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David Russell QC acts successfully for Godolphin Australia Pty Ltd, owned by HH Ruler of Dubai, in thoroughbred horse breeding dispute

In Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue, David Russell QC acted successfully for the plaintiff, with the Australian court finding that the thoroughbred horse breeding properties were exempt from land tax. Factors included, the uneconomic nature of the racing operations viewed as a stand-alone operation, as important reasoning for finding the dominant use of the land was for the maintenance of animals to sell their bodily produce. 

The plaintiff, Godolphin Australia Pty Ltd, is part of the global thoroughbred breeding operation and horseracing team founded by the Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum. Represented by David Russell QC, it sought a review under s97(1) of the Taxation Administration Act 1996 (NSW) of an unfavourable assessment of land tax concerning two properties for the duration of the 2014-2019 tax years. It was undisputed by either party that each parcel of the Land constituted rural land within the meaning of s10AA (4) of the Land Tax Management Act.

Godolphin contended that the land in question was exempt from land tax according to s10AA(3)(b) of the Land Tax Management Act 1956. The underlying reasoning supporting this contention asserted the dominant use of the land, in each of the aforementioned tax years was “for the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce” (para 2). 

Conversely, the Chief Commissioner asserted whilst the dominant use of the land may have been the maintenance of animals, this dominant usage was not for the statutory purpose of selling those animals, their natural increase of bodily produce. Instead, the purpose of the land was stated to have been for breeding and training thoroughbred racehorses and spelling thoroughbred racehorses in hiatuses between race events; any sale of horses was incidental to this overarching purpose.

In the alternative, the Chief Commissioner argued that to the extent the land was being used for the maintenance of animals for the purpose of selling their natural increase or bodily produce, this land usage was non-dominant with respect to ulterior uses of the Land, namely breeding and training of thoroughbred horses for racing purposes.

The decision

The judge began her determination by noting a principal difference between parties concerned the lens through which racing operations are viewed: with the Chief Commissioner viewing breeding, training and education as conduits for racing (“breed to race”) informing the commissioner’s view that this was the dominant purpose of use of the land (para 254). The question, therefore, became whether there were two distinct activities so that a determination was required regarding the dominant use on each parcel of land or an integrated “composite” activity (involving breeding and raising (para 256)).

In her determination, the judge found decisively against the composite argument. In coming to this conclusion, the judge noted the uneconomic nature of the operations had they been confined to racing solely, and that racing prowess is a key factor in the leverage afforded to sellers when selling stallions’ semen. Consequently, the judge found in favour of the appellant, concluding that the dominant use of each of the parcels of land at all material times was for the maintenance of animals with the intention of selling their bodily produce or natural increase.

Find out more

David is a renowned barrister who commenced legal practice in 1974. He currently practices in Dubai, London, and Sydney. David is a former President of the Asia Oceania Tax Consultants Association, and former Deputy Chair and Director of STEP Worldwide. He is co-editor of the Oxford University Press Journal Trusts and Trustees, and from 2016 to 2017 chaired the DIFC Wealth Management Review Working Group.

To instruct David or find out more please contact Matt Sale on +44 (0)20 7427 4910 or Sam Carter on +44 (0)203 989 6669 for a confidential discussion.

News 3 May, 2022


David Russell KC

Call: 1977 (Australia) Silk: 1986

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