Moses v Parker; Ex parte Moses

[1968] HCA 63

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Kitto, Menzies and Owen JJ.

HOLLINWORTH v. COMMISSIONER OF LAND TAX

(1968) 118 CLR 45

16 October 1968

Land Tax (N.S.W.)

Land Tax (N.S.W.)—Tax charged on lands of taxpayer—Lands consisting of several distinct parcels—Sale of one parcel—Proportion only of total tax to be borne by parcel sold—Land Tax Management Act, 1956-1965 (N.S.W.), s. 47.*

Decisions

October 16.
The following written judgments were delivered:-
BARWICK C.J., KITTO AND MENZIES JJ. In each of the years from 1958 to 1960 one Stanley Ernest White was the owner within the meaning of the Land Tax Management Act, 1956-1965 (N.S.W.) of certain lands in New South Wales including a property known as Bomera which consisted of seven portions comprised in one certificate of title under the provisions of the Real Property Act, 1900 (N.S.W.) and three portions comprised in holdings under the Crown Lands Consolidation Act, 1913 (N.S.W.). None of his lands being exempt from taxation under the Land Tax Management Act, White was assessed thereunder to land tax upon the taxable value of all the land that he owned on 31st October in each of the years mentioned. Some or all of the tax so assessed in respect of each of the years is still unpaid, and the question raised by these proceedings, at the instance of mortgagees of Bomera exercising their power of sale of that property, is in effect whether, on the true construction of a provision of the Act which makes land tax a first charge upon "the land taxed", Bomera stands charged with the unpaid land tax assessed upon the whole of White's lands or only with so much of that land tax as is proportionate to the value which Bomera alone had at the material date in each of the relevant years. In the Supreme Court of New South Wales, Hardie J. held that Bomera is charged with the unpaid balance of the land tax assessed upon all White's lands, and the Court of Appeal by majority affirmed the decision. Hence the present appeal. (at p47)

2. The charging provision is in s. 47, which begins by providing that "Land tax shall until payment be a first charge upon the land taxed". The appellants' contention involves construing these words in a general sense, so that any part of the land that is to be included in an assessment is charged with its proportionate part of the owner's land tax. The language of later provisions of the section lends colour to the argument. Not satisfied with making the charge a "first charge" and emphasizing the result by the words "in priority over all other encumbrances whatever", the first paragraph of the section adds that notwithstanding "any disposition of the land" it shall continue to be liable in the hands of a purchaser or holder for the payment of "the land tax" so long as it remains unpaid. The second paragraph is a proviso enacting that the charge is to be of no effect as against a bona fide purchaser for value who, at the time of purchase, made "due inquiry" but had no notice of the liability. The third paragraph is a further proviso enacting that a purchaser shall be deemed to have made due inquiry who has made inquiry in the prescribed manner at the office of the Commissioner. The fourth paragraph (as it stood before being amended in 1963) required the Commissioner, "on application of the purchaser of any land" and on payment of the prescribed fee to issue a certificate showing if there is "any land tax due and unpaid" - it does not say charged - "on the land described in the application". This undoubtedly applies to a purchaser of part only of a taxpayer's land, and the appellants contend that it enables such a purchaser, by describing in his application that land only which he is purchasing, to obtain from the Commissioner a certificate showing what amount, if any, is payable as land tax "on" that part as distinguished from the land tax payable "on" the whole of the vendor's land. This must be done, they say, by an apportionment of the whole amount of land tax for which the vendor is liable, because only a proportionate part is "payable" on the described part; and if that be so that part must be "the land taxed" in relation to the amount apportioned to it, so that that amount only is "the land tax" which the first paragraph charges on that part. (at p47)

3. The argument the other way is strong, as the judgments of the majority in the Supreme Court demonstrate. It extracts from the leading provisions of the Act a general intention that for the purposes of land tax all non-exempt land owned by a taxpayer at the critical time in each year shall form a composite subject of tax, so that the taxpayer becomes liable for a single amount of tax in respect of, or "on", the whole, and therefore "on" every part, of that land. In this context, the argument proceeds, the reference in s. 47 to "land tax" must be to the whole of each taxpayer's land tax and "the land taxed" must be the whole of his non-exempt land. The provisions mainly relied upon in support of this view are ss. 7, 8 and 9, introducing Pt III under the general title of "Land Tax". The provision made by s. 7 is that subject to the Act land tax at such rates as may be fixed by any Act shall be "levied and paid" upon the unimproved value of all lands situated in New South Wales which are owned by taxpayers (i.e., by persons "chargeable" with land tax: s. 3) and which are not exempt from taxation under the Act. By s. 8 it is provided that the tax shall be "charged" on land owned at midnight on 31st October immediately preceding the year for which the land tax is levied, and that "year" means the period of twelve months commencing on 1st November. By s. 9 (1) it is provided that land tax shall be payable by the owner of land upon the taxable value of all land owned by him and not exempt from tax under the Act. The taxable value of all the land owned by a person is the total sum of the unimproved value of each parcel of the land, less a certain deduction in a class of cases to which the present case does not belong: s. 9 (2). (at p48)

4. Rates of land tax in respect of "the taxable value of all the land owned by any person" at midnight on 31st October in each of the relevant years are fixed by s. 3 (1) of the Land Tax Act, 1956 (N.S.W.), which provides that the tax shall be "charged, levied, collected and paid" under the provisions of the Management Act, and in the manner therein prescribed, at the respective rates set out in a schedule. In the context it seems clear that the word "charged" as used in s. 8 of the Land Tax Management Act and s. 3 (1) of the Land Tax Act refers only to the creation in the prescribed manner of the personal liability of a taxpayer as a person "chargeable", as s. 3 of the Management Act says, with land tax. A manner of charging such a person with land tax is prescribed by the Management Act, mainly in Pt IV; and a manner of its collection and payment is prescribed mainly in Pt VI. The provisions which prescribe the manner of charging a taxpayer with the tax with which he is chargeable begin with s. 12 (1) which requires a person to furnish to the Commissioner an annual return of all land owned by him on the last preceding 31st October "for the purposes of the assessment and levy of land tax" for the period of twelve months commencing on 1st November in each year. By s. 12 (2) the Commissioner is empowered to require the furnishing of a further return, and by s. 14 he is given the duty of causing to be made from the returns and any other information in his possession, an assessment of "the taxable value of the land owned by any taxpayer" and of "the land tax payable thereon". The Commissioner is to cause notice in writing of the assessment to be served on the taxpayer (s. 19), and the tax is due and payable thirty days after service of the notice of assessment (s. 39). It is only then that the tax is deemed to be a debt due to Her Majesty and is recoverable by the Commissioner (s. 42). In none of these provisions is there any express indication that the charge is to be considered as so spread over the taxpayer's non-exempt lands that upon a disposition of a part of them that part continues liable in the hands of the purchaser or holder for the payment of a corresponding proportion only of the taxpayer's total land tax. But neither is that notion expressly excluded, and therefore it is necessary to search the less prominent provisions of the Act for further indications of intention. (at p49)

5. As appears from ss. 14 and 15, which provide for the assessment of land tax "thereon", i.e., on the taxable value of the land owned by a taxpayer at the material time, the Act regards the whole of a taxpayer's land tax as payable "on" the whole of his land; but "on" in such a context is equivalent to "in respect of", and the provision is therefore not inconsistent with a proportionate amount of the tax being regarded as payable "on" any given part of his land. The Act does not deal with any case in which the incidence of land tax as between parts of a taxpayer's land needs to be specially provided for, until it comes to a group of cases where an individual liability for tax in respect of land is imposed upon each of a plurality of persons each of whom may own other land and accordingly may be liable for a total amount of land tax different from the total for which the others are liable. (at p49)

6. The first such case that is provided for is the case of mortgagor and mortgagee. As regards the mortgagor, s. 22 provides that he is liable for land tax as if he were the owner of an unencumbered estate. As regards the mortgagee, s. 23 provides that he is not liable in respect of his mortgage unless he is in possession of (the mortgaged) land and has been in possession of it for more than three years; but when that is so the mortgagor is deemed to be the primary taxpayer and the mortgagee to be the secondary taxpayer, a deduction being allowed "from the land tax payable by the latter in respect of the land" of such amount (if any) as is necessary to prevent double taxation. The mortgagee is expressly made responsible for the payment of "the land tax due by the mortgagor" if the latter makes default in the payment of "land tax in respect of the land" during or after the period of three years. The payment is to be deemed to be made by the mortgagee on behalf of the mortgagor. With this provision it is necessary to read s. 34, which provides that where in the Act reference is made to the land tax payable by a person in respect of any land or interest the reference is to so much of the whole land tax payable by him as bears to the whole land tax payable by him the proportion which the unimproved value of the land or interest referred to bears to the unimproved value of all the land owned by him. There are two references in the concluding provision of s. 23 to the land tax payable by the mortgagor in respect of the mortgaged land (though neither is in those precise words), and this section read in the light of s. 34 plainly means that if the mortgagor makes default in the payment of so much of his whole land tax as is proportionate to the unimproved value of the mortgaged land the mortgagee is responsible for the payment of it, and his payment of it is to be deemed to be made by him on behalf of the mortgagor. (at p50)

7. Not only is there obvious significance in the reference to the mortgagor's making default in the payment of so much of his whole land tax as is proportionate to the value of the mortgaged land - as distinguished from making default in the payment of his land tax generally, but the necessary implication from the provision as a whole is that the Commissioner must accept the mortgagee's payment as relating exclusively to the mortgaged land, and that that land shall thereupon cease to be subject to the charge under s. 47. Suppose that thereafter the mortgagor, or the mortgagee exercising his power of sale, sells the mortgaged land, and the purchaser applies to the Commissioner for a certificate under the fourth paragraph of s. 47. The paragraph as applied to that case must mean that the certificate shall show that no land tax is "due and unpaid on" the mortgaged land, even though, if it be the fact, the mortgagor (and the mortgagee too for that matter) owes land tax for the same year in respect of his ownership of other lands. These considerations indicate, in our opinion, that s. 47 is addressed to an amount of land tax considered as relating specifically to a given piece of land, in the sense that it is a proportionate amount of the land tax which is for the time being payable by the owner (or deemed owner) of that piece of land in respect of the whole of his non-exempt lands. And indeed the provision for a deduction to prevent double taxation is expressed in terms which treat the land tax payable by the mortgagee in respect of the mortgaged land as distinguishable from the land tax payable by him in respect of other lands. (at p51)

8. Then there is the comparable case of purchaser and vendor. As to that case s. 26 enacts provisions identical in all relevant respects with the provisions as to mortgagor and mortgagee. Both parties are made liable for land tax "in respect thereof", the purchaser being made the primary taxpayer and the vendor the secondary taxpayer. There is a provision here as in s. 23 against double taxation, allowing a deduction necessary for that purpose to be made, not from the land tax payable by the vendor generally, but from the land tax payable by him in respect of the relevant land. And again the default by the purchaser which is to make the vendor responsible for the payment of so much of the purchaser's land tax as is proportionate to the relevant land is a default in payment of the land tax "in respect of the land" - a form of words which presupposes that a default may be identified as relating specifically to one part of a taxpayer's land and therefore that a payment may have discharged his liability in respect of other parts. If so, s. 47 can hardly mean to maintain the charge over those other parts. At least it seems clearly enough to be the intention that if a vendor, having become responsible under the section for the payment of so much of the purchaser's total land tax as is proportionate to the value of the land sold, discharges his responsibility by making a payment of that amount to the Commissioner, the land shall no longer be subject to any charge under s. 47 for any land tax payable either by the purchaser or by the vendor. (at p51)

9. Two other special cases that are dealt with are those of the owner of an equitable estate or interest and of joint owners. A trustee having been made by s. 24 liable in respect of land tax as if he were beneficially entitled to the land (but subject to provisions for his being separately assessed in respect of other lands), s. 25 makes the owner of an equitable estate or interest liable in respect of land tax as if he were the legal owner of the estate or interest, the legal owner being deemed the primary taxpayer and the equitable owner the secondary taxpayer. Then follows the same kind of provision as before, that there shall be deducted from "the land tax payable by the latter in respect of the land" such amount (if any) as is necessary to prevent double taxation. (at p51)

10. As to joint owners the plan adopted (in s.27) is to make the joint owners jointly liable for land tax in respect of the land as if it were owned by a single person, and to make each of them separately liable in respect of his individual interest together with any other land owned by him in severalty and his individual interests in any other land. The joint owners in respect of their joint assessment are deemed to be the primary taxpayer, and each joint owner in respect of his separate assessment to be a secondary taxpayer - presumably meaning so far as the jointly owned land is concerned; and then follows a provision to prevent double taxation of the secondary taxpayer, namely that the necessary deduction shall be made "from the land tax payable in respect of his interest in the land by each joint owner". (at p52)

11. It seems clear beyond doubt that the provision of s.34 (that where reference is made to "the land tax payable by a person in respect of any land or interest" the reference is (in effect) to a proportion of that person's land tax corresponding with the proportion which the unimproved value of the land or interest bears to the unimproved value of all his land) is enacted particularly, if not exclusively, for application to the provisions as to a deduction to prevent double taxation; and when it is applied to ss. 25 and 27, as to the other similar provisions, it produces the phenomenon of the Act allowing a deduction, not from the secondary taxpayer's land tax considered as a whole and as the subject of a statutory charge over the entirety of his land, but from an amount of his land tax which is proportionate to the unimproved value of the relevant land or interest. Thus that notionally segregated amount of his land tax is treated as capable of being separately reduced by the making of the necessary deduction; and the only way of satisfactorily reconciling this with s. 47 seems to be to read s. 47 as creating a charge which is capable of being removed from the relevant land or interest by the payment of the proportionate amount of the secondary taxpayer's total land tax. (at p52)

12. The concept of a taxpayer's land tax as being so spread over the land in respect of which it has been assessed that a disposition of any part of that land will be subject to a statutory charge for a proportionate part only of the tax seems thus to lie behind the drafting of the Act at each point at which the extent of the charge needs to be specifically defined. It emerges, we think, in s. 47 itself, where the subject matter is described by the general, indefinite expression "land tax", so that the provision may be applied in reference to any unpaid amount of land tax that may be selected as being proportionate to a particular piece of land, that piece of land then satisfying the expression that is introduced by the definite article "the land taxed" - the land the owning of which has given rise to the liability for the particular unsatisfied amount. (at p52)

13. We regard the question at issue in this appeal as exceedingly difficult, but the balance of considerations seems to us to favour the construction of s. 47 for which the appellants contend. The result it produces is in our view more reasonable - indeed we are prepared to say less oppressive - than the result of the opposite construction; and for that reason we think it is the more readily to be placed upon the equivocal language of the section. (at p53)

14. Accordingly we would allow the appeal. (at p53)

McTIERNAN J. I agree that the appeal should be allowed. I have read and considered all of the relevant sections of the Land Tax Act (N.S.W.) and the Land Tax Management Act (N.S.W.) and concluded that the amount of land tax which is a first charge upon one portion of the lands owned by a taxpayer is only that amount of the total tax payable by the taxpayer that bears to the total tax the same proportion that the value of the portion of the land in question bears to the whole of the land owned by the taxpayer at that time. (at p53)

OWEN J. The plaintiffs in these proceedings are the first and second mortgagees respectively of a property known as Bomera in New South Wales which was owned by one S. E. White whose estate was sequestrated in March 1962. (at p53)

2. White owned a number of parcels of land in New South Wales in addition to Bomera and at all relevant times a substantial amount was owed by him for land tax. Under s. 9 (1) of the Land Tax Management Act land tax is payable by the owner of land upon the taxable value of all land owned by him, other than land which is exempt from taxation and, by s. 9 (2), the "taxable value of all the land owned by a person is the total sum of the unimproved value of each parcel of the land" less certain deductions which are not material in the present case. Under s. 14 the Commissioner of Land Tax is required to cause an assessment to be made of the taxable value of the land owned by any taxpayer and of the land tax payable thereon. The effect of these provisions is that "one composite tax is levied upon the owner in respect of all the land owned by him": Tooth &Co. Ltd. v. Newcastle Developments Ltd. (1966) 116 CLR 167 , and a single assessment is made of the taxable value of all his land and of the tax payable thereon. (at p53)

3. Section 47 of the Act provides that:

"Land tax shall until payment be a first charge upon the land taxed in priority over all other encumbrances whatever, and notwithstanding any disposition of the land it shall continue to be liable in the hands of any purchaser or holder for the payment of the land tax so long as it remains unpaid: Provided that no such charge shall be of effect as against a bona fide purchaser for value who, at the time of purchase, made due inquiry but had no notice of the liability: Provided further that a purchaser shall be deemed to have made due inquiry who has made inquiry in the prescribed manner at the office of the Commissioner. The Commissioner shall on application of the purchaser of any land . . . issue a certificate showing if there is any land tax payable on the land described in the application . . . ." (at p54)

4. In the present case the first mortgagees of Bomera who have not gone into possession have, in the exercise of their power of sale, entered into an agreement to sell that property and the question that arises, as between the plaintiffs and the Commissioner, is whether the total amount of tax owing by White is a first charge upon each and every parcel of the land (including Bomera) owned by him, or whether, as the appellants contend, the amount charged upon Bomera is so much of the total tax payable by White as bears to the total tax the proportion which the unimproved value of Bomera bears to the unimproved value of all the lands owned by White. (at p54)

5. Prima facie the first paragraph of s. 47 operates, in my opinion, to make the whole of the one composite tax payable by White in respect of all the lands owned by him a charge upon the whole of those lands and upon each and every parcel of them. For the appellants, however, it was submitted that the fourth paragraph of s. 47 points to the conclusion that where the taxpayer owns more than one parcel of land the words "land tax" which appear in the first paragraph of the section refer to part only of the composite tax assessed on the taxable value of all the parcels of land owned by the taxpayer and that, for the purposes of s. 47, the amount charged on any particular parcel is to be ascertained by applying a formula which is to be found in s. 34 of the Act. (at p54)

6. That section is in these terms:

"Where in this Act reference is made to the land tax payable by a person in respect of any land or interest, the reference is to so much of the whole land tax payable by him as bears to the whole land tax payable by him the proportion which the unimproved value of the land or interest referred to bears to the unimproved value of all the land . . . owned by him."

There seems to me to be two reasons why these submissions cannot be accepted. In the first place the fourth paragraph of s. 47 is, in my opinion, in no way inconsistent with the view that the words "land tax" in the first paragraph mean the whole of the composite tax which the Act requires to be assessed on all the parcels of land owned by the taxpayer and that the words "the land taxed" in that paragraph refer to the whole of the land to which that assessment relates. It is true that where the land taxed consists of a number of parcels, one only of which is agreed to be sold, what the purchaser seeks from the Commissioner and the Commissioner is required to give pursuant to the fourth paragraph of the section, is a certificate showing whether there is any land tax payable on the parcel of land which is the subject of the sale. But if the first paragraph of s. 47 operates to charge all the land owned by the taxpayer and each and every parcel of it with the total tax assessed, no difficulty arises in applying the fourth paragraph. In such case the Commissioner would certify that the tax payable on the land agreed to be purchased was the total amount payable by the taxpayer. If, on the other hand, the effect of the first paragraph is to create as many charges as there are parcels of land included in the assessment, each charge representing a proportion only of the total tax, and to charge each parcel with its appropriate proportion, again no difficulty would arise in the application of the fourth paragraph. In other words, whichever construction is given to the first paragraph the provisions of the fourth paragraph fit in equally well. (at p55)

7. Nor do I think that s. 34 can be applied to the first paragraph of s. 47. The purpose of s. 34 is to limit the meaning which would otherwise be given to the phrase "the land tax payable by a person in respect of any land or interest" wherever it appears in the Act and that phrase is not found in s. 47. Section 34 is, however, clearly applicable to a group of sections (ss. 23, 25, 26, 27, 30, 32 and 33) immediately preceding it, which deal with cases in which more than one person is or is deemed by the Act to be the owner of land and as such falls within one or other of two categories, one being that of a "primary" taxpayer, the other a "secondary" taxpayer. One purpose of these provisions is to prevent double taxation and to this end s. 33 provides that:

"Where under this Act - (a) any person is deemed to be the secondary taxpayer in respect of any land or interest; and

(b) it is provided that there shall be deducted from the land tax payable by the secondary taxpayer, in respect of the land or interest, such amount (if any) as is necessary to prevent double taxation.

the amount of the deduction (if any) shall be the lesser of the following amounts:- (i) the amount of land tax payable in respect of the land or interest by the secondary taxpayer; or

(ii) the amount of land tax (if any) payable in respect of the land or interest by the primary taxpayer aggregated with the amount of land tax (if any) payable in respect of the land or interest by a precedent secondary taxpayer (if any): Provided that the secondary taxpayer shall be assessed and liable in respect of the land or interest, notwithstanding that the primary taxpayer is exempt from taxation in respect of the land or interest, or that there is no primary taxpayer in respect of the land or interest."

It is to these sections, and particularly to s. 33, that s. 34 is, in my opinion, designed to apply. (at p56)

8. For these reasons, which are in substance, those given by Hardie J., the judge of first instance, and by Sugerman and Walsh JJ.A. in the Court of Appeal, I am of opinion that the appeal should be dismissed. I would add that the decision in Tooth &Co. Ltd. v. Newcastle Developments Ltd. (1966) 116 CLR 167 , to which I have referred earlier, does not seem to me to throw any light on the questions raised in the present case, except in so far as it emphasizes that the tax imposed by the Act is one composite tax, assessed by means of one assessment, upon all the lands owned by the taxpayer. The Court was there called upon to construe a provision in a lease by which the lessee had covenanted to pay all taxes imposed upon or in respect of the demised premises or upon the lessor in respect of those premises. The lessor owned a number of parcels of land in addition to the land demised and it was held that the intention of the parties as expressed in the covenant was not that the lessee should be required to pay the whole amount of tax for which the lessor became liable but that the lessee's liability was limited to the payment of a proportion only of the total tax payable by the lessor, the proportion payable by the lessee representing so much of the lessor's total liability as bore to its total liability the same ratio as did the value of the demised land to the total value of all the lands owned by the lessor. (at p56) (at p56)

Orders

Appeal allowed with costs. Order of the Supreme Court of New South Wales (Court of Appeal Division) discharged. In lieu thereof order that the appeal to that Court be allowed with costs, that the decretal ordder of Hardie J. be set aside and that in lieu thereof the following declaration and order be made: 1. A declaration that the charge under s. 47 of the Land Tax Management Act, 1956 (as amended) upon the property known as Bomera in respect of land tax which became payable by Stanley Ernest White for the years ended respectively on 31st October 1958, 1959 and 1960 is for so much only of the said land tax as bears the same proportion thereto as the unimproved value of Bomera as at the said respective dates bears to the unimproved value of all the land owned by the said Stanley Ernest White as at the said respective dates.
2. An order that the Commissioner of Land Tax pay the costs of the plaintiffs of the suit in the Supreme Court.

Solicitors for the appellants, W. A. Baxter &Co., Gunnedah, by A. J. McLachlan, Hoare &Co.

Solicitor for the respondent, R. J. McKay, Crown Solicitor for the State of New South Wales.

R. A. H.