Lease A Leaf Property Pty Limited v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 41

Summary

On 3 December 2010, the Administrative Decisions Tribunal (“the Tribunal”) affirmed the decision of the Chief Commissioner of State Revenue (the "Chief Commissioner") that the applicant's property located at Terrey Hills (the "property") was liable for land tax for the 2005 to 2009 land tax years. The property was used to conduct a business of leasing indoor plants. The Tribunal ruled that the dominant use of the land was not primary production, and refused the applicant an exemption from land tax under the "land used for primary production exemption" in the Land Tax Management Act 1956 ("the Act"). The Tribunal also declined to remit the market rate interest included in the land tax assessment. The Applicant appealed to the Appeal Panel of the Tribunal.

On 15 September 2011, the Appeal Panel dismissed the appeal and affirmed the decision of the Tribunal.

The appeal panel held that only exceptional circumstances would justify any remission of market rate interest and refused to vary the Tribunal's order to not remit the market rate interest.

Background

Lease a Leaf Pty Ltd ("LAL") conducted an indoor plant hire business on land leased from the owner, Lease A Leaf Property Pty Limited, who was the appellant in this case. LAL maintained plants for hire to clients in Sydney, but did not propagate plants on the land.

Before the Tribunal the dispute centred on the meaning of the words "commercial plant nursery" in s.3(d) of the Act as it then was for the 2005 land tax year, and s.10AA(3)(e) for the 2006-2009 land tax years. The Chief Commissioner submitted that the phrase required the nursery to be a place where plants are propagated, rather than merely nursed or maintained, and also that the plants must be sold, not merely leased or hired.

Judicial Member Frost of the Tribunal held that propagation was required for the purpose of the exemption, but also held that leasing plants or trees could satisfy the commercial element of the expression “commercial plant nursery” (but not without propagation of plants).

The issue before the Appeal Panel was whether the phrase "commercial plant nursery" in the exemption provision required the propagation and sale of plants.

The appellant submitted that:

• the Tribunal erred in holding that the expression "nursery" requires propagation;
• the phrase in the exemption should be interpreted without reference to extrinsic material;
• there were indications from the context of the provision as to why propagation was not necessary;
• market rate interest should be remitted.

The Chief Commissioner submitted that:

• dictionary definitions support the view that the phrase requires propagation and this is consistent with the context in which the expression "commercial plant nursery" appears;
• it was legitimate to look at extrinsic materials to interpret the purpose of the exemption;
• the Tribunal erred in holding that the phrase did not require propagation for sale;
• the normal meaning of the phrase "primary production" connotes the bringing into existence of some product that will be sold.

Decision

Without statutory definitions of the meaning of the expression "commercial plant nursery", the Appeal Panel considered the ordinary meaning of the phrase. The Appeal Panel held:

• the essential part of the expression is the term "nursery";
• dictionary definitions indicate that a "nursery's" activities are confined to early cultivation of plants or trees ending when the plants are ready for transplant or sale;
• the reference to the historical background and extrinsic materials provided by the Chief Commissioner is not necessary as the ordinary meaning is clear;
• given that the activities of a nursery are confined to the early cultivation of plants or trees those activities must commence with propagation;
• the requirement that a "commercial plant nursery" be a place where plants are propagated is reinforced by the words within the Act "but not a nursery at which the principal cultivation is the maintenance of plants…";
• the exemption was intended to be limited to land which is principally used for the production of plants and was not intended to include retail enterprises such as suburban garden centres;
• the use of the term "commercial" in the exemption indicates that the propagation of plants at a "commercial nursery" must be for the purpose of sale;
• in the absence of exceptional circumstances, market rate interest should not be remitted.

The Appeal Panel accepted the Chief Commissioner's submission that there are at least 5 reasons that the exemption requires that plants be produced for the purpose of sale [see paragraphs 22 and 32]. Importantly for the interpretation of the primary production exemption as a whole, one of those reasons is that the normal meaning of the phrase "primary production" connotes the bringing into existence of some product that will be sold.

The orders of the Appeal Panel were:

1. appeal dismissed;
2. the order made by the Tribunal on 3 December 2010 is confirmed.

Link to decisions

Tribunal decision

Lease a Leaf Property Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADT 289

Appeal Panel decision

Lease A Leaf Property Pty Limited v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 41