Flaracos v Chief Commissioner of State Revenue

[2003] NSWSC 68

CITATION:	Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 revised - 14/03/2003
HEARING DATE(S):	14/02/03
JUDGMENT DATE:	14 March 2003
JUDGMENT OF:	Gzell J
DECISION:	Assessments revoked. Chief Commissioner to pay plaintiff's costs.
CATCHWORDS:	TAXES AND DUTIES - Land Tax - Exemption for use and occupation for residential purposes - Sharing a dwelling with a lodger not a loss of occupation - Extended absences with intention to resume possession with a lodger not a loss of continuous occupation
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Commissioner of Land Tax v Christie (1973) 2 NSWLR 526 Newcastle City Council v Royal Newcastle Hospital [1959] AC 248
PARTIES :	Flaracos - Plaintiff Chief Commissioner of State Revenue - Defendant
FILE NUMBER(S):	SC 5792/02
COUNSEL:	Mr Flaracos - In Person - Plaintiff Ms H Roberts (Solicitor) - For the Defendant
SOLICITORS:	I V Knight Crown Solicitor

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

FRIDAY 14 MARCH 2003

5792/02 FLARACOS v COMMISSIONER OF STATE REVENUE

JUDGMENT

1 The central issue in this appeal was whether the plaintiff’s property was used and occupied by him as his principal place of residence and was thereby exempt from land tax.

2 Section 7(1) of the Land Tax Management Act 1956 (“Act”) levied land tax on the land value of all land in New South Wales owned by taxpayers other than land which was exempt from taxation under the Act. Section 10(1)(r) was in the following terms:

“Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, the exempt from taxation under this Act:
…

(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose (except as provided by subparagraph (iii)), being:
(i) a strata lot or,
(ii) a parcel of residential land, or
(iii) a parcel of residential land on which there is also one of the residential occupancies referred to in subsection (1D)(b)(ii)(A)–(F),
unless the owner or all of the joint owners who so used and occupied the lot or parcel (as appropriate) is such an owner by reason only of being a trustee.”

3 For the year which commenced on 1 January 1997 there was a like provision which also contained a limitation of the parcel of residential land to an area not exceeding 2,100 square metres.

4 The plaintiff owned land and dwelling at 146 Lorraine Street, Peakhurst, Sydney. The defendant, the Chief Commissioner of State Revenue, accepted that this land answered one or other of the descriptions of a parcel of residential land for the purposes of s 10(1)(r) of the Act. The Chief Commissioner raised assessments for the period from 1 January 1996 to 31 December 1999 and thereafter for the 2000 calendar year. The assessment for the year 1 January 1996 to 31 December 1996 was subsequently withdrawn.

5 Section 3(3) of the Act contained a definition of use or occupation as a principal place of residence. It provided:

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

6 The plaintiff appeared in person before me and was not assisted in his dealings with the Chief Commissioner. He said he did not receive the notices of assessment with respect to the 1996 to 1999 years until late September or early October 1999. They were not sent to his Peakhurst address. He lodged a letter containing objections dated 5 November 1999. Section 89(1) of the Taxation Administration Act 1996 required an objection to be lodged with the Chief Commissioner no later than 60 days after the date of service of the notice of assessment. Notwithstanding the lateness of the lodgement of the plaintiff’s letter, the Chief Commissioner dealt with the objections.

7 In his letter, the plaintiff said that because he was unemployed he tried to get some money by renting his home. He continued:

“Over the assessment period I’ve lived in cheap shared accommodations (mainly with people on the dole who were getting concessions that I wasn’t eg rent assistance, medicals, travel etc) for about 2-3 months at a time. I also lived in my home and rented to someone. Also my home has been vacant for long periods because I hate putting in tenants, but I still sleep at nights there for security. I’ve also gone on holidays and rented my home.”

8 In the letter the plaintiff said he thought it was fair for him to receive a two-year exemption from tax. Section 10T(1) of the Act provided that if the Chief Commissioner was satisfied that the owner of land intended to use and occupy the land solely as his or her principal place of residence, that intended use and occupation was to be regarded as its actual use and occupation for the purposes of s 10(1)(r). Section 10T(4)(a) restricted this deeming to the two tax years immediately following the tax year in which the person became owner.

9 Having considered the objections, the Chief Commissioner notified the plaintiff that his land did not qualify for exemption in terms of s 10(1)(r) of the Act as the provisions of s 10T had not been met.

10 The plaintiff objected to an assessment for the 2000 calendar year by letter dated 13 April 2000. It referred back to his earlier letter of 5 November 1999. In response, the Chief Commissioner said that the earlier notice of objection stated that the land was not used and occupied continuously as the plaintiff’s principal place of residence as the land had been used for rental purposes.

11 In one of his affidavits read before me, the plaintiff said that any renting of his house was always temporary. The house had also been vacant. He rented his house while on holidays and he also shared it.

12 The plaintiff’s mother swore an affidavit in which she said her house at 266 Old Canterbury Road, Summer Hill, Sydney was not the main residence of the plaintiff between 1995 and 2000 and, to the best of her knowledge and belief, he lived in his house at 146 Lorraine Street, Peakhurst during that period.

13 Dikeos Flaracos, the brother of the plaintiff, swore an affidavit in which he said that, to best of his knowledge and belief, the plaintiff lived at his house at 146 Lorraine Street, Peakhurst in the period from 1995 to 1999. He said that from time to time the plaintiff shared his house during that period but from 1998 onwards he did not recall him sharing the house. He visited his brother in about August 1998 and again in the next year and said he was living alone.

14 Mr Dikeos Flaracos gave oral evidence before me and was cross-examined. He said he visited his brother’s house in late 1995 and he saw someone he had never seen before who went into a bedroom and watched television until his brother came out of his bedroom and they left together. About a year to eighteen months later he saw a different person living in the house with his brother. In about August 1998, a date he fixed by reference to the Rugby League semi-finals, there was no one else living in the house when he went to pick up his brother. He said that it was the same the following year and every time he went to the house thereafter he did not see any other person.

15 The plaintiff was cross-examined. He said that a Mr Pierce, or it might have been a Mr Parsons, lived in the house with him but he left in about May 1998. He was asked to explain that portion of his letter of objection set out above in which he said he lived in his home and rented to someone. He was asked whether he remained in the house or whether he gave it over to the tenant. He said he lived in the house at the same time. He said his reference to cheap, shared accommodation for about two to three months at a time was when he went travelling. He said he drove to Queensland and he drove to Victoria. He said he went on several trips looking for work. He also went to South Australia and to Western Australia. When he went on these trips someone else lived in his house and paid him rent when he returned.

16 The plaintiff was cross-examined about his driver’s licence. For some time it bore the address of his mother. He said his driver’s licences nominated his house at Peakhurst but he registered a motor vehicle he acquired in late 1993 at his mother’s address because he was travelling to lectures four to five days a week and it was easier to leave from his mother’s house. When he went to renew his licence in 1995 the document he was given had the address of his mother on it and he did not bother to change it. That he did in 2000, when he had difficulty with a furniture delivery because the delivery address, at his Peakhurst home, was different from the address on his driver’s licence. The plaintiff gave his mother’s address for some correspondence. He denied he gave that address because he was not living regularly at his Peakhurst home.

17 The evidence before me puts a different complexion upon the material available to the Chief Commissioner when he made his assessments. The inference open to the Chief Commissioner that, in leasing his home, he had parted with the possession of it in favour of the tenant was countered by the plaintiff’s evidence that he remained in the dwelling, sharing it with the tenant. His living in cheap accommodation for months on end was countered by his evidence that this was limited to the periods he was away on trips looking for work. At the end of those periods he returned to take up residence in the dwelling. The fact that some of his correspondence, the registration of his motor vehicle and, for a time, his driver’s licence, were directed to his mother’s address was inconclusive. The plaintiff put on evidence that other correspondence, including water bills and rate notices, were addressed to him at his Peakhurst address.

18 It was submitted on behalf of the Chief Commissioner that I should reject the plaintiff’s evidence as being inconsistent with his first letter of objection. I reject that submission. His evidence is consistent with the earlier letter although it leads to a contrary inference. His leasing of portion of the dwelling to tenants involved joint physical presence in the dwelling and not the handing over of exclusive possession to the tenant. This evidence was corroborated by the testimony of his brother and, to a minor extent, by the affidavit of his mother.

19 The Chief Commissioner submitted that the plaintiff bore the onus of proof and all he had established was occupancy in August 1998 and on one later occasion. I reject that submission. The plaintiff’s brother said that in August 1998 there was no one at the plaintiff’s premises and that was the same the following year and after about late 1998 every time he went there he did not see any other person. That statement, in cross-examination, confirmed his statement in his affidavit that from 1998 onwards he did not recall the plaintiff sharing his house.

20 There was some cross-examination of the plaintiff as to a tenant being the registered consumer of electricity at the Peakhurst premises. That cross-examination was inconclusive. The plaintiff insisted that the tenant left the premises in May 1998.

21 While more evidence might have been led for the plaintiff had he been legally represented, I am of the view that he established that until about August 1998 he had tenants in his home to whom he did not convey exclusive possession. He remained in his home with them except on occasions when he took holidays and made extended trips to Queensland, Victoria, South Australia and Western Australia. On each occasion the plaintiff intended to, and did, return to the premises to resume a physical presence. From about August 1998 onwards there were no tenants and he remained in exclusive possession of the premises.

22 Section 10(1)(r) of the Act required the land to be used and occupied as the principal place of residence of the plaintiff if it was to be exempt. Of the former concept in the forerunner of the provision, Bowen JA, with whom Jacobs P agreed, said in Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533:

“”Use” has regard to the purpose to which the land is put. Under sec 9(3)(e) it must be shown to have been devoted to the purpose of constituting the site of the dwelling house. Provided there is a unity in the land in question in a physical sense and a unity in what is done in devoting it to the purpose of providing or constituting the site, and provided there is a sufficiently proximate and not too remote connection between the dwelling house and its requirement or the requirements of its users or occupants on the one hand and the whole of the land in question on the other hand, then this element will be sufficiently established to demonstrate “use” as the site of the dwelling house.”

23 On the evidence before me the plaintiff’s home at Peakhurst was used as a place of residence. There was a dwelling on the land used for this purpose and no other. On the findings I have made, it was used as his sole and, therefore, his principal place of residence.

24 Of the requirement of occupation, Bowen JA went on to say at 533-534:

“”Occupation” is not synonymous with legal possession. It includes possession, but it also includes something more: see Newcastle City Council v Royal Newcastle Hospital . It involves an element of control, of preventing or being in a position to prevent the intrusion of strangers ( Newcastle City Council v Royal Newcastle Hospital ). It is for this reason that physical presence on the land and fencing are evidence of occupation. But continuous physical presence or physical presence on every part of the land does not have to be shown in order to establish occupation. If it were necessary to prove physical presence on every part of a residential block to secure the deduction a substantial proportion of residential blocks could well be denied it. It is not uncommon in our community for there to be portions of such blocks which are rarely or never visited. Indeed, as these present cases illustrate, there may well be portions of such blocks which are precipitous, or are under water or are covered with dense bushland and which are, therefore, in a practical sense difficult if not impossible to traverse physically. This does not mean they are not “occupied” in a legal sense. To hold otherwise, would be to subvert the obvious intent of s 9(3)(e). Nor, although the presence of fencing may be some evidence of occupation, does the absence of fencing establish that there is no occupation: Newcastle City Council v Royal Newcastle Hospital .”

25 In Newcastle City Council v Royal Newcastle Hospital [1959] AC 248, a public hospital for the treatment of tuberculosis owned 291 acres of unfenced virgin land adjoining land upon which the hospital stood. The hospital made no physical use of the adjoining land which was acquired to keep the atmosphere clear, to prevent building on it, to provide a quiet and serene surrounding and to give room for expansion of the hospital. The statute in question provided that land belonging to a public hospital and used or occupied by the public hospital for the purposes thereof was exempt from the payment of rates. The Privy Council affirmed the decision of the High Court that the adjoining land was used for the purposes of the hospital although it was kept in its virgin state.

26 The Privy Council did not decide that the hospital was in occupation of the adjoining land. It was unnecessary to its decision. At 255-256 it doubted that it was. The hospital was in possession of the adjoining land because, in the absence of anyone else in possession, possession followed title. But occupation required a sufficient measure of control to prevent strangers from interfering and, in the absence of fencing, there was doubt whether that control existed.

27 On the findings I have made I am of the view that plaintiff was in occupation of the Peakhurst premises. Notwithstanding the contemporaneous presence of a tenant, it was the plaintiff who maintained control over the premises. This was not a case in which premises were handed over to a tenant who thereby obtained exclusive possession of them. The plaintiff was also in possession and he had the right to control that possession.

28 The continuous use and occupation required by s 3(3)(a) of the Act means that the use of the land for residential purposes must remain constant throughout each relevant eighteen month period. If portion of a residence is converted into a shop, the land no longer answers the description of continuous use for residential and no other purpose. The plaintiff’s land having at all times been used as a dwelling, it satisfied this requirement.

29 In my opinion continuous physical presence on the land is not required to constitute continuous occupation. If a person leaves his or her premises for a holiday, it would defeat the purpose of the Act to conclude that occupation had ceased to be continuous. So long as the person retains the right to possession and controls possession, that person remains in occupation, in my view. The observation of Sir Nigel Bowen in Christie that physical presence over all the land is not necessary to establish occupation is equally apposite when there is some hiatus in physical presence over time.

30 In the instant circumstances, there were extended periods of two to three months during which the plaintiff was absent from his Peakhurst home and during which various tenants were in possession. That does not seem to me to have contravened the requirement in s 3(3)(a) of the Act for continuous occupation. The plaintiff was in occupation of the premises when he and a tenant were physically present in it. Like the tenant he was in possession but unlike the tenant he had the right of control. When he left on his extended trips he intended to and did return to live in the premises. During his physical absence he retained the right to possession and he maintained his rights of control over the land.

31 I find that in each period commencing on I July of the year preceding each year of assessment and ending on the last day of the year of assessment, the plaintiff continuously used and occupied his land at 146 Lorraine Street, Peakhurst for residential purposes and for no other purposes and the land satisfied the requirements in s 3(3)(a) of the Act. In consequence, I find that the land at 146 Lorraine Street, Peakhurst was, in each of the years in question, exempt from land tax under s 10(1)(r).

32 Each of the assessments in question will be revoked. The Chief Commissioner must pay the plaintiff’s costs. The Chief Commissioner is to bring in short minutes of orders in accordance with these reasons.

Last Modified: 03/17/2003