Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86 Hearing dates: 31 January 2013 Decision date: 18 April 2013 Before: McColl JA at [1];
Basten JA at [67];
Gzell J at [84]Decision: (1) Appeal allowed.
(2) Orders 3 and 4 of the Administrative Decisions Tribunal Appeal Panel made on 15 April 2011 set aside.
(3) Decision of the Chief Commissioner of State Revenue of 12 November 2008 set aside.
(4) Case remitted to the Revenue Division of the Administrative Decisions Tribunal for determination of the question whether the Appellants' use and occupation of the land for the land tax years 2004 to 2008 satisfied the definition of residential land in clause 3 of Schedule 1A to the Land Tax Management Act 1956.
(5) Direct that the parties, if they wish, may adduce further evidence subject to due objection.
(6) Respondent to pay the Appellants' costs of the appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: TAXATION AND REVENUE - land tax - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1A - exemption from land tax where person owns land "used and occupied by the person as his or her principal place of residence" - whether use and occupation must be lawful - where appellants resided on land in a mobile home or caravan - where council approval required - where council approval not obtained
STATUTORY INTERPRETATION - principles - maxim that legislation not intended to permit a person taking advantage of own wrong - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1A - exemption from land tax where person owns land "used and occupied by the person as his or her principal place of residence" - whether maxim requires lawful use and occupation
WORDS AND PHRASES - used and occupied by the person as his or her principal place of residence - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1ALegislation Cited: Administrative Decisions Tribunal Act 1997 (NSW), ss 119, 120
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 40-65, 195-1
Aboriginal Land Rights Act 1983 (NSW), s 36
Electric Lighting (Clauses) Act 1899 (UK), s 27
Environmental Planning and Assessment Act 1979, s 109
Income Tax Assessment Act 1936 (Cth), ss 51, 222AKA, 222APE
Interpretation Act 1987 (NSW), s 33
Land Tax Act 1956 (NSW), s 1
Land Tax Management Act 1956 (NSW), ss 4, 7, 8, 9, 10, 10B, 10D, 10E, 10G, 10P; Schedule 1A, cll 1, 2, 3, 6, 7, 8, 9; Pts 2, 3
Local Government Act 1919 (NSW), ss 309, 342T, 342U
Local Government Act 1993 (NSW), s 68
Solicitors Act 1974 (UK), s 31
Solicitors' Costs Information and Client Care Code, r 15
Taxation Administration Act 1996, ss 4, 61
Work Health Act 1986 (NT), s 3Cases Cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27
Allen v Bega Valley Council (1994) 85 LGERA 364
Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd [1970] HCA 58; 124 CLR 262
Baulkham Hills Shire Council v Iaria [1977] 2 NSWLR 41
Baulkham Hills Shire Council v Iaria [1978] 1 NSWLR 678
Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292
Braunack v Goers (1979) 23 SASR 1
Carr v Western Australia [2007] HCA 47; 232 CLR 138
Chief Commissioner of Land Tax v MacAry Manufacturing Pty Ltd [1999] NSWCA 471
Commissioner of Land Tax v Christie [1973] 2 NSWLR 526
Commissioner of Taxation (Cth) v La Rosa [2003] FCAFC 125; 129 FCR 444
Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 87 ALJR 98
Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) [1981] HCA 26; 147 CLR 297
Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1
Deputy Commissioner of Taxation v Craddock [2006] VSC 408, 204 FLR 274
Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450
Director of Public Prosecutions v Leys [2012] VSCA 304
Garbutt v Edwards [2005] EWCA Civ 1206; [2006] 1 All ER 553
Grozier v Tate (1946) 64 WN (NSW) 1
Hall v Jones (1942) 42 SR (NSW) 203
Hayward v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 17
Holden v Nuttall [1945] VLR 171
Hooper v Lane (1859) 6 HL Cas 443
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499
Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307; 141 FCR 299
Nicholls v Michael Wilson & Partners Pty Ltd [2012] NSWCA 383
Paliflex Pty Limited v Chief Commissioner of State Revenue [2003] HCA 65; 219 CLR 325
Pearse v Chief Commissioner of State Revenue [2007] NSWADT 14
Puttick v Attorney General [1980] 1 Fam 1
Re London Celluloid Co (1888) 39 Ch D 190
Reuman v Chief Commissioner of State Revenue [2004] NSWADT 96
Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [2005] NSWCA 443; 12 BPR 23,923
Shah v Barnet London Borough Council [1983] 2 AC 309
Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562
Stephen Bowers Architects Pty Ltd v Waverley Council [2003] NSWLEC 16; 125 LGERA 292
The Firm (Australia) Pty Ltd v South Sydney Council [1999] NSWLEC 5
Thompson v Groote Eylandt Mining Co Ltd [2003] NTCA 5; 173 FLR 72
Vidler v Federal Commissioner of Taxation [2010] FCAFC 59, 183 FCR 440
Vumbaca v Baulkham Hills Shire Council [1979] HCA 66; 141 CLR 614
Wentworth Securities Ltd v Jones [1980] AC 74
Wollongong City Council v Vic Vellar Nominees Pty Ltd [2010] NSWLEC 266, 178 LGERA 445
Woodcock v South Western Electricity Board [1975] 2 All ER 545Texts Cited: Broom's Legal Maxims, 10th ed (1939) Sweet & Maxwell Ltd (at 191)
F A R Bennion, Statutory Interpretation, 5th ed (2008) LexisNexis, at 792, 1106, 1107, 1141
F A R Bennion, Statutory Interpretation, 1st ed (1984), Butterworths, at 780
Philip Burgess "Deductions and Illegal Income" (2008) 37 Australian Tax Review 7, 9
Lord Coke's commentaries on The Laws of England by Littleton
D C Pearce and R S Geddes, Statutory Interpretation in Australia, 7th ed (2011) LexisNexis (at [2.41])Category: Principal judgment Parties: Rochelle De Marco (First Appellant)
Brian Hayward (Second Appellant)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel:
I Stanley (Appellants)
I V Knight, Crown Solicitor (Respondent)
S Gibb SC/C Burnett (Respondent)
Solicitors:
File Number(s): CA 2011/226825 Decision under appeal
- Jurisdiction:
- 9113
- Citation:
- [2011] NSWADTAP 17
- Date of Decision:
- 2011-04-15 00:00:00
- Before:
- J Needham SC, Deputy President
S Frost, Judicial Member
C Bennett, Non-judicial Member- File Number(s):
- 096045
HEADNOTE
[This headnote is not part of the judgment]
The appellants owned land in Arcadia, New South Wales. Before December 2002, and for a continuous period of at least six months, the appellants lived on the land in a mobile home and then a caravan. The Local Government Act 1993 (NSW), s 68(1) allowed a person to install a moveable dwelling on land only with prior approval from the relevant Council. The appellants had not received such approval.
The respondent raised assessments to land tax under the Land Tax Management Act 1956 (NSW) for the land tax years 2004 to 2008. The appellants objected, claiming entitlement to the "principal place of residence" exemption. The relevant exemption operates if the person is the owner of land "that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least six months", within the terms of cl 8(1)(a) of Schedule 1A of the Land Tax Management Act.
The issues for determination on appeal were:
(i) whether, to engage the exemption, the use and occupation must be "lawful"; and
(ii) whether final orders could be made.
Held, allowing the appeal, by majority:
Per Basten JA and Gzell J
In relation to (i)
1. It is only permissible to read words into a statute where three conditions are satisfied, namely: it is possible to determine precisely what mischief it was the purpose of the Act to remedy; it is apparent that Parliament overlooked an eventuality required to be dealt with in order to achieve the purpose of the Act; and it is possible to say with certainty what additional words the Parliament would have used: [74], per Basten JA.
Wentworth Securities Ltd v Jones [1980] AC 74 applied.
2. The language of cl 8 is satisfied by use and occupation which is, as a matter of fact, as a principal place of residence. The legislative scheme does not call for, and therefore does not permit, the introduction of an additional constraint, namely that the use and occupation must be lawful, in the sense of complying with the requirements of the relevant planning legislation, at least in circumstances where the use and occupation was permissible with consent: [75], [77] and [79], per Basten JA.
3. The Chief Commissioner's general administration of the Land Tax Management Act and other State taxation laws should not be expanded to require him to determine whether the use and occupation of land is lawful. That is the function of Councils. Internal indications in the Land Tax Management Act support that approach. In particular, the requirement in cl 6(2)(c) of the Schedule that the intended use and occupation not be unlawful, and the absence of that specific requirement in cl 2, cl 3 and cl 8, militates against an implication of that requirement in those clauses: [119], [152], [153] and [156], per Gzell J.
Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562; Vumbaca v Baulkham Hills Shire Council (1979) 141 CLR 614; Thompson v Groote Eylandt Mining Co Ltd [2003] NTCA 05, (2003) 173 FLR 72; Deputy Commissioner of Taxation v Craddock [2006] VSC 408, (2006) 204 FLR 274; Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307, (2004) 141 FCR 299 distinguished.
Commissioner of Taxation v La Rosa [2003] FCAFC 125, (2003) 129 FCR 494 considered.
per McColl JA (dissenting)
4. The words "used and occupied" in cl 2, cl 3 and cl 8 must be taken to mean "lawfully used and occupied" in application of the maxim of statutory interpretation that, absent clear intention to the contrary, no person should be allowed to take advantage of his or her own wrong: at [32], [60]-[61], [63]-[64].
Grozier v Tate (1946) 64 WN (NSW) 1; Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562; and Allen v Bega Valley Council (1994) 85 LGERA 364 applied.
Commissioner of Taxation v La Rosa [2003] FCAFC 125, (2003) 129 FCR 494 distinguished.
In relation to (ii)
5. There was a live issue, not addressed below, as to whether use by the appellants of a caravan or mobile home satisfied the definition of "residential land" for the purpose of the exemption. Accordingly, the matter must be remitted to the Tribunal for this issue to be determined: [81], per Basten JA and [166], per Gzell J.
Judgment
McCOLL JA: Rochelle De Marco and Brian Hayward, the appellants, appeal from a decision of an Appeal Panel of the Administrative Decisions Tribunal finding in favour of the Chief Commissioner of State Revenue, the respondent, in a dispute concerning the appellants' claim to an exemption from land tax. The respondent was successful in persuading the Appeal Panel that the appellants' unlawful use and occupation of the land precluded them from taking advantage of the principal place of residence ("PPR") concession in cl 8(1) of Schedule 1A to the Land Tax Management Act 1956 (NSW) ("LTMA"), as in force for the 2004 to 2008 tax years: Hayward v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 17.
The facts are set out in Gzell J's reasons. I gratefully adopt, and will not repeat, his Honour's exposition of the facts and relevant legislation save where contextual necessity dictates.
The critical question is whether use and occupation of land for which council approval had not been obtained pursuant to s 68(1) of the Local Government Act 1993 (which it was accepted could be described as "unlawful") constituted use and occupation within the meaning of cl 8(1) of the LTMA such as to entitle the appellant to the PPR exemption from land tax: s 10(1)(r), LTMA.
For the reasons that follow, I am of the view that the appeal should be dismissed with costs.
The principal place of residence exemption
Land tax is levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers, other than land which is exempt from taxation under the LTMA: s 7, LTMA; see also s 9. Land that qualifies for the PPR exemption, as provided by Schedule 1A of the LTMA, is exempt from land tax: s 10(1)(r), LTMA. The calculation of the land tax payable is outlined by the Land Tax Act 1956 (the "Tax Act"), which is to be read and construed with the LTMA: s 1, Tax Act. The LTMA is also to be read with the Taxation Administration Act 1996 ("Administration Act"): s 4, LTMA. Neither party suggested anything turned on either the Tax Act or the Administration Act.
Part 2 of Schedule 1A to the LTMA relevantly provided:
"2 Principal place of residence exemption
(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act ... if the land is:
(a) a parcel of residential land ...
(3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption.
(4) The exemption conferred by this clause is referred to as the 'principal place of residence exemption'.
3 Residential land - meaning
(1) In this Schedule, 'residential land' means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes ..."
The appellants could not qualify for the cl 2(1) exemption for the relevant land tax years because they did not use and occupy the land as their principal place of residence after December 2002.
Part 3 of Schedule 1A deals with "Concessions in application of principal place of residence exemption". Clause 8(1) in Part 3, pursuant to which the appellants claimed the PPR exemption, provided in each of the relevant land tax years:
"(1) If the Chief Commissioner is satisfied that:
(a) a person is the owner of land ('the former residence') that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least 6 months, and
(b) the person uses and occupies other land (whether or not in New South Wales), that is not owned by the person, as his or her principal place of residence,
the person is taken, for the purposes of the principal place of residence exemption, to continue to use and occupy the former residence as his or her principal place of residence."
Clause 6 which is also found in Part 3 of Schedule 1A should be mentioned. It provides a PPR exemption for unoccupied land for a period of 4 tax years after a person became the owner of land, if the owner intends to use and occupy the land solely as his or her principal place of residence and "the intended use and occupation of the land is not unlawful": cl 6(2)(c).
It was common ground that the appellants owned the land. Their last use and occupation of the land was in December 2002 so that, if the PPR exemption applied, the period of their deemed use and occupation ceased in December 2008: cl 8(3)(a).
The argument proceeded on the basis that for the purpose of resolving the question of law, the land was "residential land": cl 3, Schedule 1A. However as Gzell J points out (at [165]) the factual issue as to whether the dwellings the appellants occupied fell within the meaning of "building" in cl 3, Schedule 1A, LTMA was not resolved.
Submissions
The appellants' essential submission is simple. Mr I Stanley, who appeared on appeal but not before the ADT, submitted that the words in cl 2(1) and cl 8(1) are unambiguous and do not warrant the implication of a lawfulness requirement. He contended that implying such a qualification would "extend the scope and purpose of the land tax legislation beyond its intended reach as a taxing regime into the realm of planning, building or development law" or, more colloquially, that the respondent is not administering the Local Government Act.
Secondly, Mr Stanley contrasted cl 8(1) with the concession for unoccupied land intended to be the owner's principal place of residence in cl 6(1) of the LTMA: see [9] above. Mr Stanley submitted that the inclusion of the words "not unlawful" in cl 6(2)(c) manifested a clear legislative intention to introduce a qualification not otherwise found in Schedule 1A.
Mr S Gibb of Senior Counsel, who appeared for the respondents on appeal with Ms C Burnett, but not before the ADT, submitted that the fact that the definition of "residential land" in cl 3 of Schedule 1A applied the PPR exemption to "land that is used and occupied for residential purposes ... being use and occupation of a building or buildings designed, constructed or adapted for residential purposes ..." meant that the exemption operated against the background of the general law in relation to development consent approvals. Accordingly, whether the use was unlawful from a development control and consent perspective was relevant to determining whether a building was used and occupied for residential purposes.
Secondly, Mr Gibb submitted that the express reference to "unlawful" use in cl 6(2)(c) was explained by the fact that that provision "concerns an intended future (i.e. notional) use of unoccupied land". By contrast, cl 8(1) concerns "land that has previously been used and occupied by the person as his or her principal place of residence."
Thirdly, Mr Gibb submitted that failing to imply a requirement of lawfulness in cl 8(1) would create the curious outcome in which the PPR exemption would be available where the actual use and occupation was unlawful, but not where the intended use and occupation was unlawful.
Fourthly, Mr Gibb submitted that the purpose of "protecting legitimate home ownership from taxation" is better served by denying the cl 8(1) concession where the use and occupation is unlawful.
Finally, Mr Gibb relied on the maxim that courts resist adopting a construction of a statute that would allow a person to take advantage of his or her wrong and that to allow the cl 8(1) concession where the appellants had not obtained council approval for their occupation of the land would flout that approach.
Consideration
The LMTA is a taxing statute. However its interpretation must be undertaken in accordance with general principles governing the interpretation of statutes: Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) [1981] HCA 26; (1981) 147 CLR 297 (at 323) per Mason and Wilson JJ; Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 87 ALJR 98 (at [39]) per French CJ, Hayne, Crennan, Bell and Gageler JJ. Thus, "tax statutes do not form a class of their own to which different rules of construction apply", although "the fact that a statute is a taxing Act ... is part of the context and is therefore relevant to the task of construing the Act in accordance with ... settled principles": Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 (at [57]) ("Alcan") per Hayne, Heydon, Crennan and Kiefel JJ.
In Alcan (at [51]) the plurality emphasised that "[f]ixing upon the general legislative purpose of raising revenue carried with it the danger that the text [does] not receive the attention it deserves." They quoted Gleeson CJ's admonition in Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138 (at [6]) ("Carr") in which, illustrating the proposition that "to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose" (Carr (at [5])), his Honour said:
"... [I]t may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling." (Emphasis added)
In Paliflex Pty Limited v Chief Commissioner of State Revenue [2003] HCA 65; (2003) 219 CLR 325 ("Paliflex"), which concerned the question whether the LTMA and the Tax Act had valid operation in relation to land Paliflex purchased from the Commonwealth, Gleeson CJ and McHugh, Gummow, Kirby and Hayne JJ observed (at [30]) that:
"The Tax Act and the [Land Tax] Management Act are not concerned with the uses to which any land within a delineated geographic area may be put. They impose fiscal burdens only upon those 'owners' who are 'taxpayers'."
In similar vein, Mason P (with whom Sheller JA agreed) said in Chief Commissioner of Land Tax v MacAry Manufacturing Pty Ltd [1999] NSWCA 471 ("MacAry Manufacturing") (at [31]) that "the legislative scheme [created by the LTMA and the Tax Act] envisaged that ownership would be the criterion of taxability".
The observations in both cases reflect s 7 and s 9(1) of the LTMA.
The statement in Paliflex that the LTMA is not concerned with the use to which land can be put was made in the context of distinguishing that case from Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd [1970] HCA 58; (1970) 124 CLR 262. While the plurality's statement concerning the primary operation of the LTMA is germane to its construction, it does not distract from the necessity in the present case of determining the construction of the concession afforded by cl 8 by reference to its text, which operates by reference to ownership as well as to use and occupation as a principal place of residence.
The legislative purpose apparent from the provisions of the LTMA dealing with the PPR exemption is that owners of land should have at least one property which is exempt from land tax, being their principal place of residence. The use and occupation requirement establishes the parameters within which that exemption can be attracted. The concessions Part 3 of Schedule 1A creates identify the circumstances in which the PPR exemption is available even to those who do not meet the primary criteria of use and occupation in cl 2(2) of Schedule 1A. Further, each Part 3 concession operates independently of the others.
It was common ground that to qualify for the PPR exemption, the appellants' land had to fall within the meaning of "residential land" for the purposes of cl 2(1) of Schedule 1A. Thus it had to have been "use and occupation of a building or buildings designed, constructed or adapted for residential purposes".
The terms "use" and "occupation" (and the latter's grammatical variations) in Schedule 1A refer to different, but cumulative, requirements: Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 (at 533) ("Christie") per Bowen JA (Jacobs P agreeing). "'Use' has regard to the purpose to which the land is put": Christie (at 533); see also Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 (at [21]) per Allsop P (Campbell and Whealy JJA agreeing). "'Occupation' ... includes possession [and] ... involves an element of control, of preventing or being in a position to prevent the intrusion of strangers: Christie (at 533). There was no issue as to the appellants' occupation of the land, albeit it may be inferred that if their use of it was unlawful, so, too, was their occupation.
There is force in the respondent's submission that the reference in cl 3(1) to the essential attributes of the building claimed to be the primary place of residence directs attention to the necessity that there have been council approval as required for its design, construction or adaptation.
The respondent referred in this respect to Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307; (2004) 141 FCR 299 (at [62] - [63]) ("Marana Holdings") where, in the course of considering whether the sale of a motel was of residential premises used for residential accommodation for the purposes of s 40-65(1), A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the "GST Act"), the Court (Dowsett, Hely and Conti JJ) said:
"...To say that a building is 'intended' to be occupied as a residence implicitly describes the intention with which it was designed, built or modified, which intention will be reflected, to greater or lesser extent, in its suitability for that purpose. It is true that this meaning may overlap with the further requirement that the building be capable of occupation as a residence ...
[63] As far as we can see, there is no evidence concerning the physical suitability as at the date of sale ... of the premises for use as a residence, as to whether they were then capable of being so occupied or as to whether such use would have then been lawful. As it was apparently necessary to modify the premises, obtain council permission for the change of use and convert the title to strata title, it seems likely that they were neither intended to be, nor capable of being occupied as a residence as at the date of sale ..." (Emphasis added)
Marana Holdings is persuasive authority. However it was decided in a different statutory context. The definition of "residential premises" in s 195-1 of the GST Act relevantly provided "... land or a building that ... (b) is intended to be occupied, and is capable of being occupied, as a residence". However the case did not turn on lawful use and the passage I have emphasised in [63] was not essential to the reasoning. Further, the reference in the definition of "residential premises" to the land or building as being "capable of being occupied" arguably conveyed a notion of legality.
Nevertheless, independently of Marana, I would accept that the phrase "used and occupied" in, at least, cl 2(1), cl 3(1) and cl 8(1) of Schedule 1A should be read as qualified by the word "lawfully".
Such construction finds support, as the respondent submitted, in the maxim that no person should be allowed to take advantage of his or her own wrong (see D C Pearce and R S Geddes, Statutory Interpretation in Australia, 7th ed (2011) LexisNexis (at [2.41])).
F A R Bennion, Statutory Interpretation, 5th ed (2008) LexisNexis (at 1141) states:
"Unless the contrary intention appears, an enactment by implication imports the principle of the maxim nullus commodum capere potest de injuria sua propria (no one should be allowed to profit from his own wrong)."
I shall refer to the principle "no one should be allowed to profit from his own wrong" as the "maxim" in the remainder of my reasons.
In the first edition of his work, Bennion commented that "[t]he effect [of the maxim] is usually that the literal meaning of the enactment is departed from where it would result in wrongful self-benefit": F A R Bennion, Statutory Interpretation, 1st ed (1984), Butterworths (at 780).
As Bennion explained (5th ed, at 792), the maxim is related to the technique of construction in bonam partem which entails that:
"If a statutory benefit is given on a specified condition being satisfied, it is presumed that Parliament intended the benefit to operate only where the required act is performed in a lawful manner." (Emphasis in original)
An illustration of the in bonam partem technique of construction can be seen in Shah v Barnet London Borough Council [1983] 2 AC 309, to which Bennion referred (5th ed, at 792) in which Lord Scarman said (at 343 - 344):
"If a man's presence in a particular place or country is unlawful, eg in breach of the immigration laws, he cannot rely on his unlawful residence as constituting ordinary residence (even though in a tax case the Crown may be able to do so) ...There is, indeed, express provision to this effect in the Immigration Act 1971, s 33(2). But even without this guidance I would conclude that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully."
Another technique of construction related to the maxim is the principle allegans suam turpitudinem non est audiendus (a person alleging his own wrongdoing is not to be heard). The "essence of [this] principle is that the party needs to prove an illegal act in order to succeed": Bennion (5th ed, at 792, 1106). The learned author observes (at 1107) that:
"The ... principle is often applicable where the wrongdoing consists in a contravention of the Act under which benefit is sought. This connection is immaterial however. What matters is reliance on a cause of action which depends on something forbidden by law ... The principle does not apply where the illegality is merely incidental ... The fact that a statutory requirement has not been complied with does not necessarily render the transaction unlawful and unenforceable. 'What the court has to do is to determine the effect of the requirement as a matter of the true construction of the statutory provision.'"
Bennion extracted the quotation in the last sentence of the previous paragraph from Garbutt v Edwards [2005] EWCA Civ 1206; [2006] 1 All ER 553 (at [35]). That case concerned the question whether the breach of the requirement in r 15 of the Solicitors' Costs Information and Client Care Code (made pursuant to s 31 Solicitors Act 1974 (UK)) to give an estimate of costs rendered a solicitor's contract of retainer unlawful. The Court of Appeal held that it did not because (at [37]) the rule requiring that estimate was not automatically breached by a failure to do so, (at [38]) the code did not require a costs estimate to be given in every case and (at [40]) there were disciplinary sanctions for breach of r 15.
Broom's Legal Maxims, 10th ed (1939) Sweet & Maxwell Ltd (at 191) states that the maxim that no man shall take advantage of his own wrong is "based on elementary principles" and "admits of illustration from every branch of legal procedure". In Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [2005] NSWCA 443; (2005) 12 BPR 23,923 (at [20]) ("Ruthol"), Giles JA (Santow JJA and Hunt AJA agreeing) after explaining the application of the maxim in the area of contract law, observed that it "founds a like rule of construction of statutes", for which proposition his Honour cited Grozier v Tate (1946) 64 WN (NSW) 1; Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562 and Allen v Bega Valley Council (1994) 85 LGERA 364.
However, as Giles JA observed (Ruthol at [21]) in Hooper v Lane (1859) 6 HL Cas 443 (at 460 - 461); 10 ER 1368 (at 1375 - 1376), Lord Bramwell explained the proper application of the maxim, saying:
"... that rule only applies to the extent of undoing the advantage gained [by the wrongdoer], where that can be done, and not to the extent of taking away a right previously possessed ... [the maxim] means that no one shall gain a right by his own wrong; and not that if he has a right, he shall lose it, or the power of exercising it, by a wrong done in connection with it."
The operation of the maxim was also explained in Re London Celluloid Co (1888) 39 Ch D 190 (at 206) where Bowen LJ said:
"The maxim that no man can take advantage of his own wrong must be carefully considered, and expressed in more precise terms, before it can be safely applied. It means that a man cannot enforce against another a right arising from his own breach of contract or breach of duty. The observations of Baron Bramwell in Hooper v Lane on this subject are very instructive ... To return to the maxim that a man cannot take advantage of his own wrong, we can see the point where it ceases to be applicable. Construing the maxim as I have said, the first question is, has the right to demand payment in cash been acquired through the breach of contract in question? Was it through non-registration of the contract that the liability to pay in cash arose? In my opinion it was not: the liability arose from taking the shares, although such liability might have been avoided in the one way pointed out by the section."
The planning decisions
The respondent contended that the Court should adopt the approach to the application of the maxim apparent in the authorities decided in the statutory context to which Giles JA referred in Ruthol (at [20], see [39] above) in all of which a requirement of lawfulness has been implied.
Grozier v Tate concerned the question whether a prohibited use of land could be continued pursuant to the existing use exception in s 309(2) of the Local Government Act 1919 which provided for the continued "use of any building for any purpose for which the same was used immediately before ...". Owen J held (at 3) that the section did not protect an unlawful use. His Honour said:
"The subsection is, in my opinion, designed to save rights, not to perpetuate wrongdoing. It is, of course, an elementary principle of interpretation that words should be given their plain and ordinary meaning, but it is an equally sound rule that the Legislature will be presumed, in the absence of some indication to the contrary, not to have intended that wrong-doers should benefit by their wrongdoing ... In my opinion the user to which s 309(2) refers means 'lawful user', that is to say, a use which is not prohibited by statute or by regulation or proclamation validly made under a statute."
In Steedman v Baulkham Shire Council [No 2] the court rejected the appellants' submission that use of a building, work or land for a lawful purpose, as required by s 109(1) of the Environmental Planning and Assessment Act 1979 to exempt the continuance of that use from requiring consent, included an unlawful use. Kirby P (at 570) applied Grozier v Tate (at 3) to hold that the words "use ... for a lawful purpose" in s 109 "should be taken to mean ... a lawful use". Handley JA (with whom Meagher JA agreed) said (at 580):
"There is no reason to suppose that parliament intended to reward illegality in this way ... [T]he appellants' construction is contrary to the objects of the Act ... and subversive of lawful and orderly planning ... If s 109(1) had merely referred to a 'use of ... land for a purpose' with no express requirement that such purpose be lawful the prima facie construction would have been that only lawful purposes were referred to ... It would be a remarkable result if an express instead of implied requirement that the use be for a lawful purpose should result in a different construction.
The appellants' submissions, if correct, would have the result that s 109 operated to legalise all existing contraventions of planning laws which were capable of being regularised by the grant of consent and continued to operate to regularise such contraventions whenever a new environmental planning instrument came into force. There is nothing to suggest that the section was intended to create a potentially large class of deemed unconditional consents in this way. Very clear language would be required to produce such a result. The words of Owen J in Grozier v Tate (1946) 64 WN (NSW) 1 at 3 are in point." (Emphasis added)
In Allen v Bega Valley Shire Council (at 369 - 370) the Court (Clarke JA, Kirby P and Meagher JA agreeing) held that cl 7(1) of State Environmental Planning Policy 21 ("SEPP 21"), which exempted caravan parks or camping grounds in existence on the day on which SEPP 21 took effect (1 December 1986) from requiring development consent for the placement or use of movable dwellings, only applied to such parks or grounds lawfully in existence at that date. Clarke JA reasoned to his conclusion partly because he was unable to discern "an implied intention to render lawful that which prior to 1 December 1986 had been unlawful", as well as because of the absurdity of the proposition that "a person who had, prior to December 1986, blatantly set up a caravan park knowing that he or she did not have the necessary development consent could successfully resist legal proceedings that had been instituted by the local council to close down the park relying upon the terms of SEPP 21". He also held (at 370), referring to Grozier v Tate (at 3) and its approval in Steedman v Baulkham Shire Council [No 2], that "the submission is contrary to the established principle that, in the absence of a clear intention to the contrary, the legislature is to be presumed not to have intended that persons who are in breach would benefit from their illegality."
There are limits on the application of the maxim as can be seen from Baulkham Hills Shire Council v Iaria [1978] 1 NSWLR 678. The owners of land at Kellyville carried on a business of supplying the requirements of landscape and home gardeners in breach of the local planning scheme ordinance. The Council sought declarations and injunctions to prevent further contravention. Before the hearing of the application the local planning scheme ordinance was suspended and replaced by an interim development order which prohibited all "development" other than those particular instances which it specifically permitted, sometimes unconditionally, in other cases subject to consent. The owners' use of the land could not have commenced after the interim development order came into force.
Section 342T(1) of the Local Government Act 1919 (the "LGA 1919") defined "development" for the purposes of the interim development order as meaning, in relation to land use, use "for a purpose which is different from the purpose for which the land ... was last being used". The proviso to s 342U(4) of the LGA 1919 precluded any interim development order from preventing "the continuance of the use of any land or building for the purposes for which such land or building was lawfully used immediately before the coming into operation of the interim development order."
Holland J dismissed the proceedings on the ground that the continued use of the premises did not constitute "development" within the definition in s 342T(1) and that neither the interim development order or the proviso to s 342U(4) prohibited the continuance of an existing user that was previously unlawful: Baulkham Hills Shire Council v Iaria [1977] 2 NSWLR 41 (at 47).
On appeal, Hutley JA (with whom Moffitt P agreed) held (at 683) that the words "last being used" in the definition of "development" in s 342T(1) meant "last user which is legitimate in the eyes of the law." His Honour referred (at 683) to Grozier v Tate (at 3) as one of a number of cases suggesting that it was "a basic assumption of planning law that illegal user is not regarded as giving rise to rights which are given to users." Reynolds JA reached a like conclusion (at 681), observing that "the preservation of existing use rights should not be founded in illegalities." The consequence was that the owners' continued unlawful use of the land after the interim development order came into operation, for the same purpose as before, constituted "development" as defined in s 342T(1) when compared with the last legitimate use, and was in breach of the proviso to s 342U(4) and, accordingly, of the interim development order.
Baulkham Hills Shire Council v Iaria was reversed in Vumbaca v Baulkham Hills Shire Council [1979] HCA 66; (1979) 141 CLR 614. Stephens J (at 620) referred to Hutley JA's reference to the "basic assumption" and said:
"I regard this assumption as irrelevant to the case in point. There is here no question of rights being conferred upon the Vumbacas; the only question is whether they have breached the prohibition of the order. The authorities which are said to proceed upon and to establish this 'basic assumption' are concerned with the quite distinct situation of a prohibition upon particular uses coupled with an exception in favour of the continuation of any such uses as antedate the prohibition itself. It has been held that only lawful prior use can be thus relied upon: Grozier v Tate; Nash v Stielow; Glamorgan County Council v Carter. However the Vumbacas do not rely upon user, lawful or otherwise, prior to the interim development order as bringing them within any exemption: they simply deny the existence of any prohibited 'development'. If it is only 'development', and not particular uses of the land, at which the order's prohibition is aimed, the above authorities and the assumption which they are said to support are of no present relevance." (Emphasis added)
Mason, Aickin and Wilson JJ (with whom Barwick CJ agreed) were also unable to derive any assistance from Grozier v Tate or Nash v Stielow which they described (at 630) as "concerned with a situation where a planning scheme which had prohibited a certain use was repealed by a later scheme which itself prohibited the same use". Their Honours regarded "[t]hat situation [as] very different from the present one where a planning scheme which prohibited a specified use is superseded by an interim development order which prohibits 'development', i.e. change of use."
Other cases
A number of cases decided in a non-planning statutory context also illustrate the application of the maxim.
In Holden v Nuttall [1945] VLR 171 (at 178) Herring CJ held that the word "hardship" in the National Security (Landlord and Tenant) Regulations (Vic) should, if necessary, be limited as a matter of construction "to avoid attributing to the regulation-maker the intention of bringing about an injustice or allowing a man to benefit from his own wrong."
In Woodcock v South Western Electricity Board [1975] 2 All ER 545 (at 549) Dunn J held that squatters were not entitled to electricity supply because the word "occupier" in s 27(1) of the Schedule to the Electric Lighting (Clauses) Act 1899 (UK) did not include a person whose original entry on the premises was unlawful and forcible.
In Thompson v Groote Eylandt Mining Co Ltd [2003] NTCA 5; (2003) 173 FLR 72 (at [35]) Mildren J (Martin CJ and Thomas J agreeing) held that the definition of "worker" in s 3(1) of the Work Health Act 1986 (NT), which relevantly required the person who sought to be so characterised to be "a PAYE taxpayer", should not be construed literally so as to enable an employer who, unknown to the worker, had failed to make PAYE deductions, to deny the person was a "worker" and hence take advantage of his own wrong. Accordingly, his Honour concluded "that the words 'employer makes deductions' in the definition of 'PAYE taxpayer' includes those employers who are required by law to make such deductions, but who do not do so without the knowledge or authority of the worker."
In Commissioner of Taxation (Cth) v La Rosa [2003] FCAFC 125; (2003) 129 FCR 444 ("La Rosa") the Full Federal Court considered whether the illegal activities of the respondent who was involved in drug dealing precluded him from claiming a sum of $220,000 as a loss or outgoing "incurred in gaining or producing the assessable income, or ... necessarily incurred in carrying on a business for the purpose of gaining or producing such income" under s 51(1) of the Income Tax Assessment Act 1936 (Cth) ("ITAA"). Those monies were the proceeds of his drug-dealing activities and were stolen from him during an intended drug purchase by unknown persons.
Hely J (with whom Merkel J agreed) rejected (at [46]) the Commissioner's contention that "expenditure (other than fines and penalties) which ha[d] the requisite nexus with the business operations should nonetheless not be deductible because those operations are unlawful and involve breaches of the criminal law". His Honour observed:
"[55] ... [T]he purpose of the ITAA is to tax taxable income, not to punish wrongdoing. The language of s 17, s 25, s 48 and s 51 of the ITAA is indifferent as to whether the income, loss or outgoing in question has its source in lawful or unlawful activity. Tax is imposed upon taxable income, not upon assessable income. There should not be a higher burden of taxation imposed on those whose business activities are unlawful than that imposed in relation to lawful business activities. Punishment of those who engage in unlawful activities is imposed by the criminal law, and not by laws in relation to income tax."
Carr J (at [9]) agreed with Hely J "that punishment of those who engage in unlawful activities is imposed by the criminal law and not by laws in relation to income tax." His Honour also said (at [6]):
"it would be an extraordinary public policy which permitted the Commissioner to bring the retail proceeds of heroin and amphetamine sales into the calculation of assessable income, but to deny the loss here claimed as an allowable deduction."
The underlying rationale for La Rosa was explained by Philip Burgess ("Deductions and Illegal Income" (2008) 37 Australian Tax Review 7 (at 9)) as follows:
"The policy for [the La Rosa] conclusion is best expressed by the Supreme Court of the United States in its reasons for decision in Commissioner of Inland Revenue v Tellier 383 US 687 (1966) at 691:
'We start with the proposition that the federal income tax is a tax on net income, not a sanction against wrongdoing. That principle has been firmly imbedded in the tax statute from the beginning. One familiar facet of the principle is the truism that the statute does not concern itself with the lawfulness of the income that it taxes. Income from a criminal enterprise is taxed at a rate no higher and no lower than income from more conventional sources. '[T]he fact that a business is unlawful [does not] exempt it from paying the taxes that if lawful it would have to pay.' United States v Sullivan, 274 US 259, 263 See James v United States, 366 US 213." (Emphasis added)
Conclusion
In my view the respondent's submissions should be accepted. The words "used and occupied" in cl 2(1), cl 3(1) and cl 8(1) must be taken to mean lawfully "used and occupied". The maxim applies absent "clear intention to the contrary" (Allen v Bega Valley Shire Council (at 370)). I discern no contrary intention. Rather, in my view, application of the maxim affords a rational construction of the PPR exemption: Carr (at [5]) per Gleeson CJ. A literal reading of the PPR exemption which is indifferent to whether or not the use and occupation was lawful is not, in my view, a construction the Court would attribute to the legislature. Rather I would infer that the LTMA was enacted on the presumption that the Court would apply the maxim and permit owners of land to take advantage of a statutory benefit the PPR affords only if the qualifying conditions are performed "in a lawful manner".
This is not a case of applying the maxim to take away a right the appellants previously possessed. Rather the appellants are seeking to gain a right, the PPR exemption, the benefit of which flows from use and occupation of land "as the principal place of residence", in circumstances where that use and occupation was unlawful. In the planning cases the maxim applies to deny the benefit of lawful use to those whose use had hitherto been unlawful. Similarly, in the present case, the LTMA should not be construed so as to permit the appellants the benefit of an exemption which turns on use and occupation of residential premises when they did not have statutory approval to so use the premises.
On the appellants' argument the PPR exemption would be available even if the zoning of the land on which the owner constructed a residence did not permit use for residential purposes, so that building approval could never be given by the local government authority, so that the use and occupation could never be lawful. It would be absurd to attribute such an intention to the legislature.
La Rosa is clearly distinguishable. In that case the Commissioner was seeking to tax illicit earnings. If his argument that the taxpayer could not deduct the expenses and losses incurred in earning it was correct, the taxpayer would have been deprived of a deduction generally available for business expenses. The Commissioner was empowered to tax taxable income, no matter how it was earned. The corollary was that the taxpayer was entitled to claim deductions notwithstanding that the expenditure was derived from illegality.
Here the respondent is not seeking to impose a tax by reference to the appellants' unlawful use and occupation of the land. The respondent seeks to impose land tax by virtue of the appellants' ownership of the land: Paliflex; MacAry Manufacturing. It is the appellants who seek the statutory benefit cl 8 of Sch 1A affords. It is they who have the burden of proving the facts necessary to claim the cl 8 concession: Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450 (at 457) per French J (as his Honour then was). To do so they seek to rely upon unlawful use and occupation of the land. As the foregoing discussion of the maxim indicates, the Court will presume that the legislature did not intend the benefit of the cl 8 concession to operate in such circumstances.
The presence in cl 6(2)(c) of the reference to "unlawful" use does not detract from that conclusion. That concession refers to intended use whereas the references in cl 2(1), cl 3(1) and all the concessions in Part 3, save that provided by cl 6, are to actual use and occupation. The legislature was dealing with a different subject matter from the actual use and occupation provisions. I would not infer, accordingly, a legislative intention that the absence of express reference to lawful use and occupation in the remaining provisions of Part 1A demonstrated a legislative intention that the maxim did not apply.
Finally it would be an absurd construction of the LTMA to conclude that a PPR exemption was available where the actual, albeit past, use or occupation of land was unlawful, but not if an intended use could be so described. As Jordan CJ said in Hall v Jones (1942) 42 SR (NSW) 203 (at 208), "a Court is entitled to pay the Legislature the not excessive compliment of assuming that it intended to enact sense and not nonsense."
BASTEN JA: This appeal concerns the liability of the appellants to pay land tax in respect of a property owned by them and situated at Arcadia, north-west of Sydney, for the tax years 2004-2008. Although they did not physically use or occupy the land during that period, they relied upon an extension to the exemption for a "principal place of residence", as permitted by the Land Tax Management Act 1956 (NSW), s 10(1)(r) and Schedule 1A, cl 8. The appeal should be allowed and the orders proposed by Gzell J should be made.
The relevant legislation has been set out in the judgment of Gzell J and need not be repeated. In substance, the relevant exemption operates if the Chief Commissioner is satisfied that the person is the owner of land "that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least six months", within the terms of cl 8(1)(a) of Schedule 1A. It is accepted that the appellants did in fact reside on the land during a sufficient period to engage the exemption; the question was whether, to engage the exemption, the use and occupation must be "lawful". The Chief Commissioner accepted that the word "lawful" did not appear in the relevant provision, but submitted that the legislation should be construed so that for taxpayers to take advantage of a specified exemption, their qualifying conduct must be lawful. Otherwise taxpayers could obtain a financial advantage from their own wrongdoing. The appellants contended that no such limitation should be read into the legislation.
As Gzell J explains, none of the authorities relied on by the parties provide much assistance in resolving the issue. In particular, none was concerned with the Land Tax Management Act, let alone Sch 1A, cl 8 thereof. It is possible to obtain some assistance from the fact that the particular exemption provided by cl 6, also appearing in Schedule 1A, is stated not to apply unless the intended use and occupation of the land is "not unlawful": cl 6(2)(c). The clause is also excluded in particular circumstances where land is capable of having more than two residences "lawfully built on it": cl 6(7)(c). However, little assistance can be derived from the fact that lawfulness is expressly adverted to in some provisions, but not in others.
Land tax is levied on land, the taxpayer being the owner of the land. It is not levied on the person who uses or occupies the land: Land Tax Management Act, ss 7 and 9. The Act contains numerous exemptions, some of which depend on the identity or character of the owner. The exemption relevant in the present case, however, depends on use and occupation of the land for a particular purpose, namely "as the principal place of residence of the owner of the land": Schedule 1A, cl 2(1). That must be the sole purpose of the use and occupation.
The terms "use" and "occupation" may not be synonymous, though in a practical sense they will usually be identified by the same characteristics which, where use and occupation are associated with ownership, will commonly involve the exercise, or at least the intention to exercise, the legal right of control which flows from ownership: Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1 at 4 (PC, Lord Denning). That fact suggests that the phrase "use and occupation" should be treated as an hendiadys, thus relieving of the need to consider each concept separately.
The fact that use and occupation may flow from ownership is not to equate the two concepts. As stated in Royal Newcastle Hospital at p 4, "[o]ccupation is a matter of fact and only exists where there is sufficient measure of control to prevent strangers from interfering: see Pollack and Wright on Possession in the Common Law (1888) pp 12, 13". That use and occupation involves a factual assessment, without a legal characterisation, indicates that lawfulness or otherwise will require a separate and additional inquiry. That understanding is reflected in statutory provisions which identify the intended use or occupation as being "lawful" or "not unlawful". For example, Crown land is not "claimable" under the Aboriginal Land Rights Act 1983 (NSW) unless it is "not lawfully used or occupied": s 36(1)(b).
It would have been open to Parliament to impose a requirement of lawful use and occupation in respect of the exemption for a principal place of residence. That step would not have changed the role of the Chief Commissioner or placed an unusual burden on the administration of the Land Tax Management Act. Indeed, determining whether the purpose was lawful might be more straightforward than determining the underlying factual question as to whether residential use and occupation was indeed the sole purpose of the owner in particular circumstances. In any event, the Parliament did not insert the word "lawful" before the phrase "use and occupation" in cl 8 and it is therefore necessary to determine whether that characteristic should be imposed by way of implication.
Principles of statutory construction are often more readily identified than applied. Determining whether a condition which does not appear in a statute may be implied requires the resolution of conflicting principles. On the one hand, it may be a practical and sensible approach to effecting a clear legislative purpose which has not been fully expressed; on the other hand, it may involve the court purporting to legislate and thus exceeding the bounds of judicial power. The approach consistently adopted by this Court is derived from the formulation of Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 at 105-106, based on a purposive construction, mandated in this State by the Interpretation Act 1987 (NSW), s 33. Lord Diplock accepted that it might be permissible to read words into a statute, but only where three conditions were satisfied, namely:
"First, it was possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the bill passed into law."
That language was applied by this Court in Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at 299 (Hope JA) and 302 (McHugh JA); and see authorities identified by the Victorian Court of Appeal in Director of Public Prosecutions v Leys [2012] VSCA 304 at footnote 117. In the present case, it would have been easy for the legislature to insert the word "lawful" if that had been intended. Such a qualification would not arise only in unexpected circumstances. It is therefore difficult to be satisfied that it was inadvertently omitted. Further, as will be discussed below, it is by no means clear that the insertion of the word "lawful" would have assisted the argument for the Chief Commissioner in the present case. Thirdly, again subject to one qualification to be dealt with shortly, it is far from clear that the purpose of the statute requires the insertion of the qualifier "lawful" before use and occupation. In other words, if owners of land in fact use and occupy the land solely for their own residence, whether or not they have complied with planning legislation is not a factor which should necessarily qualify exemption from liability to land tax.
To avoid that conclusion the Chief Commissioner relied upon the general principle that no person should benefit from his or her own wrongdoing. It has been described as a "fundamental legal principle" which can be traced back to Lord Coke's commentaries on The Laws of England by Littleton, published more than 400 years ago. It was repeated in Broome's Legal Maxims (10th ed, 1939) at p 191, as noted by Sir George Baker P in Puttick v Attorney General [1980] 1 Fam 1 at 5. A form of the maxim has been applied recently in this State as a basis for taking a "robust" approach to assessing compensation payable by a wrongdoer whose actions have made an accurate determination problematic: LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508 (Hodgson J); Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59D (Handley JA, Mason P and Beazley JA agreeing); Nicholls v Michael Wilson & Partners Pty Ltd [2012] NSWCA 383 at [124], [139] (Sackville AJA, Meagher and Barrett JJA agreeing). However, as appears from the discussion in Puttick, where there is a statutory scheme to be applied, the consequences of even repetitive conduct involving fraud, perjury and false pretences is likely to require assessment in the context of the statutory scheme with only limited assistance from legal maxims. That result is inevitable because of the level of generality at which the maxim is stated.
There is a further difficulty: "wrongdoing" covers a wide expanse of conduct. At one extreme, it includes deliberate and serious criminality; at the other pole, there may be inadvertent breach of a regulation, or even conduct which is not necessarily unlawful, but might be considered immoral, disreputable, unprofessional or unconscionable - other epithets could be used. Similarly, that which may be described as "unlawful" could involve a broad range of conduct. The kinds of case in which reference is made to the maxim tend to be those involving deliberate meretricious acts. Such conduct is unlikely to engage the land tax exemption. That is because the principal place of residence exemption is defined to mean use and occupation by the owner "as the principal place of residence ... and for no other purpose": Schedule 1A, cl 2(1). Any deliberate illegal purpose undertaken on the land will take the use and occupation outside the scope of the exemption. The only possible conduct which might be thought to warrant a reading down of the exemption would be the deliberate use of land for residential purposes, either knowing that such use is prohibited or, although less offensive, knowing that permission for such use is necessary and has not been obtained. Again, however, without more, such conduct would have no clear policy connection with the exemption from land tax.
Underlying the Chief Commissioner's submission may have been a concern that some conduct, involving a colourable claim for an exemption in circumstances where the use and occupation was not bona fide as a principal place of residence, could ostensibly fall within the scope of the exemption. That, however, was not raised in the present matter and it is unnecessary to consider how such a concern should be addressed.
It is sufficient to conclude that:
(a) the language of cl 8 is satisfied by use and occupation which is, as a matter of fact, as a principal place of residence, and
(b) the legislative scheme does not call for, and therefore does not permit, the introduction of an additional constraint, namely that the use and occupation must be lawful, in the sense of complying with the requirements of the relevant planning legislation, at least in circumstances where the use and occupation was permissible with consent.
Orders
The foregoing reasoning establishes that the Chief Commissioner and the Appeal Panel were in error in concluding that the exemption was not available to the appellants because their use and occupation of the land was unlawful.
Nevertheless, final orders disposing of the question of liability cannot be made because there is an outstanding issue. A further element in the definition of the "principal place of residence exemption" is that the land is a parcel of "residential land": Schedule 1A, cl 2(1)(a). The phrase "residential land" is defined by reference to use and occupation for residential purposes, but in circumstances where that use and occupation is "of a building or buildings designed, constructed or adapted for residential purposes": cl 3(1). As Gzell J explains, there was a live issue, not addressed below, as to whether the use by the appellants of a caravan or mobile home, apparently not connected to Council services, satisfied the definition of "residential land" in cl 3. Accordingly, final orders cannot yet be made.
Although there are circumstances in which determination of a legal issue can be expected to resolve the dispute, thus avoiding the need to call evidence in relation to factual elements, it is often undesirable in circumstances where there are at least two levels of appeal as of right on questions of law to address the legal issue separately and before other issues in the case. Especially is that so in circumstances where there is only one level of appeal, requiring leave, in respect of factual issues, the determination of which at first instance may finally resolve the case.
It is, of course, easy to be critical, with the benefit of hindsight, of procedural steps taken at an early stage. All that need be said for present purposes is that the matter will need to be remitted for further hearing in the Tribunal. The Court has power to make "such orders as it thinks appropriate in light of its decision": Administrative Decisions Tribunal Act 1997 (NSW), s 120(1). Although it is usual to remit the matter to the Appeal Panel from whence the appeal came, I agree that in the present case it is appropriate to remit the matter to the Tribunal as constituted for a first instance hearing.
GZELL J:
Introduction
The Appellants owned land in Arcadia within Hornsby Shire, New South Wales upon which they lived in mobile homes and then in a caravan. They had not received approval to do so from Hornsby Shire Council.
The Chief Commissioner of State Revenue (Chief Commissioner) raised assessments to land tax under the Land Tax Management Act 1956 (Land Tax Act) for the land tax years 2004 to 2008. The Appellants objected, claiming entitlement to the principal place of residence exemption from land tax. The Chief Commissioner disallowed their objection and they sought review of that decision in the Administrative Decisions Tribunal (ADT).
Judicial Member Hole confirmed the Chief Commissioner's decision. The Appellants' appeal to an Appeal Panel of the ADT was also dismissed. The Appellants appeal to this Court on a question of law under the Administrative Decisions Tribunal Act 1997 (ADT Act), s 119(1).
The Appellants ceased to live on their land in December 2002 when their caravan was destroyed by a bushfire. They have not resumed occupation. By December 2002 they had lived on the land for a continuous period of at least six months.
Legislation
Section 7 of the Land Tax Act provided that land tax was to be levied and paid on the taxable value of all land situated in New South Wales which was owned by taxpayers, other than land which was exempt from taxation under the Act. Section 9(1) provided that land tax was payable by the owner of land on a taxable value of all the land owned by that owner which was not exempt from taxation under the Act. Section 8 provided that land tax should be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax was levied. The land tax year was the period of twelve months commencing on the first day of January.
The Land Tax Act, s 10(1)(r) defined the principal place of residence exemption upon which the Appellants relied. It was in the following terms in the land tax years 2004 to 2008:
"10 Land exempted from tax
(1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G, and 10P, be exempted from taxation under this Act:
...
(r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Sch 1A."
Sections 10B, 10D, 10E, 10G and 10P do not apply to the case before the Court.
Clause 1(1) in Sch 1A (Schedule) of the Land Tax Act defined the principal place of residence exemption by reference to cl 2. Clauses 2 and 3 were in the following terms as at 31 December 2003:
"2 Principal place of residence exemption
(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2004 or any succeeding year, if:
(a) the land has a land value in respect of the year of less than the premium tax threshold, and
(b) the land is:
(i) a parcel of residential land, or
(ii) a lot under the Strata Schemes (Leasehold Development) Act 1986.
(2) Land is not used and occupied as the principal place of residence of a person unless:
(a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or
(b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence.
(3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption.
(4) The exemption conferred by this clause is referred to as the principal place of residence exemption.
3 Residential land - meaning
(1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings:
(a) comprised of lots within a strata plan or residential units, or
(b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or
(c) from any part of which income is derived.
(2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted."
For the 2005 to 2008 land tax years the land value provision in cl 2(1)(a) was deleted.
For the 2007 and 2008 land tax years cl 2(5) subjected the principal place of residence exemption to restrictions in Pt 4 of the Schedule which do not, however, apply to the case before the Court.
The exemption in cl 2 of the Schedule was not available to the Appellants in the land tax years 2004 to 2008 because they did not then use and occupy their land. But Pt 3 of the Schedule contains a series of concessions that enable the principal place of residence exemption to be claimed. This appeal is concerned with the concession in cl 8. For present purposes it relevantly provided as follows as at 31 December 2003:
"8 Concession for absences from former residence
(1) If the Chief Commissioner is satisfied that:
(a) a person is the owner of land (the former residence) that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least 6 months, and
(b) the person uses and occupies other land (whether or not in New South Wales), that is not owned by the person, as his or her principal place of residence,
the person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy the former residence as his or her principal place of residence.
(2) The maximum period for which a person may be taken, under this clause, to continue to use and occupy a former residence as a principal place of residence is 6 years starting at the end of the last period (of at least 6 months) during which the former residence was used and occupied by the person as a principal place of residence (not including any period for which the person may be taken, under clause 7 or this clause, to have used and occupied the former residence as a principal place of residence).
(3) If the principal place of residence exemption applies to the former residence of a person by operation of this clause, the exemption is revoked if the person is the owner of the former residence at the end of the 6-year period referred to in subclause (2) and fails:
(a) to resume actual use and occupation of the residence as a principal place of residence by the end of that period, and
(b) to continue that use and occupation for at least 6 months.
(4) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the former residence in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.
For the 2006 to 2008 land tax years cl 8(3) provided that the exemption ceased to have effect rather than being revoked and cl 8(4) was repealed.
Nothing now turns on the Appeal Panel's interpretation of cl 8(3)(a) of the Schedule because the Chief Commissioner accepts that insofar as the Appeal Panel may have held that the application for review was bound to fail due to a lack of compliance with cl 8(3)(a), it erred in law. The Chief Commissioner also accepts that at the end of the six year period, in this case in December 2008, the principal place of residence exemption, if otherwise applicable, would have ceased to have effect from and after that period.
Appellants' case
The Appellants' case is simply stated. On 31 December preceding each of the land tax years in question, the subject land had been used and occupied by them as their principal place of residence for a continuous period of at least six months.
From December 2002 they used and occupied other land not owned by them as their principal place of residence.
In consequence, pursuant to cl 8(1) of the Schedule, they were to be taken to have continued to use and occupy their land as their principal place of residence.
And as they had not used their land for any other purpose, their land was exempt from taxation in terms of cl 2(1)(a) of the Schedule and the Chief Commissioner's assessments should be revoked.
The Chief Commissioner's case
The Chief Commissioner submitted that cl 8(1) of the Schedule required a person's use and occupation of land not to be unlawful.
The Local Government Act 1993 (Government Act), s 68(1) provided that a person might install a manufactured home, moveable dwelling or associated structure on land only with the prior approval of the Council of the relevant area.
The Chief Commissioner argued that the Appellants' failure to obtain Hornsby Shire Council's approval to the installation of the mobile homes and the caravan on their land made their use and occupation of the land unlawful.
A requirement of lawfulness is not specified in cl 2, cl 3 or cl 8 of the Schedule. The Chief Commissioner argued that the requirement was to be implied.
Judicial Member Hole and the Appeal Panel came to that conclusion. The Judicial Member relied on an earlier ADT decision of Reuman v Chief Commissioner of State Revenue [2004] NSWADT 96 at [20]:
"Is the structure capable of being described as a residence or as a dwelling house? To be a residence it must be capable of being or resided in, that is a person must be able to live there. To be able to live in the structure, it would be necessary to satisfy the requests of the State and local governments in respect of a structure that is to be lived in as a residence. This would include provision of bathroom facilities in these circumstances..."
The Appeal Panel had regard to the decision in Reuman and also to Pearse v Chief Commissioner of State Revenue [2007] NSWADT 14 at [40]:
"In this case the use of the construction, being the sandstone cottage, as a residence was specifically precluded by the local council. For the applicant to live there and to claim it as his principal place of residence it would have been necessary to satisfy the requirements of the local council to do so. This requirement is as referred to in Reuman."
The authorities
It was submitted that support for the reading of the phrase used and occupied in cl 2, cl 3 and cl 8 of the Schedule as lawfully used and occupied was supported by the decision of Handley JA in Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562.
That was a case in which the appellants owned land in the Council's area that was used for an extractive industry. They sought a declaration in the Land and Environment Court, contested by the Council, that their land enjoyed existing use rights.
Before the Environmental Planning and Assessment Act 1979 (Assessment Act) commenced, existing use rights in environmental planning instruments of the Council were repealed so that the environmental planning instruments that prohibited uses of land without consent, including use for an extractive industry, operated without qualification. The appellants did not have consent to their use of the land.
In each of the land tax years 2004 to 2008 an environmental planning instrument was defined to mean a State environmental planning policy, a regional environmental plan, or a local environmental plan, and except where otherwise expressly provided by the Assessment Act it included a deemed environmental planning instrument. An environmental planning instrument is now defined to mean an environmental planning instrument (including a SEPP or LEP but not including a DCP) made, or taken to have been made, and in force. A SEPP is a State environmental planning policy. A LEP is a local environmental plan and a DCP is a development control plan.
The Assessment Act provided existing use rights in s 109(1). On the second appeal to this Court, the construction of that section, amongst other matters, was in issue. It provided:
"Nothing in an environmental planning instrument operates so as to require consent to be obtained under this Act for the continuance of a use of a building, work or land for a lawful purpose for which it was being used immediately before the coming into force of the instrument or so as to prevent continuance of that use except with consent under this Act being obtained."
The appellants argued that at the commencement of the relevant environmental planning instrument, the Shire of Baulkham Hills Interim Development Order No 118 (1977 instrument), their land was being used for a lawful purpose within s 109(1) of the Assessment Act because an extractive industry use was not absolutely prohibited but was potentially lawful if Council consent was obtained.
At 580 Handley JA dismissed this submission. His Honour said:
"The appellants' construction of s 109(1) involves either reading into the section before or after the words "... for a lawful purpose" words such as "actually or potentially" which are not there or else giving the words "lawful purpose" a wide and special meaning. In my opinion there is no warrant for either construction. There is no reason to suppose that parliament intended to reward illegality in this way ...."
His Honour went on to say, in passages relied upon by the Chief Commissioner:
"If s 109(1) had merely referred to a "use of ... land for a purpose" with no express requirement that such purpose be lawful the prima facie construction would have been that only lawful purposes were referred to: see Vumbaca v Baulkham Hills Shire Council (1979) 141 CLR 614 at 620, 630 and the cases there cited. It would not matter for this purpose whether the illegality was absolute or qualified. It would be a remarkable result if an express instead of implied requirement that the use be for a lawful purpose should result in a different construction.
The appellants' submissions, if correct, would have the result that s 109 operated to legalise all existing contraventions of planning laws which were capable of being regularised by the grant of consent and continued to operate to regularise such contraventions whenever a new environmental planning instrument came into force. There is nothing to suggest that the section was intended to create a potentially large class of deemed unconditional consents in this way. Very clear language would be required to produce such a result. The words of Owen J in Grozier v Tate (1946) 64 WN (NSW) 1 at 3 are in point. His Honour said:
'.... The subsection is ... designed to save rights, not to perpetuate wrongdoing ... the Legislature will be presumed, in the absence of some indication to the contrary not to have intended that wrong-doers should benefit by their wrongdoing.'
In my opinion therefore the appellants' argument based on s 109(1) fails. On the assumption that the use of the land for an extractive industry immediately before the commencement of the 1977 instrument was unlawful because no consent had been obtained, the section does not assist the appellants."
In Vumbaca at 620 Stephen J referred to a suggested basic assumption of planning law, irrelevant to the case in point, that illegal user is not regarded as giving rise to rights that are given to users. His Honour said that the authorities said to establish the basic assumption, including Grozier, are concerned with a prohibition upon particular uses coupled with an exception in favour of the continuation of any such uses as antedate the prohibition.
Similarly, in Vumbaca at 630 Mason, Aickin and Wilson JJ, with whom Barwick CJ agreed, said they were unable to derive any assistance from such cases including Grozier as they were concerned with a situation where a planning scheme that had prohibited a certain use was repealed by a later scheme which itself prohibited the same use.
The context in which Steedman was decided involved the application of a provision of the Assessment Act to the uses of land within a Council area under environmental planning instruments the general administration of which lay with the Council of the area, where that Council was a party to the litigation.
That is a very different context from this case. Under the Taxation Administration Act 1996 (Administration Act), s 61 the Chief Commissioner has the general administration of that Act and other State taxation laws. He may do all such things as are necessary or convenient to give effect to the Administration Act and the other taxation laws. Taxation laws are defined in s 4 of the Administration Act to include the Land Tax Act. As one would expect, taxation laws do not include the Government Act, the Assessment Act or LEPs or DCPs and Hornsby Shire Council is not a party in the case before this Court.
If the phrase used and occupied in cl 2, cl 3 and cl 8 of the Schedule is to be construed as lawfully used and occupied, the Chief Commissioner will be burdened with matters within the general administration of Councils of areas throughout New South Wales under the Government Act, arising under the Assessment Act and environmental planning instruments and DCPs made thereunder.
Most of the other cases upon which the Chief Commissioner relies do not take the matter further than Steedman. They, too, involve the interpretation of environmental planning instruments upon the underlying principle that they will not be interpreted to enable a person to benefit from his or her own wrong, with the Council of the area responsible for their compliance being a party to the litigation. Allen v Bega Valley Shire Council (1994) 85 LGERA 364, TheFirm (Australia) Pty Ltd v South Sydney Council [1999] NSWLEC 5, Stephen Bowers Architects Pty Ltd v Waverley Council [2003] NSWLEC 16; (2003) 125 LGERA 292 and Wollongong City Council v Vic Vellar Nominees Pty Ltd [2010] NSWLEC 266, (2010) 178 LGERA 445 fall into this category.
Braunack v Goers (1979) 23 SASR 1 also falls into this category. The respondent owner of land was charged by complaint with contravention of a section of planning legislation that no person should change the existing use to which land was lawfully being put without the consent of the District Council of Tanunda.
Thompson v Groote Eylandt Mining Co Ltd [2003] NTCA 05, (2003) 173 FLR 72 stands outside this category of case. It was a workmen's compensation claim. The appellant was employed by the respondent and was injured while working with a subcontractor. If he was a worker within the meaning of the relevant statute he was entitled to an award of damages.
Worker was defined to mean a natural person who under a contract or agreement of any kind performed work or a service of any kind for another person and who was a PAYE taxpayer. That term was defined to mean that the employer made deductions from money paid to the worker in accordance with the Income Tax Assessment Act 1936 (Cth) (Income Tax Act).
With his wages cheque, the appellant received a slip indicating that tax at 20% had been deducted from his wages. He was ignorant of the fact that this rate was much lower than that required for PAYE deductions. The respondent did not deduct at the appropriate PAYE rate. It was submitted that for this reason the appellant did not fall within the definition of worker.
At 80 [31] Mildren J, with whom Martin CJ and Thomas J agreed, referred to the rule of construction expressed in the maxim nullus commodum capere potest de injuria sua propria: no man can take advantage of his own wrong. At 81 - 82 [35] his Honour said:
"Applying those principles to this case, it would be quite wrong to so construe the definition of "PAYE taxpayer" as to permit the employer to take advantage of his own wrong in circumstances such as the present where the appellant is totally innocent of any wrongdoing. It is inconceivable that the legislature intended the definition to bring about that result. There is nothing in the minister's Second Reading Speech to indicate that it was intended to permit employers to take advantage of their own wrong. The purpose of the amendment was to prevent abuse, not create it. Whilst I accept that the concept of an objective test is a feature of this definition, the language of the definition is not so intractable as to preclude the operation of this rule; nor has the legislature clearly expressed an intention that this rule is not to prevail. If a literal interpretation were to be adhered to, the result would also be unjust, would not promote the purposes of either the amending Act or the Act as a whole, and would undermine and weaken the Act's provisions designed to strengthen worker's entitlements and prevent employers from avoiding the Act's provisions to which I have already referred. I would conclude that the words 'employer makes deductions' in the definition of 'PAYE taxpayer' includes those employers who are required by law to make such deductions, but who do not do so without the knowledge or authority of the worker."
This was a case in which the canon of construction that legislation should not be construed so as to enable a person to benefit from his or her own wrong was applied appropriately to a single incident. The Commissioner of Taxation (Taxation Commissioner), who has the general administration of the PAYE provisions in the Income Tax Act, was not a party and is not bound by the decision.
It was not a case like the present that will burden the Chief Commissioner with the examination of facts in relation to claims for principal place of residence exemptions and with the need to make determinations as to whether the claims should be allowed or rejected in terms of relevant environmental planning instruments or DCPs if cl 2, cl 3 and cl 8 of the Schedule are to be interpreted as the Chief Commissioner submits. Those tasks lie outside the scope of the Chief Commissioner's general administration.
Deputy Commissioner of Taxation v Craddock [2006] VSC 408, (2006) 204 FLR 274 also stands outside that category of case that involves the interpretation of environmental planning instruments upon the underlying principle that they will not be interpreted to enable a person to benefit from his or her own wrong.
It involved those provisions of the Income Tax Act that enabled the Taxation Commissioner to commence proceedings against the directors of a company to recover monetary penalties based on the Taxation Commissioner's estimate of amounts of tax withheld by the company from the salaries of its employees but not remitted.
Section 222APE of the Income Tax Act provided that the Taxation Commissioner was not entitled to recover such a penalty until the end of 14 days after he had given the person a penalty notice that, amongst other things, set out the details of the unpaid amount of the estimate.
The Taxation Commissioner sent the directors a penalty notice containing his estimate of the amount of tax withheld by the company but not remitted.
After receiving further information, the Taxation Commissioner reduced the amount of his estimate but did not issue a fresh penalty notice. One of the issues raised by the directors was that the Commissioner was obliged under s 222APE of the Income Tax Act to issue a fresh penalty notice specifying the reduced amount.
Section 222AKA(1) of the Income Tax Act provided, amongst other things, that if the amount of an estimate was reduced, provisions including s 222APE had effect, and were taken always to have had effect, as if the original amount of the estimate had been the reduced amount.
In rejecting the directors' submission Cavanough J said at 288-289 [45]:
"The Craddocks' interpretation of the relevant provisions is rendered all the more unlikely when one takes into account the sections of the Act just mentioned which provide for automatic reductions of estimates. These reductions occur by virtue of action taken by the company, rather than by virtue of a discretionary exercise of power on the part of the Commissioner. There is no provision for the Commissioner to confirm these automatic reductions by notice to the company or otherwise. Yet, on the Craddocks' argument, the Commissioner would be obliged to send an elaborate notice under s 222APE to the directors referring to the reduced amount of the estimate, and to hold off from recovery action for a further period of 14 days each time such a reduction occurred. Moreover, the opportunity to achieve a remittal of all penalties would arise again on each occasion. This would enable the directors to take advantage of their own wrong, contrary to a longstanding rule of construction of statutes."
Reference was made to Thompson.
Craddock is distinguishable from the case before this Court in that the Taxation Commissioner, who has the general administration of the Income Tax Act under s 8, was a party to the proceedings. In this Court Hornsby Shire Council had the responsibility for enforcing in its area the requirement in s 68(1) of the Government Act, but it is not a party to the proceedings. And the enforcement of s 68(1) is beyond the scope of the Chief Commissioner's general administration.
Similar considerations arise with respect to Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307, (2004) 141 FCR 299. Further, the decision placed less weight upon the principle that legislation will not be interpreted to enable a person to profit from his or her own wrong. Discussion of the 1999 amendment that added the additional requirement that the premises be capable of being occupied as a residence centred upon the interpretation of passages from the explanatory memorandum that accompanied the amending bill.
A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act), s 40-65 provided that a sale of real property was input taxed but only to the extent that it was residential premises to be used predominantly for residential accommodation. But the sale was not input taxed to the extent that the residential premises were new residential premises other than those used for residential accommodation before 1998.
Residential premises were defined in s 195-1 of the GST Act as land or a building occupied, or intended to be and capable of being occupied, as a residence. New residential premises were defined, relevantly, as residential premises that had not previously been sold as residential premises.
The appellants purchased a motel and obtained Council approval to use the premises as residential apartments and an application for division into strata title lots was lodged. The former rooms were renovated into apartments. When strata title conversion was approved one completed apartment, being one strata title lot with an associated parking space, was sold. The Taxation Commissioner regarded the sale as a taxable supply.
The appellants argued that it should be input taxed. At 313 [63] the Court concluded as follows:
"As far as we can see, there is no evidence concerning the physical suitability as at the date of sale by Hajuku to Tarfex, of the premises for use as a residence, as to whether they were then capable of being so occupied or as to whether such use would have then been lawful. As it was apparently necessary to modify the premises, obtain council permission for the change of use and convert the title to strata title, it seems likely that they were neither intended to be, nor capable of being occupied as a residence as at the date of sale. In any event the onus of establishing these matters was upon the appellants, and they seem not to have sought to discharge it. We conclude that the premises were not occupied as residential premises at the date of sale by Hajuku to Tarfex, and that they were not then intended to be, and capable of being so occupied. It follows that the premises were 'new residential premises' as at the date of sale to Ms Wells."
In this category is the final case relied upon by the Chief Commissioner, Vidler v Federal Commissioner of Taxation [2010] FCAFC 59, (2010) 183 FCR 440.
Like Marana the appellant submitted that a sale, in this case of vacant land, should be input taxed. The canon of construction that legislation should not be construed so as to enable a person to profit from his or her own wrong was not the basis of the decision. Consideration was given to the same passages in the explanatory memorandum to the 1999 bill as had been a focus in Marana.
In Marana and Vidler the Taxation Commissioner was a party. In the case before this Court Hornsby Shire Council is not.
In contrast to the cases upon which the Chief Commissioner relies was the rejection of unlawfulness as a relevant consideration in determining whether business expenses incurred in the conduct of illegal activity were deductible under s 51(1) of the Income Tax Act in Commissioner of Taxation v La Rosa [2003] FCAFC 125, (2003) 129 FCR 494.
Section 51(1) of the Income Tax Act provided that all losses and outgoings to the extent to which they were incurred in gaining or producing the assessable income, or were necessarily incurred in carrying on a business for the purpose of gaining or producing such income, should be allowable deductions except to the extent to which they were losses or outgoings of capital, or of a capital, private or domestic nature, or were incurred in relation to the gaining or production of exempt income.
In La Rosa at 498 [15] Hely J, with whom Carr and Merkel JJ agreed, summarised the findings of the Administrative Appeals Tribunal (AAT) thus:
"The AAT made the following factual findings:
(a) the taxpayer was carrying on a business of dealing in drugs;
(b) the sum of $220,000 belonged to the taxpayer. It was the accumulated proceeds from drug dealings accumulated for use in the business;
(c) the sum of $220,000 had been buried in the taxpayer's backyard and dug up for an intended drug deal in May 1995;
(d) the sum of $220,000 was stolen from the taxpayer during the intended drug purchase by unknown persons;
(e) the money was lost during activities directly connected with the carrying on of the taxpayer's illicit drug dealing business; and
(f) the money was lost during operations to acquire trading stock."
The AAT held that the money had been properly included in the taxpayer's assessable income and he was allowed a deduction for the loss under s 51(1) of the Income Tax Act. The primary judge dismissed the appeal. The Full Court of the Federal Court did likewise.
The Taxation Commissioner argued that there was an overriding, but unexpressed, principle flowing from public policy considerations that denied a deduction to the respondent.
Having analysed the cases that held that fines and penalties were not deductible, Hely J said it was too late to change that rule and he stated the Taxation Commissioner's public policy point at 505-506, [46]:
"Nonetheless the authorities deny entitlement to a deduction for expenditure of that type, and whatever the logic of the distinction, it is now too late (at least at the level of this Court) to change the rule which the Courts have adopted in that respect. But none of these authorities supports the more general proposition for which the Commissioner contends that expenditure (other than fines and penalties) which has the requisite nexus with the business operations should nonetheless not be deductible because those operations are unlawful and involve breaches of the criminal law."
In rejecting the public policy point at 508 [55] Hely J limited taxation laws to the gathering of tax leaving punishment for criminal activities to the criminal law:
"But the purpose of the ITAA is to tax taxable income, not to punish wrongdoing. The language of ss 17, 25, 48 and 51 of the ITAA is indifferent as to whether the income, loss or outgoing in question has its source in lawful or unlawful activity. Tax is imposed upon taxable income, not upon assessable income. There should not be a higher burden of taxation imposed on those whose business activities are unlawful than that imposed in relation to lawful business activities. Punishment of those who engage in unlawful activities is imposed by the criminal law, and not by laws in relation to income tax."
I prefer this approach to that advocated by the Chief Commissioner. It limits the Taxation Commissioner's field of general administration to taxation laws and does not burden him with decisions as to whether or not a taxpayer is in breach of the criminal law.
By analogy, in this case the Chief Commissioner's general administration of the Land Tax Act and other State taxation laws should not be expanded to require him to determine whether the use and occupation of land is lawful. That is the function of Councils of areas within New South Wales.
Internal indications
There are some indications in the Land Tax Act that support the approach of limiting the Chief Commissioner's functions to his general administration of the Land Tax Act and other State taxation laws.
Another principal place of residence concession is found in cl 6 of the Schedule. It was in the following terms in the 2004 and 2005 land tax years:
"6 Concession for unoccupied land intended to be owner's principal place of residence
(1) If the Chief Commissioner is satisfied that the owner of unoccupied land intends to use and occupy the land solely as his or her principal place of residence, the owner is taken, for the purposes of the principal place of residence exemption, to use and occupy that land as his or her principal place of residence.
(2) This clause does not apply unless the Chief Commissioner is satisfied that:
(a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
(b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
(c) the intended use and occupation of the land is not unlawful.
(3) This clause applies in respect of the assessment of a person's ownership of land only in the period of:
(a) 2 tax years immediately following the year in which the person became owner of the land, or
(b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner's intended use and occupation of the land are physically commenced on the land.
(4) The Chief Commissioner may extend the period in which this clause applies if satisfied that:
(a) there is a delay in the completion or, in a case referred to in subclause (3)(b), the commencement of the building or other works necessary to facilitate the owner's intended use and occupation of the land, and
(b) the delay is due primarily to reasons beyond the control of the owner.
(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land and to continue to so use and occupy the land for at least 6 months.
(6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.
(7) This clause does not apply in respect of land owned by a person if:
(a) the person or any member of the person's family (within the meaning of cl 12) is entitled to have his or her actual use and occupation of other land taken into account under s 9C or under this Schedule, or
(b) the person or any joint owner of the land owns outside New South Wales that is the principal place of residence of the person or joint owner, or
(c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.
(8) For the purposes of this clause:
unoccupied land means land that is not being used or occupied for any purpose."
For the 2006 to 2008 land tax years the changes to cl 6 of the Schedule were:
Clause 6(1) was re-worded as follows:
"(1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence, if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence."
The Chief Commissioner's satisfaction was omitted from cl 6(2).
The Chief Commissioner's satisfaction in cl 6(4) was changed to the owner's demonstration.
Clause 6(7)(b) was re-worded as follows:
"(b) the person owns land outside New South Wales that is the principal place of residence of the person or a member of that person's family (within the meaning of clause 12)."
The requirement in cl 6(2)(c) of the Schedule that the intended use and occupation not be unlawful and the absence of that specific requirement in cl 2, cl 3 and cl 8 militates against an implication of that requirement in those clauses.
It was submitted on the Chief Commissioner's behalf that it was not necessary to specify the requirement in cl 2, cl 3 and cl 8 of the Schedule as the legislature could be presumed to have assumed that the requirement was implied in those provisions. That is drawing too long a bow.
The suggestion that use and occupation be qualified by the implication of the words lawful or not unlawful creates some awkwardness of expression in cl 6 of the Schedule. Clause 6(1) speaks of the intention of the owner to use and occupy the land solely as a principal place of residence. Why should this be read as the intention of the owner to lawfully use and occupy the land when a specific requirement of lawfulness is contained in cl 6(2) but not elsewhere in cl 6?
Clause 6(7)(a) of the Schedule requires a consideration of actual use and occupation. One would think that that requirement is indifferent to whether the use and occupation is lawful or unlawful. To imply lawfulness of that use and occupation seems rather to defeat the purpose of the provision.
And to imply lawfulness in the definition of unoccupied land in cl 6(8) of the Schedule produces the clumsy definition:
"unoccupied land means land that is not being lawfully used or occupied for any purpose."
To limit the definition in this fashion appears to me to be contrary to the intended meaning of the term. It is the lack of any use or occupation to which the definition is directed which requires no consideration of lawfulness or unlawfulness.
Resolution
In their reasons for judgment at [70] the Appeal Panel said:
"Again, though, the logic that an actual occupation (as required by cl 8) be a lawful one is sensibly imported into the definition of 'principal place of residence'."
In my view the Appeal Panel erred in construing cl 8(1) of the Schedule by importing the requirement that the use and occupation of the land be a lawful one. Ground 1 of the Further Amended Notice of Appeal filed on 7 September 2012 has been made out and the appeal should be allowed.
But that is not a complete answer to the Chief Commissioner's assessments because the definition of residential land in cl 3(1) of the Schedule requires the use and occupation of a building.
That matter was not addressed before the Appeal Panel or at first instance. Ms Burnett of counsel who appeared for the Chief Commissioner before Judicial Member Hole and the Appeal Panel said in her reply before the Appeal Panel, having referred to Reuman and Pearse:
"[T]he respondent would firstly of course defend the correctness of those decisions and argue that that interpretation promotes the objective purpose of the legislation and is generally consistent but in that event there might then be a need to go into the other arm of that argument that was put below being about whether the caravan and mobile home occupations which took place in a couple of different periods and some absences in between and had differing levels of connections with council services whether they themselves are capable of amounting to residential land within cl 3. Because there hadn't been any indication that that legal issue was put, the respondent hasn't prepared evidence going to that building aspect of the case, but I just wanted to flag that."
It seems to me, unfortunately, that the matter must go back for this issue to be determined. Section 120(2) of the ADT Act provides:
"The orders that may be made by the Supreme Court on appeal include (but are not limited to):
(a) An order affirming or setting aside the decision of the Appeal Panel, and
(b) an order remitting the case to be heard and decided again by the Appeal Panel (either with or without the hearing of further evidence) in accordance with the directions of the Supreme Court."
This Court is not limited to remitting the matter to the Appeal Panel. In my view it is appropriate that it be remitted to the Revenue Division of the ADT. This would preserve any appeal rights of a dissatisfied party.
I propose the following orders:
(1) Appeal allowed.
(2) Orders 3 and 4 of the Administrative Decisions Tribunal Appeal Panel made on 15 April 2011 set aside.
(3) Decision of the Chief Commissioner of State Revenue of 12 November 2008 set aside.
(4) Case remitted to the Revenue Division of the Administrative Decisions Tribunal for determination of the question whether the Appellants' use and occupation of the land for the land tax years 2004 to 2008 satisfied the definition of residential land in clause 3 of Schedule 1A to the Land Tax Management Act 1956.
(5) Direct that the parties, if they wish, may adduce further evidence subject to due objection.
(6) Respondent to pay the Appellants' costs of the appeal.
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- AGLC
- De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86
- Case
- [2013] NSWCA 86
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the Court of Appeal was whether the "use and occupation" of land as a principal place of residence, for the purposes of the land tax exemption, must be lawful. The taxpayers argued that their de facto residence on the land satisfied the exemption, while the Chief Commissioner contended that the lack of lawful approval for their occupation rendered it invalid for the exemption. The court also considered the application of the legal maxim that legislation is not intended to permit a person to take advantage of their own wrong.
The Court of Appeal allowed the appeal, finding that the exemption under clause 8(1)(a) of Schedule 1A did not require the use and occupation to be lawful. The court reasoned that the wording of the exemption focused on the factual use and occupation of the land as a principal place of residence, rather than the legality of that occupation. The maxim concerning taking advantage of one's own wrong was held not to be applicable in this context, as the exemption was not intended to be conditional on the owner's compliance with all other statutory requirements, such as obtaining council approval for their dwelling. The court set aside the previous orders and remitted the case to the Administrative Decisions Tribunal for determination of whether the taxpayers' use and occupation satisfied the definition of residential land for the relevant tax years, allowing for the adduction of further evidence.
Orders
Orders of the court
(1) Appeal allowed.
(2) Orders 3 and 4 of the Administrative Decisions Tribunal Appeal Panel made on 15 April 2011 set aside.
(3) Decision of the Chief Commissioner of State Revenue of 12 November 2008 set aside.
(4) Case remitted to the Revenue Division of the Administrative Decisions Tribunal for determination of the question whether the Appellants' use and occupation of the land for the land tax years 2004 to 2008 satisfied the definition of residential land in clause 3 of Schedule 1A to the Land Tax Management Act 1956.
(5) Direct that the parties, if they wish, may adduce further evidence subject to due objection.
(6) Respondent to pay the Appellants' costs of the appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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