Bayside Council v Karimbla Properties (No 3) Pty Ltd

[2018] NSWCA 257

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	Bayside Council v Karimbla Properties (No 3) Pty Ltd [2018] NSWCA 257
Hearing dates:	17, 18 July 2018
Date of orders:	14 November 2018
Decision date:	14 November 2018
Before:	McColl JA at [1]; White JA at [2]; Emmett AJA at [63]
Decision:	(1) Each of the appeals is allowed. (2) The parties are required to bring in short minutes of orders to give effect to the conclusions in the reasons dated 14 November 2018.
Catchwords:	LAND AND ENVIRONMENT – categorising rateable land – assessment of the rates payable by the owner of land during the period of development – whether the dominant use of land can be categorised as “for residential accommodation” when the relevant land is being developed for the purpose of the construction of residential apartments – s 516(1)(a) of the Local Government Act 1993 (NSW) considered
Legislation Cited:	Environmental Planning and Assessment Act 1979 (NSW) Land Tax Act 1915 (Qld) Land Tax Management Act 1956 (NSW) Local Government Act 1993 (NSW)
Cases Cited:	Assessor of Area # 10-Burnaby/New Westminster v Intracorp Developments Ltd 2000 BCCA 121; (2000) 137 BCAC 63 Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1637 Bosa Development Corporation v Assessor of Area #12 Coquitlam (1996) 30 BCLR (3d) 263 Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11; (2017) 105 ATR 11 Commissioner of Land Tax (NSW) v Joyce (1974) 132 CLR 22 Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 Council of the City of Parramatta v Brickworks Ltd (1972) 128 CLR 1 Educang Limited v Brisbane City Council [2002] QSC 374 Karimbla Properties v Council of the City of Sydney; Bayside City Council; and North Sydney Council [2017] NSWLEC 75 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775 Leda Manorstead v Chief Commissioner of State Revenue (2010) 79 NSWLR 724; [2010] NSWSC 867 Mayor, Councillors and Citizens of the City of Essendon v Cox [1967] VR 545 Meriton Apartments Pty Ltd v Parramatta City Council [2003] NSWLEC 309 Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No 2) [2016] NSWSC 332; (2016) 102 ATR 781 Needham v Commissioner of Land Tax [1999] 2 Qd R 611 The Commonwealth v New South Wales (1923) 33 CLR 1 at 33; [1923] HCA 34 Penrith Rugby League Club Limited v Commissioner of Land Tax [1983] 2 NSWLR 616 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 Roman Catholic Bishop of Perth v Perth Road Board (1933) 49 CLR 37; [1933] HCA 7 Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue (2009) 25 VR 59; [2009] VSCA 167
Category:	Principal judgment
Parties:	North Sydney Council (Appellant in 2018/72569) Council of the City of Sydney (Appellant in 2018/72572) Bayside Council (Appellant in 2018/72580) Various “Karimbla Properties” Companies (Respondents)
Representation:	Counsel: J Gleeson SC with M E Hall (Bayside Council & Council of the City of Sydney) T S Hale SC with T To (North Sydney Council) C McEwen SC with S Nash (Respondents)   Solicitors: North Sydney Council (Appellant - 2018/72569) Council of the City of Sydney (Appellant - 2018/72572) Houston Dearn O’Connor (Appellant - Bayside Council, 2018/72580) Meriton Group (Respondents)
File Number(s):	2018/72569; 2018/72572; 2018/72580
Publication restriction:	No
Decision under appeal	Court or tribunal: Land and Environment Court of New South Wales Jurisdiction: Class 3 Citation: [2017] NSWLEC 75; [2018] NSWLEC 3 Date of Decision: 14 February 2018 Before: Sheahan J File Number(s): 2016/245526, 2016/245527, 2016/245528, 2016/245529, 2016/245530, 2016/245531, 2016/245532, 2016/247852, 2016/301331, 2016/305876, 2016/305877, 2016/305878

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants appeal from the orders of Sheahan J in favour of the respondents which held that the respondents were to pay the “residential” rate for the construction phase of the development of residential apartments for the purposes of Chapter 15 of the Local Government Act 1993 (NSW). It was common ground that any findings concerning the land owned by Karimbla 24 on O’Dea Avenue within the Council of the City of Sydney’s local government area would apply to the other properties and councils.

On 30 May 2012, Karimbla 24 became the owner of the land and on 14 December 2012 a development application was lodged with the Council seeking the necessary consent to build residential apartments, three retail tenancies, and parking as well as associated earthworks and landscaping works. At that time, the land was rated as “business”. On 7 February 2013, the Council issued a construction certificate for demolition and on 11 February these works commenced. On 9 May 2013, the development consent was granted in largely similar terms to that in the application. On 4 August 2014, the project had been partially completed. Occupation certificates were issued in the period from 21 May 2015 to 18 April 2016.

On 6 June 2016, Karimbla 24 applied to have the land declared “residential” with retrospective effect from 9 February 2013. On 10 August 2016, the Council determined that the land should be considered “residential” but only with effect from 6 June 2016 and not from 9 February 2013 as requested. On 15 August 2016, Karimbla 24 filed an application in the Land and Environment Court of New South Wales by way of appeal from the decision of 10 August 2016.

Sheahan J held that s 516 of the Local Government Act applied so as to categorise the land during its construction phase as residential. Section 516 provides, inter alia that land is to be categorised as residential if “its dominant use is for residential accommodation”. The construction phase is the phase between the commencement of activity that is designed to render the land capable of being lived in, or being residential accommodation, and the achievement of a condition of the land in which it is in fact physically and lawfully capable of being lived in, or being residential accommodation.

The principal issues before the Court of Appeal were:

(i) whether for the purposes of s 516(1)(a) of the Local Government Act 1993 (NSW) the dominant use of land can be categorised as being “for residential accommodation” when the relevant land is being developed for the purpose of the construction of residential apartments;

(ii) whether the owner of such land would be entitled to recover rates levied and paid on the basis that, during the construction phase, the dominant use of the land was not for residential accommodation;

(iii) whether it is within the jurisdiction of the Land and Environment Court of New South Wales to order such recovery; and

(iv) whether the primary judge erred in declining to order that Karimbla 7 pay North Sydney Council’s costs of a hearing on 19 October 2017.

The Court (McColl and White JJA, Emmett AJA) allowed the appeal:

In relation to issue (i)

Per Emmett AJA, McColl JA agreeing

(1) Properly construed, s 516(1)(a) signifies a present use even though the purpose may be preparation for an eventual different “use”. A focus on physical acts in relation to the relevant land as opposed to a more general inquiry into purpose reflects the words of s 516(1)(a) and accords with the ordinary meaning of the word use. The exceptions in s 516(1)(a) and 516(1A) demonstrate that it is only the fact of use and the nature of use that is relevant: [115]-[123].

Per White JA

(2) The exclusions and exceptions in s 516(1) and 516(1A) indicate that the reference to land being used “for residential accommodation” is to be understood as land being used as residential accommodation: [51]-[55].

Per Emmett AJA, McColl JA agreeing

(3) The issue of an occupation certificate is an indication that a future intended use for residential accommodation has come sufficiently to fruition to become a present use for residential accommodation: [129]-[131].

White JA contra

(4) An issue of an occupation certificate is not a sufficient indication that a use for residential accommodation has come sufficiently to fruition to become a present use as residential accommodation. It does not create a deemed state of occupation. The commencement of occupation is an objectively verifiable fact: [58].

In relation to issue (ii)

Per Emmett AJA, McColl and White JJA agreeing

(5) There may be cogent reasons for concluding that s 527 of the Local Government Act created no right or cause of action providing an entitlement to a refund of rates paid voluntarily without protest under a lawful rate notice. However, it is undesirable to embark on a consideration as to whether or not Karimbla 7 had a basis to pursue a claim against the Council as the question does not arise: [152].

In relation to issue (iii)

Per Emmett AJA, McColl and White JJA agreeing

(6) It is undesirable to express an opinion about a matter that is entirely hypothetical: [153].

In relation to issue (iv)

Per Emmett AJA, McColl and White JJA agreeing

(7) It was conceded that his Honour erred in principle in ordering that the parties pay their own costs. In light of his Honour’s conclusion that Karimbla 7 was not entitled to interest or a stay, and having previously conceded that an order should be made, there does not appear to be any reason why North Sydney Council should not have had its costs of 19 October 2017: [154]-[156].

Judgment

1. McCOLL JA: I agree with Emmett AJA’s reasons and the orders his Honour proposes.

2. WHITE JA: These are three appeals brought by Bayside Council, Council of the City of Sydney, and North Sydney Council, against declarations and orders made in proceedings in the Land and Environment Court on the application of companies who are members of what is called the Karimbla Properties Group. Companies in the Karimbla Properties Group owned various parcels of land known as “Meriton” development sites in local government areas of the three councils. It is unnecessary to identify the different respondents individually. They can each be called Karimbla.

3. Under Ch 15 of the Local Government Act 1993 (NSW) a council must declare each parcel of rateable land in its area to be within one of four categories, namely, farmland, residential, mining or business (s 514). The amount of rates levied on land categorised as residential was less than the amounts levied on land categorised as business. In all cases the lands held by Karimbla had been categorised as “business”.

4. In the proceedings in the Land and Environment Court Karimbla contended that the lands should have been categorised as “residential”. The Land and Environment Court (Sheahan J) held that the parcels of land in question were within the residential rating category under the Local Government Act. Where rates had been paid at the higher level applicable to the business category the Land and Environment Court ordered that the councils pay Karimbla an adjustment of rates consequential upon the declaration that the parcels of land were within the residential rating category (Karimbla Properties v Council of the City of Sydney; Bayside City Council; and North Sydney Council [2017] NSWLEC 75).

5. The relevant legislation has been set out in the reasons for judgment of Emmett AJA which I have had the advantage of reading in draft. Nonetheless, it is convenient to quote here s 516 of the Local Government Act:

“516 Categorisation as residential

(1)     Land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and:

(a)     its dominant use is for residential accommodation (otherwise than as a hotel, motel, guest-house, backpacker hostel or nursing home or any other form of residential accommodation (not being a boarding house or a lodging house) prescribed by the regulations), or

(b)     in the case of vacant land, it is zoned or otherwise designated for use under an environmental planning instrument (with or without development consent) for residential purposes, or

(c)     it is rural residential land.

(1A)    For the purposes of this section, a boarding house or a lodging house means a building wholly or partly let as lodging in which each letting provides the tariff-paying occupant with a principal place of residence and in which:

(a)   each tariff charged does not exceed the maximum tariff for boarding houses or lodging houses for the time being determined by the Minister by order published in the Gazette for the purposes of this subsection, and

(b)   there are at least 3 tariff-paying occupants who have resided there for the last 3 consecutive months, or any period totalling 3 months during the last year,

and includes a vacant building that was so let immediately before becoming vacant, but does not include a residential flat building, licensed premises, a private hotel, a building containing serviced apartments or a backpacker hostel or other tourist establishment.

(2)   The regulations may prescribe circumstances in which land is or is not to be categorised as residential.”

6. The critical issue is as to the meaning of the words in s 516(1)(a) “its dominant use is for residential accommodation”. That expression has to be construed in the context of the section as a whole and the context of s 516 within Ch 15.

7. For the rating years in question Karimbla engaged in activities on the lands involving in sequence the demolition of an existing building, excavation, and construction of a building which, when completed, and when an occupation certificate had been granted, was authorised to be used wholly or substantially as residential accommodation. Karimbla submitted that the dominant use of the land was “for residential accommodation” from the time physical activities of demolition commenced. Emmett AJA at [63] helpfully describes this period as the construction phrase. The Council of the City of Sydney and Bayside Council submitted that the lands were not used “for residential accommodation” until an occupation certificate had been issued so that it would be lawful for the buildings to be used as residential accommodation. North Sydney Council contended that the lands were not used for residential accommodation until they were actually occupied as such.

8. For the reasons which follow I would accept the submission of North Sydney Council. The appeals should be allowed and the order proposed by Emmett AJA made.

Primary judge’s reasons

9. The primary judge accepted Karimbla’s contention that in s 516(1)(a) the expression “its dominant use is for residential accommodation” did not mean “its dominant use is as residential accommodation”. His Honour applied the earlier decision of Pain J of the Land and Environment Court in Meriton Apartments Pty Ltd v Parramatta City Council [2003] NSWLEC 309. There, the developer, Meriton, submitted that the dominant use of the land was for residential accommodation once the erection of the buildings which would ultimately be used for residential accommodation had commenced (at [12]). The Council argued that use for residential accommodation had not commenced because at the relevant time “no building existed to house residential accommodation” (at [15]). Pain J applied observations of Taylor J in Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 at 515 that:

“But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land.”

10. Her Honour observed that this statement was accepted by Gibbs J (Barwick CJ, Menzies and Owen JJ agreeing) in Council of the City of Parramatta v Brickworks Ltd (1972) 128 CLR 1 at 22 (at [19]). Her Honour also referred to the conclusion of Gibbs J in Brickworks (which concerned the question of whether land immediately adjoining a brickworks and quarry was the subject of existing use rights when it had not been physically used for quarrying or brickworks) (at 21-22) that:

“It is not enough to bring cl 32 into operation that land has been acquired with the intention of using it for a particular purpose in the future. On the other hand, it is not necessary, to constitute a present use of land, that there should be a physical use of all of it, or indeed of any of it.

…

if the whole of the land in question was acquired for and devoted to the purpose of quarrying and brick-making, the whole may be held to have been used for that purpose although only part of it was physically used.” (at [20])

11. Her Honour concluded (at [22]):

“I accept Meriton's reasoning that use of land must be for a purpose and that the erection of a building is the means in this case by which the land is made to serve that purpose (see para 13). While intention to use vacant land is not sufficient, as was conceded by Meriton, the purpose of the use of land is manifested by the commencement of building construction the use of which building is for the purpose of residential accommodation.”

12. The primary judge rejected the submission of the councils that decisions of this Court in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 and Chief Commissioner of State Revenue v Metricon (Qld) Pty Ltd [2017] NSWCA 11 (“Metricon”) had overtaken or cast doubt on the conclusion in Meriton Apartments.

The importance of “for”

13. The key phrase in s 516(1)(a) is “its dominant use is for residential accommodation” (emphasis added).

14. It is common ground that the reference to “use” is to a present use and not to a future use. The present use on the various parcels of land was the demolition of an existing building, excavation, or construction. The question is whether that current use can be “for” residential accommodation when residential accommodation is not presently available, but the future provision of residential accommodation is the objective purpose of the existing activities.

15. The position taken by the Sydney City Council and the Bayside Council was that the dominant use of the properties was “for” residential accommodation from the time an occupation certificate was issued, such that the units could then be lawfully occupied. Mr Gleeson SC who appeared for those councils submitted that this position was taken by way of concession. He did not identify any reason for the concession on those appellants’ cases. He said that those councils did not disagree with the position taken by North Sydney Council. The position of North Sydney Council was that the use was only “for” residential accommodation when the building had been constructed and physically used as residential accommodation.

16. On the construction contended for by the North Sydney Council the phrase “its dominant use is for residential accommodation” means “its dominant use is as residential accommodation”. On the formal position taken by the Sydney City Council and Bayside Council, the phrase means “its dominant use is capable of providing residential accommodation”. On Karimbla’s case, the phrase should be construed as allowing for either of the earlier constructions, but also including that “its dominant use is for the purpose of providing residential accommodation”.

17. It has often been observed that the word “use” has no single meaning. In Metricon Barrett AJA (with whom Macfarlan and Ward JJA agreed) said (at [45]) that “use” of land has a core meaning independent of statutory context of physical activities undertaken on the land. The present case does not turn on the meaning of “use”. The lands were used for residential development by way of physical activities of demolition, excavation or construction. But residential development is not a competing use with residential accommodation. It is the precursor to land being used as residential accommodation. The question is whether land used for residential development is also used “for” residential accommodation within the context of s 516. The word “for” may involve an element of futurity.

13. In the Roman Catholic Bishop of Perth v Perth Road Board (1933) 49 CLR 37 the Roman Catholic Bishop of Perth claimed an exemption from rates in respect of land of which he was the registered proprietor. The exemption was available in respect of “land belonging to any religious body, and used or held exclusively as or for a place of public worship [or] a place of residence of a minister of religion.”

14. The land in question was vacant and it was not used for any purpose. The question was whether it was held exclusively not as a place of public worship or a place of residence of a minister of religion, but for a place of public worship or a place of residence of a minister of religion. The High Court answered that question in the negative by reason of the requirement that the land be held exclusively for a place of public worship or a place of residence of a minister of religion based upon the limitations of the stated case upon which the decision was to be made. The stated case did not exclude the use of the land for any other purposes of the Catholic Church. Rich J said (at 43):

“The expression ‘held as and for’ includes a present holding for a future purpose. The real difficulty in the case lies in the necessity that the present holding shall be ‘exclusively’ for that purpose. Mere individual or collective intention of members of the faith holding authority in the Church is not, I think, sufficient to manifest the requisite exclusion of other possible purposes for which the land may be used.”

20. Dixon J said (at 46-47):

“If, although the land has not been presently used for public worship, there has yet been an express determination by a competent ecclesiastical authority requiring that it should be held for no other purpose than as a place of public worship, and that determination is recognised by law as binding those otherwise entitled to control and direct the use of the land, then, while that determination remains unrevoked, I think it would suffice to satisfy the second alternative of the condition, and the land would be held exclusively for a place of public worship within the meaning of the provision.”

21. In that case there was no current use of the land (per Dixon J at 46). But it is clear that if the evidence had established the requisite exclusivity of the purpose for which the land was held, that the High Court would have found that the land was held for a place of public worship, even though it was not being either used or held at that time as a place of public worship because nothing was constructed on the land. But in that case the provision distinguished between land being “held as” and land being “held for”. It is common ground and could not be disputed that for the purposes of s 516 if land is used as residential accommodation, it is also used for residential accommodation. The decision in Roman Catholic Bishop of Perth v Perth Road Board shows that a wider construction is at least possible. By the same token the decision illustrates that the construction for which the respondents contend could readily have been provided for by a categorisation of land as residential if its dominant use was “as or for residential accommodation”.

22. In Commissioner of Land Tax (NSW) v Joyce (1974) 132 CLR 22 one of the grounds upon which exemption from land tax was claimed was that it was “land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for a place of worship for a religious society ...” (Land Tax Management Act 1956 (NSW), s 10(1)(g)(i)). Members of a Christian sect known as the Brethren had purchased land at Burwood for the purpose of providing a gospel hall and for allied uses but planning permission had been refused and cottages still stood on the land. Gibbs J said (at 29):

“In support of their submission that the Burwood land came within the exemption conferred by s 10(1)(g)(i) of the Land Tax Management Act 1956 (NSW), as amended, counsel for the respondents laid stress on the words ‘land … used or occupied … solely as a site for a place of worship …’. The word ‘site’ can refer to a piece of ground intended for building purposes, as well as to one on which a building is constructed. When one speaks of ‘a site for a church’, rather than of ‘the site of a church’, the words naturally suggest that the church is to b[e] built, but has not yet been built, on the site mentioned. Therefore it was submitted that s 10(1)(g)(i) looks to the future, and that the Burwood land, being an area on which a place of worship was intended to be built, comes within the exemption.

I am disposed to think that the exemption conferred by s 10(1)(g) is not restricted to land on which something of the kind mentioned in the paragraph is already built or constructed. For example, if the other conditions laid down by the paragraph were fulfilled, land on which a church was in the course of erection, as well as land on which a church had been erected, would be exempt from the tax. But the exemption is not conferred on land which ‘is a site’ — to qualify the land must be ‘used or occupied … solely as a site’. When the land in fact is the site of cottages, one at least of which is occupied, and no steps can be taken towards the construction of a Gospel Hall, because a necessary consent has not been obtained, it seems to me impossible to hold that the land is ‘used or occupied … solely as a site for a place of worship’.”

23. In Needham v Commissioner of Land Tax [1999] 2 Qd R 611 the Queensland Court of Appeal (McMurdo P, Thomas JA and Wilson J) had to consider whether the trustees of Tattersall’s Club (a club not carried on for pecuniary profit), were entitled to an exemption from land tax in respect of land acquired for the purposes of the construction of a new building for the Club. Land tax was payable on land owned at midnight on 30 June 1995 (at [7]). As at that time the lots in question were vacant land. An existing building on the land had been demolished to permit the construction of a new building. Section 13(1)(g) of the Land Tax Act 1915 (Qld) exempted from land tax:

“all land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for – (i) a building owned and occupied by a society, club or association not carried on for pecuniary profit”.

24. The competing contentions were summarised by the Court as follows:

“[12]    The contention of the Commissioner is that such a club may obtain exemption from land tax only while there is an actual building owned and occupied by the Club on the land. The contention of the Club is that the exemption relates to land that is a site for a building, as well as land that is the site of an existing building, owned and occupied by the Club. In short, land may qualify for the exemption before erection of a building so long as the Club genuinely intends to erect and occupy a building on its land. There can, in the present case, be no doubt about the Club’s intention and commitment to such an objective at all material times.”

25. The Queensland Court of Appeal accepted the Club’s contentions. In so doing it applied what was said by Gibbs J in Commissioner of Land Tax (NSW) v Joyce quoted above and Penrith Rugby League Club Limited v Commissioner of Land Tax [1983] 2 NSWLR 616 at 619 per Hunt J. The Court said:

“[14]    Counsel for the respondent submitted that to interpret the exemption as applying to land on which a building is to be constructed would require the importation of such words as ‘to be’ after ‘building’ in subpara. (i). Such a meaning would naturally be implied from the introductory words ‘as a site for …’. In ordinary language, words such as ‘to be’ might properly be omitted as unnecessary in such a context. The insertion of words such as ‘whether a building is on the site or not’ might be regarded as tautologous. The element of futurity in the words ‘as a site for’ is an important component of the section. It may be noted that the construction advanced by counsel for the respondent would require the words ‘site for’ to be replaced by the words ‘site of’.”

26. It was not the word “site” that had the element of futurity, but the expression “as a site for” and it was the word “for” that had the element of futurity as is evident from a comparison with the words “site of”, (cf Leda Manorstead Pty Ltd v Chief Commissioner of Taxation (2010) 79 NSWLR 724; [2010] NSWSC 867 per Gzell J at [45]).

27. In Educang Limited v Brisbane City Council [2002] QSC 374 the issue was whether between 1 July and 31 December 1997 land owned by the applicant was being used entirely for a school. If so, it was exempt from rating (at [7]). For the period in question a school was being built on the land. The position taken by the council was described by White J as follows:

“[8]    By its letter to the applicant's solicitors dated 21 January 1999 the respondent wrote:

‘To be eligible for General Rate Exemption the property in question must satisfy certain criteria. Under the Exemption from General Rating schedule part (e) it clearly states that the land must be used entirely for a school. The property cannot be considered as being used as a school until the building has been opened and classes are being undertaken. Prior to this, the Council considers the property to be a construction site.’ [italics added]

As will be immediately apparent, the writer seems to regard ‘for’ and ‘as’ as interchangeable which they very clearly are not. The respondent granted the applicant a general rate exemption from 1 January 1998.”

28. After a consideration of the authorities White J concluded:

“[29]    In this case the applicant conducted a school, the Forest Lake College, and had done so since 1994. Since its inception, as enshrined in its memorandum and articles, it intended to have two campuses but there was only one school. The land acquired in 1997 was the realisation of that plan. From its acquisition by the applicant the land was for a school, that is, for the purposes of a school which was already established. ‘Conducted’ does not add anything to the expression ‘used ... for a school’ in temporal terms. It governs or describes the school and is, for example, to be contrasted with a school operated by the State. The town plan for Forest Lake and the terms of the contract for the sale of the land and the planning approval for it as a school make plain that this land was used entirely for a school. To emphasise the point, if ‘for the purposes of’ were inserted before ‘a school’ there could be no doubt about the exemption. Bowen JA said in Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533 ‘“use” has regard to the purpose to which the land is put’. The respondent was wrong in characterising the use to which the land was put as a construction site. That activity was ancillary to its use for a school.”

29. In Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam) (1996) 30 BCLR (3d) 263 the Court of Appeal of British Columbia considered the appropriate classification for rating purposes of land that by reason of the terms of a restrictive covenant was designated for residential use. At the relevant assessment date no application had been made for a development permit and no construction work had begun. Some geotechnical work and soil studies had been done on the site. The planned development was for the area designated residential to be developed in conjunction with other land not so designated to form a proposed town centre. Traffic studies had been carried out and a retail market study had been conducted. The relevant provisions of the regulation provided that land would be classified as residential either as:

“(a)    land or improvements, or both, used for residential purposes ...;

...

(c)   land having no present use and which is neither specifically zoned nor held for business etc purposes.”

30. The majority (Esson JA, Prowse JA concurring) held that although the land was held for residential purposes, it was not being used for residential purposes. It therefore did not fall within para (a). It did not fall within para (c) because the land was zoned for business purposes. The majority left open the question whether the land would be used for residential purposes if buildings intended for residential purposes were being built but were not ready to be occupied for such purposes (at 270).

31. Lambert JA dissented and held that the juxtaposition of paras (a) and (c) indicated that para (a) should not be given its “most plain and most ordinary meaning of “occupied as living quarters” because to do so would give rise to an absurdity. That was that under para (c) bare land with no present use which is zoned residential only was entitled to residential classification, and the occupation of living quarters would have that classification and it would be absurd that that classification would be lost during the period of construction. Lambert JA said:

“[72]    It follows that if the very land that has been accorded residential classification as bare land is put into use by the commencement of construction of living quarters on the land, then it can no longer be said to have ‘no present use’.  So it could no longer attain its residential classification under para.1(c).  But it would be absurd to suggest that it would have residential classification before construction started, residential classification after construction was completed and the living quarters occupied, but lose its residential classi­fication during the construction process and until the living quarters were occupied.”

32. Lambert JA went on to conclude that a parcel of land was “used for residential purposes” within the meaning of para (a) if it were committed and dedicated to becoming living quarters for people (at [76]).

33. This concept was taken up in a later decision of the Court of Appeal of British Columbia (Assessor of Area # 10-Burnaby/New Westminster v Intracorp Developments Ltd 2000 BCCA 121; (2000) 137 BCAC 63) Donald JA, with whom other members of the Court agreed said:

“[27]    The problem in this case comes down to one of statutory interpretation: what is meant by the phrase ‘used for residential purposes’? This matter has been considered before, and Bosa No. 2, in particular, offers some useful interpretive approaches. It is clear from both the majority and dissenting opinions in Bosa No. 2 that the phrase does not contemplate holding property for residential purposes. For the purpose behind the use of the land to become residential, there must be more than a mere intention to develop the land as residential: Assessor of Area #10 - Burnaby/New Westminster v. Reemark XIII Developments Ltd. and Fairmont (4 June 1992), Vancouver, Registry, A921572 (B.C.S.C.) (Stated Case No. 329). At the other end of the spectrum, all three judges in Bosa No. 2 accepted that the phrase allowed for something less than actual occupation. The construction phase of a development lies in the gray area between mere holding and actual obligation.

[28]    I am attracted to the notion of commitment to a residential use proposed by Mr. Justice Lambert in his dissenting opinion in Bosa No. 2. The issue remains, however, as to the degree of development required to demonstrate such a commitment. In other words, at what stage in the progress of the project can it be said with confidence that the commitment to follow through with the intention to develop the land for residential purposes has been proven? In light of the majority view in Bosa No. 2, by which I am bound, the commitment must go beyond pre-construction development steps and manifest itself in the actual building of the project. Once it is clear that the project has entered the construction phase then the facts should be examined in each instance to determine whether the development has reached the stage where the owner is committed to one use rather than another.

[29]    The degree of commitment may be inferred from a number of factors examined in the context of the development as a whole including, but not limited to:

1.    the various legal instruments attached or applicable to the land and/or proposed buildings (zoning requirements, restrictive covenants, building permits, purchase and sale agreements, etc.);

2.   relevant features of the actual construction (with the acknowledgment that it may be difficult to discern anything meaningful at early stages of construction; and

3.    any substantial indication that the owner is using the land for a non-residential purpose or is in some way reneging on the stated intention to develop the land for residential use.

[30]    Although the construction itself may often be the most persuasive indication of commitment, it may not be the determining factor in every instance. This is particularly evident in the early stages of construction. For example, it may be that there is something about the site preparation that establishes that the owner has embarked upon a specific residential project. In the absence of any compelling indication to the contrary, the likely conclusion is that the land is being used for a residential purpose. However, the reverse does not necessarily follow. It may be that the site clearing and demolition leave open a number of optional uses. But this fact alone does not automatically negate a commitment to a residential purpose without further inquiry into all of the circumstances of the development. The issue is really one of whether the owner has dedicated the land to a particular use and has actually started construction. This, as stated, is evaluated by reference to the factors listed above.”

34. These decisions address similar issues to those in this case in a statutory context that has some similarities to, but also some differences from, the present. The decision of the majority in Bosa that there was no current use of the land for residential purposes at the planning stage, where only geotechnical studies or traffic or like studies had been conducted is in accordance with the decision in Metricon. In Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1637 I reached a similar conclusion in relation to the Chief Commissioner’s contention in that case that primary production was not a dominant use of the land because there was a competing use for residential development, but there had been no substantial physical use of the land for that purpose and the land owner was not necessarily committed to such a development (at [26]-[31]).

35. A similar issue also arises in this case in relation to the juxtaposition of paras (a) and (b) of s 516(1) as concerned Lambert JA in the passage quoted at [31] above. In Meriton, Pain J also considered it would be anomalous if land should be categorised as residential when vacant, be categorised as business until completion of the building and issue of an occupation certificate, and then revert to the residential category when an occupation certificate is issued or the building is actually occupied (at [24]). The respondents make the same contention on appeal.

36. In Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue (2009) 25 VR 59; [2009] VSCA 167 land was exempted from land tax if it were:

“vested in any body corporate ... that exists for the purpose of providing or promoting cultural or sporting recreation ... and which is used for out-door sporting recreation or cultural purposes or similar out-door activities”. (at [6])

37. Dodds-Streeton JA, with whom Buchanan JA and Beach AJA agreed, held that land on which the construction of golf courses and other out-door sporting facilities had commenced but had not been completed and which was not yet used for playing golf or any other out-door sporting activities was not within the scope of the exemption. Her Honour held that the structure and language of the relevant provision (s 9(1)(g) of the Land Tax Act 1958) was that the legislative goals were those identified by Adam J in Mayor, Councillors and Citizens of the City of Essendon v Cox [1967] VR 545, namely:

“... as encouraging ‘the retention of existing out-door cultural and sporting and recreational lands and their continued use as such’, as opposed to the mere provision of such land. So much is clear from the addition of the user requirement in s 9(1)(g).” (at [60]) (emphasis in original)

38. Buchanan JA said that only land actually used for out-door sporting, recreation or cultural purposes or activities by a body which existed for the specified purposes was exempt (at [20]).

39. Dodds-Streeton JA said (at [75]) that the specific language of s 9(1)(g) indicated that it did not cover the preliminary stage of development principally for the reason emphasised by the primary judge (Mandie J). Mandie J said:

“The expression ‘which is used for out-door sporting recreation or cultural purposes or similar out-door activities’ looks to the actual use of the land at the relevant date.”

40. Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue concerned a landowner’s claim for exemption from land tax pursuant to s 10AA of the Land Tax Management Act 1956. The question was whether the dominant use of land was “for” the maintenance of animals for the purpose of selling them or their natural increase or bodily produce (s 10AA(3)(b)). The plaintiff was the owner of some 593 hectares of land on which at the relevant date for the imposition of land tax somewhere between 268-279 cattle were grazing on the land. The landowner intended that the land would be developed as a residential subdivision and substantial earthworks had been carried out to that end. The landowner contended that the cattle operation was the only relevant use of the land and that the earthworks did not constitute a “use for” property development. At first instance Gzell J reviewed many of the authorities to which I have referred above and concluded (at [54]):

“In the instant circumstances, Cobaki was acquired for residential development and construction of that residential development has commenced with large sums of money dedicated to earthworks. They are not complete, but that does not alter the principle enunciated in Educang that in appropriate circumstances land in the development phase may be used for the end purpose that is to follow completion of construction. On that basis it is open to determination whether Cobaki was as at 31 December 2005 being ‘used for’ residential development.”

41. His Honour concluded that the earthworks activities that were “for” residential development constituted the dominant use.

42. The conclusion was upheld on appeal (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775). Allsop P (with whom Campbell and Whealy JJA agreed) held (at [25]) that:

“The primary judge’s overall evaluation of the use for which Leda was putting the land, as commercial land development or residential development was, in my view, correct.”

43. Allsop P said:

“[29] The various cases to which his Honour made reference and which were referred to in argument do not advance the resolution of the appeal. None was directed to a statutory provision in the same terms as s 10AA. Each was directed to a particular form of words in which a particular use was identified and the question arose whether antecedent or collateral activity could be seen to be part of that use because of its proximity or connection or whether it was to be seen as antecedent and separate from the later particular use. A brief examination of these cases will reveal that this was their context and that they are of no particular utility in resolving this appeal.

...

[38]    It is true that the primary judge said that he preferred the approach in Meriton, Educang and New Westminster to the approach taken in Sandhurst Holdings.

[39]    It is unnecessary to come to a view whether his Honour was correct in the expression of that view, just as it is unnecessary to analyse each of these cases in order to consider whether they were correctly decided on their relevant provisions.

[40] It can be accepted that for the resolution of this appeal used “for” is to be seen as a present use. Leda was using the land for two purposes: cattle grazing and commercial land development. The question was whether the former was the dominant use so as to attract or satisfy s 10AA(3).

44. Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No 2) [2016] NSWSC 332; (2016) 102 ATR 781 and on appeal Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11; (2017) 224 LGERA 236 also concerned the construction and application of s 10AA(3) of the Land Tax Management Act. Metricon was a land developer. It acquired land for the purpose of future residential development. At the relevant taxing dates the land was being used for cattle grazing. Relevantly, the Chief Commissioner contended that a competing use was that the lands formed part of the stock in trade constituting the “land bank” of Metricon and were held for the purpose, when the time was appropriate, of being developed, subdivided and resold for profit in the course of commercial land development business of Metricon. The Chief Commissioner further contended that for the relevant land tax years the lands were used for commercial land development where Metricon incurred ongoing expenses in connection with the development of the land which exceeded the financial outlay and financial return from primary production (Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No 2) at [20]).

45. I concluded that the comparison required by s 10AA(3) of a primary production use with other uses was not confined to a comparison with other physical uses. On appeal Barrett AJA (with whom Macfarlan and Ward JJA agreed) disagreed. This Court held that for the purposes of s 10AA(1) of the Land Tax Management Act only a competing physical use of the land is to be taken into account in determining whether or not the primary production use was dominant, as distinct from an intangible use.

46. It is common ground that this conclusion is applicable to the construction of s 516 of the Local Government Act. The councils do not contend that Karimbla’s use of the lands to derive profit from redevelopment is a competing use to a use of the land “for” residential accommodation. Rather, the councils contend that there is no current use for residential accommodation because at material times the only current use was as a site for commercial or residential development.

47. Neither Leda Manorstead nor Metricon addresses this question.

48. The resolution of the question depends upon whether, in the context of s 516, the expression “dominant use is for residential accommodation” means and means only that the dominant use is as residential accommodation, or whether the expression includes that the dominant use is for the provision of residential accommodation. If the latter construction is correct then the fact that the land is used for residential development does not mean that it is not also being used for residential accommodation.

“For” in the context of s 516

49. If the only words to be construed were the opening words of s 516(1)(a), namely, that land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and its dominant use is for residential accommodation, then I would be inclined to agree with the decision of Pain J in Meriton (although for different reasons) that “for residential accommodation” does not only mean “as residential accommodation” (although it no doubt encompasses that), but also includes a present use for the provision of future residential accommodation.

50. But when the opening words of paragraph 516(1)(a) are read in the context of the whole of that paragraph and in the context of subsection (1A) the better view is that the words “for residential accommodation” are to be read as meaning “as residential accommodation”.

51. Section 516 provides that land is to be categorised as residential if “... its dominant use is for residential accommodation (otherwise than as a hotel, motel, guesthouse ... or any other form of residential accommodation (not being a boarding house or a lodging house) prescribed by the regulations)”. Thus, a boarding house or a lodging house is excepted from the exclusion that applies where a dominant use is for residential accommodation as an hotel, motel, guesthouse etc. The exceptions of boarding houses and lodging houses from that exclusion apply only where a boarding house or lodging house is being let as a lodging, that is, is being used as residential accommodation. The exclusion of a dominant use “for residential accommodation (otherwise than as a hotel, motel ... [etc])” must thus be read as an exclusion where residential accommodation is currently “as a hotel, motel, guesthouse [etc])”. This indicates that in s 516(1)(a) the reference to the dominant use being “for” residential accommodation means that the dominant use is currently “as” residential accommodation. That is so because the exclusion uses the preposition “as” rather than “for” and the specific terms of the exception from the exclusion that refer to a current use of a boarding house or lodging house preclude the preposition “as” in the exclusion being read as including a future use.

52. This is reinforced by s 516(1A)(a) and (b). Boarding houses and lodging houses are exceptions to the exclusion in s 516(1)(a) of land whose dominant use is as a hotel, motel, guesthouse etc. The exception only applies where the boarding house or guesthouse has at least three tariff-paying occupants who have resided for a sufficient period to satisfy s 516(1A)(b) and who pay less than a tariff determined by the Minister (s 516(1A)(a)). Excluded from the exception to the exclusions are, amongst other establishments, a residential flat building, a building containing serviced apartments, a backpacker hostel or any other tourist establishment.

53. The application of s 516(1A) requires consideration of the current use of the premises as premises let for lodging that satisfies paras (a) and (b), or as a private hotel, licensed premises, a building containing serviced apartments, a backpacker hostel or other tourist establishment.

54. It may not be possible to determine objectively whether land that is being used by the carrying out of demolition or excavation works is to be used in the future, for example, as a hotel, or as serviced apartments. If the former, the land could not be categorised as residential. If the latter, it would be by virtue of Local Government (General) Regulation 2005, cl 122. This may also be the case while the building is under construction.

55. Even after the commencement of construction a developer could apply for modification of terms of a development consent that could change the intended future use to a use that could fall within an exclusion, for example, by changing a number of intended residential apartments to hotel suites.

56. This supports the construction of s 516 that “for residential accommodation” is to be read as “as residential accommodation.”

57. Accordingly, I respectfully disagree with Pain J’s decision in Meriton.

58. I respectfully differ from Emmett AJA’s conclusion at [131] that the issue of an occupation certificate is a sufficient indication that a future intended use for residential accommodation has come sufficiently to fruition to become a present use for residential accommodation. The issue of an occupation certificate means that the land is capable of being occupied as (or for) residential occupation, but does not itself involve any physical activity on the land that Metricon holds to be the core meaning of “use”. Section 6.4 of the Environmental Planning and Assessment Act 1979 (NSW) defines an occupation certificate as a certificate that “authorises” occupation. An occupation certificate does not create a deemed state of occupation. The commencement of occupation of a building, or apartments within a building, as a residence is an objectively verifiable fact.

59. Karimbla submitted that so to construe s 516(1)(a) would be to create an anomaly where a homeowner ceased to live on a residential property while renovations or extensions to a home were carried out or an existing dwelling was demolished to be replaced with a new dwelling, or even where a house was left vacant for a period. However, I agree with Emmett AJA’s reasons (at [127]) that such a postulated change of use would not necessarily lead to a conclusion that the land was not being used “for residential accommodation”.

60. I also agree with Emmett AJA’s reasons at [122] for rejecting Karimbla’s contention that the construction contended for by the councils creates an anomaly where vacant land zoned residential is to be categorised as business once development commences but reverts to residential once development is complete and the building is occupied as residential accommodation.

61. For these reasons I agree that the appeals should be allowed.

62. I agree with Emmett AJA’s reasons in relation to the other issues arising on the appeal and with the order his Honour proposes.

63. EMMETT AJA: The principal question in these three appeals is whether, for the purposes of s 516(1)(a) of the Local Government Act 1993 (NSW) (the Local Government Act), the dominant use of land can be categorised as being “for residential accommodation” when the relevant land is being developed for the purpose of the construction of residential apartments. The question arises in the context of the assessment of rates payable by the owner of the land during the period of development. For the purposes of argument, it is convenient to refer to the activity of demolishing buildings, excavating the site of the demolished buildings and constructing new buildings in connection with development as the construction phase.

64. Ancillary questions arise in relation to one of the appeals. The first is whether the owner of such land would be entitled to recover rates levied and paid on the basis that, during the construction phase, the dominant use of the land was not for residential accommodation. The second is whether it is within the jurisdiction of the Land and Environment Court of New South Wales (the L&E Court) to order such recovery.

65. The respondents to the appeals (the Landowners) are members of the Meriton Group, a substantial land developer for commercial purposes. Each of the Landowners owns a parcel of land situated in the local government area of the Council of the City of Sydney (Sydney Council), Bayside Council (Bayside Council) or North Sydney Council (North Sydney Council). Each of the Landowners is a special purpose vehicle, usually entitled “Karimbla Properties” with a number in parenthesis thereafter, incorporated by the Meriton Group to undertake the development of the particular parcel of land owned by it.

66. By way of example, Karimbla Properties (No 24) Pty Ltd (Karimbla 24), at relevant times, owned a parcel of land in O'Dea Avenue, Waterloo, in the local government area of Sydney Council (the O'Dea Avenue Property). Karimbla Properties (No 34) Pty Ltd (Karimbla 34), at relevant times, owned a parcel of land situated in Kent Street, Mascot, in the local government area of Bayside Council (the Kent Street Land). Karimbla Properties (No 7) Pty Ltd (Karimbla 7), at relevant times, owned a parcel of land situated in Miller Street within the local government area of North Sydney Council (the Miller Street Land).

67. The appellants in the respective appeals are Sydney Council, Bayside Council and North Sydney Council (the Councils). The appeals are brought from orders made by the L&E Court in proceedings brought under s 526 of the Local Government Act. That section provides for an appeal to the L&E Court from a declaration made by a local council in relation to the categorisation of land for the purposes of levying rates.

68. By Notice of Appeal filed on 6 March 2018, Sydney Council appeals from the orders made by the primary judge in favour of Karimbla 24 and four other members of the Meriton Group. On 6 March 2018 Bayside Council filed a Notice of Appeal in relation to orders made by his Honour in favour of Karimbla 34 and four other companies in the Meriton Group. A Notice of Appeal was also filed by North Sydney Council on 6 March 2018 in respect of the orders made by his Honour in favour of Karimbla 7.

69. It will be convenient to deal specifically with the O’Dea Avenue Land, which is one of the parcels of land that is the subject of the appeal by Sydney Council. It is common ground that the question of principle applies equally in relation to all of the parcels of land owned by the Landowners. Before dealing with the O’Dea Avenue Land, it is desirable to describe the legislative framework under which the principal question arises.

Legislative Framework relevant to the Principal Question

70. The relevant legislative framework involves not only the Local Government Act but also the Environmental Planning and Assessment Act 1979 (NSW) (the Planning Act). It is necessary to describe the provisions of both the Local Government Act, relating to the categorisation of land, and the Planning Act, relating to the issue of certificates.

Categorisation of Land under Local Government Act

71. Chapter 15 of the Local Government Act deals with the financing of local councils. Part 1 of Ch 15, consisting of ss 491 to 504, provides an overview of rates and charges. Under s 491, a Council may, in accordance with Ch 15, obtain income from rates, as well as from other sources. Under s 492, a Council may make “ordinary rates” and “special rates”. Section 493 provides that there are four categories of ordinary rates and four categories of rateable land being:

• Farmland, defined in s 515;

• Residential, defined in s 516;

• Mining, defined in s 517; and

• Business, defined in s 518.

72. Under s 494, a council must make and levy an ordinary rate for each year on all rateable land in its area. It is common ground that all of the land in question in these three appeals is rateable land. Under s 497, an ordinary rate may, at a council’s discretion, consist of an ad valorem amount or a base amount to which an ad valorem amount is added. Under s 498, the ad valorem amount of an ordinary rate is an amount in the dollar determined for a specified year by the council and expressed to apply to the land value of all rateable land in the council’s area within the relevant category. The ad valorem amount of the rate is to be levied on the land value of rateable land. Under s 509, a council must not make rates and charges for a year so as to produce general income of an amount that exceeds the notional general income of the council for the previous year as varied by a percentage determined in accordance with the provisions of the Local Government Act.

73. Part 3 of Ch 15, which consists of ss 514 to 531B inclusive, deals with ordinary rates. Under s 514, before making an ordinary rate, the council must have declared each parcel of rateable land in its area to be within one or other of the following categories:

• Farmland;

• Residential;

• Mining; and

• Business.

74. Under s 515, land is to be categorised as farmland if its dominant use is for farming that has a significant and substantial commercial purpose or character and is engaged in for the purpose of profit on a continuous or repetitive basis. Land is not to be categorised as farmland if it is rural residential land.

75. Under s 517, land is to be categorised as mining if its dominant use is for a coal mine or metalliferous mine.

76. Section 516 is critical for the purpose of the three appeals. Relevantly for present purposes, if the dominant use of land is for residential accommodation then, subject to certain exceptions, the land is to be categorised as residential. However, the other provisions of s 516 may be relevant in so far as they throw light on the proper construction of the relevant words in s 516(1)(a).

77. The precise language of s 516 is set out below:

“516 Categorisation as residential

(1)   Land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and:

(a)   its dominant use is for residential accommodation (otherwise than as a hotel, motel, guest-house, backpacker hostel or nursing home or any other form of residential accommodation (not being a boarding house or a lodging house) prescribed by the regulations), or

(b)   in the case of vacant land, it is zoned or otherwise designated for use under an environmental planning instrument (with or without development consent) for residential purposes, or

(c)   it is rural residential land.

(1A)   For the purposes of this section, a boarding house or a

lodging house means a building wholly or partly let as lodging in which each letting provides the tariff-paying occupant with a principal place of residence and in which:

(a)   each tariff charged does not exceed the maximum tariff for boarding houses or lodging houses for the time being determined by the Minister by order published in the Gazette for the purposes of this subsection, and

(b)   there are at least 3 tariff-paying occupants who have resided there for the last 3 consecutive months, or any period totalling 3 months during the last year,

and includes a vacant building that was so let immediately before becoming vacant, but does not include a residential flat building, licensed premises, a private hotel, a building containing serviced apartments or a backpacker hostel or other tourist establishment.

(2)   The regulations may prescribe circumstances in which land is or is not to be categorised as residential.”

78. Finally, under s 518, land is to be categorised as business if it cannot be categorised as farmland, residential or mining. Thus, for present purposes, the only question is whether the O’Dea Avenue Land and the other relevant parcels should, at relevant times, be categorised as “residential” or “business”. It has not been suggested that any of the land should be categorised as “farmland” or “mining”.

79. Section 520 provides that a council must give notice to each rateable person of the category declared for each parcel of land for which the person is rateable. Relevantly for present purposes, the rateable person is the owner of land, namely, the Landowners. Such a notice must state that the person has the right to apply to the council for a review of the declaration that the land is within the category stated in the notice. Under s 521, a declaration that a parcel of land is within a particular category takes effect from the date specified for that purpose in the declaration. Under s 522, a declaration that a parcel of land is within a particular category ceases when a subsequent declaration concerning the land takes effect.

80. Section 523(1) provides that a council need not review annually a declaration that a parcel of land is within a particular category. However, it may review a declaration as part of a general review of the categorisation of all or a number of parcels of land, or because it has reason to believe that a parcel of land should be differently categorised. Under s 524, a rateable person must notify the council within 30 days after the person’s rateable land changes from one category to another. Section 523(2) provides that a council must review a declaration if required to do so by a person who is rateable in respect of the land to which the declaration applies.

81. Under s 525(1), a rateable person may apply to the council at any time for a review of a declaration that the person’s rateable land is within a particular category, or to have a person’s rateable land declared to be within a particular category. Section 525(2) provides that an application must nominate the category the applicant considers the land should be within.

82. Under s 525(3), the council must declare the land to be within the category nominated in the application unless it has reasonable grounds for believing that the land is not within that category. If the council has reasonable grounds for believing that the land is not within the nominated category, it may, under s 525(4), notify the applicant of any further information it requires in order to be satisfied that the land is within the category. After considering any such information, the council must declare the category for the land. Section 525(5) requires the council to notify the applicant of its decision, which must include the reasons for the decision if it declares the land is not within the category nominated in the application.

83. Section 526 provides that a rateable person who is dissatisfied with the date on which a declaration is specified to take effect, or a declaration of a council under s 525, may appeal to the L&E Court. An appeal must be made within 30 days after the declaration is made. On appeal, the L&E Court may declare the date on which a declaration is to take effect or the category for the land, or both, as the case requires.

84. Under s 527, a council must make an appropriate adjustment of rates paid or payable by a rateable person following a change in category of land. As will become apparent, the construction of s 527 is of critical importance in relation to the grounds of appeal raised by North Sydney Council.

Consents and Certificates under the Planning Act

85. Under s 4.2(1) of the Planning Act, if an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless such a consent has been obtained and is in force, and the development is carried out in accordance with the consent and the instrument. Section 1.5(1) provides that for the purposes of the Planning Act, development relevantly includes any use of land, the erection of a building, the carrying out of a work and the demolition of a building or work.

86. Section 6.3(1)(a) of the Planning Act provides that a person must not carry out building work without a certificate under Pt 6 that is required for that activity. Under s 6.7(1), a construction certificate is required for the erection of a building in accordance with development consent. Under s 6.4(a), a construction certificate under Pt 6 is, relevantly, a certificate to the effect that building work completed in accordance with specified plans and specifications or standards will comply with the requirements of the regulations.

87. Section 6.3(1)(c) of the Planning Act provides that a person must not carry out the occupation or use of a building, including a change of use, without a certificate under Pt 6 that is required for that activity. Under s 6.9(1)(a), an occupation certificate is required for the commencement of the occupation or use of the whole or any part of a new building, or for the commencement of a change of building use for the whole or part of an existing building. Under s 6.4(c), an occupation certificate is a certificate that authorises the occupation and use of a new building in accordance with development consent, or a change of building use for an existing building in accordance with development consent.

88. Under s 6.10(1), an occupation certificate must not be issued unless any pre-conditions to the issue of the certificate that are specified in development consent have been complied with. Under s 6.10(2)(c), an occupation certificate must not be issued to authorise a person to commence occupation or use of a new building, or part of a new building, unless the completed building, or part of the building, is suitable for occupation or use in accordance with its classification under the Building Code of Australia. Under s 6.1, the term new building includes an altered part of, or an extension to, an existing building.

Background in relation to the O’Dea Avenue Land

89. At relevant times, the O’Dea Avenue Land was zoned “B4 Mixed Use” under the Sydney Local Environmental Plan 2012 and the improvements on it consisted of warehouses and offices that were being used for commercial purposes. It is common ground that the carrying out of the construction phase of the development on the O’Dea Avenue Land required development consent.

90. On 29 February 2012, Karimbla 24 lodged a development application with Sydney Council in relation to the O’Dea Avenue Land for the demolition of all existing structures and removal of all materials. On 30 April 2012, development consent was granted for Karimbla 24 to demolish all existing structures on the O’Dea Avenue Land and remove all materials.

91. On 30 May 2012, Karimbla 24 became the owner of the O’Dea Avenue Land. At that time, the O’Dea Avenue Land was categorised for rating purposes under the Local Government Act as “business”.

92. On 14 December 2012, a development application in respect of the O’Dea Avenue Land was lodged with Sydney Council, seeking consent for the following:

“Detailed design of five residential flat buildings containing a total of 367 residential apartments, three retail tenancies and parking for 254 cars, associated earthworks and landscaping works.”

93. On 7 February 2013, Sydney Council issued a construction certificate for demolition works on the O’Dea Avenue Land (CC1). On 11 February 2013, Karimbla 24 commenced the work authorised by CC1.

94. On 10 April 2013, a second construction certificate was issued in relation to the O’Dea Avenue Land for remediation works and lifting of slabs where required (CC2). By 12 April 2013, Karimbla 24 had commenced excavation works on the O’Dea Avenue Land in accordance with CC2.

95. On 9 May 2013, development consent was granted in relation to the O’Dea Avenue Land for the following:

“Construction of five residential flat buildings ranging in height from 8 to 25 storeys comprising 361 residential apartments, three retail tenancies and parking for 254 cars, associated earthworks, excavation, public domain works and landscaping.”

That development consent was subsequently modified pursuant to s 96 of the Planning Act. As modified, the consent approved 34,485 square metres of residential floor area and 1,251 square metres of non-residential floor space.

96. On 27 June 2014, a third construction certificate was issued in relation to the O’Dea Avenue Land (CC3) in relation to the following:

“1.   Structural works to Building 1 Level 8 excluding [certain areas].

2.   Structural works to Building 1 Level 9 as detailed on stamped plan…

3.   Structural works to Building 2 Level 8, 9 and 10 excluding [certain areas].

4.   Structural works to Building 3 Level 3 excluding [certain areas].

5.   Structural works to Building 3 Level 4 excluding [certain areas].

6.   Structural works to Building 3 Level 5 and 6 as detailed on stamped plan…

7.   Structural works to Building 4 Ground Floor excluding all hobs and floor slabs as detailed on stamped plan…

8.   Structural works to Building 4 Level 1 and 2 as detailed on stamped plan…”

97. By 4 August 2014, residential flat buildings containing residential apartments, retail tenancies, a child care centre and car parking had been partially completed on the O’Dea Avenue Land. In particular, structural work to portions of the car parking below Buildings 1 to 4 and Building 1 up to Level 8, Building 2 up to Level 8, Building 3 up to Level 3 and Building 4 up to the Ground Floor had been completed.

98. On 21 May 2015, an interim occupation certificate was issued in respect of construction of residential Building 1 and 2, including parts of the car parking and excluding certain areas. On 14 August 2015, an interim occupation certificate was issued in respect of “23 residential Building 4 excluding ground floor unit”. On 27 October 2015, an interim occupation certificate was issued in respect of “Retail UG15 (Building 2) and Retail UG10 (Building 1)”.

99. Finally, on 18 April 2016, an occupation certificate was issued in respect of the following:

“Construction of building 3 and excluding [certain areas]

1.   Structural works to building 3 level 3 excluding [certain areas].

2.   Structural works to building 3 level 4 excluding [certain areas].

3.   Structural works to building 3 level 5 and 6 as detailed on stamped plan …”

100. On 6 June 2016, Karimbla 24 submitted an application to Sydney Council to have the O’Dea Avenue Land declared to be “residential” for the purposes of s 514 of the Local Government Act, and requesting a change from “business” to “residential” with effect from 9 February 2013. On 28 June 2016, Karimbla 24 sent further documents to Sydney Council supporting the application.

101. On 10 August 2016, Sydney Council determined Karimbla 24’s application to change the categorisation of the O’Dea Avenue Land from “business” to “residential” but only with effect from 6 June 2016 and not from 9 February 2013 as requested. On 15 August 2016, Karimbla 24 filed an Application Class 3 in the L&E Court by way of appeal from the decision of 10 August 2016. By the Application, Karimbla 24 sought:

• an order that the O’Dea Avenue Land be declared to be within the “residential” rating category under the Local Government Act on and from 10 February 2013; and

• an order for an appropriate adjustment of rates paid and payable by Karimbla 24 to Sydney Council relating to the O’Dea Avenue Land to reflect the date of the change of rating category so declared.

102. On 14 February 2018, for reasons published on 26 June 2017 and supplementary reasons published on 29 January 2018, a judge of the L&E Court (the primary judge) declared that, taking effect on 21 January 2013, the O’Dea Avenue Land was within the residential rating category under the Local Government Act and ordered Sydney Council to pay to Karimbla 24 the sum of $398,952.37, being an adjustment of rates for the period 21 January 2016 to 30 June 2016 consequential upon that declaration. The primary judge ordered Sydney Council to pay Karimbla 24’s costs up to 26 June 2017 with each party paying its own costs after 26 June 2017, including a hearing on 19 October 2017.

The Proper Construction of s 516(1)(a)

103. Sydney Council and Bayside Council contend that the O’Dea Avenue Land should be categorised as “residential” only when, first, the construction phase is complete, and secondly, apartments in the buildings erected on the O’Dea Avenue Land are fit for occupation as residential accommodation, as evidenced by the issue of an occupation certificate. Sydney Council and Bayside Council also submit that the issuing of an occupation certificate is an objective guide as to when the construction phase has come to an end and the use of the property begins to be “for residential accommodation”. Moreover, they argue that it is not until the issue of an occupation certificate that what was previously an ultimate and intended purpose comes to fruition and the use of land becomes “for residential accommodation”. Therefore, they contend, as no occupation certificate was granted, the use of the O’Dea Avenue Land, during the construction phase, was not “for residential accommodation”. Accordingly, they say, the O’Dea Avenue Land should be categorised as “business” for the whole of the construction phase.

104. North Sydney Council contends that land should not be categorised as “residential” until apartments are actually occupied and should continue to be categorised as “business” until then.

105. As the Landowners point out, nothing in s 516(1)(a) refers expressly to the lawful use of land, for example, by occupation certification. They say that if the use of land is unlawful, then that is a matter for relevant regulatory authorities and has no bearing on the categorisation of the land for rating purposes, which involves a purely factual inquiry. Instead, the Landowners propose that the lawful execution of works in accordance with a development consent, involving the erection of a building, the dominant use of which will be for, and is approved for, residential accommodation, will meet the criterion in s 516(1)(a).

106. There is no dispute that, at the relevant times, Karimbla 24 was carrying out activities in the construction phase in accordance with the Planning Act. The Landowners eschew reliance on any proposition that it is necessary to have regard to future use, intention or purpose. They contend that the actual present or current use, during the construction phase, was “for residential accommodation”, as evidenced and manifested by the construction works and the relevant development consents. They assert that there can be no dispute that the purpose of those activities was the creation of buildings “for residential accommodation”. They contend that the concept of “use for residential accommodation” of land involves an inquiry into “purpose”.

107. In support, the Landowners rely on the proposition that the concept of use in relation to land is that of the physical deployment of the concrete, physical mass in pursuance of a particular purpose of obtaining present benefit or advantage from it. In that context, deployment must be understood as including not only activity but also inactivity deliberately adopted as a means of obtaining such actual and present advantage from the land, and purpose must be understood as objectively ascertained purpose[1] . Therefore, the Landowners contend that the issue in the present appeal calls for an inquiry into the purpose of the physical activity being carried out on the land. They say that if the purpose of the relevant activity was “for” residential accommodation, then the proper categorisation of the rateable land would be “residential”, irrespective of whether the activity being undertaken was merely preparatory to a person being able to live, or reside, on the land.

     1. See Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11; (2017) 105 ATR 11 at [60]-[61] (Chief Commissioner v Metricon), referring to the observations of Isaacs J in The Commonwealth v New South Wales (1923) 33 CLR 1 at 33; [1923] HCA 34.

108. The Landowners contend that the Councils’ construction of s 516(1)(a) involves a substantial reading down of the word “use”, a reading down that is not justified either textually or contextually. They assert that, if the word “use” is read down so as to require physical completion and lawful occupation of a building, it would follow that an ongoing inquiry, and monitoring, would be required to determine whether a building remains dominantly occupied by residential owners or tenants from time to time, and that that could not have been the intention of the legislature in enacting s 516(1)(a).

Consideration

109. It is possible to discern three different stages in relation to a parcel of land’s possible use for residential accommodation, namely, acquisition and holding of the land, followed by the construction phase, and then actual occupation. At the first stage, land may be acquired and then held by the owner with the intention that, in the future, it will be developed so as to be used for the purposes of residential accommodation. At that stage, the owner might, for example, carry out surveys and testing. However, the land’s use at that stage could not be said to be for residential accommodation[2] . Relevantly, a distinction can be drawn between the purpose for which land is acquired, on the one hand, and the purpose for which it is currently being used, on the other. The purpose of acquisition may or may not correspond with the current use. For example, land specifically acquired for the sowing of crops may be put either to that use or to some other use, such as cattle grazing. The inquiry must be as to the current tangible and physical deployment of the land and not to the purpose for which it was acquired[3] .

     2. See Bosa Development Corporation v Assessor of Area #12 Coquitlam (1996) 30 BCLR (3d) 263 at [16] (Bosa Development Corporation); Roman Catholic Bishop of Perth v Perth Road Board (1933) 49 CLR 37 at 43, 45-47; [1933] HCA 7.

     3. See Chief Commissioner v Metricon at [59]; cf Meriton Apartments Pty Limited v Parramatta City Council [2003] NSWLEC 309 at [23]-[25].

109. At the third stage, people actually reside on the land or it is used for the purpose of a kind normally ancillary to use for residential purposes, such as for lawns, gardens, tennis courts and the like[4] . It is clear that at that third stage, use of the land would be “for residential accommodation” within the meaning of s 516(1)(a).

     4. See Bosa Development Corporation at [18].

110. It is the second or middle stage that is in issue in the present appeals, namely, the construction phase, between the commencement of activity that is designed to render the land capable of being lived in, or being residential accommodation, and the achievement of a condition of the land in which it is in fact physically and lawfully capable of being lived in, or being residential accommodation. In that regard, it is significant that s 516(1)(a) does not refer to “purpose” but only to “use”, although the phrase “use for” may signify purpose. The criterion is that the use must be for residential accommodation.

111. The word “use” is a word of variable meaning. Nevertheless, in relation to land, the word has a core meaning independent of statutory context. Examination of activities undertaken upon the land in question is central to the identification of the “use” of the land [5] . In that context, the word “use” in s 516(1)(a) signifies use at large, rather than use by any particular person[6] .

     5. See Chief Commissioner v Metricon at [45]-[46].

     6. Ibid at [47].

112. The legislative framework outlined above requires a central focus upon the physical activities that are being conducted on, or in respect of, the land at the relevant date, and an objective characterisation of those activities in order to determine whether the use of the land that those activities constitute is “for residential accommodation”. In that process, regard cannot be had to the subjective intention, past, present or future, of the owner or the occupier, or of both, except in so far as that intention sheds light on the objective characterisation of the physical activities actually being conducted on, or in respect, of the land[7] .

     7. Ibid.

113. The emphasis placed by the Landowners on both the word “for” and the identification of the purpose of the “use” of the land entails a significant element of futurity and tends to conflate present use with presently intended future use. A distinction must be drawn between the present use of the land, on the one hand, and any intended future, or ultimate use that may come into existence if and when the activities that constitute the present use have been brought to a successful conclusion.

114. The concept of “use” of land being “for residential accommodation” signifies a present use. Land can be used now for a particular purpose, even though its use for that purpose may also be in preparation for its eventual use for a quite different purpose. For example, land might be used for the purpose of commercial land development at one point in time, even though the use of it for that purpose at that time is preparatory to its eventual use, after subdivision, by persons who have bought lots in the subdivision for residential purposes[8] . Similarly, while land is in the development phase, it is not being used “for residential accommodation”.

     8. See Leda ManorsteadPty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775 at [40] and [50].

115. As the Councils contend, focusing on physical acts in relation to the relevant land, as opposed to a more general inquiry into “purpose”, reflects the words of s 516(1)(a) and accords with the ordinary meaning of the word “use”. That interpretation also accords with the fact that the statutory language does not employ some broader phrase, such as the land being used “for the purposes of bringing into existence the conditions for residential accommodation” or the land being used “for residential purposes” simpliciter. While the Landowners’ present purpose may be relevant in so far as it sheds light on the characterisation of the physical activities actually being carried out on or in respect of relevant land, the actual words used in s 516(1)(a) would be ignored if “purpose” is afforded any greater or more generalised role in the construction of the provision.

116. Further, focusing on the current or present activities on the land corresponds with the language of s 516(1)(a) in so far as the word “is”, in the present tense, appears before the phrase “for residential accommodation”. That focus on current or present use is consistent with the distinction drawn between the actual use of the land in s 516(1)(a) and the potential, and permissible, use of the land in s 516(1)(b).

117. Immediately following the phrase “residential accommodation” in s 516(1)(a) is a series of exceptions, contained in parenthesis, specifying types of buildings, or forms of accommodation, that would otherwise ordinarily be considered as falling within the phrase “residential accommodation”. The exceptions include “hotel”, “motel”, “guesthouse”, “backpacker hostel” and “nursing home”. The types of buildings specified indicate that the focus must be on whether the acts on, or in respect of, the relevant land presently facilitate a person residing or being accommodated on the land, namely, living and sleeping there. Prior to the issue of an occupation certificate, there can be no assurance that a person can reside or be accommodated on the land in question.

118. The definition of the phrase “a boarding house or lodging house” in 516(1A), which is an exception to the exception in parenthesis in s 516(1)(a), supports the Councils’ contention that the subjective intention or purpose of the Landowners should have a very limited role in relation to s 516(1)(a). It is only the fact of use and the nature of the use that is relevant [9] .

     9. See Chief Commissioner v Metricon at [63], “residential accommodation".

119. Moreover, where land is being used as a boarding house, having regard to the subjective intention or purpose of the owner or occupier of the land could lead to conflicting conclusions. From the owner’s perspective, the land would be being used for the dominant purpose of the business of deriving a profit through the renting out of accommodation. However, from the perspective of the occupier, the land would be being used for the dominant purpose of residential accommodation. Those two conclusions are inconsistent with each other. It must follow that neither the occupier’s nor the owner’s intention, or purpose, could be determinative of what the land is being “used for” within the meaning of s 516(1)(a). Rather, the focus must be on what is presently happening on, or in respect of, the land.

120. The language of s 516(1A) makes it clear that the accommodation referred to, being “a boarding house or a lodging house”, must presently exist. There could not be a “tariff-paying occupant” unless there was an existing building being occupied. Moreover, ss 516(1A) and 516(1)(a) must be read together and must be capable of standing consistently together. [10] That is to say, s 516(1)(a) must be construed so as to be consistent with the language and purpose of all of the provisions of the Local Government Act in which it appears and its meaning must be determined by reference to the language of the Local Government Act viewed as a whole[11] . Those considerations further support the conclusion that, in construing s 516(1)(a), regard must be had to the activities actually being conducted and not to the ultimate purpose for which those activities are being engaged in. The Landowners contend that the Councils’ reliance on s 516(1A), as demonstrating that actual occupation of land is necessary where s 516(1)(a) is applicable, must therefore be rejected.

     10. See Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 35; [1998] HCA 28 at [69].

     11. Ibid.

121. Moreover, the construction propounded by the Councils is consistent with the operation of s 516(1)(b). Where land is vacant, and is in a sense not being used, it is highly likely that the owner would lack the capacity to pay the higher rates it would otherwise be required to pay when development and construction is taking place on the land. That is because it is unlikely that the land would be able to generate an income for the owner if it was zoned as “residential” and vacant. Therefore, while the land may be categorised as “residential” whilst it is vacant, it makes practical sense for it to be categorised as “business” rateable land once commercial land development takes place as it is more likely to be able to generate an income for the owner.

122. The legislative purpose of categorisation under the Local Government Act also throws some light on the construction of these provisions. Clearly, the purpose of different categories of rateable land is to enable councils to levy higher rates on particular categories. Land categorised as “business” tends, as a matter of fact, to have a higher rate levied than land characterised as “residential” and, accordingly, has the potential to support higher rates than land categorised as “residential”. On the construction advanced on behalf of the Councils, an owner of land will only get the benefit of the presumptively lower rate for land categorised as “residential” when people are legally able to, and do in fact, reside on or are accommodated on the land. That accords with the rationale for different categories.

123. The Councils accept the Landowners’ submission that their construction of s 516(1)(a) may require an ongoing factual inquiry into the present actual use of the land. That is to say, because the physical activities being conducted on the land may change from day to day, it must follow that the use of land, for the purpose of s 516(1)(a), could change from day to day. However, to the extent, if any, that that may cause inconvenience, it is merely the by-product of the deliberate decision of the legislature.

124. Moreover, as indicated above, s 524 imposes an obligation on a rateable person to notify the local council, within 30 days after rateable land changes from one category to another, of the fact of the change. The presence of s 524 recognises the fact that changes in use of land will occur from time to time. The rateable person will normally be in the best position to be aware of such a change. It is interesting, but perhaps irrelevant to the present question of interpretation, that none of the Landowners notified any of the Councils of any change pursuant to s 524.

125. The Landowners postulated the hypothetical circumstance of homeowners deciding to demolish their existing “residential” categorised home and engaging a builder to construct a larger one. They say that, on the Councils’ construction of s 516(1)(a), the homeowners would be required to notify the local council that the construction phase had commenced. Accordingly, the property would then be categorised as “business” and the higher rate would be levied for the duration of the construction phase. It would only be upon completion, or the commencement of the lawful occupation, of the new home that the category of the land would revert to “residential”. They say that that demonstrates the alleged “absurdity” of the Councils’ contention as well as their concern that the Councils’ construction of s 516(1)(a) would require an ongoing inquiry into the use of the land in question.

126. The answer to the Landowners’ hypothetical circumstance is that the Councils’ interpretation of s 516(1)(a) would not necessarily lead to the conclusion that the present use, and therefore categorisation, of the land would change during the construction phase of the new home. Rather, the past activity on the homeowners’ rateable land may impact the characterisation of present activity, or inactivity, on the land[12] . Therefore, in the hypothetical circumstance, the homeowners’ land may continue to be categorised as “residential” as it was categorised as such prior to the construction of their new home. A significant difference between the Landowners’ hypothetical and the present appeals, however, is that the land in question in the appeals was not used “for residential accommodation” and was not categorised as “residential” prior to the construction phase. The land in question was always categorised as “business”. In any event, the Councils have accepted, as summarised above, that an ongoing inquiry into the present actual use of land may be required, even in circumstances similar to those set out in the Landowners’ hypothetical circumstance.

     12. See Chief Commissioner v Metricon at [46]; Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue (2009) 25 VR 59; [2009] VSCA 167 at [17].

127. Finally, if the examination of the physical activities that are presently being carried out on land indicates more than one present use, further inquiry must be undertaken in order to determine which use is the dominant use. Only if the dominant use is “for residential accommodation” will categorisation of the land as “residential” be appropriate. Of course, if the current physical activities cannot objectively be characterised as “residential”, or as “farming” or “mining”, it is not necessary to characterise the activities at all since, by the operation of s 518 of the Local Government Act, the activities will be categorised as “business”. As no suggestion has been made that the land in question should be categorised as mining or as farmland, it is unnecessary to characterise the land in question where the dominant use of the land is not for residential accommodation.

Conclusion

129. During the construction phase in respect of the O’Dea Avenue Land, prior to the issue of occupation certificates, there was no residential accommodation available on, or in respect of, the land and no person in fact resided or was accommodated on any part of the land. Not only would it have been unlawful for a person to reside there, it was not physically possible during most of the construction phase for a person to reside or be accommodated on any part of the O’Dea Avenue Land.

130. Whatever use was being made of the O’Dea Avenue Land prior to the issue of occupation certificates, it was not use “for residential accommodation”. It may be, and probably was, the fact that the ultimate and intended future purpose of the construction phase on the O’Dea Avenue Land was to create buildings that were capable of being used “for residential accommodation”, as evidenced by the development consent. However, no buildings were capable of being used for residential accommodation until after the issue of occupation certificates. Only upon the issue of an occupation certificate was it legally permissible for a person to reside on or be accommodated on the O’Dea Avenue Land. In any event, even if it may have been physically possible, a short time before the issue of an occupation certificate, for a person to reside or be accommodated in some part of a new building, albeit unlawfully, an inference could probably be drawn that that would have been practicable only a very short time before an occupation certificate was issued in respect of that part.

131. The issue of an occupation certificate is an indication that a future intended use for residential accommodation has come sufficiently to fruition to become a present use for residential accommodation. It is difficult to discern, on the Landowners’ contentions, how the actual and present pursuit of the residential accommodation use could constitute a singular and identifiable event that would trigger a change in category. Therefore, it is impossible to discern when, as a matter of fact, an intended future use would become a present use for the purpose of s 516(1)(a).

132. Moreover, development consent, contrary to what was contended by the Landowners, provides limited to no assistance in determining whether the present use is “for residential accommodation”. First, at the point in time at which development consent is granted, the land in question may be unused and vacant, or only in the construction phase. Secondly, development consent is directed at future use of land. That is, it is only upon receiving development consent that development for the purpose of constructing residential accommodation can lawfully commence, and, again, the present actual use of the land at that stage would not be “for residential accommodation” but for commercial land development.

133. The primary judge erred in concluding that the O’Dea Avenue Land should be declared to be within the residential rating category prior to the issue of occupation certificates in relation to the buildings constructed on that land. The appeals should be allowed in respect of each parcel of land that is the subject of an appeal.

134. Accordingly, it is not strictly necessary to deal with the other grounds raised by North Sydney Council in its appeal. However, since the grounds were fully argued, it is appropriate to say something about them. First, it is desirable to outline the statutory framework against which the second issue arises, which is concerned with the entitlement of Karimbla 7 to a refund of rates levied and paid in respect of the Miller Street Land during the construction phase on the basis that it was categorised as “business”.

Legislative Framework relevant to Refund of Rates

135. Part 4 of Ch 15 of the Local Government Act, which consists of ss 532 to 545 inclusive, deals, relevantly, with the making of rates. Under s 532, a council must not make a rate until it has given public notice of its draft operational plan for the year for which the rate is to be made and has considered any matters concerning the draft operational plan. Under s 533, a rate must be made before 1 August in the year for which the rate is made and, under s 534, each rate is to be made for a specified year, being the year in which the rate is made or the next year. Under s 535, a rate is to be made by resolution of the council.

136. Part 5 of Ch 15, which consists of ss 546 to 550 inclusive, deals with the levying of rates. Under s 546, a rate is levied on the land specified in a rate notice by the service of the rate notice on the rateable person for the land. The rate notice may be served at any time after 1 July in the year for which the rate is made or in a subsequent year. A rate notice that is required to effect an adjustment of rates may be served in the year for which the rate is made or a subsequent year.

137. Part 7 of Ch 15, which consists of ss 560 to 574, deals with the payment of rates. Section 560 relevantly provides that the owner for the time being of land on which a rate is levied is liable to pay the rate to the council. Under s 562, annual rates may be paid in a single instalment or by quarterly instalments. If payment is made in a single instalment, the instalment is payable by 31 August. If payment is made by quarterly instalments, the instalments are payable by 31 August, 30 November, 28 February and 31 May. However, if the rate notice is not served by 1 August, the single instalment or the first two instalments, if applicable, is or are payable by 30 November or by the day that is 30 days after service of the rate notice, whichever is the later.

138. Under s 574, a person who has an estate in land in respect of which a rate notice is served may appeal to the L&E Court against the levying of the rate on the ground that the land or part of it is not rateable. An appeal must be made within 30 days after service of the rate notice. However, s 574 expressly provides that an appeal may not be made under that section on the ground that the land has been wrongly categorised under Pt 3.

139. Part 8 of Ch 15, which consists of ss 575 to 601 inclusive, deals with concessions. Some of the provisions of Pt 8 may have relevance to the construction of s 527. Division 2 of Pt 8 enables a ratepayer to apply for a postponement of the part of rates on land that is used only as the site of a house or rural land but, because of its zoning or permitted use, is valued for rating purposes in a way that reflects its permitted use rather than its actual use. Under s 585, the rateable person for certain land may apply to the council for a postponement of rates payable for the land in the current or following rating year. Under s 591, a council must postpone the payment of rates for land in any rating year for which a determination or re-determination of the attributable part of the land value is in force. Under s 593, the Council must refund to a rateable person any amount of rates paid by the person that exceeds the amount of the rates remaining after part of the rates is postponed.

135. Under s 594, on a re-determination of the attributable part of the land value of land, a Council must adjust amounts payable for rates to be postponed as appropriate. Any amounts paid in excess are to be refunded and amounts short paid are recoverable as arrears of rates. North Sydney Council place weight on the distinction drawn between the requirement to adjust rates and the requirement to refund excess rates paid. It draws attention to the absence of any reference in s 527 to refund of rates after the adjustment required by s 527.

136. Section 602 may also have some relevance to the construction of s 527. Under s 602, a Council is required to keep a record of each rate made by it and, in relation to each separate parcel of land within its area, the land value of the parcel, whether the parcel is rateable and the category declared under Pt 3 for the parcel. The Council is also required to keep a record of the owner or lessee of each such parcel. The Council may amend the record as the occasion requires. Again, there is no reference to any refund of rates.

The Construction of s 527

142. On 14 February 2018, having declared that the Miller Street Land was within the “residential” category under the Local Government Act on and from 20 December 2008, the primary judge ordered North Sydney Council to pay Karimbla 7 the sum of $260,466.92, being an adjustment of rates for the period 20 December 2008 to 30 June 2016, consequential upon that declaration.

143. In its Notice of Appeal, North Sydney Council contends that his Honour erred in holding that s 527 of the Local Government Act provided a statutory right for the recovery of a refund, or repayment of rates, and that the L&E Court had jurisdiction to order a refund or repayment. North Sydney Council also asserts that the primary judge erred in holding, first, that the words “must make an appropriate adjustment” in s 527 imposed an obligation on a local council to make an appropriate refund or repayment and, secondly, that s 527 affords a statutory right for the recovery of such a refund or repayment.

144. That question requires an analysis of the scheme of the Local Government Act in relation to the making and levying of a rate on all rateable land in the area of the local council, as summarised above, in the context of s 527. Section 527 provides as follows:

“A council must make an appropriate adjustment of rates paid or payable by a rateable person following a change in category of land.”

145. North Sydney Council contends that the phrase “rates paid or payable” clearly refers to the rate or rates levied on land, the particulars of which are provided in a rate notice. The phrase is a composite one and refers to that portion of the levied rates that has been “paid” and that portion that has not been paid but is “payable” under s 562. The aggregate of the amount “paid” and the amount that is “payable” will be equal to the amount of the rates levied on the land by the service of the rate notice. The rateable person will be liable to pay the rate so levied, being the amount specified in the rate notice.

146. Following a change in category of land, one adjustment that a council will be required to make under s 527 is to serve a new rate notice under s 546(3), which provides as follows:

“A notice that is required to effect an adjustment of rates or charges may be served in the year for which the rate or charge is made or a subsequent year.”

Such a rate notice will specify the rate levied on the land in consequence of the change in category. The notice will “effect” an adjustment of rates, being “rates paid or payable” by the rateable person upon whom the notice is served.

147. If the change in category results in a lower rate, the amounts payable will be reduced. If an instalment has already been paid, the records of the council will record that the amounts payable have been reduced by the amount of the instalments that have been paid. That will require an adjustment in the record required to be kept by the council under s 602. That is to say, the record will be adjusted in relation to both the category and the rate made by the council in respect of each parcel of land in the council’s area.

148. Section 527 makes no reference to a refund, repayment or any other means for recovery by a rateable person of overpaid rates. North Sydney Council contends that the absence of such a provision is consistent with the legislative scheme of the Local Government Act. Thus, the rating year is from 1 July to 30 June and, ordinarily, a rate notice will be served before 1 August. Because of the importance of the categorisation of land in the rating process, a rateable person is required by s 524 to notify the council within 30 days after land changes from one category to another. An appeal in respect of a rates notice, other than in respect of a change of category, must be brought within 30 days after service of the rate notice. Those time limits are important in the context of the raising of funds by a council for the purposes of its operations.

149. North Sydney Council then points to the absence of any requirement for promptness in making an application under s 524 for a review of a declaration that rateable land is within a particular category or to have rateable land declared to be within a particular category for the purposes of s 514. Such an application may be made at any time, notwithstanding that the rateable person may be in breach of obligations imposed under s 524 to notify the council of a change of category within 30 days of the change. Accordingly, a rateable person would have an incentive to comply with the obligation imposed by s 524 and make a prompt application under s 525 if the change of category would lead to a lower rate. If there has been no change of category declared before an instalment of the rates is payable, the rateable person will have an obligation to pay the rates. The absence of an entitlement to a refund is consistent with the statutory context and scheme, as well as the language of s 527 itself.

150. As indicated above, Karimbla 7 did not notify North Sydney Council in accordance with s 524 that its rateable land had changed from “business” category to “residential” category, as it now contends had occurred. There was nothing unlawful or invalid about the rate notice pursuant to which Karimbla 7 paid the rates. It paid the amount of the rates voluntarily and without protest. It did not pay the rates under any mistake.

151. Had there been a change of category, contrary to the conclusion reached above, Karimbla 7 was required to notify North Sydney Council within 30 days of the change. At that point, North Sydney Council would have been required to make an appropriate adjustment of rates paid or payable, in accordance with s 527. If, before the rates became due for payment, North Sydney Council had failed to make a declaration under s 525 that the Miller Street Land was within the residential category or the L&E Court failed to make such a declaration on appeal under s 526, Karimbla 7 could have taken steps to defer payment of the rates if North Sydney Council insisted upon payment.

152. There appear to be cogent reasons for concluding that s 527 created no right or cause of action entitling Karimbla 7 to a refund of rates paid voluntarily without protest under a lawful rate notice. However, in the circumstances where the question does not arise, it is undesirable to embark on a consideration of whether or not Karimbla 7 may have had a basis for pursuing a claim against North Sydney Council.

Jurisdiction of the L&E Court

153. North Sydney Council’s third ground of appeal is that the primary judge erred in holding that the L&E Court had jurisdiction to make an order that it pay Karimbla 7 a sum of money by way of refund of rates paid pursuant to the rate notice issued before the L&E Court made the declaration as to the category of the land. His Honour made the order, it appears, on the basis that that question was a matter ancillary to the matter that was before the L&E Court, namely, the appeal under s 526 of the Local Government Act concerning the failure of North Sydney Council to declare that the land was within the residential category. In the circumstances, it is undesirable to express an opinion about a matter that is entirely hypothetical.

Costs

154. The fourth ground relied upon by North Sydney Council is that the primary judge erred in declining to order that Karimbla 7 pay North Sydney Council’s costs of a hearing on 19 October 2017. On 26 June 2017, his Honour published reasons for concluding that all of the land owned by the Landowners should be declared to be within the “residential” category. His Honour then directed the parties to bring in short minutes of order to implement his finding and to address the question of costs that had not at that stage been argued.

155. North Sydney Council consented to an order that it should pay Karimbla 7’s costs of the proceedings. However, on 19 October 2017, there was a further hearing before the primary judge, in relation to a possible stay of the proceedings pending appeals and a claim by Karimbla 7 for interest on the rates that his Honour ordered to be repaid. For reasons published on 29 January 2018, the primary judge concluded that Karimbla 7 was not entitled to interest or to a stay. Nevertheless, his Honour concluded that North Sydney Council and Karimbla 7 should each pay its own costs of the hearing on 19 October 2017. At the hearing of the appeal, Karimbla 7 conceded that his Honour erred in principle in so far as he relied on an earlier decision of the L&E Court in reaching that conclusion. It was therefore necessary for this Court to re-exercise the discretion.

156. Having previously conceded that an order should be made against it for Karimbla 7’s costs of the proceedings, and in the light of his Honour’s conclusion that Karimbla 7 was not entitled to interest or a stay, there does not appear to be any reason why North Sydney Council should not have had its costs of 19 October 2017. However, that question appears to be academic in the light of the conclusion reached above, namely, that his Honour erred in the disposition of the principal question before him as to the declaration as to the category of the relevant parcels of land.

Conclusion and Orders

157. It follows from the above that each of the appeals should be allowed. The orders made by the primary judge should be set aside. The Landowners should be ordered to pay the costs of the Councils of their respective appeals, such order to include North Sydney Council’s costs of the hearing on 19 October 2017.

158. That leaves the question of whether this Court should make orders in lieu of those set aside or whether the matters should be remitted to the L&E Court for further consideration. The Councils formulated orders to which they contend they would be entitled. However, the Landowners disputed some aspects of the proposed orders. The parties agreed that the preferable course was to await this Court’s decision before arguing the question of orders. The parties should be required to bring in short minutes to give effect to the conclusion reached above. If need be, the Court will hear the parties further as to the terms of the orders if they cannot be agreed.

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Endnotes

Decision last updated: 14 November 2018