Morrison v Federal Commissioner of Land Tax

[1914] HCA 10

17 C.L.R.] OF AUSTRALIA.

497

a clear introductory recital explaining what was intended to be H . C. o f A.

done. But, so far as the recitals go, there is no hint that the parties were about to remodel what was treated as the statutory

W

i l l i a m s

V.

position. The nearest approach to such a hint is the recital of a

P e r p e t u a l

power of sale in the trustees of Jenkin-s’s will, but it is significant

T r u s t e e

Co. L t d .

that the conveyance does not purport to be an exercise of the power. If the intention was to extinguish the possibility of reverter, this intention has to be gathered from the operative part of the deed. The words of the conveyance are usual words in New South Wales in an ordinary conveyance operating under sec. ‘S2 of the Conveyancing and La,w of Property Act 1898.

Tlie words purporting to convey the land to “ the Company,

its successors and assigns for ever according to the true intent

and meaning of the hereinbefore recited A ct” are apparentl}'

taken from Schedule A to the Lands Clauses Consolidation Act

1845, where by virtue of sec. 81 of that Act they have a special

statutory force. The words in this deed must be read together.

Tliej' are not apt words to show an intention to extinguish tlie

po.ssibility of reverter. On the contrary, they are reasonably

appropriate words if the conveyance was made for the purpose of

confirming the parliamentaiy title which the parties believed to

•

be vested in the Company, and in pursuance of what we are informed is a usual practice in New South Wales where lands are taken under a parliamentary title for the construction of railways.

These considerations are sufficient to justify the decision of

Street J., and to dispose of the appeal.

Appeal dismissed with costs.

Solicitor, for the appellant, J. V. Tillett, Crown Solicitor for

New South Wales.

Solicitors, for the respondents, Abbott, Tout <i: Balcombe.

B. L.

Al’Pl

Foil

^r^aneC U y Coninioth McCeochy

Council V

Federal

wcnUh V

yoLier^Gencral

OUifield Commissioner

(W 6) 133

'Land Tax

CLRM2

498 HIGH COURT

[1914.

[H IG H C O U R T OF

A U S T R A L IA .]

.MORRISON AND OTHERS

. Appellants ;

THE FEDERAL COMMISSIONER OF

R e s p o n d e n t .

LAND TAX

.....................................

H . C. o r A.

Land T a x—Assesument— Unimproved value o f land— “ Value of Improvements ”—

1914.                 What are Improvements— Land T ax Assessment Act 1910-1912 (A^o. 2 2 o / '1910 — No. 37 0 /1912), sec. 3.

A Ie l b o u iin e ,

The term “ value of im provem ents ” in relation to land , as defined in sec. 3 of the Land Tax Assessment H ci 1910-1912, includes the p resen t enhancement of the value of th e land a ttr ib u tab le to th e operations of man upon the land

M a r c h

13,

16. •

Griffith C.J.,

Barton,laaaos, effected since the land has ceased to be Crown land, th e benefit of which con­

Powers an,i

tinues a t the date of valuation , and also includes th e present enhancement of value a ttr ib u tab le to those operations of n a tu re w hich are only etfeotual by reason of w hat man has done.

Rich JJ.

The word “ im provem en ts” in the definition of the term “ unimproved value ” of land in th a t section includes such of the above-m entioned operations of man and n a tu re as have con tribu ted to bring about the present enhance­ m ent of th e value of the land.

Case stated for the opinion of the Court.

On an appeal by Christina Gordon Morrison, Annie Robertson and Margaret Gordon Buchanan from an assessment of them for the year ending 30th June 1911 by the Commissioner of Land Tax, in respect of land owned by them and known as Killing- worth, Isaacs J. stated a case, the material part of which was as

follows:—

_

“ 6. Killingworth, which now is, and has for over 40 years been, used as a sheep and cattle station, is situated in the North-Eastern

17 C.L.R.] OF AUSTRALIA.

499

district of Victoria, and is bounded in part by the river Goulburn.

C. o f A.

It consists of about 12,700 acres, of wliich about 2,250 acres are

river flats, and the remaining land, about 10,450 acres, is hill morrisox

country.

“ 7. In a state of nature the land was more or less heavily

timbered, principally with red gum, white gum and grey box, and laxd Tax.

on part of it were tussocks and thick undergrowth, in parts also

the grass was rank and the soil damp and soft and, to a certain

extent, unwholesome for sheep. That is the condition in which it

would have been on 30th June or l.st July if the undermentioned

improvements had not taken place.

C o m m is -

“ 8. The best possible use of the land as a ^vhole is that to which it is, and has for the period mentioned been, put; and the case has been conducted on both sides upon that basis.

“ 9. The lands of which the property consists were originally taken up in independent parcels by various settlers at different times, which for tlie purposes of this case I state as from 40 to 50 years ago, under Crown Lands Acts which required tlie selectors to make improvements.

“ 10. Various improvements were then made in accordance with the requirements of the law, and the selectors obtained their titles to the land. The improvements so made by them included fencing, ringing timber, burning it, and otherwise clearing the land.

“ 11. The land by various mesne transfers passed into the hands of subsequent holders, ultimately forming one united pro­ perty, and was so held in 1876 by Kerr from whom Chrystal pur­ chased in 1883, and the latter in 1898 sold to the appellants, who have since continued to own the lands. Kerr, Chrystal and the appellants used it for pastoral purposes and made many improve­ ments.

“ 12. The improvements as existing on 30th June and 1st July 1910 included, inter alia, fences, residence, station buildings, tanks, wind mills and other constructions having a distinctive existence and positive character.

“ 13. 'riie land has from time to time been in fact improved in the following manner :—(a) Ringing timber ; (b) clearing timber that had fallen in consequence of ringing; (c) clearing timber

500 HIGH COURT

[1914,

H. C. OF A. that had fallen through natural decay or storms; {d) clearing timber that had been brought there by floods ; (e) actively burn­

M o r r i s o ning timber on the ground; ( / ) actively burning tussocks and

V.

F e d e r a t , other grass ; {g) burning by bush fires which, so far as the

C o m m i s ­

owners of Killingworth were concerned, were accidental, and

s i o n e r

OP

which burned ofl' dead and useless timber, and burned tussocks

L a n d

T a x .

and rank grass; Qi) as a result of the above-mentioned operations the land was sweetened and became sounder sheep country; (i) the stocking of the land consolidated it to some extent, and otherwise improved its condition.

“ 14. On 30th June and 1st July 1910 the beneficial effect, or a portion of the beneficial effect, upon the land of each and every of the said improvements in fact still existed and the value of tlie land was thereby enhanced.

“ 15. The process of sweetening, sanitation and consolidation necessarily occupied, and must always occupy, some years to com­ plete, the gradual operation of the sun and the air upon tlie altered condition of the land being an essential factor.

“ 16. If on the dates mentioned the land had still been left in a natural condition, by which I mean unaltered by the hand of man, it would not have attained its then present condition or value for .some years after all the improvements hereinbefore referred to took place, other than the improvements effected by the action of the sun and air and by the actual running of stock upon the land. “ 17. The respondent contended that in law the improvements in fact mentioned in par. 18 hereof are not 'improvements’ within the meaning of the Act, and particularly within the meaning of that word as used in the definition of the term ‘ unimproved value ’ in sec. 3. These contentions the appellants contested. The respondent relied, among other things, upon the definition of ‘ value of improvements ’ in sec. 3 of the Act as affecting in his favour the construction to be placed on the defi­ nition of ‘ unimproved value ’ in that section and in sec. 10.

“ 18. The appellants contended (a) that the definition of ‘ value of improvements ’ did not assist the respondent; and, if it did, they further contended (h) that the definition of ‘ value of improve­ ments ’ in sec. 3 of the Act is not to be regarded in construing the definition of ‘ unimproved value ’ in the same section or in sec. 10,

17 C.L.R.] OF AUSTRALIA.

501

on the ground tliat on tlie true construction of the Act the defini­

H . C. OF A.

1914.

tion of ‘ value of improvements ’ should be limited to sec. 48, and

(c) that if on the true construction of the Act there should not be

M o r r i s o n

V.

that limitation, then sec. 48 is invalid as beyond the competency

F r d e r a t .

of the Commonwealth Parliament to enact, with the consequence

COMMIS-

of excluding the definition of ‘ value of improvements’ in sec. 3 l1nd*̂ Tax.

from consideration, or of rendering the whole Act invalid. The

re.sj)ondent contested these contentions.

“ 19. I therefore state this case for the opinion of the High Court upon all the questions of law arising as aforesaid on the hearing of the appeal as set forth in pars. 17 and 18 hereof.”

Mitchell K.C. (with him Starke and S. R. Lewis), for the appellants. “ Improvements ” include everything which, if the land were in a state of nature, would be necessary to be done in order to bring the land into its present improved condition. They are not limited to existing visible improvements such as fences and buildings, but include the effect of what man has done. Where there is no evidence of the market value of the land in a state of nature, the Court must inquire what matters a ĥ ’pothetical purchaser of the land in a state of nature would have to consider. He would have to con.sider not only the outla}' rec|uired to bring it into its present improved state, but also the interest on his outlay during the time required for that process, and the fact that for a great pai-t of that time the return from the land would be small. He would also have to make an allowance

for possible vici.ssitude.s.

In that way the value of the improve­

ments would be arrived at.

All the matters mentioned in the

case are, in that view, improvements. In the case of an accidental bush fire, if its beneficial effect were contributed to by what man has done before or afterwards, to that extent its result is an improvement. The amendment of the definition of “ improved value ” in sec. 3 made by sec. 2 of the Land Tax Assessment Act 1912, does not affect the present case, but the amendment is only for the purposes of sec. 48 of the Act. The case of Commissioner of Land 'Tax v. Nathan (1) does not decide anything to the con­ trary. It was there decided merely that the proved suitability

(1) J6 C.L.K., 654.

VOL, XVII.

34

502 HIGH COURT

[1914.

H.C. OF A. of tlie land fora particular purpose must not be ignored in ascer-

1914 . taining the unimproved value.

MoiinisoN

V.

McArthur K.C. and Wanliss, for the respondent.

What this

F e d e r a t . _ _ . . .

,

CoMMis- Court said in Commissioner of Land Tax v. Nathan (T) seems to Land-Tax. indicate that the improvements to be taken into consideration are those which are visible on the land, and do not include the pre­ sent effect of improvements which have disappeared. The legis­ lature miuht intend that course to be taken because of the difficulty in a.scertaining the value of the effect of past improve­ ments. This view is supported by the words “ im2n'ovements thereon,” not “ improvements thereto ” or “ thereof.”

Mitchell K.C., in repl3^

[Rich J, referred to Ex parte Thomas (2).]

G r i f f i t h C.J. The question to be decided in this case,

although one of considerable importance to many people in this Commonwealth, does not seem to present any very serious diffi­ culties. The question is as to the interpretation of the provisions of the Land Tax Assessment Act relating to the unimproved value of land whicli is the subject matter of taxation under that Act. The unimproved value of land is the subject matter of taxation in several, if not all, of the States of the Commonwealth, and the definition of unimproved value varies in different States, but we are only concerned in this case with the definition in tlie Commonwealth Act, which differs materially from that in some, at least, of the State Acts. “ Improved value ” is defined to mean “ the capital sum which the fee-simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bond fide seller would require.” There is no practical difficulty in understanding that definition. Then “ unimproved value” is defined as meaning “ the capital sum which the fee-simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bond fide seller would require”—so far repeating the words of the definition of “ improved value,”—“ assuming that the

(1) 16 C .L .R ., 6.54, a t p. 662.

(2) 2 N .S .W .L .R ., 39.

17 C.L.R.] Oî ' AUSTRALIA.

.503

improvements (if any) thereon or appertaining thereto and made H . C. o f A.

1914.

or acquired by tlie owner or liis predecessor in title had not been

made.” Then, by way of supplement, the term “value of improve­

M o r r i s o n

V.

ments” is defined to mean “ the added value which the improve­

F e d e r a l

ments give to the land at the date of valuation irrespective of the

Co>m is-

cost of the improvements.”

It seems plain enough that that L a n d T a x .

means that the value of improvements is the present enhance­ ment of the value of the land attributable to the operations of man upon the land the benefit of which still continues, including also in some cases improvements not actually effected upon the land itself, to which qualification it is not necessary to refer for present purposes. What operations of man are improvements ? When I say “ operations of man,” I think the term should be limited to what is done by the owner for the time being, that is, after the land has ceased to be Crown land. Any operation of man on land which has the effect of enhancing its value comes within the definition of “ improvement.” When one considers the nature of land in Australia, and how lately it has passed from its primitive condition, it is obvious that all sorts of operations may tend to enhance its value. Take, for instance, a jungle so dense that it is almost impenetrable by four-footed animals, even the smallest. Compare it with the same land after the lapse of— say—10 years, when it presents the appearance of a meadow clothed with grass and carrying dairy herds. What is the value of the improvements in that case? Surely, the difference betw'een the value of the land as jungle and its value in the condition in which it is when found. 'That difference clearly comes within the definition of “ value of improvements,” “ the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements.” In such a case as I have mentioned—and it applies with variation to a great part of Australia—the improvement is effected not merely bj' the immediate acts of man in cutting down trees, ring-barking, destroying tussocks of grass, and so on, but by all the operations of nature which could not take place without the prior operations of man. It is the combined effect of what man has done and of the operations of nature which are only effectual by reason of what man has done. And it is provided that the cost of doing it

504 HIGH COURT

[1914.

H.C. OF A. is not to be the test. The only questions, therefore, are: Wliat

1914. would be the value of the land if it had continued in a state of

M o r r i s o n

nature, and what is its value now ? It follows that the value of

V.

F e d e r a l

the improvements is a “ constant,” which is to be deducted from

C o m m i s ­

the improved value, which is a “ variable.”

s i o n e r

OF

I am, of course, speaking of operations the full effect of which

L a n d

T a x .

Griffith C.J.has been obtained, as, for instance, in the case of land which was

originally covered with stones and thereby unfit for agriculture, and which by their removal has become fit for it. That opera­ tion has been completed and the benefit remains, and so far as tlie benefit continues the value of the improvement is a “con­ stant.” While the improvements or the consequent operations of nature are still g o i n g on, the value of the improvements maj", of course, increase from year to year, just as, in the case of some improvements, it may be exhausted. It is in that sense that I use the term “ a constant.”

Applying these principles, the first question we are asked is whether certain operations are improvements. They are ; ringing timber ; clearing timber that had fallen in consequence of ringing; clearing timber that had fallen through natural decay or storms; clearing timber that had been brought there by floods ; actively burning timber on the ground ; actively burning tu.ssocks and other grass ; burning by bush tires which, so far as the owners of Killingworth were concerned, were accidental, and Mdiicli burned off dead and useless timber, and burned tussocks and rank grass.; as a result of which operations the land was sweetened and became sounder sheep country ; the stocking of the land consoli­ dated it to some extent, and otherwise improved it. Anyone familiar with Australia knows that all these operations do improve the value of land, and make it saleable at a higher price. It is also obvious that every one of these operations is only a

means to an end.

They enable the forces of nature to operate by •

bringing Sunshine and rain to the soil. They sweeten the land and produce as important changes as the draining of a swamp. The only one of the enumerated operations as to which there may be some doubt is the burning off by accidental bush tires. With respect to this it may be that the benefit is divisible. Suppose that £1,000 has been added to the value of the land by an