Commissioner of State Revenue v Applewood Residential Developments Pty Ltd
[2005] VSC 232
•1 July 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
VICTORIAN TAXATION APPEALS
No. 8009 of 2004
| COMMISSIONER OF STATE REVENUE | Applicant |
| v | |
| APPLEWOOD RESIDENTIAL DEVELOPMENTS PTY LTD | Respondent |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 May 2005 | |
DATE OF JUDGMENT: | 1 July 2005 | |
CASE MAY BE CITED AS: | Commissioner of State Revenue v Applewood Residential Developments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 232 | |
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LAND TAX – Exemption – Retirement Village - Whether land used and occupied as a retirement village – Land Tax Act 1958, s 9(1)(j).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | C M Caleo | Solicitor for the Commissioner of State Revenue |
| For the Respondent | C J Delany SC | Gadens Lawyers |
HIS HONOUR:
This is an application by the Commissioner of State Revenue (“the Commissioner”) for leave to appeal from a decision of the Victorian Civil and Administrative Tribunal (“the Tribunal”) that set aside an assessment to land tax on the basis that the whole of the respondent taxpayer’s land was used and occupied as a retirement village and was thus exempt from land tax under s 9(1)(j) of the Land Tax Act 1958 (“the Act”). Section 9(1)(j) exempted from land tax “land which is used and occupied as a retirement village and for no other purpose”. The Commissioner had assessed the land to tax on the basis that the exemption applied only to that part of the respondent’s land that was occupied or available to be occupied as a retirement village, which was established by provision of a certificate of occupancy. The assessment was made as at 31 December 2002[1], at which time only three of 14 stages of the retirement village had been built. The issues before the Tribunal were: (a) whether s 9(1)(j) operated to exempt the whole of the land at the relevant time (as the respondent submitted) or only part thereof (as the Commissioner submitted), and (b) if the exemption was partial, how was it to be applied and calculated pursuant to s 9(2AB) of the Act?
[1]Section 8(1) of the Act makes midnight on 31 December 2002 the relevant time at which to assess the land tax payable in respect of the year 2003, which is the subject of this case. For convenience I refer to 31 December 2002 as “the relevant time”.
As a matter of convenience the application for leave to appeal and the appeal were heard together.
It was common ground that if the appeal were allowed, the assessment should be remitted to the Commissioner. The Commissioner conceded, as he did before the Tribunal, that he had made an error in applying the formula in the now-repealed s 9(2AB). Thus, if the Commissioner’s view that part only of the land was exempt from land tax was correct, the Commissioner would still have to apply the statutory formula in order to calculate the appropriate reduction in the unimproved value of the land, and hence the tax payable in respect thereof.
Facts
The respondent, Applewood Residential Developments Pty Ltd (“Applewood”) is the registered proprietor of land at 13-19 Tram Road, Doncaster, described in single Certificate of Title, Volume 10385, Folio 187. Applewood purchased the land with the intention of developing it as a retirement village, and in November 2000 the City of Manningham issued a planning permit which provided for the land to be developed for such use in stages. At the relevant time the whole of the land was encumbered by a statutory charge pursuant to s 29 of the Retirement Villages Act 1986. Also at the relevant time the taxpayer was in the process of developing the whole of the land into a retirement village. The development was planned in 14 stages. At the relevant time, the land fell into two basic categories.
The first category - which was agreed to be exempt from land tax - comprised three completed stages (1, 2 and 3A), occupied by retired persons pursuant to leases. The leases gave the occupants a right to use the residential premises as well as common areas specified in the lease.
The second category (“the disputed land”) comprised stages 2A and 3B upon which buildings were under construction, in addition to a further nine stages awaiting future development. There was development on the disputed land in the sense that services such as sewerage, drainage and roadways ran through the undeveloped land. Further, undeveloped land was fenced off from the three occupied stages, however the residents had access to stages 8, 9 and 10, but simply by informal arrangement rather than as of right under the “common areas” provision in the leases.
It is convenient, at the risk of some repetition, to set out a series of findings of fact in para 11 of the decision of the Senior Member who constituted the Tribunal. The findings are:
“Other Relevant Facts
11 Mr Delany SC, on behalf of the applicant [Applewood], recited a number of facts which I find to be correct:
(a)The development permitted and partially complete at 31 December 2002 provides for 68.12% open space and 29.28% site coverage by buildings.
(b)So far as actual buildings comprising part of the Retirement Village complex are concerned, as at 31 December 2002:
·Stage 1, 4 units, 2 display units, 1 community centre was complete (18 March 2002)
·Stage 2, 17 units were complete (24 September 2002)
·Stage 3A, 28 units and landscape zone was complete (5/12/02)
·Stage 2A, 57 apartments, 1 community centre and community facilities and pool and bowling green was under construction
·Stage 3B, 36 units was under construction.
(c)Certificates of occupancy had been issued for 4 units in stage 1, 17 units in stage 2 and 28 units in stage 3A at 31 December 2002. The units for which certificates of occupancy had issued were occupied by retired persons pursuant to lease agreements. Other units under construction were in some case the subject of agreement to lease incorporating the standard lease agreements.
(d)The following constitute the facts and circumstances in relation to the Applewood land as at 31 December 2002:
·The permitted use of the Applewood land was ‘retirement village’.
·A number of units forming part of the building development comprising the retirement village complex had been constructed as had parts of the landscaping and community facilities.
·So far as the complex contained residential premises for which certificates of occupancy had issued, such residential premises were predominantly or exclusively occupied by retired persons.
·The occupancy by retired persons was in pursuance of lease agreements.
·The whole of the title to the Applewood land was encumbered by a statutory charge in favour of actual occupants and certain potential occupants.
·The owner of the parcel of land had obtained a beneficial private tax ruling covering the period based upon use and development of the whole of the land as a single project retirement village development which ruling applied to the whole of the land.
·So far as part of the land comprised land in the course of development by building or other works such building or other works was for or ancillary to the purpose of the whole retirement village.
·The whole of the retirement village being the Applewood title land was fenced and so far as staged development had not commenced on part of the land such land was not used or occupied for any purpose other than for retirement village purposes.
Counsel for the Commissioner submitted, during his reply, that the last two points in para 11(d) were not findings of fact but, rather, conclusions of mixed fact and law. Counsel for Applewood submitted that they were findings of fact involving no conclusion as to the application of any of the relevant provisions of the Act. However, on analysis I do not think that they can be so described. That is because they are findings made in terms of s 9(1)(j) and s 9(2AA), and in terms express a conclusion as to the application of those provisions in the circumstances. I consider however that the point is immaterial because the real question is whether the Tribunal properly applied the law to the facts, not whether the conclusion thereby resulting happened to be placed under the subheading “facts”.
The Act
At the relevant time, the relevant provisions of the Act were s 3(1) which defined the expression “retirement village”, s 9(1)(j) which contained the exemption, and s9(2AA) and s 9(2AB) relating to the exemption.
Section 9 provides that:
“(1) Subject to this Act –
(j)land which is used and occupied as a retirement village and for no other purpose –
is exempt from land tax.”
Section 3(1) contains the following definition of “retirement village”:
“’retirement village’ means a complex containing residential premises (whether or not including hostel units) predominantly or exclusively occupied by retired persons in pursuance of –
(a) a residential tenancy agreement or any other lease or licence; or
(b) …
(c) ... “
In the present case the residents of stages 1, 2 and 3A occupy the premises pursuant to a lease as referred to in para (a) of the definition.
Section 9(2AA) clarifies the application of s 9(1)(j) in stating that:
“Land does not cease to be used and occupied for the purpose of a retirement village merely because any building or improvement on the land is used or occupied for a purpose ancillary to that purpose.”
Section 9(2AB) provides that:
“If the Commissioner is satisfied that part only of land is used and occupied as a retirement village and for no other purpose, the unimproved value of the land must be reduced for the purposes of land tax by an amount calculated in accordance with the formula R = A x B/C where –
R is the reduction in the unimproved value
A is the unimproved value before reduction
B is the area of the land used and occupied as a retirement village and for no other purpose
C is the total area of the land”.
The Act is amended
The above provisions were amended by Act No 113 of 2003, with effect from 11 December 2003. Although this case is to be decided on the basis of the Act as in force on 31 December 2002, counsel for the taxpayer relied on the fact and terms of the amendments on the question of leave. I will return to this later, merely noting for present purposes that the following amendments were made:
a) The definition of “retirement village” in s 3(1) now contains the words “, or available for occupation,” after the word “occupied”.
b) The exemption provision in s 9(1)(j) now reads “land which is occupied, or currently available for occupation, as a retirement village – is exempt from land tax”. Thus, the concepts of “use” and “purpose” have been removed.
c) Section 9(2AA) was repealed and substituted by the following:
“If the Commissioner is satisfied that part only of land is land to which subsection (1)(j) applies –
(a) land tax is assessable on the remaining part of the land, unless an exemption (other than subsection (1)(j)) applies to the remaining part; and
(b) section 3A applies, if necessary, for that purpose.”
d) Section 9(2AB) was repealed.
The Tribunal decision
It will aid understanding of the Tribunal’s reasons if I first summarise the submissions of counsel before the Tribunal, taking for this purpose the statement of the submissions in the decision.
Applewood’s submissions
The whole of the land came within the definition of “retirement village” in that it was a “complex” containing residential units exclusively or predominantly occupied by retired persons pursuant to a lease. The exemption applied to the whole of the land comprising the complex, not just those parts of the land upon which there had been constructed residential premises occupied by retired persons.
At the relevant time work was being undertaken in accordance with the staged development plan. Because that staged development was a development of the whole of the land and was for retirement village purposes, the whole of the land was “used and occupied as a retirement village and for no other purpose” within the meaning of s 9(1)(j). Where building work or development is being carried out on the land, provided that the work or development is for the purpose of a retirement village, the land remains exempt.
Section 9(2AA) means that where there is use or occupation of land for a purpose ancillary to that of a retirement village, as was the case here with the building work and development, the land so used or occupied is exempt.
Insofar as land is vacant but within the retirement village, that land also falls within the exemption in s 9(1)(j) because it is held for the requisite purpose. Even if no physical use were made of the vacant land prior to 31 December 2002, it is an integral part of the retirement village as identified for future staged development. It is not at that time used or occupied for some “other purpose”, other than that of a retirement village.
Commissioner’s submissions
Only that part of the land which is physically used and occupied as a retirement village at the relevant time is entitled to the exemption. In s 9(1)(j), the word “used” refers to some form of use other than actual occupancy: see Ryde Municipal Council v Macquarie University (1978) 139 CLR 633 at 637. It refers to the actual use to which the land is put by the persons who in law control it for the time being: see Randwick Corporation v Rutledge (1959) 102 CLR 54 at 88.
Further, there is a difference between the words “as” and “for” in s 9(1)(j). The expression “land used and occupied as a retirement village” is a narrower requirement that the land be used for the purposes of a particular activity. He drew a contrast with the use of the word “for” in s 9(1)(d) and s 9(1)(fa). To emphasise the distinction, counsel also referred to Educang Limited v Brisbane City Council [2002] QSC 374 and Council of the City of Newcastle v Royal Newcastle Hospital (1959) 96 CLR 493 at 515.
Counsel referred to the definition of the word “complex” in the Macquarie Dictionary, namely “a complex whole or system, a complicated assembly of particulars: a shopping complex, a complex of ideas”. Finally, counsel submitted that the taxpayer bears the burden of satisfying the exemption sought. As the disputed land was a building site or unused or awaiting development at the relevant time, that land was not used and occupied by retired persons within the meaning of the exemption.
The Tribunal reasons
Having summarised counsel’s submissions, the Senior Member stated his conclusions at [25]-[27] which, given their structure and the detailed submissions made in this Court, must be set out in full:
“25In this particular instance, the land in question in fact has no other purpose other [sic] than a retirement village. The part of the land containing buildings in partial state of construction is being used as a retirement village and is ancillary to that part of the retirement village which is presently being occupied by retired persons. That is, it is part of the whole development. The same applies to the vacant land that is awaiting development, that is also part of the entire complex and ancillary to that complex. It is awaiting construction. In my view, it would be quite artificial to divide one block of land in the way that is suggested by Mr Caleo. It is noted that many of the services of that part of the retirement village which is currently occupied goes [sic] through other parts of the retirement village, viz, sewer connections, drainage and roadways. It would be quite artificial to take a single block of land and divide it up into different uses or occupations simply because a particular portion had not reached a particular stage of development. The whole of the land comes within the definition of retirement village because even the part of the land under construction and that which is vacant forms part of the complex within the meaning of the definition.
26The situation would be entirely different, if part of the land was used for something quite unrelated to a retirement village. For instance, if part of the land was being used for a school, factory or even for residential purposes for people that do not fit the requirement of the persons that need to occupy retirement villages. But that is not the situation here.
27Under these circumstances, I find that the whole of the land is used and occupied as a retirement village and for no other purpose.”
The Senior Member then referred to the alleged distinction between “as” and “for”, and dealt with the Commissioner’s submission as follows:
“28To attempt to draw a distinction between the word as used in s 9(1)(j) with [sic] the word for used in other parts of that section, in my view, looking at the section as a whole is quite artificial. In some Acts, that are obviously carefully drawn, such a distinction may be appropriate. However, I notice that s 9 of the Act appears to be drawn in a very haphazard way, and has had many amendments thrown in throughout its life. I also noticed that s 9(2AAA) precedes s 9(2AA). This is clearly an illustration of the haphazard way in which the section is drawn. To try and [sic] interpret a section that is drawn in such a manner, by attempting to distinguish words such as as with the word for, in my view, is likely to lead to error.”
Next, he turned to the decision of Member Gibson in Burwood Terrace Pty Ltd v Commissioner of State Revenue[2]. Unlike the present case, that case concerned retirement village apartments and townhouses which were completed, but many of which were not yet occupied. The Commissioner sought to assess the unoccupied parts of the village to land tax. Member Gibson held that the whole of the land, containing both the occupied and the unoccupied dwellings, was exempt from land tax under s 9(1)(j). Although he acknowledged the different facts of Burwood Terrace, the Senior Member opined that there was little distinction in principle between the two cases. He quoted paras 9 – 12 and 14 of Member Gibson’s reasons in Burwood Terrace, saying that he agreed with the comments and that they were appropriate to the present case. In this Court, counsel addressed oral submissions as to the significance of the Senior Member’s reliance on Burwood Terrace, the Commissioner contending that such reliance led the Tribunal astray as the impugned passage contained errors and was, in any case, irrelevant. I will return to this issue later.
[2][2002] VCAT 183.
Then, at [30], the Senior Member rejected the Commissioner’s submission that the word “used” in s 9(1)(j) and s 9(2AA) bears a narrow meaning relating to actual use. The Senior Member said that the word “used” should be given its very widest meaning and that such a result followed from the principle stated by Taylor J in Council of the City of Newcastle v Royal Newcastle Hospital[3]. I interpolate that in the Royal Newcastle Hospital case, the hospital owned 36 acres of land on which the chest hospital buildings were built. The hospital owned a further 291 acres of pristine bushland - the disputed land - which surrounded the chest hospital. Section 132 of the Local Government Act 1919 (NSW) provided that all land in a municipality was rateable “except land which belongs to any public hospital…and is used or occupied by the hospital…for the purposes thereof”. The council levied rates on the 291 acres and then sued the hospital to recover the sum owing. The trial judge dismissed the claim, finding that although the hospital made no physical use of the land as such, it nevertheless used the land for its purposes within the meaning of the exemption provision. The relevant “use” was that of providing a buffer-zone to prevent the encroachment of houses and factories with their attendant pollution which might be detrimental to patients’ recovery from chest diseases. The Council’s appeal to the Full Court of the Supreme Court of New South Wales was dismissed by majority, as was an appeal to the High Court. In the High Court, Taylor J said, in the passage referred to by counsel for the Commissioner and the Senior Member:
“The word “used” is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute “use” will depend to a great extent upon the purpose for which it has been acquired or created. … 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. In my opinion where a hospital acquires or sets apart, for a project which may properly be described as a purpose of a public hospital, a tract of land which it considers is the minimum requirement for its contemplated project and thereupon proceeds to carry out that project it, thereby, uses the whole of the land.”
[3](1959) 96 CLR 493 at 515 per Taylor J.
The Senior Member then reiterated that all the disputed land was not used for any purpose other than a retirement village and stated that it would be artificial to break the word “used” into sub-categories of buildings under construction and vacant land awaiting construction. He then quoted an extract from Lord Denning’s judgment in the Privy Council, which dismissed a further appeal in the Royal Newcastle Hospital case[4]. His Lordship rejected the argument that, by leaving the bushland “unused”, the owner could not be said to use the land for relevant purposes. Rather, “an owner can use land by keeping it in its virgin state for his own special purposes”[5] Having thus accepted that the land was used for the purposes of the hospital, it was unnecessary to consider the alternative question whether the hospital occupied the land for its purposes. Nevertheless, in dicta Lord Denning said “a few words” about the argument. He doubted that the hospital occupied the land, occupation being a question of fact, and given the lack of fencing and the difficulty in saying that the 291 acres were linked with the hospital grounds so as to form an entire whole. In contrast, he posed a hypothetical example of a farmer who, “even though he does not set foot on the woodlands within … [his farm] from one year’s end to another”, undoubtedly occupies his land[6].
[4](1959) 100 CLR 1; [1959] AC 248.
[5]At CLR 4; at AC 255.
[6](1959) 100 CLR 1 at 4; [1959] AC 248 at 255-256.
Then, applying the dicta of Lord Denning, the Senior Member said that the taxpayer’s land was occupied by the retirement village and that “[t]he retirement village was clearly exercising possession over the whole of the land”[7]. The land had been fenced, services were running throughout the land, and it was a whole project divided into stages. He concluded that the situation was similar to Lord Denning’s hypothetical farmer example.
[7]At [33].
Then, as the exemption in s 9(1)(j) applied to the whole of the land, it was unnecessary to consider “the amplification contained in s 9(2AA)”. However, that provision gave additional support for the view that s 9(1)(j) applied, because “the whole of the land is used for the purpose of a retirement village or purposes ancillary to that purpose within the meaning of s 9(2AA)”[8].
[8]At [34].
The Senior Member then rejected the Commissioner’s submission that Applewood had the burden of “proving the exemption in s 9(1)(j)”. He stated that even if there were such a burden, Applewood had discharged it. Having reached the decision that the whole of the land was exempt, it was unnecessary to consider s 9(2AB).
Submissions in this Court
Commissioner
The central thrust of the Commissioner’s submission was that the Tribunal erred in law by failing to properly apply s 9(1)(j), in its terms, to the facts of the case. The Tribunal fell into error because the Senior Member asked himself the wrong question, namely whether the whole land was a “retirement village” (or a complex) as defined in s 3(1), rather than focusing on the question raised by the exemption provision itself, namely: Was the whole of the land used and occupied as a retirement village and for no other purpose, as at 31 December 2002? In aid of this submission counsel pointed to several particular errors as evidencing the Tribunal’s general misdirection:
(a)In the last sentence of [25], the Senior Member concluded that the whole of the land came within the definition of retirement village because even the disputed land formed part of the complex within the meaning of the definition. At [26] he said that the situation would be different if part of the land was used for a purpose unrelated to a retirement village, such as a school or a factory, but that was not the case here. He concluded at [27], in the circumstances, that the whole of the land was used and occupied as a retirement village and for no other purpose. It was submitted that although the conclusion at [27] was expressed in the language of s 9(1)(j), the Senior Member never turned his mind to the question enlivened by that provision. Rather, the conclusion was premised on the finding in the last sentence of [25], which was merely concerned with, and did not take the consideration beyond, the definition of retirement village. Nor did the comments in [26] supply the basis for the conclusion reached because what was said in [26] referred to what the land was not used for rather than what it was used for. Thus, “the reasons read as if the Tribunal takes the view that the conclusion in the last sentence of [25] in effect amounts to the assertion made in [27]”. Section 9(1)(j) is the controlling provision, with s 3(1) merely providing a definition which gives content to the main provision. Here, however, the Tribunal inverted the position such that the definition in s 3(1) controlled and ultimately supplanted s 9(1)(j).
(b)At [28] the Senior Member wrongly rejected the distinction urged by the Commissioner between the expression “land used and occupied as a retirement village”, found in s.9(1)(j) of the Act, and an alternative expression such as “land used and occupied for [the purpose of] a retirement village”. Although citing imprecise drafting as the reason for not giving effect to the distinction, the Tribunal failed to proffer its own view as to the correct construction of the section. And, while stating that to distinguish between the words “as” and “for” is “likely to lead to error”, the Senior Member failed to explain why that was so and what the resulting error would be.
(c)The Tribunal’s reliance on the Burwood Terrace case was misplaced. First, that case concerned s 9(2AB), while the present case concerns s 9(1)(j). Secondly, although the Senior Member said that he agreed with the comments of Member Gibson which were “appropriate to this situation”, it was unclear what aspect of Member Gibson’s reasoning the Senior Member sought to rely on. In any case, counsel submitted that the following passage from Member Gibson’s reasons in Burwood Terrace[9] contained a “plain error” and misguided the Tribunal:
“The requirement that land be used for no other purpose is in my view contravened by using the land for some other purpose, and not by failure to use the land for any purpose at all. A provision in a statute or a lease that a shop must be used as a massage parlour but not as a brothel would not be contravened if the owner ceased business and did nothing at all with the shop. A proscription of doing X is not a proscription of doing nothing – if you want to require someone positively to do something, you have to say so. ”
The error in this passage was the conclusion that, by not using land at all, one could satisfy a positive requirement that land be used in a particular way or, as counsel for the Commissioner put it, “using the negative to prove the positive.” As s 9(1)(j) positively required that the land be used and occupied as a retirement village and for no other purpose, the fact that the vacant land was not used for any other purpose (because it was not used at all) did not mean that it was used and occupied as a retirement village.
(d)At [33], the Senior Member stated that “the land was used for a retirement village within the definition of retirement village in the Act”. He then added that the land was occupied by the retirement village, in that “the retirement village was clearly exercising possession over the whole of the land”. Counsel submitted that it made no sense to say that the retirement village exercised possession over the land. Rather, a textual analysis of s 9(1)(j) required the Tribunal to ask itself whether the land was used and occupied as a retirement village, which question implied a cognate question, namely by whom was the land so used and occupied? Counsel submitted that the relevant use and occupation was that of the retired persons, not that of the retirement village or of the builders constructing the latter stages. Even if this were not so, the builders used and occupied the land as a construction site and not as a retirement village. The Tribunal misdirected itself, as the retired persons living in the first three stages were not using and occupying the disputed land as a retirement village within the meaning of s 9(1)(j).
(e)The Senior Member misconstrued s 9(2AA) by finding that “the whole of the land is used for the purpose of a retirement village or purposes ancillary to that purpose within the meaning of s 9(2AA)”[10]. He failed to appreciate that the sub-section applies to buildings and improvements on the land, not to the land itself.
[9][2002] VCAT 183 at [14], cited by the Senior Member at [29].
[10]At [34].
In developing his submission as to the distinction between the words “as” and “for”, counsel referred to the decision of White J in Educang Limited v Brisbane City Council[11]. In that case, s 47(1)(d) of the City of Brisbane Act 1924 (Qld) provided that “all land is rateable land other than land used for … educational purposes that is exempt from rating under a resolution of the council”. A council resolution provided an exemption from rates for “any land that is used entirely for a school…”. The applicant landowner had begun constructing school classrooms on its land before the school year began. The council determined that the land was not exempt from rates because it was not being used for educational purposes at the relevant time. The council wrote to the applicant’s solicitors, stating “…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 undertaken. Prior to this, the Council considers the property to be a construction site” (emphasis added by White J). Her Honour said[12] that “…the writer seems to regard “for” and “as” as interchangeable which they very clearly are not.”
[11][2002] QSC 374.
[12][2002] QSC 374 at [8].
I interpolate that this comment may have been prompted by the landowner’s concession, made in its written outline, that the land was not being used as a school, but that the expression for in the relevant council resolution was of wider meaning and encompassed the construction of school buildings. In other words, the case proceeded on the agreed basis that as and for were not interchangeable. As White J said at [9], the issue in the case was “…a narrow one, namely, whether the land was ‘used entirely for a school’ during the construction and fit out of the classrooms and before classes commenced”. After setting out the facts and referring extensively to case law, her Honour concluded (at [29]) that the land was used entirely for a school within the meaning of the resolution. The council was wrong to characterise the use to which the land was put as a construction site. That activity was ancillary to the land’s use for a school.
In aid of his submission that the Tribunal erred by not focusing on the actual use of the land, Mr Caleo referred to [23] of Educang, where White J discussed the decision of the Full Court of the Queensland Supreme Court in The Council of the Town of Gladstone v The Gladstone Harbour Board[13]. In that case, the rating legislation exempted “Crown land which … is used for public purposes”. The Board held the relevant land for the extension or development of harbour works, however the land had not been used physically for any purpose during the two years it was charged with rates. The Board sought to rely on the Royal Newcastle Hospital case for the proposition that land is used when held for the purpose of being used in the future. Gibbs J (as he then was) distinguished the Royal Newcastle Hospital case on the ground that, there, the land was “used” (although not physically used) because the hospital derived actual and present advantages by keeping the land in its virgin state. His Honour reiterated that there is a distinction between “using” land and “intending to use” land.
[13][1964] Qd R 505.
Counsel emphasised that, properly construed, s 9(1)(j) contained such a distinction. Applying the law to the present facts, the only correct view was that the disputed land was not used and occupied as a retirement village within the meaning of the exemption provision. Thus, no exemption could arise.
I note for completeness that the Commissioner submitted that the Tribunal erred by rejecting the argument that Applewood bore the burden of establishing its entitlement to the exemption. He also made submissions in response to Applewood’s contention that I should refuse leave to appeal. I now turn to Applewood’s submissions.
Applewood
It was first submitted that leave to appeal should be refused. The Commissioner did not identify any error of law, his complaints raised questions of fact, and even if there were an error of law, that error could not have affected the outcome given the factual findings made. The case raised no question of public importance, being “…a stand alone decision relating to one parcel of land, concerning one year’s land tax under now repealed and amended legislation”. In support of the argument based on the legislative amendments, counsel took me to the Commissioner’s decision, notified by letter to Applewood dated 1 October 2003, which partially upheld the taxpayer’s objection and following which, on 13 October 2003, the Commissioner issued the assessment in question[14]. That letter referred to a State Revenue Office policy, namely that the exemption in s 9(1)(j) would apply to land where “it is occupied or available for occupation as a retirement village”. Counsel said that, to give effect to this policy, the Act was amended so that the definition of “retirement village” in s 3(1) now contains the words “, or available for occupation,” after the word “occupied”. Similarly, s 9(1)(j) now provides that “land which is occupied, or currently available for occupation, as a retirement village” is exempt from land tax. Gone are the expressions “use” and “for no other purpose” which formed the basis of the decision in the present case.
[14]Exhibit GP-4 to the affidavit of Gary Pertile sworn 8 September 2004.
Leaving to one side the question of leave, counsel submitted that the Senior Member’s reasons, when read as a whole, show that he correctly applied s 9(1)(j) of the Act to the facts as found. Reliance was placed on the Tribunal’s factual findings, in particular the findings at para 11(a) and the last two points in para 11(d) set out at [7] above. That is to say, that the whole retirement village complex (when all 14 stages are complete) will provide for 68.12% open space. And, so far as part of the land was in the course of development by building or other works, such building or other works were for or ancillary to the purpose of the whole retirement village. Finally, that the whole of the retirement village was fenced off, in that it was surrounded by an external fence, and, insofar as staged development had not commenced on part of the land, that land was not used or occupied for any purpose other than for retirement village purposes.
Counsel then focused on the Tribunal’s reasons at [25]. That discussion showed the Senior Member had addressed the issues raised by s 9(1)(j). In the first sentence the Senior Member said that the land had no purpose other than a retirement village. In the second sentence he addressed the issues of use and occupation. After making some comments about the artificiality of dividing up the land in the way suggested by the Commissioner, the Senior Member returned to the definition of retirement village. He concluded that the whole of the land came within the definition, because even the disputed land was part of the complex within the meaning of that definition.
Counsel then focused on the word “complex”, which he said is “the starting point” for the definition of retirement village[15]. While the complex must contain residential premises occupied by retired persons as specified in the Act, the exemption applies to the whole of the land comprising the complex and not just to the residential premises. In this regard, the Tribunal was correct to adopt Member Gibson’s comments in Burwood Terrace that “there is the requirement that the residential premises be predominantly or exclusively occupied by retired persons but no such requirement in respect of the balance” [16]. Further, the Senior Member was correct to conclude that there was no relevant distinction between occupied as opposed to unoccupied parts of a completed building on the one hand (Burwood Terrace) and complete stages as opposed to incomplete stages and vacant land on the other, as in the present case.
[15]Applewood’s written submission at [12].
[16][2002] VCAT 183 at [9].
It was further submitted that the Tribunal was correct to disregard the distinction between “for” and “as” urged by the Commissioner. Substituting the word “for” did not change the meaning of the exemption, nor was it helpful to compare the provision to other parts of s 9. He pointed to inconsistent drafting in the Act and the number of amendments made thereto. Further, Educang did not assist the Commissioner because the parties in that case conceded that the words “as” and “for” were different.
Decision
Although the Senior Member stated in terms[17] that the criteria in s 9(1)(j) were satisfied, for the following reasons I accept the Commissioner’s argument that the Tribunal failed to properly construe and apply the exemption provision.
[17]At [27].
The Senior Member placed undue reliance on the statutory definition of “retirement village” and the word “complex” found within that definition, to the exclusion of the actual terms of s 9(1)(j). As the exemption provision required that the land be used and occupied as a “retirement village”, which was defined in the Act as a “complex” containing residential premises occupied by retired persons, the defined meaning of the expression “retirement village” had to be taken into account. In doing so, the Senior Member could also consider the dictionary meaning of the word “complex” as an aid to the interpretation of that word in the definition, and of the definition itself, in the context of s 9(1)(j). However, the definitions of these terms were not independent ends in themselves which, without more, determined the application of the exemption provision. In my view, the Senior Member treated the definition of retirement village as an end in itself, and as a result misdirected himself.
The Senior Member characterised the land as fitting the definition; that is to say that the whole land formed part of “the complex” and “the whole of the land comes within the definition of retirement village”[18]. Although mentioning in passing that in argument the Commissioner had referred to the definition of the word “complex”, the Senior Member did not himself consider the meaning of that word. The Concise Oxford Dictionary defines the noun “complex” as “a group of similar buildings or facilities on the same site. An inter-linked system; a network”. This definition is apt in the present situation. It is clear, both from the dictionary definition and the context in which the word appears in s 3(1), that a “complex” is something quite distinct from the land on which it is built. The Senior Member, however, mistakenly treated the issue in the case as being whether the “complex”, the “retirement village” and “the whole of the land” were coextensive, that is to say whether they were one and the same.
[18]At [25].
Concluding that they were, the Senior Member missed the real issue raised by s 9(1)(j), namely whether, at the relevant time, the disputed land was used and occupied as a retirement village and for no other purpose. This question has a temporal aspect, in that it is to be answered by reference to the state of the land at the relevant time. If the situation is changed at the time of a future assessment, for example because some more or all of the 14 stages have been completed, that change will be taken into account when the land is assessed to tax. It appears that the Senior Member lost sight of this fact. Thus, he made the error of ascribing a permanent quality to the disputed land at the relevant time, namely that it was then a complex and a retirement village, and that it then had no purpose other than that of a retirement village. Having so concluded, the Tribunal was led inexorably to the conclusion that the criteria in s 9(1)(j) were satisfied. But, as I have said, this conclusion was reached without proper consideration of the terms of the provision.
The Senior Member also erred in his treatment of the word “purpose” which appears in s 9(1)(j) and s 9(2AA). Ultimately, he conflated “purpose” with “used and occupied”[19]. His starting point appears to have been that, because the land is destined to become a single retirement village[20] the whole of the land “has no purpose or was not used for any purpose other than a retirement village”[21]. However, he used the word “purpose” in a loose sense, akin to stating the landowner’s intention, which is irrelevant to the exemption provision which is concerned with the nature of the actual use and occupation at a particular time. Following the statement about purpose, and without further explanation, the Senior Member concluded that the part of the disputed land on which buildings were under construction “is being used as a retirement village and is ancillary to that part of the retirement village which is presently being occupied by retired persons. That is, it is part of the whole development”[22]. He then said that the same applies to the “vacant land” in that it is “part of the entire complex and ancillary to that complex”. Leaving aside for the moment the concept of the land being “occupied”, the Senior Member appears to have used the “purpose” which he identified to found the statement that the disputed land is “ancillary” to and is being “used as a retirement village”. This approach was incorrect.
[19]At [25].
[20]Albeit one containing 14 stages.
[21]At [25] and [31].
[22]At [25].
How then is “purpose” to be understood in s 9(1)(j)? The fact that “land is used and occupied as a retirement village” is necessary - but not sufficient – to satisfy the terms of s 9(1)(j). The taxpayer must also show that the land is used “for no other purpose”, taking account in this respect of s 9(2AA) which provides that land is not used for another purpose simply because any building or improvement on the land is used for a purpose ancillary to that of a retirement village. That is, s 9(2AA) is to be read with s 9(1)(j) and applied where appropriate. The process involved is one of characterisation of the use and occupation of the subject land. The exemption will be applicable if the proper characterisation is that the subject land is used and occupied as a retirement village and for no other purpose. Hence, a decision that the exemption is applicable involves a finding (for this purpose invoking, if necessary, s 9(2AA)) that at the relevant time the use and occupation of the subject land is for the purpose only of a retirement village.
In effect, the Tribunal jumped from a general conclusion as to the disputed land having “no other purpose” to a specific conclusion that, at the relevant time, the disputed land was used and occupied as a retirement village. This is an example of “using the negative to prove the positive” to which the Commissioner referred. I further accept the Commissioner’s submission (at [31(c)] above) that the reasoning in the cited passage in Burwood Terrace was erroneous, and I conclude that the Senior Member made a similar error. The correct approach was to ask whether, at the relevant time, the disputed land was used and occupied as a retirement village and for no other purpose. If it was not so used and occupied, the matter was at an end as the exemption could never apply.
On the facts, it was not open to the Tribunal to conclude that the disputed land was used and occupied as a retirement village. Section 9(2AA), which only goes to the “no other purpose” aspect of s 9(1)(j), was irrelevant because the provision presupposes that the land in question is “used and occupied as a retirement village”.
Although it is unnecessary to do so, out of deference to the submissions of counsel, I venture the following observations as to s 9(2AA) and the use made thereof by the Senior Member. The provision, beneficial to the taxpayer, seeks to ensure that land not lose the exemption simply because some building or improvement on the land is used or occupied for a purpose which is ancillary to the purpose of a retirement village. In other words, s 9(2AA) is concerned with the use or occupation of some building or improvement on the land. Although the Senior Member referred to the common services running throughout the whole of the land - which may be improvements within the meaning of s 9(2AA) - he did not identify any particular building or improvement on the disputed land that was used or occupied for a purpose ancillary to that of a retirement village, such that s 9(2AA) was enlivened. Rather, he focused on the land itself, describing the undeveloped land as “part of the entire complex and ancillary to the complex” and the land with buildings under construction as “ancillary to that part of the retirement village which is presently being occupied by retired persons”[23]. In my view, this was erroneous. Strictly speaking, the Tribunal stated that it did not need to have recourse to s 9(2AA), because it was positively satisfied that the exemption in s 9(1)(j) applied. However, the Senior Member added that if he was wrong in his view that the land fell within s 9(1)(j), “the whole of the land is used for the purpose of a retirement village or purposes ancillary to that purpose…”[24]. Again, this was an error which resulted from the Tribunal taking the word “ancillary” from the narrow confines of s 9(2AA) and placing it in a broader context to which it did not belong.
[23]At [25].
[24]At [34].
A similar error can be seen in the manner in which the Senior Member used the concept of “ancillary” to link “used” and “occupied”. The expression “used and occupied” is a composite one; it is unhelpful to divide it into constituent parts[25]. Nevertheless, as the Tribunal dealt with occupation separately, it is necessary to say something about “occupied” as it appears in s 9(1)(j). In particular I note the passage at [25] of his reasons where the Senior Member said – to paraphrase - that the disputed land was being used as a retirement village and was ancillary to that part of the village “presently being occupied by retired persons”. This reference to the part “being occupied by retired persons” appears to be derived from Burwood Terrace[26]. In that case, Member Gibson made the point that “there is the requirement that the residential premises be predominantly or exclusively occupied by retired persons but no such requirement in respect of the balance”[27]. Thus, a complex does not cease to be a “retirement village” merely because the lawns, or the kiosk or the medical facilities are not “occupied” by retired persons. These observations are obviously correct, but they only concern the definition of retirement village and do not determine how the land was “used and occupied” for the purpose of s 9(1)(j). I express no view as to the correctness of the ultimate result in Burwood Terrace, which was that the land was exempt from land tax under s 9(1)(j), even though only 10 of the 66 dwellings were occupied[28]. It is sufficient to conclude, as I do, that Burwood Terrace is readily distinguishable from the present case. It concerned a retirement village where the buildings were complete, but most dwellings were unoccupied. Here, parts of the disputed land were either under construction or undeveloped. It is a qualitatively different situation. The Senior Member erred by equating the disputed land with “the balance of the complex” identified by Member Gibson as not needing to be occupied by retired persons. The disputed land may have been “ancillary” to the parts actually occupied by the retired persons, having regard to their completed state. But that is not the test, and it cannot substitute the terms of s 9(1)(j).
[25]I do not overlook the possibility that retired persons might “use” but not “occupy” a particular part of a retirement village, for example recreational facilities. That is to say, the two concepts are not one and the same, although they are aspects of, and concerned with, the one thing, the existence or not of a retirement village. The facts of the present case – where the disputed land was neither used nor occupied by retired persons – do not lend themselves to an exploration of the nuances of the expression “used and occupied”.
[26][2002] VCAT 183.
[27][2002] VCAT 183 at [9].
[28][2002] VCAT 183 at [8]-[9], [11] and [18].
I note further that Burwood Terrace was the catalyst for the amendment to s 9(1)(j) to which I referred above at [14(b)][29]. The exemption now applies to “land which is occupied, or currently available for occupation, as a retirement village”. In his second reading speech on the Bill which introduced the amendments set out at [14] above, the Treasurer explained that the amendment to s 9(1)(j) was necessary, as Burwood Terrace “significantly widened the scope of the exemption by determining that it should be wholly available even where not all of the land was actually used and occupied as a retirement village at the relevant date… The amendments will clarify the scope of the exemption…”. In other words, the practical effect of the decision, namely that the exemption should not be denied merely because a completed building has not yet filled up, has been enshrined in the legislation. I do not rely on the amendment to interpret s 9(1)(j) as it stood at the relevant time, however it does illustrate the effect of Burwood Terrace, in that the case expanded the scope of s 9(1)(j) but only as far as complete buildings were concerned. Neither the case nor the amendments extend to vacant land or buildings under construction and, to the extent that the Senior Member decided that they did, he erred.
[29]Hansard of the Legislative Assembly, 16 October 2003, at 1108.
The Senior Member concluded that it was artificial to divide “a single block of land … into different uses and occupations simply because a particular portion had not reached a particular stage of development”[30]. But far from being artificial, consideration of the state of development on the land was essential in deciding how the land was used and occupied for the purpose of applying s 9(1()(j) at the relevant time. Section 9(2AB), which only applies where the Commissioner is satisfied that part only of land is used and occupied as a retirement village, shows that the legislature intended that land might be divided into “different uses and occupations”, depending on the stage of development. This scheme is complemented by the fact that land is assessed to land tax annually, on the basis of the use that is made of the land as at the assessment date, which is 31 December of the preceding year. Thus, if the Commissioner considers that part of the land is not exempt, for instance because it is not used and occupied as a retirement village, that assessment is not for all time. It is for one year only. If, by the time of the next assessment, the relevant part of the land is used and occupied as a retirement village, the exemption will apply. Conversely, if the retirement village owner becomes insolvent and the residential premises are abandoned, the land might lose an exemption which it once enjoyed. The fact is that the present exemption from land tax is one which applies where land is used and occupied in a particular way. It is not an exemption which applies merely because the owner of the land intends to construct a retirement village on the whole of the land.
[30]At [25].
The Commissioner provided to the Court a folder of authorities and both counsel referred to numerous authorities in their written and oral submissions. I do not overlook any of these authorities, nor do I overlook any of the matters referred to by counsel in their submissions. However, it is unnecessary to refer to the authorities at greater length than I have done in setting out the way the case was put. Each case turns on the terms of the particular statutory provision and its unique set of facts. For instance, the exemption provision in the Royal Newcastle Hospital case concerned land used by the hospital for its purposes. That language raised a broader enquiry than does s 9(1)(j). In the present case, s 9(1)(j) must be applied according to its terms and in light of the facts pertaining to the case.
And, contrary to what the Senior Member said[31], Applewood did have the burden of proving that the exemption applied. Section 26 of the Act provides that:
[31]At [37].
“(1) Upon any review or appeal under this Act –
(a) …
(b)the burden of proving that the assessment is excessive shall lie upon the taxpayer. “
The Senior Member appears to have overlooked this provision, instead relying on a general passage from the judgment of Tadgell JA (with whom Batt and Buchanan JJA agreed) in Transport Accident Commission v Bausch[32], where his Honour noted that it was well established that the Commonwealth Administrative Appeals Tribunal (and State and Territorial tribunals established by cognate legislation, such as in Victoria) were obliged by statute, when reviewing a primary administrative decision, to decide for themselves whether the decision was, on the material before the tribunal, the correct or preferable one. This was the tribunal’s task, regardless of the form the parties’ submissions took and an error of law might be committed by the tribunal through ignoring a central issue, even though no party had raised that issue. It is not to question the correctness of what his Honour said to observe that his comments were made in a statutory context different from the present. The plain words of s 26(1)(b) state that, upon a review by the Tribunal or appeal to the Court, the taxpayer bears the burden of proving that the assessment was excessive.
[32][1998] 4 VR 249 at 263 per Tadgell JA.
In the circumstances, the Commissioner should have leave to appeal from the Tribunal’s decision. I do not overlook anything said by counsel against leave, either in oral argument or in his written submission. However, the Tribunal’s errors raise a question of law, namely the proper construction of s 9(1)(j). I reject Applewood’s submission that the Tribunal’s characterisation of the land as a “complex” was a mere conclusion of fact. Rather, it went to the heart of the Tribunal’s failure to properly apply the exemption provision. Further, although the relevant provisions have been amended, it cannot be said that the issue raised is irrelevant to the provisions as they currently stand. Even accepting Applewood’s argument that the case raises no matter of public importance, that factor alone is not decisive. Secretary to the Department of Premier and Cabinet v Hulls[33] makes it clear that it is merely one factor to take into account. Here, the decision is a final order which affects substantive rights. In all the circumstances, leave should be granted.
[33][1999] 3 VR 331.
As to the appeal itself, for the reasons given above, the Tribunal failed to properly apply s 9(1)(j) of the Act. The appeal will be allowed. I note that the assessment requires recalculation. I will hear counsel on the terms of the orders and as to costs.
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