Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue

[2017] ACAT 96

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

GUNGAHLIN GOLF INVESTMENTS PTY LTD v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2017] ACAT 96

AT 30/2017

Catchwords:              ADMINISTRATIVE REVIEW – rates assessment on unimproved land – preliminary question – permitted use in the Crown lease – meaning of ‘in addition to’ and ‘ancillary’

Legislation cited:      ACT Civil and Administrative Tribunal Act 2008 s 68

Planning and Development Act 2007 ss 248, 382

Rates Act 2004 ss 6, 61, 73

Taxation Administration Act 1999 s 108A

Territory Plan s 13

Cases cited:               Bowler v Hilda Pty Ltd (2001) 112 FCR 59

Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32
Peter Kohlsdorf Golf Distributors Pty Ltd v Minister for Planning [2003] ACTAAT 29

Wheeler v Kelly (1956) 94 CLR 206

Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

List of

Texts/Papers cited:    DC Pearce and RS Geddes, Statutory Interpretation in Australia (7^th edition, 2011)

Tribunal:                   Senior Member R Orr QC

Date of Orders:  20 November 2017

Date of Reasons for Decision:         20 November 2017

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          AT 30/2017

BETWEEN:

GUNGAHLIN GOLF INVESTMENTS PTY LTD

Applicant

AND:

COMMISSIONER FOR ACT REVENUE

Respondent

TRIBUNAL:Senior Member Robert Orr QC

DATE:20 November 2017

ORDER

The Tribunal orders that:

1.This matter be listed for further directions on 27 November 2017 at 11:00am.

………………………………..

Senior Member R Orr QC

REASONS FOR DECISION

1.Gungahlin Golf Investments Pty Ltd (Gungahlin Golf or lessee or applicant) is the lessee of land at Block 2 Section 85 Division of Nicholls in the Australian Capital Territory (which contains a range of other blocks) (Land), under a lease granted on 1 December 2014 for a term commencing on 1 December 2014 and terminating on 30 May 2105 (Lease).[1] The relevant terms of the Lease are set out below, but importantly clause 3 provides that “THE LESSEE FURTHER COVENANTS … (a) To use the premises for the purpose of … a golf course … AND IN ADDITION …[part of the premises] may also be used for one or more of the following purposes: (i) commercial accommodation …; (ii) indoor recreation facility; (iii) outdoor recreation facility; and (iv) club and/or child care facility ANCILLARY TO outdoor recreation facility and/or indoor recreation facility.”

[1] The lease in the T documents at pages T35-T47 is an earlier lease dated 3 May 2006. The current Lease was attached to the submissions of the respondent on preliminary issue

2.The Commissioner for ACT Revenue (Commissioner or respondent) has levied rates on this Land in a rates assessment dated 16 August 2016 based on an unimproved land value as at 1 January 2016 of $1,800,000.[2] Gungahlin Golf lodged an objection to this valuation, but it was confirmed in a letter dated 30 March 2016 (which should be 2017).[3] Gungahlin Golf has now applied to review the confirmation of the assessment decision under section 68 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) and section 108A of the Taxation Administration Act 1999 (Tax Administration Act).

Summary of decision

[2] T documents, pages T48-T49

[3] T documents page T9; see also the letter dated 30 March 2017, pages T11-T12

3.The Tribunal has listed for consideration as a preliminary question the interpretation of the permitted use in the Crown Lease. Relevant questions are set out below, and generally concern the obligations under the Lease which might be relevant to what a person would pay for the Land in an unimproved condition.  

4.In summary, there is an obligation on the lessee from the beginning of the Lease and ongoing to use the Land for a golf course. If the Land is unimproved, this requires the lessee to construct a golf course.

5.The additional uses for commercial accommodation, indoor recreation facility or outdoor recreation facility may be undertaken as well as the use for a golf course. But the additional uses cannot be an alternative to the use for a golf course.

6.While the lessee has some discretion as to how to programme the building of a golf course and for any additional uses, the additional uses can generally only be in operation after the golf course is in operation. Any valuation should be done principally on the basis that these requirements are met. The relevant provisions of the Territory Plan should be considered in the valuation.

Legislation

7.The Rates Act 2004 (Rates Act) sets out the requirements for levying rates. Rates are levied on the unimproved value of the land.

8.Section 6 of the Rates Act provides for the meaning of unimproved value:

6 Meaning of unimproved value

(1)     The unimproved value of a parcel of land held under a lease from the Commonwealth is the capital amount that might be expected to have been offered on a date (the base date), for the lease of the parcel, assuming that—

(a)the only improvements on or to the parcel were the improvements (if any) by way of clearing, filling, grading, draining, levelling or excavating—

(i)if the Territory or Commonwealth had, before the parcel became rateable as a separate parcel, granted a development lease of land that included the parcel—made by the lessee under that lease or by the Territory or Commonwealth, or the cost of which was met by that lessee or by the Territory or Commonwealth; or

(ii)in any other case—made by the Territory or Commonwealth or the cost of which was met by the Territory or Commonwealth; and

(b)the circumstances that existed on the prescribed date also existed on the base date; and

(c)on the base date, the lease had an unexpired term of 9 years; and

(d)a nominal rent was payable under the lease for the 99 year term.

9.There is currently a golf course on the Land the subject of the Lease. However, the Rates Act requires an assessment of the unimproved value, which is the value without those improvements.

Lease

10.The critical clause of the Lease provides as follows:

3. THE LESSEE FURTHER COVENANTS WITH THE COMMONWEALTH as follows:

(a)To use the premises for the purpose of an outdoor recreation facility that must consist of a golf course with grassed greens and a minimum of eighteen (18) holes that may include practice fairways and putting greens;

AND IN ADDITION only the part of the premises at Block 14 Section 86 Division of Nicholls identified by cross hatching on the plan at Attachment 1 may also be used for one or more of the following purposes:

(i)commercial accommodation use LIMITED TO guest house, hotel, and motel;

(ii)indoor recreation facility;

(iii)outdoor recreation facility; and

(iv)club and/or child care centre ANCILLARY TO outdoor recreation facility and/or indoor recreation facility;

PROVIDED THAT:

…

11.Under the Planning and Development Act 2007 (Planning and Development Act), land must not be used for a purpose other than a purpose authorised by the lease (section 247), failure to comply with the terms of the lease can result in enforcement of those terms (chapter 11 and schedule 2), and indeed termination of the lease (section 382).

12.The Tribunal accepts the submission of the respondent that the words of the Lease should be interpreted according to their plain and ordinary meaning, in the context of the rest of the document.[4] As a form of agreement, the Lease should be given the meaning which a reasonable person would attach to the provision.[5] Further, in Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority the Court of Appeal of the ACT Supreme Court stated that the principles for interpretation of dealings with land that are registered under a Torrens system apply to land in the ACT[6], and cited Bowler v Hilda Pty Ltd where Gyles J stated: “In my opinion it was erroneous to have regard to the extrinsic material in question in construing the registered unit lease. To do so detracts from certainty of title in the Land Titles Act 1925. The Land Titles Act introduced a Torrens title system in familiar form, with the Register paramount.”[7]

[4] Submissions of the respondent on preliminary issues at [C.3]; DC Pearce and RS Geddes Statutory Interpretation in Australia (7^th edition, 2011), at [1.4]

[5] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]

[6] [2015] ACTCA 32 at [53]

[7] (2001) 112 FCR 59 at [55]

13.The respondent also suggested that the terms of the Planning and Development Act and the Territory Plan may be relevant to interpreting the terms of the Lease. This issue is considered further below.

14.As noted, the Rates Act requires an assessment of the unimproved value of the Land the subject of the Lease, that is without the golf course currently there. But this unimproved value is affected by what can, must and must not be done on the Land. The questions raised go to this issue, and are set out in the applicant’s outline of submissions on preliminary points.

Question 1: Is there an obligation under the Crown Lease to construct a golf course on the Land?

15.As set out above, the Lease provides that the lessee covenants with the Commonwealth to “use the premises for the purpose of an outdoor recreation facility that must consist of a golf course … with a minimum of eighteen (18) holes that may include practice fairways and putting greens”. This clearly involves an obligation to construct and operate such a golf course. The use of the word ‘must consist of’ indicates this is a mandatory obligation; it stands in contrast to the words ‘may also be used’ in relation to the additional uses. The provision begins with the general phrase ‘outdoor recreation facility’, but the phrase ‘that must consist of’ makes it clear that the provision is only here granting a right, and imposing an obligation, to use the Land as a golf course.

16.This obligation is confirmed by other provisions of the Lease. The grant of the Lease is for Land “to be used by the Lessee for the purpose set out in Clause 3(a) of this lease” (page 2). Clause 3(j) requires that the lessee shall permit persons to play on the golf course and use other recreational facilities constructed on the Land.

17.Clause 5(a) provides that if the Land “is at any time not used for a period of one year for the purpose for which this lease is granted” the Authority may terminate the Lease. The only mandatory use in the Lease is the golf course and therefore this clause applies to this use.

18.The answer to Question 1 is therefore: yes. There is an obligation on the lessee from the beginning of the Lease and ongoing to use the Land for a golf course. If the Land is unimproved, this requires the lessee to construct a golf course. There are further comments about the timing of this construction below.

Question 2: Must the golf course be built first?

19.Within the covenant to build a golf course the Lease provides that “and in addition” part of the premises “may also be used for one or more” other specified purposes.

20.‘Addition’ is defined in the Macquarie Dictionary online as follows:

noun 1. the act or process of adding or uniting. 2. the process of uniting two or more numbers into one sum, denoted by the symbol + . 3. anything added. 4. (often plural) wings, rooms, etc., added to a building, or land added to property already owned. 5. Obsolete a particularising designation added to a person's name. – phrase 6. in addition, besides. 7. in addition to, as well as. [Latin additio; replacing Middle English addicioun, from French]

21.The reference in the definition of ‘in addition’ to ‘besides’ is given further content by the definition of ‘besides’, which is:

adverb 1. moreover. 2. in addition. 3. otherwise; else. – preposition 4. over and above; in addition to. 5. other than; except.

22.The Shorter Oxford Dictionary gives the meaning of ‘addition’ as “1. The action or process of addition” and then “2. A thing added; an appendix, an accession” and then “in addition as an added thing (to), as well”.

23.Although the current task is not one of statutory interpretation, it is noted that in Wheeler v Kelly[8] (Wheeler) the High Court considered the meaning in a statute of the definition of the term ‘public purpose’. The definition was that it  “means and includes, in addition to any purpose specified as a public purpose in any section of this Act, any purpose declared by the Minister” (emphasis added). The Court stated that in this context ‘in addition to’ means “no more than ‘as well as.’” The Court went on to state that the sense of the definition would have been given if it had been written “not only any purpose specified … but also any purpose declared by the Minister.”[9]

[8] (1956) 94 CLR 206

[9] (1956) 94 CLR 206, 212

24.Therefore the general concept of ‘addition’ is adding one thing to another; one number to an existing number; wings or rooms to an existing building; land to property already owned. The principally relevant definition in this context in relation to the use of land or the purpose of the grant of a lease is ‘as well as’ the first use. As noted in Wheeler the sense of the term suggests that not only must the Land be used as a golf course, but also part of it may be used as commercial accommodation, an indoor recreation facility, an  outdoor recreation facility, and a club and/or child care facility.

25.Clause 3 also uses the term ‘ancillary’ which is defined by the Macquarie Dictionary online as:

adjective 1. accessory; auxiliary. – noun (plural ancillaries) 2. an accessory, subsidiary or helping thing or person.[Latin ancillāris relating to a handmaid]

26.There is significant consideration of the concept of ‘ancillary’ in relation to the use of land. In particular in Peter Kohlsdorf Golf Distributors Pty Ltd v Minister for Planning[10] (Kohlsdorf) President Peedom stated at [61] that the “fact that the use of land for a particular purpose is not expressly permitted by the purpose clause of a lease will not necessarily exclude that use as a lawful activity if it is a use which is ancillary to one which is expressly permitted.” This concept picks up uses not specified.

[10] [2003] ACTAAT 29

27.In that case the relevant provision provided for the lessee “[t]o use the land only for the purpose of an outdoor recreation facility restricted to a facility for the playing of golf related activities and ANCILLARY THERETO club educational establishment guest house hotel indoor recreational facility and/or motel.”  President Peedom stated at [53] that in such a clause:

… the words following ‘ANCILLARY THERETO’ are to be interpreted not as exhaustive of the kinds of ancillary land uses permitted under the Crown lease but as expressly permitting land uses that may not necessarily have been regarded as sufficiently related to the principal land use so as to otherwise be capable of being regarded as ancillary to the specified use. There is no natural or usual direct relationship between a golf course, as a primary use of land, on the one hand, and an educational establishment, guest house, hotel, indoor recreation facility and/or a motel, on the other hand. While the use of a traditional golf course for the purpose of a club would ordinarily be sufficiently related to golf course use, this is less obvious in the case of a course for golf-related activities.

28.Clause 3(a)(iv) of the Lease in issue here is in a slightly different form, reversing the order in the lease in Kohlsdorf and providing for use as “a club and/or child care centre ANCILLARY TO” a recreation facility. But in substance it is still making it clear that a “club and/or child care centre” can be ancillary to a recreation facility.

29.Therefore an ancillary use or purpose is one which is an accessory, subsidiary or auxiliary use to a principal use. In this case the Lease itself has made clear, to avoid doubt, that a “club and/or child care centre” can be ancillary to an “outdoor recreation facility and/or indoor recreation facility”.

30.The structure of clause 3 and these definitions suggest therefore that:

(a)There is a mandatory use of the Land for a golf course. This may include unspecified ancillary uses as discussed by President Peedom in Kohlsdorf at [61].

(b)The use of part of the Land for commercial accommodation, indoor recreation facility or outdoor recreation facility can be an additional use to, that is added to or as well as, the use for a golf course. These may also include unspecified ancillary uses as discussed by President Peedom in Kohlsdorf at [61].

(c)The use of a club and/or child care centre can be ancillary to, that is can be an accessory, subsidiary or auxiliary to, the outdoor recreation facility and/or indoor recreation facility allowed as an additional use. It is important to note that the specified use as club and/or child care centre is not ancillary to the use as a golf course; it is ancillary to the additional uses as an indoor recreation facility or outdoor recreation facility.   As noted in (b), there may be other unspecified uses ancillary to an indoor recreation facility or outdoor recreation facility.

31.From this structure it is clear that the additional uses cannot be alternative uses to the use as a golf course. There must be a golf course. Therefore, the requirement of the Lease is that there must be the use as a golf course, but there can also be the additional uses, but there cannot be the additional uses without the use as a golf course. Just as in order for there to be an addition to a number, there needs to be a number; and in order for there to be an addition to a house, there needs to be a house; so in order for there to be an additional use to a golf course, there needs to be a golf course.

32.However, as to how these uses are implemented the Lease does not say. There is no prescription as to when the developments to enable these uses should begin or end. Therefore the lessee has some discretion as to how to programme this, so long as the Land is used as a golf course and any additional use remains additional.

33.There may be a range of ways to do this. However it would seem that generally the use as a golf course needs to be in operation or development; and any additional use generally could not be in operation before the use as a golf course is in operation. The term ‘generally’ is used because there may be exceptional or extraordinary circumstances when these requirements can be avoided, but a valuation should be done principally on the basis that they need to be met.

34.The respondent argues that the distinction in the Lease between the use of the term ‘additional’ and the use of the term ‘ancillary’ means that in relation to the additional uses, “the owner of the hypothetical lease can take advantage of those uses without first having to establish the golf course.” Conversely, it is said, in relation to ancillary uses, “the owner must have principal uses in place to which those ancillary uses will be ancillary.”[11]

[11] Submissions of the respondent on preliminary issue, at [D.3] and [D.4]

35.These submissions seem to be put in support of the valuation by the ACT Valuation Office where it is stated:

There are no specified “commencement and/or completion” clauses for development within the Crown Lease of the subject property. ACTVO considers this does not place an obligation to firstly supply a golf course proper providing the Crown Lessee the prudent opportunity to develop the other permitted uses to establish an income flow to support the maintenance etc of the golf course.[12]

[12] T documents, page T14

36.This statement in the valuation is somewhat ambiguous, but read in conjunction with the submission it seems to be saying that there is no obligation to construct a golf course, and the lessee can use the Land for the additional uses before it uses the Land as a golf course.

37.The ACT Valuation Office also takes this position in an email dated 24 February 2017 where it is stated that “the subject property does not have a commencement and/or completion development clauses which enables more flexibility of the term of the Crown …[Lease] … not compelling the Crown Lessee to incur development costs until it suits them …”. [13]

[13] T documents, page T180

38.In relation to these propositions a few points are clear. First, while it is true that there are no specified commencement or completion clauses for the development of the golf course, there is an obligation on the lessee to use the Land as a golf course. This obligation needs to be met.

39.Second, the use for this purpose is not at the discretion of the lessee. There is an ongoing obligation to use the Land for this purpose. Indeed clause 5 provides that if the Land is at any time not used for a period of one year for the purpose for which this Lease is granted the Authority may terminate the Lease. Of course, the reality is that construction of the golf course may take some time. But the obligation in the Lease to use the Land as a golf course can under this provision only be delayed for a year.

40.Third, the other permitted uses are additional and ancillary. It is true that there is some discretion as to timetabling as to construction. But as noted the additional uses must be in addition to, not alternatives to, the first use as a golf course.

41.The answer to Question 2 is therefore: while the lessee has some discretion as to how to programme the building of a golf course and for the additional uses, the additional uses can generally only be in operation after the golf course is in operation. Any valuation should be done principally on the basis that these requirements are met.

Question 3: Are the provisions of the Territory Plan considered in the valuation and if so, what are the key provisions of the Plan which might be considered?

42.The Court of Appeal of the ACT Supreme Court stated in Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority:[14]

It is agreed that certain matters external to the leases are properly taken into account in valuing each lease; these include “public laws which affect the value of the land, ... including restrictions imposed by planning laws and instruments made thereunder” (Valuer-General v New South Wales Golf Club (2012) 192 LGERA 105 at 114; [36], applying Royal Sydney Golf Club v Federal Commissioner of Taxation (1995) 91 CLR 610 at 624). In the ACT this would include the Territory Plan as well as zoning rules and requirements and certain other instruments made under or for the purposes of the Plan, and possibly other restrictions such as tree preservation orders or heritage listings.

[14] [2015] ACTCA 32 at [24]

43.The terms of the Lease, as legal restrictions on the use of the Land, are relevant to the valuation of the Land. Other legal restrictions will also be relevant. Both factors may be relevant to the “the capital amount that might be expected to have been offered on … the base date … for the lease of the parcel” (section 6(1) of the Rates Act).

44.As to which aspects of the Territory Plan and other rules and requirements are relevant, there were few submissions on this issue, and the Tribunal does not have sufficient information to assess this at this stage.

45.The answer to Question 3 is therefore: the relevant provisions of the Territory Plan should be considered in the valuation. It is not possible on the basis of the information before the Tribunal to say what they are.

Question 4: Are the uses following the words ‘in addition’ in clause 3(a) ancillary uses?

46.As discussed above, there is a distinction between the ordinary meaning of ‘in addition’ and ‘ancillary’. Under the Lease, the uses in clauses 3(a)(i), (ii) and (iii) are additional to the first use as a golf course; the uses in clause 3(iv) can be ancillary to the additional uses in clause 3(a)(ii), namely an indoor recreation facility, and clause 3(a)(iii) an outdoor recreation facility.

47.In light of the ordinary meanings discussed above, some of the additional uses specified may also fall within the general concept of ancillary uses, as discussed by President Peedom in Kohlsdorf at [61]. That is the additional use as an indoor recreation facility may involve an indoor putting green. This is likely to be a use which is within the general concept of an ancillary use to the outdoor golf course. But some additional uses will not be; such as a bowling alley.

48.In the applicant’s submissions, this issue was apparently linked to the use of these terms in the Planning and Development Act and the Territory Plan. In particular the question seemed to be addressed to whether the additional uses in clause 3(a) of the Lease would be ancillary uses for the purposes of the Act and Territory Plan. The Act and Plan can inform interpretation of a lease,[15] though whether and how this occurs depends on the terms of the lease, Act and Plan. It is a different question whether a lease can inform interpretation of the Act and Plan.

[15] Peter Kohlsdorf Golf Distributors Pty Ltd v Minister for Planning [2003] ACTAAT 29 at [49]-[52]

49.There are no relevant definitions in the Planning and Development Act. ‘Addition’ is used in a way consistent with the meaning set out above, and the use of ‘ancillary’ is in the same position.

50.The Territory Plan has some relevant definitions in section 13. There is no definition of ‘addition’, and this term is generally used in the Plan in a way which reflects its ordinary meaning. There is a provision that:

Ancillary use means the use of land for a purpose that is ancillary to the primary use of the land.

51.This adds little and picks up the ordinary meaning set out above and as discussed by President Peedom in Kohlsdorf at [61]. This is then used in the definition of ‘outbuilding’:

Outbuilding means a shed, garage or similar structure that is ancillary to the permitted use of the land.

52.The use of these terms in any particular provision will depend on that provision and the application of relevant statutory interpretation principles. The Tribunal was referred in particular to the Parks and Recreation Zones Development Code, which provides in Part A(2) - PRZ2 - Restricted Access Recreation Zone, for element 1, restrictions on use, and intent (a) “to provide for high quality recreation facilities without adverse effects on the amenity of the locality”. In relation to “club, educational, establishment, guest house, hotel, motel” rule R7 requires that development for these purposes meets one of the following: “(a) is ancillary to the use of the land for recreation purposes” or (b), in summary, that the proportion of the land area used for these purposes is a maximum of 15%. ‘Ancillary’ in rule R7(a) would take the meaning discussed at paragraphs [50] and [51] above. The fact that the Lease specifically provides that a club and/or child care centre can be ancillary to an outdoor recreation facility may be relevant to whether this would comply with rule R7(a), but this is unlikely to be determinative of this issue.

53.There is also a criteria C7(a) which is that it “(a) does not unreasonably restrict the availability of land in the zone for recreation purpose” and “(b) is of an appropriate scale and compatible with the recreational purposes of the zone”.

54.It is difficult to determine without further evidence or argument the application of this restriction to the Land subject to the Lease. But it is not generally relevant in its terms to the uses of the golf course itself and any outdoor or indoor recreation facility as allowed by the Lease.

55.It may be relevant in its terms to any guest house, hotel, motel allowed as additional uses by the Lease, and any club and/or child care centre allowed as specific ancillary use by the Lease. There would certainly be arguments that these are, or at least could be, “ancillary to the use of the land for recreation purposes” under rule R7(a). But, even if they are not, compliance with rule R7(b) or criteria C7 is possible. Therefore, these requirements would seem to have limited impact for the purposes of any valuation. However, the Tribunal could hear evidence and argument on this issue insofar as a party thinks it necessary.

56.The answer to Question 4 is therefore: the uses after ‘in addition’ in clause 3(a) could be ancillary uses within the general meaning of that term, but may not be. Where the concept of ancillary use is used in a statutory context, such as in the Planning and Development Act and the Territory Plan, its meaning will depend on the application of relevant statutory interpretation principles.

………………………………..

Senior Member R Orr QC

HEARING DETAILS

FILE NUMBER:	AT 30/2017
PARTIES, APPLICANT:	Gungahlin Golf Investments Pty Ltd
PARTIES, RESPONDENT:	Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT	Mr P Walker SC
COUNSEL APPEARING, RESPONDENT	Mr C Erskine SC
SOLICITORS FOR APPLICANT	Trinity Law
SOLICITORS FOR RESPONDENT	ACT Government Solicitor
TRIBUNAL MEMBERS:	Senior Member R Orr QC
DATES OF HEARING:	17 July 2017