 kilometres south of Cleveland Post Office. Panoramic rural and sea views are available from the land. The land was zoned "Rural Non Urban". A main dwelling and a caretaker's residence were constructed on part of it, the balance being used for the agistment of horses. When the appellants purchased the land it was overgrown and improvements were run down. The appellants cleared the land and made numerous improvements, including enlarging a dam for use in a proposed turf farming venture. They did not proceed with that venture but did experiment with various primary production activities with little success. At the relevant date of valuation, they were agisting 28 horses on the land for fees of $35 per calendar month, returning a gross annual income of $11,760. Each fortnight all the horses graze in one of three 16 acre paddocks. The rotation practice leaves one paddock free of horses and allows for the pastures in the other paddock to be irrigated. At the relevant date of valuation the enterprise was showing a loss, but the appellants expected to show a modest profit (say $10,000 per annum) within a year or so. There was some evidence from the valuer who gave evidence for the Chief Executive that the land had a higher primary production potential, for example, as a turf farm. The Court was satisfied that the land was used for the business or industry of grazing and that that was the dominant use of the land. The business or industry was engaged in for the purposes of profit, at least in the longer term, and on a continuous and repetitive basis. The only issue was whether the enterprise had a significant or substantial commercial purpose or character. The Court held that the grazing activity could only be described as modest at that stage and could not be said to have a significant and substantial commercial purpose or character. The Court left open the possibility that the situation may be different in the future. -- 15 of 21 -- 16 The present cases are distinguishable on the facts from Taylor. It is apparent that, despite the genuine efforts made over a long period in grazing cattle on difficult country, the evidence points to only a limited financial return being possible, even in reasonable seasons. On Mr Whackett's own evidence, the land is stocked to capacity and will "never make a big profit". In our view neither the objective character nor the subjective purpose of the grazing enterprise can be said to be significantly and substantially commercial. We emphasise, however, that we arrive at this conclusion on the facts presented in this case. There is insufficient evidence to find in favour of the owners. No books of account or trading figures of any kind were presented. Before us both parties relied on the verbal evidence of Mr Whackett in the Court below that these lands carry 70 head of mixed cattle on a year to year basis, that for the three years to 1992 they sold approximately 25 head of cattle per year and that he estimated their average recent gross return at $5,000 per annum. He also stated that the maximum carrying capacity is 70 head of cattle and it would be necessary to run more cattle to make any profit. No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming. We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant or substantial commercial purpose or character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts' business activities are presented in more detail, the matter could again be considered, with quite different results. (d) Engaged in for the purpose of profit on a continuous or repetitive basis The final statutory criterion of "farming" is that the business or industry is engaged in for the purpose of profit on a continuous or repetitive basis. In this context also the word "purpose" seems to have a subjective character in the sense that it refers to the intention of the persons engaged in the business or industry. Support for that view that is found in the following passage from Inland Revenue Commissioner v. Watson: " 'Business' includes any undertaking carried on for pecuniary profit. It is not necessary that such a profit should be made, but it is essential, even if not sufficient, that at least an intention to gain pecuniary profit from the activities should be proved before undertaking can be termed a business." ([1960] NZLR 259 at 262 per Henry J cited with approval by North P in Harley v. Inland Revenue Commissioner [1971] NZLR 482 at 487.) -- 16 of 21 -- 17 Similarly it has been held that, when determining whether a tax payer is in "business" for the purposes of a taxing statute, there is a two-fold inquiry, first, as to the nature of the activities actually carried on and, second, as to the intention of the taxpayer in engaging in those activities (Calkin v. Inland Revenue Commissioner [1984] 1 NZLR 440 at 443, 446 per Cooke and Richardson JJ). The question whether a particular business or industry is engaged in on a continuous or repetitive basis must be answered in light of the factual circumstances surrounding the business, or businesses of that type. Some types of farming may require frequent and intensive amounts of activity while in other cases "the activity may be intermittent with long intervals of quiescence in between" (American Leaf Blending Co v. Director-General of Inland Revenue [1978] 3 All ER 1185 at 1189 per Lord Diplock, also Bartholomew v. The Valuer-General (1978) 5 QLCR 253 at 259). The evidence in these cases indicates that the business of grazing is being engaged in for the purpose of profit (however modest) on a continuous or repetitive basis. In summary, we have concluded that the answers to the four questions set out earlier in these reasons for decision are as follows: 1.Is the land used for the purposes of: (a)the business or industry of a type specified (namely, grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry); or (b)any other business or industry involving an activity of a type specified (namely, the cultivation of soils, the gathering in of crops or the rearing of livestock)? The subject land was being used for the business or industry of grazing. 2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land? The subject land was being used solely for the business or industry of grazing. 3.Does the use of the land for the purposes of that business or industry have: (a)a significant and substantial commercial purpose; or (b)a significant and substantial commercial character? No. -- 17 of 21 -- 18 4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on: (a)a continuous basis; or (b)a repetitive basis? Yes. The appeal is allowed on the basis that the subject land did not fall to be valued in accordance with section 11(9) and (10) of the Act (now section 17(1) and (2)). The remaining question is what were the unimproved values of the subject lands at the relevant date of valuation? The unimproved values of the subject lands As noted earlier in these reasons for decision, the landowners contended that if the decision of the Land Court was incorrect in law, the parcels should be valued as rural residential land with unimproved values of $66,000 and $120,000 respectively. The appellant Chief Executive did not present further evidence in this appeal, relying upon the evidence of Mr IL Hawley, registered valuer, in the Court below. His evidence there was that he regarded the subject lands as having potential for subdivision and that this was taken into account when the valuations were made. The Rural "C" zoning under the Albert Shire Council Town Plan allows subdivision to a minimum area of 20 hectares. Mr Hawley had relied upon two sales of undeveloped forest country, zoned Rural "C", to support his valuations. His sale No. 1 is situated north-west of the subject lands, has an area of 20.01 hectares and sold in September 1991 for $80,000. This sale was analysed to show an unimproved value of $77,000 and $75,000 was applied in the 1992 valuation. Mr Hawley described this as moderate to steeply sloping forest country, located beside a rural residential subdivision and at the time of sale had no formed access. He regarded it as inferior to the subject lands. Mr Hawley's sale No. 2 is situated to the south of the subject lands, has an area of 26.5 hectares and sold in June 1991 for $140,000. This sale was analysed to show an unimproved value of $135,000 and $125,000 was applied in the 1992 valuation. Mr Hawley stated that this block is located in a developing rural residential area, has formed gravel access but is bisected by a powerline easement. He considered it to be inferior to the subject lands, primarily because of their subdivisional potential. As pointed out by the learned Member in the Court below, Mr Hawley made only a limited inspection of the subject lands from the roadside, relying heavily upon aerial photographs. While he stated that there were a number of suitable sites where houses -- 18 of 21 -- 19 could be located, he was unable to say just where they were. Mr Hawley said that his sales showed $3,748 per hectare and $4,600 per hectare respectively and he relied on a rate per hectare as a guide, allowing for differences in size when he applied approximately $4,000 per hectare to each of the subject lands, taking into account their potential for subdivision. The Whacketts' case in the Land Court, presented by Mr Olsen, was directed at demonstrating the eligibility of the subject lands for valuation as lands used for the purposes of farming. It did not address the valuation of those lands as rural residential sites. Before us, however, while continuing to pursue his primary argument, Mr Olsen also raised as an alternative argument the valuation of the subject lands as rural residential sites. A house has recently been relocated to a site on the eastern side of Shaws Pocket Road on Parcel A which Mr Olsen described as "an inferior homesite". He stated that in his opinion there is no viable site on the balance area and he concluded that subdivision is not warranted. As for the balance area, he stated that "Any possible advantage in the largeness of the site is offset by problems in keeping this difficult land free from noxious weeds, lantana, under the regulations". In respect of Parcel B, Mr Olsen stated: "The land under the zoning could be cut into two blocks. In a careful examination of the block the best potential viable homesite was found to be an elevated area of approximately 60 metres x 80 metres on sound land well into the block. The land is isolated by a deep gully on either side which serves to channel water running off the mountain in wet weather. The site would have to be serviced with a substantial road from the frontage across difficult ground. Estimated cost of this road approximately $8,000 and by electricity brought up from Buchback Road at a cost estimated by the SEQEB at $8,000 and a further cost of approximately $4,000 into the block to the selected site.... This is the best site in this 20 hectare section. The balance of the area is considered to have no viable house site. The land is therefore valued as a single rural homesite. " In valuing these properties as rural homesites, Mr Olsen relied upon three sales. Two of these sales took place in September 1993, some 18 months after the date of valuation and, according to Mr Olsen, were sales by the South-East Queensland Water Board as part of the disposal of lands acquired for the now-abandoned Wolffdene Dam project. In the circumstances, we prefer not to rely upon these two sales as a basis for the valuation. The other sale is the transaction relied upon by Mr Hawley in the Land Court as his sale No. 2. Mr Olsen agreed with Mr Hawley's analysis of this sale to an unimproved value of $135,000. He described it thus: "Frontage 250 metres to formed gravel road. First 8.75 hectares cleared consists -- 19 of 21 -- 20 of easy undulating land level with road rising gently to the rear of this section. Balance area 17.75 hectares rises very steeply into heavily timbered area. Powerline runs diagonally across the section. Average distance from road 500 metres. This line represents no disadvantage to the site and two pylons can hardly be seen from the road or any site on the cleared section." Contrasting with Mr Hawley's opinion, Mr Olsen considered this property to be superior to each of the subject lands. As he put it, a 26 hectare site with a decent homesite on it, close to amenities and with a desirable place for a rural homesite purchaser to live, is worth much more than a larger area which nobody can do anything with and with an inferior house site. Mr Olsen thought that there was one viable homesite on Parcel B, which was much better than the homesite on Parcel A. However, he saw little value in the balance land on either block, saying that while Parcel B is very steep, Parcel A is steeper, "perilously steep" as he described it. Mr Olsen called three witnesses who gave evidence on this aspect of the subject lands. Mr CF Coplick, an earth-moving contractor of Tamborine, who had dozed 4-wheel-drive tracks over the subject lands, Mr BC Currey, a licensed consulting surveyor of Upper Coomera and Mr BP Hickey, a building contractor of Cedar Creek, who lives nearby and knows the subject lands well. These witnesses gave evidence which substantially supports Mr Olsen's opinion that there is only one viable homesite on each of the subject lands and that there is essentially no subdivisional potential for either of them. Their evidence clearly indicates that while there may be other areas flat enough upon which to build houses, because of the possibility of land slips, the steepness and the substantial expense of providing adequate access to these sites, they are simply not viable. On the basis of this evidence we have come to the conclusion that each of the subject lands should be valued as a large rural residential site without any subdivisional potential. The only reliable evidence as to the value of the subject lands as large rural residential sites is the sale upon which both valuers have relied and which both have analysed to $135,000. While the sale land is much smaller than each subject block, we are persuaded by the argument that a purchaser of a rural residential site is primarily looking for a site upon which to construct a house in a rural environment. It is the quality of the site that attracts the value. While there is some value attributable to the balance land, this will vary according to circumstances. It will always be secondary to the value of the homesite. In making the comparison between the sale land and the subject lands, we are more persuaded by the evidence of Mr Olsen than that of Mr Hawley. We accept that -- 20 of 21 -- 21 the sale of the 26.5 hectare block on Cedar Creek Road is superior to both parcels. We also find that Parcel A is the less valuable of the two, because the one viable homesite on it is inferior to that on Parcel B. Its balance area is also steeper and less accessible although, on the evidence, there is little to choose between these two steep landslip-prone areas. In the absence of other evidence, we accept Mr Olsen's comparison between the unimproved value disclosed by the only reliable sale and the unimproved value of the two subject parcels. We would comment, however, that in relating the $135,000 unimproved value disclosed by the sale to the two subject parcels at $80,000 and $125,000 respectively, Mr Olsen was under the mistaken impression that these figures were for the subject lands partially improved. He proceeded to deduct from these figures amounts for some existing improvements and for improvements required to partially improve them. This of course is not correct. Any comparison between the unimproved value disclosed by sales and the subject lands must result in unimproved values being applied to those lands. If this was not so, the exercise is meaningless, as like is not being compared with like. In the circumstances, we are prepared to accept Mr Olsen's comparison between the unimproved value of the sale at $135,000 and the unimproved value of Parcel A at $80,000 and the unimproved value of Parcel B at $125,000 respectively, as we feel that he has made due allowance for the differences between sale and subject properties. Accordingly, the appeals are allowed and the unimproved value of Lot 2 on RP 47469 is determined at $80,000 and the unimproved value of Lot 2 on RP 144905 is determined at $125,000. (JJ Trickett) Member of the Land Court (GJ Neate) Member of the Land Court -- 21 of 21 --