Chief Commissioner of State Revenue v Mesiti

[2003] NSWADTAP 57

Appeal Panel - Internal

CITATION:	Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57
PARTIES:	APPELLANT Chief Commissioner of State Revenue RESPONDENT Sharyn Mesiti
FILE NUMBER:	039035
HEARING DATES:	13/08/2003
SUBMISSIONS CLOSED:	09/04/2003
DATE OF DECISION:	11/21/2003
DECISION UNDER APPEAL:	Mesiti v Chief Commissioner of State Revenue [2003] NSWADT 99
BEFORE:	Hogan A - Deputy President; Seve J - Judicial Member; Bennett C - Member
CATCHWORDS:	effect of errors on decisions
MATTER FOR DECISION:
FILE NUMBER UNDER APPEAL:	026034
DATE OF DECISION UNDER APPEAL:	05/13/2003
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956
CASES CITED:	Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 Buckley v Commissioner of Land Tax (NSW)(1975) 5 ATR 269 Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 Knowles v Newcastle Corporation (1909) 9 CLR 534 Pro-Campo Ltd v Commissioner of Land Tax (NSW) (1981) 81 ATC 4270 Fincher v Commissioner for ACT Revenue [1996] ACTAAT 134
REPRESENTATION:	APPELLANT H R Sorrensen, barrister RESPONDENT S Mesiti
ORDERS:	To the extent of the errors of law in the decision at first instance, the Appeal Panel decision is subsituted for the decision at first instance. Order at first instance is affirmed

1 This is an appeal from the decision of the tribunal in Mesiti v Chief Commissioner of State Revenue [2003] NSWADT99. The appeal is on a question of law only.

2 Pursuant to Sections 73(3) and 73(5) of the Administrative Decisions Tribunal Act 1997, by notice in writing to the parties dated 20 August 2003, the Tribunal invited the parties to make written submissions on an issue which it felt had not been adequately addressed during the hearing. The Appellant responded with a written submission dated 3 September 2003, copied to the Respondent. The respondent did not make any further submission.

3 The issue so raised by the Tribunal was that at paragraphs 38 and 39 of the first instance decision of the Tribunal, Judicial Member Mr Verick purported to exercise the discretion reposed in the Appellant by Section 3(3)(b) of the Land Tax Management Act 1956 (“the Act”), if it should be held that Section 3(3)(a) of the Act did not apply.

4 For the reasons given in this decision, consideration of Section 3(3)(b) of the Act is not required in this case.

Agreed Facts

5 The respondent was not cross-examined on her written statement of facts, which is set out in full in the first instance decision, together with a chronology produced by the appellant. Those documents comprised the only evidentiary materials before the Tribunal at first instance and before us. Briefly, the facts were as follows.

6 The Respondent owned a property at Willoughby NSW (“Willoughby property”), in which she lived with her two sons. However, from 1998 the Respondent began to spend a lot of time with her then partner (now her husband) at a property owned by him at Drummoyne, NSW (“Drummoyne property”).

7 At that time, the Respondent was not sure whether her relationship with her partner was going to work. Her sons remained at the Willoughby property. They never paid rent. They paid the utility bills, while she paid the rates and insurance. Apart from her clothing her other possessions remained at the Willoughby property. When her partner was away on business and on other occasions she stayed with her sons at the Willoughby property.

8 In December 1998 the respondent changed her driver’s licence details to the Drummoyne address, as she said, “purely for convenience as I was spending more of my time at Drummoyne”.

9 In October and November 2000 she gave up full time work for health reasons, and began to live full time at the Drummoyne address, helping her partner with his personal and business affairs. She changed her details on the electoral roll to the Drummoyne address.

10 In June 2002 the Respondent sold her Willoughby property. She married her partner in October 2002.

11 The Respondent did not at any time have any financial interest in the Drummoyne property.

12 The Appellant assessed the Respondent for land tax for the 2000, 2001 and 2002 tax years in respect of the Willoughby property. The Respondent objected to the assessments on the ground that the Willoughby property was exempt under Section 10(1)(r) of the Act as being her principal place of residence. The Appellant disallowed the objection and the Respondent applied to this Tribunal for a review of that decision. At first instance, Judicial Member Mr Verick set aside the decision of the Appellant under review and allowed the objection against the assessments.

The legislation

13 So far as is relevant to this appeal, the Land Tax Management Act 1956 requires, among other things, that land must be used and occupied as the principal place of residence of the owner if it is to be exempt from taxation.

14 Section 3(1) of the Land Tax Management Act 1956 includes the following definition:

"principal place of residence" of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person”.

15 Section 3(3) provides as follows: (emphasis added)

"For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless :
(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or

(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence.”

16 Section 10(1)(r) of the Act provides as follows (emphasis added):

“10(1) Except where otherwise expressly provided in this Act the following lands shall , subject to sections 10AA, 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose (except as provided by subparagraph (iii)), being:

(i), or

(ii) a parcel of residential land, or

(iii) ”

17 Accordingly, for land to be exempt under Section 10(1)(r) of the Act, that land must:

(a) satisfy the principal place of residence definition in Section 3(1) of the Act;

(b) satisfy Section 3(3)(a) or 3(3)(b) of the Act; and

(c) satisfy Section 10(1)(r) of the Act.

18 At paragraphs 1 to 11 of his reasons the Tribunal Member, Mr Verick, set out the background to the dispute, the facts, and the overall contentions of the parties. At paragraphs 12 to 27 the relevant legislation and materials bearing upon its interpretation were set out, including a reference to Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68, a decision which had been handed down after argument before the Tribunal had concluded.

19 At paragraph 28 the Tribunal member held

“For the Applicant to succeed she has to demonstrate that (a) her Willoughby residence was used as a residential property; (b) that she had the right to possession and controlled that possession during the relevant period and (c) that she did not "use and occupy" any other land as her principal place of residence."

20 At paragraphs 29 and 30 he held that the respondent met the requirements of (a) and (b). As findings of fact we would respectfully agree that she retained possession and control of the Willoughby property until it was sold, and that it was at all relevant times used for residential purposes. Whether those three requirements accurately summarise the requirements of the legislation is the question at issue.

21 At paragraphs 31 to 33 he dealt with the question, said to be raised by S. 3(3)(a), which he stated as “whether the applicant had “used and occupied” any other property as her principal place of residence during the relevant period”. He held,

“The provisions found in S. 3(3)(a) that relate to the exemption being available to only one residential property have to be read very carefully. The requirement is in respect of any other “ land or flat" which has "been continuously used and occupied". It would apply where an owner had two properties, which were used for residential purposes. The exemption will be available to only the property that could properly be described as the owner’s principal residence. The restriction found in those provisions cannot, in my opinion, apply where an owner of a single residence also spends time living with a friend gratis . In the present matter, the applicant did not have a lease or any interest in relation to the Drummoyne property. The "use and occupation" test required by S. (3)(a) in respect of that property would not apply to the applicant because, legally, the applicant did not have possession nor any control over possession of that property. She was there entirely due to the friendship and generosity of her partner.”

22 Accordingly he held that the Willoughby property remained the respondent’s principal and only residential property.

23 At paragraphs 34 to 39 he considered the exercise of the discretion in S. 3(3)(b), which he would have exercised in the respondent’s favour if any of the requirements of S. 3(3)(a) were not met. After a reference to the policy behind the exemption, which was introduced into the legislation after the decision in Buckley v CLT (NSW)(1975) 5 ATR 269, he set aside the decision under review and allowed the objection to the assessments.

Grounds of Appeal

24 The Appellant’s grounds of appeal were that the Tribunal at first instance erred at law:

(a) in finding that the Respondent “was there [Drummoyne] entirely due to the friendship and generosity of her partner” in the absence of evidence on that issue;

(b) in failing to take any account of evidence that the Respondent made statutory declarations nominating Drummoyne as her residential address;

(c) in finding that Section 3(3)(a) of the Act applies only where the taxpayer is the owner of two properties which were used for residential purposes;

(d) in finding the “use and occupation” test required by Section 3(3)(a) in respect of Drummoyne would not apply to the Respondent;

(e) in finding that “legally, the Applicant did not have possession nor any control of possession of [Drummoyne]” the Tribunal misconceived the “use and occupation” test required by Section 3(3)(a);

(f) in finding that during the relevant period Willoughby “remained the Applicant’s principal and only residential property” the Tribunal misconceived the requirements of the relevant provisions of the Act;

(g) in making determinations in reliance on Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 without first allowing the Appellant an opportunity to make submissions on that decision.

25 The Appellant submitted that the Tribunal at first instance should have made findings:

(a) that each of the Willoughby property and the Drummoyne property was, for the purposes of the Act, a “place of residence” of the Respondent, according to the ordinary meaning of those words, in each or any of the 2000, 2001 and 2002 land tax years;

(b) as to which of the Willoughby property and the Drummoyne property was, within the meaning of the Act, “the principal place of residence” of the Respondent in each or any of the 2000, 2001 and 2002 land tax years; and

(c) that Section 3(3) of the Act would operate only where the Willoughby property was, within the meaning of the Act, “the principal place of residence” of the Respondent in a relevant tax year.

26 Ground (a). The finding that the Respondent “was there [Drummoyne] entirely due to the friendship and generosity of her partner”

27 As a finding of fact, that finding was open to the Tribunal, as an inference from the uncontested written statement of the respondent. She was certainly there entirely because of the relationship between her and her partner, no matter how that fact be described. Its relevance to the legal decision that had to be made is another matter, dealt with below. We do not uphold that ground of appeal.

28 Ground (b). Failing to take any account of evidence that the Respondent made statutory declarations nominating Drummoyne as her residential address

29 The Tribunal acknowledged at paragraphs 7 and 25 of the reasons for decision the reliance placed by the Appellant on the change of licence and electoral details. (There was no evidence that either change had been made by statutory declaration). Although the reasons do not make specific reference to the way in which those facts were taken into account, it does not appear that the Tribunal failed to give any weight to them at all.

30 In Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 Gzell J held as follows at paragraph 17:

“17. The evidence before me puts a different complexion upon the material available to the Chief Commissioner when he made his assessments… The fact that some of his correspondence, the registration of his motor vehicle and, for a time, his driver's licence, were directed to his mother's address was inconclusive. The plaintiff put on evidence that other correspondence, including water bills and rate notices, were addressed to him at his Peakhurst address.”

The address of a person on a licence or on an electoral roll is evidence, but not conclusive evidence, on the question whether that address is the principal place of residence of the person. We are not persuaded that ground (b) is made out as a matter of law.

31 Ground (g). Making determinations in reliance on Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 without first allowing the Appellant an opportunity to make submissions on that decision.

32 There is no duty on a Court or Tribunal, of its own instigation, always to recall the parties and invite submissions on an authority decided after the date of a hearing. It was open to either of the parties, of their own volition, to apply to the Tribunal for an opportunity to make further submissions in this case. However, neither party made any such application. In any event, the use that the Tribunal made of the authority was quite consistent with, and referred to, the criteria laid down in CLT v Christie [1973] 2 NSWLR 526. Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 did not effect any change in the law or raise any issue that had not been addressed during argument. There was no error in law in Mr Verick’s referring to it.

33 Whether grounds (c), (d), (e) and (f) are made out, and whether the Tribunal should have made the findings referred to at paragraph 25 above, depends upon an analysis and construction of the legislation, to which we now turn.

34 In that construction we agree with the Tribunal below that it is proper to take into account the fact that S. 3(3) was introduced by amendment after the decision in Buckley, for the purpose outlined by the Minister in his speech, in which he said,

“At present an exemption is provided in respect of what has been defined as residential land. However, cases have occurred where persons have been able to demonstrate that they use more than one property as their residence, and others have got around the spirit of the legislation by vesting one property in the name of the husband and another in the name of the wife. In other cases it has been evident that, while persons own a residence in this State, the principal place of residence is outside the State. The new definition will limit the exemption to one property but the impact of this change will be reduced by other amendments in the bill."

35 At first sight, the circumstances of this case, where the respondent only ever owned one home, do not seem to be within the evil being struck at by the amending legislation. However, that is not sufficient to determine the matter. Despite modern tendencies in statutory interpretation, it is still necessary to pay attention to the actual words used by the legislature.

Section 10(1)(r)

36 This case turns upon the question whether the Willoughby property was “used and occupied as” the respondent’s “principal place of residence”. If it was, it is clear that it was the respondent, who was the owner, who so used and occupied it as such; that she used and occupied it for no other purpose; and that it was a parcel of residential land. She would then be entitled to the exemption. Counsel for the appellant did not contend to the contrary.

Section 3(1)

37 This subsection obviously contemplates that a person may have one or more places of residence. It or they may be inside or outside Australia. On the other hand, the subsection is obviously designed to provide that a person may have only one principal place of residence. So much might appear to be mere common sense, but we are here dealing with revenue legislation, in which drafters are wise not to leave anything important to be identified by so flexible a metwand as common sense.

38 We agree with the submission of the appellant, that what the subsection therefore requires is that a judgement or comparison be made, to identify which, among the one or more places of residence of a particular person, is the principal place of residence of that person.

39 When, at paragraph 28 of his reasons, (see paragraph 19 above), the Tribunal member set out what he perceived to be the requirements for the respondent to succeed, he did not advert to any such comparison or judgment. He did not proceed to deal with any criteria other than those that he set out in that paragraph. Criteria (a) and (b) were summarily dealt with, and it is obvious that he perceived (c) as being relevant to the application of S. 3(3). In his failing to make the findings required by S. 3(1), we consider that there was an error of law.

Section 3(3)

40 This subsection contemplates that, by ordinary canons of construction, a parcel of residential land, for example, might well qualify as being the principal place of residence of a person, as defined in S. 3(1), but it proceeds to exclude it from being dealt with as such for the purposes of the Act, (such as the exemption contained in S. 10(1)(r)), unless it meets one or other of the two possible further tests that it contains. Those two tests are set out in subparagraphs (a) and (b). Subparagraph (b) comes into play only when subparagraph (a) does not apply.

41 The test contained in subparagraph (a) has a number of elements. The first links up with the phrase used in S.10(1)(r), “used and occupied as”, a phrase that is not used in the definition section, S. 3(1). Use and occupation would be required for the purposes of S. 10(1)(r) in any event. This test then adds the following requirements:

-the land must have been continuously used and occupied since a certain date;

-that continuous use and occupation must have been by that person;

-the use and occupation must have been for residential purposes;

-it must have been for no other purpose; and

-no other land has, since that date, met those other requirements.

42 “Use” and “occupation” are separate and cumulative requirements. Knowles v Newcastle Corporation (1909) 9 CLR 534 at 545; Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533.

43 “Use” has regard to the purpose to which the land is put. Commissioner of Land Tax v Christie supra at 533. The only premises in issue in this case, the Willoughby property and the Drummoyne property, were at all times used for residential purposes and for no other purposes.

44 “Occupation”, on the other hand, deals with the relationship between a person and the land in question. Bowen JA, as he then was, said in Christie supra, at 533-4,

“’Occupation’ is not synonymous with legal possession. It includes possession, but it also includes something more: see Newcastle City Council v Royal Newcastle Hospital (1957) 96 CLR 493, at 500 et seq ; confirmed (1959) 100 CLR 1; [1959] AC 248. It involves an element of control, of preventing or being in a position to prevent the intrusion of strangers. ( Newcastle City Council v Royal Newcastle Hospital (1959) 100 CLR 1 at 4; [1959] AC 248 at 255). It is for this reason that physical presence on the land and fencing are evidence of occupation. But continuous physical presence or physical presence on every part of the land does not have to be shown in order to establish occupation. …Nor, although the presence of fencing may be some evidence of occupation, does the absence of fencing establish that there is not occupation: Newcastle City Council v Royal Newcastle Hospital (1957) 96 CLR 493 at 504.”

45 On the other hand, legal possession is not required for “occupation”. A person who, without having any title, takes actual possession of a house or piece of land, whether by leave of the owner or against his will, is the occupier of it. Pro-Campo Ltd v Commissioner of Land Tax (NSW) (1981) 81 ATC 4270 at 4277.

46 We agree with the Appellant that Section 3(3)(a) of the Act is not limited to apply only to cases where the taxpayer is the owner of two (or more) properties used for residential purposes. It is possible for land or a flat to have been “continuously used and occupied by a person for residential purposes and for no other purpose” within the meaning of Section 3(3)(a) without the person being the “owner” (as defined in Section 3(1) of the Act). Nothing in the language of Section 3(3)(a) of the Act suggests otherwise. We therefore uphold ground (c) of the grounds of appeal.

47 We have no doubt that the Willoughby property was at all relevant times both used and occupied by the respondent, that it was so used and occupied continuously by her, that the use and occupation was for residential purposes, and that it was used and occupied by her for no other purpose. Indeed, we do not understand counsel for the appellant to contend to the contrary. In his written submission about Mr Verick’s purported exercise of the discretion in S. 3(3)(b), at para 9, he wrote, “Willoughby was in fact “continuously used and occupied by the taxpayer for residential purposes and for no other purpose” throughout the six-month period.”

48 The only possible point at issue in the application of this subsection to this case is whether “no other land” was so used and occupied by her. The only relevant land is the Drummoyne property.

49 On the only evidence in this case, over the relevant period the Drummoyne property was continuously used for residential purposes and for no other purpose. The only question remaining is whether that use and occupation was by the respondent.

50 The Drummoyne property was at all times owned by the respondent’s partner and husband to be. She had no legal interest in it. She did not even have possession of it, whether legal possession or otherwise, let alone that “something more” to which Bowen JA referred in Christie supra. There is no evidence that she had any element of control over it, or that she was in any way able to prevent the intrusion of strangers into it. That possession and control resided in her partner, the owner of the property, and in him alone. It was he who was using and occupying it. She was living there, as she admitted, and as is evidenced by her change of address on her licence and notification to the electoral authorities. But that is not the same thing as “use and occupation” for the purposes of this legislation.

51 It follows that, on the evidence, no land other than the Willoughby property was continuously used and occupied over the relevant period by the respondent for residential purposes. The Willoughby property meets all the requirements of S. 3(3)(a). There is no occasion for the exercise of any discretion under S. 3(3)(b). S. 3(3) does not have the effect that the Willoughby property may not be held to be the respondent’s principal place of residence. Its force is spent in this case. That is not the same thing as holding that the Willoughby property was, in fact, her principal place of residence. To decide that question one must return to S. 3(1).

52 We note that there is no requirement in this definition for any such concept as use and occupation. The words, “place of residence” and “principal” must be given their ordinary meaning when making the comparison called for by the definition.

53 Like NSW, the ACT also imposes land tax subject to exemptions. The Rates and Land Tax Act 1926 in the ACT and the Act in NSW are different. However, prior to amendments made to the ACT Rates and Land Tax Act 1926 some years ago, there was an exemption from land tax in the ACT for property that was the "principal place of residence" of the owner. In Fincher v Commissioner for ACT Revenue [1996] ACTAAT 134, Professor L J Curtis, President, stated

“13. The use of the term "principal place of residence" in the Rates and Land Tax Act necessarily implies that a person may have more than one place of residence at any one time…But each place of residence must have something of a settled character about it; a person cannot be said to reside at a place if his or her connection with the place is transient or temporary or of a passing nature. ”

54 A decision of a Court or Tribunal of another Australian State or Territory is not binding on the Tribunal. However, in the absence of binding authority on a point at issue, it can be persuasive. We agree with the decision in Fincher v Commissioner for ACT Revenue [1996] ACTAAT 134 so far as it relates to the ordinary meaning of “place of residence”.

55 Therefore, on the evidence, the Respondent’s Willoughby property was a place of residence of the Respondent at the relevant times. The Drummoyne property was also a place of residence of the Respondent at the relevant times. The question therefore posed by S. 3(1) is, which of those two was her “principal place of residence”, in the ordinary meaning of those words.

56 The Appellant argued that the change of the address of the Respondent to the Drummoyne property for her licence and on the electoral roll demonstrated that the Drummoyne property was the principal place of residence of the Respondent. Those two facts do not demonstrate that conclusion, but they are strong indications in favour of it.

57 Another strong indication is the fact that she spent practically all her time living there, and little time living at the Willoughby property. It must be borne in mind that the relevant years are the land tax years 2000, 2001 and 2002. It is a fair inference from her statement that after her medical diagnosis, when she gave up full time work and took over her partner’s personal and business matters, and changed her address on the electoral role, that she was not spending as much time at Willoughby as she had during 1997 and 1998. That fact also does not conclusively demonstrate the conclusion, and it would be wrong to decide that a place was the principal place of residence merely, or even mainly, on the basis of a comparison of times spent in each. Nevertheless, there are obviously strong indications that Drummoyne was her principal place of residence.

58 On the other hand, during those years the respondent had no enforceable interest in or right to reside in the Drummoyne property. Her continued living there was at all times contingent on the strength of the relationship between her and her partner. It was not until September 2001 that she felt able to inform her sons that she would get married. Until that time she would have had the security of knowing that she had her own home at Willoughby to return to if things were not working out.

59 Whether it was her principal place of residence is an objective fact, to be decided by us. Her own impression does not conclude the matter. Nevertheless, it is relevant that she was not cross-examined on the following statement made by her:

“(k) Up until June 2002 I considered Willoughby my home and principal place of residence as did my sons. I had full control over the property at all times and the only reason I didn't sell it when I took up full-time residence at Drummoyne was because I still considered it my home while my children were living there and I wasn't prepared to ask them to leave their family home while there was even the slightest chance that my relationship would not be permanent."

60 We note that in that statement she speaks of full time residence at Drummoyne, and that the question is not whether Willoughby was her family home but whether it was her principal place of residence.

61 Nevertheless, when we compare the respective rights that she had in respect of the two places of residence, despite the indications to the contrary that we have noted, in all the circumstances we are persuaded that the Willoughby property was, at the relevant times, her principal place of residence. She owned it. She had continuous control of possession and occupation over it. Apart from her clothing, her possessions were there. Her sons lived there, rent free. The ties of her connection to it as a residence were stronger and more settled than those of her connection to Drummoyne.

62 The Willoughby property was therefore exempt from land tax under Section 10(1)(r) of the Act for the 2000, 2001 and 2002 land tax years.

63 To the extent of the errors at law in the first instance decision, this decision is substituted for the decision at first instance. The order at first instance, that the decision of the Appellant under review be set aside and the objection against the assessments for the 2000, 2001 and 2002 land tax years be allowed, is affirmed.