Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue
[2009] VSCA 167
•24 July 2009
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 3886 of 2008
No 3887 of 2008
No 3888 of 2008
| SANDHURST HOLDINGS (AUSTRALIA) LIMITED (ACN 083 189 655) | Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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JUDGES: | BUCHANAN and DODDS-STREETON JJA and BEACH AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 21 July 2009 | |
DATE OF JUDGMENT: | 24 July 2009 | |
MEDIUM NEUTRAL CITATION: | [2009] VSCA 167 | |
JUDGMENT APPEALED FROM: | [2008] VSC 439 (Mandie J) | |
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LAND TAX – Exemption – Whether land exempt from land tax because used for ‘out-door sporting recreation or cultural purposes or similar out-door activities’ – Whether construction of golf course and other out-door sporting facilities commenced on land but not completed constitutes use for the specified purposes – Land Tax Act 1958, s 9(1)(g).
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J W de Wijn QC | Maddocks |
| Mr N P De Young | ||
| For the Respondent | Mr J D Merralls QC Mr C J Horan | Solicitor for the Commissioner of State Revenue |
BUCHANAN JA:
I agree with Dodds-Streeton JA.
Like her Honour, I think limited assistance is to be derived from cases concerned with the construction of other provisions and the application of those provisions to different facts. In the case of this provision it is, I think, tolerably clear that the legislature was concerned to exempt from tax only land actually used for out-door sporting, recreational or cultural purposes or activities by a body which existed for certain specified purposes. Both requirements must be met.
DODDS-STREETON JA:
Introduction
The appellant taxpayer, Sandhurst Holdings (Australia) Limited, appeals from the decision of Mandie J, who, on 24 October 2008, dismissed its appeals against the respondent Commissioner of State Revenue’s disallowance of its objections to land tax assessments for the tax years 2002, 2003 and 2004. The appellant, both below and on appeal, contended that s 9(l)(g) of the Land Tax Act 1958 (Vic) (‘the Act’) exempted from land tax its land at Carrum Downs, on which the construction of golf courses and other out-door sporting facilities had commenced but had not been completed, and which had not yet been used for playing golf or any other out-door sporting activities.
The appellant contended that the language of s 9(1)(g) extended the land tax exemption to the construction phase of a sporting facility and the policy of the legislation and relevant authority supported its construction. His Honour, however, upheld the respondent’s contrary construction that s 9(1)(g) required a current use of the land for the specified out-door sporting purposes or activities after the completion of construction or development on the land.
Section 8 of the Act provided:
8. Land tax, on what land to be assessed
(1) Subject to sub-section (2) tax on land shall in the case of each owner thereof be assessed charged levied and collected by the Commissioner for each year on the total unimproved value of all land of which he is the owner at midnight on the thirty-first day of December immediately preceding the year for which such tax is assessed charged levied and collected.
(2) Tax on land referred to in section 9(1)(c) that is subject to tax because of section 9(2) and tax on land owned by a charitable institution that is not exempt from tax under section 9(1)(d) (whether because of section 9(2AAA) or otherwise) shall be separately assessed charged levied and collected by the Commissioner from the owner thereof for each year on the unimproved value of each parcel of land of which he is the owner at midnight on the 31st day of December immediately preceding the year for which such taxation is assessed charged levied and collected as if it were the only land owned by the owner.
(2A) Sub-section (2) does not apply in respect of land referred to in section 9(1)(c) vested in a public statutory authority.
(3) Where portion of a parcel of land (not being a portion of a building) is occupied separately from, or is obviously adapted to being occupied separately from other land in the parcel such portion shall for the purposes of sub-section (2) be regarded as a separate parcel of land.
Section 9(1)(g) of the Act provided:
9. Lands exempted from land tax
(1) Subject to this Act—
…
(g) land which is vested in any body corporate or unincorporate (not being a body that promotes or controls horse racing, pony racing or harness racing in Victoria) that exists for the purpose of providing or promoting cultural or sporting recreation or similar facilities or objectives and that applies its profits in promoting its objectives and prohibits the payment of any dividends to members and which is used for out-door sporting recreation or cultural purposes or similar out-door activities;
Background and Facts
The appellant was, as at midnight on 31 December of the tax years 2002, 2003 and 2004 (‘the relevant dates’), the purchaser and lessee of land at Carrum Downs known as the Sandhurst Gold Course (‘golf course land’), on which two 18-hole champion golf courses, an associated wetland lake system, walking and cycling paths, open spaces and a golf and community club house with associated facilities were being constructed. The parties’ joint summary states:
At each of the Relevant Dates, the Appellant was in possession of the Golf Course Land pursuant to the Lease. Construction of the golf courses and associated facilities on the Golf Course Land pursuant to the Construction Contract commenced shortly after 10 August 2001
As at each of the Relevant Dates, construction of the golf courses and associated facilities on the Golf Course Land remained in progress. The progress of the construction works can be summarised as follows:
(a) By 31 December 2001 (the relevant date for the 2002 Assessment), the earthworks for the golf courses and associated wetland / lake system were underway.
(b) By 31 December 2002 (the relevant date for the 2003 Assessment), most of the necessary works for the construction of the golf courses and associated facilities and clubhouse were in progress.
(c) By 31 December 2003 (the relevant date for the 2004 Assessment), almost all of the necessary works for the construction of both golf courses and associated facilities and clubhouse were in progress; the construction of the northern golf course, clubhouse and car park were substantially completed; and the construction of the associated open spaces, wetland / lake system and golf cart / walking / cycling paths on the northern golf course was substantially completed.[1]
[1]Joint Summary, filed 20 February 2009, [19]-[20] (citations omitted).
The respondent assessed the golf course land for land tax in three successive assessments for 2002, 2003 and 2004 (‘the assessments’), as at the respective relevant dates. The joint summary states:
The Assessments were issued on 24 October 2005.
By letter dated 28 October 2005, the Appellant objected to each of the Assessments on the basis that the Golf Course Land was exempt from land tax at each of the Relevant Dates pursuant to s 9(1)(g) of the Act (Appellant's Objections).
…
By a Notice of Decision dated 20 September 2007 a delegate of the Respondent disallowed the Appellant's Objections because at the Relevant Dates the Golf Course Land was used for the purposes of construction and development of two golf courses and various recreational and associated facilities, and was not used for any of the purposes or activities specified in s 9(1)(g). (The Respondent accepted that the Appellant satisfied the other requirements of the relevant exemption.)
By letter dated 7 November 2007, the Appellant requested that the Respondent treat the Appellant's Objections as appeals and cause them to be set down for a hearing before this Court pursuant to s 25(1)(b) of the Act.
By notices filed by the Respondent pursuant to Rule 7.05. of Chapter II of the Supreme Court Rules dated 11 February 2008, three proceedings (one for each Assessment) were instituted in this Court to have the Appellant's Objections set down as appeals.
The three proceedings were heard at the same time by Justice Mandie on 6 October 2008. The sole issue before the primary Judge was whether the Golf Course Land at each of the Relevant Dates was, in the context of s 9(1)(g) of the Act, "used for out-door sporting recreation or cultural purposes or similar out-door activities'.
…
The sole issue to be determined in these appeals is whether the Golf Course Land was at each of the Relevant Dates, in the context of s 9(1)(g) of the Act, "used for out-door sporting recreation or cultural purposes or similar out-door activities" in circumstances where the activities conducted on the land comprised the construction and development of golf courses and associated facilities.[2]
[2]Ibid, [4]-[5], [7]-[10] and [12] (citations omitted).
The background to the appellant’s incorporation and the development of the golf course land was set out in the joint summary as follows:
The Appellant was incorporated on or about 29 June 1998. As at 10 August 2001, the constitution of the Appellant recorded its objects as:
“6.1 to sell Interests to persons who desire to become an Interest Holder (and therefore a Club Member), being persons who need to acquire an Interest in order to satisfy the membership qualification set out in the Club Constitution;
6.2 to develop two Golf Courses, a Clubhouse and other facilities (including roads) at the Property for use by the Club pursuant to the terms of the Lease;
6.3 to carry out any other developments with respect to the Property;
6.4 to do anything else in relation to the Property or the Project for the benefit of Club Members, whether directly or indirectly; and
6.5 to raise funds by any lawful means for the achievement of the objects.”
The Sandhurst Club Limited (Sandhurst Club) was also incorporated on or about 29 June 1998. As at 10 August 2001, the constitution of the Sandhurst Club recorded its objects as, inter alia:
“6.1 to operate and make available the Club Facilities, pursuant to the terms of the Lease15, for use by the Members and such other persons who are, pursuant to the terms of this Constitution, authorised to use such facilities;
6.2 to operate and make available the Golf Course, pursuant to the terms of the Lease, for the use of Golf Members and such other Members who are, pursuant to the rights attached to their respective class of Membership, authorised to use the Golf Courses;
…
6.4 to maintain the Golf Courses and the Club Facilities at a reasonable standard;
…
6.10 to raise funds by any lawful means for the achievement of the objects.”
Shares issued in the Appellant are stapled with membership of the Sandhurst Club, such that in order to become a member of the Sandhurst Club a person must first be entitled to be a shareholder of the Appellant.
The Sandhurst Development Land was purchased by Sandhurst Golf Estates Pty Ltd (SGE) in July 2001.
On 10 August 2001, the following transactions occurred:
(a) The Appellant as purchaser entered into a Contract of Sale with SGE as vendor to purchase the Golf Course Land, which contract was to ultimately settle upon the date of final completion of the whole of the Sandhurst Club Development.
(b) The Appellant as tenant and SGE as landlord entered into a Lease in respect of the Golf Course Land for a term commencing on 10 August 2001 until the date the land was transferred to the Appellant or the above Contract of Sale was otherwise terminated. Under clause 3.2 of the lease, the Appellant as tenant was required to pay all rates and taxes (including land tax assessed on the basis that the Golf Course Land is the only land owned by SGE).
(c) The Appellant as principal entered into a Construction Contract with Sandhurst Golf Estates (Constructions) Pty Ltd and Links Group Constructions Pty Ltd as contractors for the construction of the golf courses and associated facilities and clubhouse on the Golf Course Land.
(d) The Appellant as landlord entered into an Agreement to Lease in respect of the Golf Course Land with the Sandhurst Club as tenant for a term commencing on the opening date of the northern golf course.[3]
[3]Ibid [14]-[18] (citations omitted).
The judgment below
The primary judge, having set out the facts, considered the competing constructions of s 9(1)(g) advanced by the parties in the light of the authorities on which they relied.
Before his Honour, the appellant submitted that:
(a)The application of s 9(1)(g) of the Act was not restricted to land on which people were actually playing sport at the time – such an interpretation was unrealistically narrow and did not take account of interruptions, such as closures for repair.
(b)The use requirement looked to the purpose for which the land was used at the relevant time. In order to promote the goal of the exemption, land should be regarded as being used for a purpose if that purpose was in the process of being implemented. It was unnecessary to decide the position of a merely intended use, without any concrete steps having yet been taken, because, in the present case, the land was being used for the purpose for which the facilities were being constructed.
Alternatively, in relation to the 2004 assessment, the appellant contended that the evidence established that the land was being used from about July 2003 until 31 December 2003 by residents of the related residential community for out-door activities, including walking, running, bike riding and bird watching. The evidence did not, however, establish the number of residents in occupation between the relevant dates, the parts of the land used or the extent of the use.
The appellant relied on an analysis of a number of authorities in support of its construction, including City of Newcastle v Royal Newcastle Hospital,[4] Mayor, Councillors and Citizens of the City of Essendon v Cox, (‘Cox’)[5] Australian Football League v Commissioner of State Revenue,[6] Needham & Holdway (as Trustee for Tattersall’s Club) v Commissioner of Land Tax,[7] Educang Ltd v Brisbane City Council,[8] Meriton Apartments Pty Ltd v Parramatta City Council[9] and Assessor of Area #10-Burnaby/ New Westminster v Intracorp Developments Ltd.[10]
[4](1957) 96 CLR 493; [1957] HCA 15.
[5][1967] VR 545.
[6](2004) 57 ATR 306; [2004] VCAT 1882.
[7][1999] 2 Qd R 611; [1998] QCA 347.
[8][2002] QSC 374.
[9][2003] NSWLEC 309.
[10][2000] BCCA 121.
The respondent relied on Cox, Applewood Residential Developments Pty Ltd v Commission of State Revenue, (‘Applewood’)[11] and Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam).[12]
[11](2006) 64 ATR 291; [2006] VSCA 207.
[12]30 BCLR (3d) 263.
The respondent contended that the exemption imposed a temporal requirement of current use of the land for the specified purposes or activities at the relevant date of the assessment.
It pointed to the exemption’s origins in the Cultural and Recreational Lands Act 1963, which dealt with rates payable in respect of recreational lands defined in terms virtually identical to those of s 9(1)(g). The respondent submitted that the genesis of s 9(1)(g), which had been transposed from the earlier legislation, indicated a need to concentrate on its specific language, rather than on comparisons with other exemptions in s 9(1).
The respondent submitted that the exemption did not extend to a merely contemplated or intended use, but was limited to current use. It required two things, viz:
(1) that the body in which the land was vested should exist for the specified purposes; and
(2)that the land should be used on the relevant date for one of the defined purposes.
In that context, the respondent submitted that:
(a)‘Purposes’ was used in conjunction with the word ‘activities’, which indicated that there must be something being done on the land which was also encompassed by the word ‘purpose’. The word ‘purpose’ should be considered as referring to ‘active purposes’ and not objects in view or ultimate objectives.
(b) That construction would not preclude coverage of a case in which there had been a temporary interruption of a pre-existing habitual use, but excluded the materially different case where there had never been any prior use of the land for the specified purposes or activities. In the present case, the construction and development works were not out-door sporting activities. Although on their completion they would be used for such activities, they did not constitute a current use of the land for out-door sporting purposes.
(c)The appellant’s construction was inconsistent with Nettle JA’s observations in Applewood to the effect that land being developed was not being used for the purpose for which it would ultimately be used.
(d) The policy behind the exemption did not require its application to the construction or development phase.
(e) If the appellant’s contention were correct, there would be no need for s 9(1)(g) to add a requirement of ‘use’.
His Honour accepted that the respondent’s construction was correct. He observed that the construction of other statutory provisions and language in different contexts were largely unhelpful.
His Honour considered that the language of s 9(1)(g) should be considered as a composite phrase in which the word ‘purposes’ took colour from the word ‘activities’. The provision was, in his view, concerned with the current use of the land for the defined purposes or activities rather than an intended purpose or activity for which the land was to be used in the future. His Honour stated:
In my view, the appellant’s submission places undue and isolated emphasis upon the words “for” and “purposes” and distorts the meaning conveyed by the composite expression “which is used for outdoor sporting recreation or cultural purposes or similar out-door activities”.[13]
[13][2008] VSC 439, [26].
His Honour considered that the precise policy underpinning the exemption could be identified only by the scope and plain meaning of the actual words used. He identified the goal as encouraging outdoor sporting activities and considered that the appellant’s construction was unnecessary to its fulfilment.
Finally, his Honour did not consider that the evidence in relation to usage of the land between July 2003 and 31 December 2003 was sufficient to support the appellant’s alternative submission in relation to the 2004 assessment.
Submissions on Appeal
Both before the primary judge and on appeal, the appellant submitted that the physical acts of use conducted on the land at each of the relevant dates comprised ‘the construction and development of golf courses and associated activities’. The construction and development were the means by which the appellant was achieving the object of providing golfing facilities for the purpose of facilitating out-door activities. It was not, realistically, for a purpose independent of the ultimate use for which it was intended.
The appellant submitted that the words ‘for’ and ‘purposes’ incorporated elements of both future and present use, in accordance with a primary dictionary meaning of ‘for’ as ‘with the object or purpose’.
The appellant submitted that the primary judge had erred in reading down the normal meaning of the phrase ‘used for out-door sporting recreation or cultural purposes’, thereby impeding the policy behind the exemption.
Before us, the respondent reiterated and amplified its submissions below. Counsel submitted that s 9(1)(g) required that the land be used for the specified purposes or activities at the relevant date for the tax year. Liability to pay land tax depended on the circumstances as at the relevant date of the tax year and the use referred to in s 9(1)(g) was, accordingly, a use current at that date. It was not a mere contemplated or intended use. It was not sufficient that the land was acquired or held with an intention of using it for a complying purpose in future. Nor did construction of facilities which would ultimately be used for sporting purposes or activities itself amount to a use for sporting purposes.
Relevant Authorities
The parties relied on a number of authorities all of which were (as the primary judge observed) distinguishable by the wording of the provision, the facts, or both. They were therefore of limited assistance in ascertaining the precise meaning of s 9(1)(g).
In City of Newcastle v Royal Newcastle Hospital (‘City of Newcastle),[14] a case to which both parties referred, the taxpayer, a public hospital, argued that a large area of underdeveloped, vacant land situated adjacent to its existing hospital building was ‘used or occupied for the purposes of a hospital’ within the meaning of s 132 of the Local Government Act 1919 (NSW) and therefore exempt from rates. The existing hospital was a chest hospital and there was evidence that the retention of a large area of undeveloped land nearby promoted the tranquil, dust-free atmosphere required for best results in the treatment of tuberculosis. The High Court majority (Williams, Webb and Taylor JJ) held that the fulfilment of the purposes of a hospital did not require the immediate, active physical use of every part of the land and the retention of the vacant land was necessary for the hospital’s operation. The vacant land was wholly devoted to the relevant purposes and thus within the ambit of the exemption. Taylor J emphasised the word ‘used’ and noted that it was a word of wide import,[15] the meaning of which would greatly depend on the context. His Honour observed that the use of land would vary according to the purpose for which it had been acquired and devoted.
[14](1957) 96 CLR 493.
[15]Ibid 515.
Kitto and Fullagar JJ dissented in City of Newcastle. Fullagar J identified a false issue in the case, stating that ‘the root of the fallacy lies in the assumption that deriving an advantage from the ownership of land is the same thing as using land’.[16] The decision was, however, subsequently affirmed by the Privy Council.[17]
[16]Ibid 506.
[17](1959) 100 CLR 1; [1959] AC 248.
As Nettle JA observed in Applewood, City of Newcastle involved a project that was already in fact carried out on the land, rather than a project which had not yet commenced at all.
In Mayor, Councillors and Citizens of the City of Essendon v Cox (‘Cox’),[18] the taxpayer contended that certain lands held on trust for a horse racing club, including the race course itself (with stands and access facilities), an adjacent area of vacant land used for grazing horses, a totalizator facilities area, a catering area and car parking areas were recreational lands which were, inter alia, ‘used for out-door sporting recreational purposes or similar out-door activities’ within the meaning of s 2(a)(ii) of the Cultural and Recreational Lands Act 1963 and therefore not liable to a general rate under the Local Government Act 1958. Adam J identified the ‘manifest policy’ of the legislation as:
[b]eing to encourage, in the interests of the community, the retention of the use of the existing out-door cultural sporting and recreational lands and their continued use as such, when controlled by organisations which derive no profit for themselves.[19]
His Honour observed that such a policy predisposed him to:
[g]ive a reasonably wide, and indeed, liberal scope to the requirements that lands should be used for the specified purposes.[20]
[18][1967] VR 545.
[19]Ibid 551.
[20]Ibid.
Therefore, Adam J held that in the absence of an express requirement that the land be exclusively or wholly used for the prescribed purposes, a use of land which (although itself lacking the character of the end purpose) was fairly regarded as ancillary or incidental to it, should be regarded as use for the end purpose. That approach advanced ‘the completer and more efficient use of the lands as a whole as recreational lands’.[21]
[21]Ibid.
His Honour concluded that the various car parking areas were only used as car parks on race days for those attending the races. He considered that while the car park lands were not used for out-door sporting or recreational purposes in any proper sense, clearly enough, they were used for purposes ancillary, incidental and subordinate to the use of the race course as a whole for such purposes and were ‘in truth but adjuncts of the race course itself’.[22]
[22]Ibid 550.
Adam J also recognised that the land used for catering was in the same position. It was ‘in one sense … for catering purposes’, but ‘the primary consideration’ was ‘the functional use of the lands by the owner’[23] and ‘the real and substantial character of the use’[24] to which the land was put. His Honour concluded that land used for totalizator facilities and the broadcasting of races was also within the definition of recreational lands.
[23]Ibid 552.
[24]Ibid 553.
In contrast, Adam J held that the land used to graze a few horses unassociated with the race course or its activities was not used for a purpose ancillary or incidental to the specified end purpose. It was therefore not liable to a general rate under the Local Government Act 1958.
His Honour distinguished between an immediate purpose and an end purpose. He considered that ‘if use exclusively for a specified purpose were not prescribed and the immediate purpose to which the lands were put had a real nexus to some end purpose’,[25] they could be regarded as used for the end purpose.
[25]Ibid 551.
Adam J stated:
No rational ground that I have been able to appreciate has been suggested for denying to lands used for the purposes merely ancillary and incidental to the end purpose of outdoor sporting and the like the privileges intended to be conferred in respect of lands used for such purposes.
The relevant distinction is, I think, that so often drawn in the rating exemption cases between, on the one hand, purposes fairly to be regarded as merely incidental and ancillary or subordinate to some end purpose, and, on the other hand, purposes fairly to be regarded as independent and collateral purposes.[26]
[26]Ibid.
In Meriton Apartments Pty Ltd v Parramatta City Council (‘Meriton’),[27] the ratepayer contended that the rating categorisation of its land should be changed from ‘Business CBD’ to ‘Residential’ pursuant to s 526 of the Local Government Act 1993 (NSW), because residential towers were currently under construction there. The legislation provided that land would be classified as residential if, inter alia, its dominant use was for residential accommodation.
[27][2003] NSWLEC 309.
Pain J held that the land’s dominant use was, in the circumstances, for residential accommodation, and the erection of the building was the means by which the land was made to serve the purpose of residential accommodation. His Honour relied, in that context, on Taylor J’s observations in City of Newcastle.
Pain J stated:
While intention to use vacant land is not sufficient, the purpose of the use of the land is manifested by the commencement of building construction the use of which building is for the purpose of residential accommodation.[28]
[28]Ibid [22].
In Educang Limited v Brisbane City Council (‘Educang’),[29] White J held that land on which an additional campus for an established, operating school was being constructed was exempt from rates because it was ‘land used for educational purposes’ within terms of s 47(1) of the City of Brisbane Act1924 (Qld), which provided:
All land is rateable land other than -
(d) Land used for public, religious, charitable or educational purposes that is exempt from rating under a resolution of the council;
[29][2002] QSC 374.
The relevant council resolution (Resolution 5) stated:
Exemptions from General Rating Schedule(e)
"Any land that is used entirely for a school conducted by or on behalf of a religious body incorporated under "The Religious Educational and Charitable Institutes Act 1861", or another statute, whether or not the land has other buildings on it that are utilised in conjunction with the school.”
In Educang, the respondent council contended that to be exempt, the land must be used as a school, which could not occur until the building was opened and classes were undertaken. Until then, the land should be regarded as a construction site. White J rejected that submission. Her Honour considered that the land was used entirely ‘for’ (as distinct from ‘as’) a school during the construction and fit-out, prior to the commencement of classes.
Her Honour referred to Needham v Commissioner of Land Tax,[30] in which the Queensland Court of Appeal (McMurdo P, Thomas JA and Wilson J) held that the words ‘used or occupied by that … society solely as a site for – a building owned and occupied by … a club – not carried on for pecuniary benefit’ in s 13(1)(g)(i) of the Land Tax Act 1915 (Qld) ‘contained an element of futurity as well as an element of present use’.[31] That analysis relied, in turn, on Commissioner of Land Tax (NSW) v Joyce,[32] in which Gibbs J (with whom Mason J agreed) distinguished the phrase ‘as a site of’ from ‘as a site for’. His Honour considered the latter term to comprehend something which was to be, but was not yet, built on the relevant site. [33]
[30][1999] 2 Qd R 611.
[31]Ibid 613.
[32](1974) 132 CLR 22; [1974] HCA 39.
[33]Ibid 29.
White J considered that there was an element of futurity in the expression ‘used … for’ in the provision in Educang, as ‘for’ took its colour from ‘used’, which preceded it. Her Honour acknowledged that the results of cases involving the construction of the phrase ‘used for’ did not appear entirely consistent. In her Honour’s view, the differing outcomes demonstrated ‘that close attention to the words of the legislation is essential if reliance on analogous cases is to be assistance’.[34]
[34][2002] QSC 374, [24].
In Educang, White J was, in my opinion, influenced by the facts that the ratepayer had conducted a school for some years, always intended to have two campuses but only one school and acquired the relevant land for the purpose of a school which was already established. Her Honour considered that the use to which the land was put was not, in such circumstances, a construction site. Rather, ‘[t]hat activity was ancillary to its use for a school’.[35]
[35]Ibid [29].
In Assessor of Area # 10-Burnaby/New Westminster v Intracorp Developments Ltd (‘Assessor of Area # 10’),[36] the Court of Appeal of British Columbia held that once the construction of residential accommodation commenced on a property, it was ‘class 1 property ‘which was’ used for residential purposes’ within the meaning of the classification scheme in regulations made pursuant to the Assessment Act RSBC 1996, c 20 and was therefore entitled to the more favourable residential tax rate. Under the relevant regulations, the definition of ‘class 1 property’ included not only (under subpara (a)) ‘land or improvements, or both, used for residential purposes’ but also (under subpara (c)) ‘land having no present use and which is neither specifically zoned nor held for business, commercial, forestry or industrial purposes’.[37]
[36][2000] BCCA 121.
[37]See Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam) (‘Bosa No 2’) 30 BCLR (3d) 263, [70] (Lambert JA dissenting).
At the valuation date for tax purposes, the excavation of the property at issue in the case was 25 per cent complete, but no other construction of the proposed buildings, including a residential tower, had begun.
Donald JA (with whom McEachern CJBC and Southin JA agreed) discussed relevant authority, including Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam) (‘Bosa No 2’), in which Esson JA doubted (but did not decide) whether property was used for residential purposes at the stage when residential buildings were being built, but were not ready for occupation.
In Assessor of Area #10, Donald JA apparently accepted the relevant legislation aimed to prevent ‘the long term holding of vacant land under the guise of intended future residential development.[38] His Honour also accepted that although ‘used for residential purposes’ did not extend to holding property with a mere intention to develop the land for such purposes, the test would be satisfied once there was a clear commitment beyond the preconstruction development steps, manifesting itself in the actual building of the project.
[38][2000] BCCA 121, [24].
His Honour stated:
Once it is clear that the project has entered the construction phase, then the facts should be examined in each instance to determine whether the development has reached the stage where the owner is committed to one use rather than another.[39]
[39]Ibid [28].
His Honour further stated:
The degree of commitment may be inferred from a number of factors examined in the context of the development as a whole including, but not limited to:
1. the various legal instruments attached or applicable to the land and/or proposed buildings (zoning requirements, restrictive covenants, building permits, purchase and sale agreements, etc.);
2. relevant features of the actual construction (with the acknowledgment that it may be difficult to discern anything meaningful at early stages of construction); and
3. any substantial indication that the owner is using the land for a non-residential purpose or is in some way reneging on the stated intention to develop the land for residential use.[40]
[40]Ibid [29].
In Applewood, on which the respondent relied, the taxpayer owned land on which a retirement village was being constructed in stages. On some parts of the land, the building was complete and residents were already in occupation. On other parts, building was in progress or had not commenced. The taxpayer sought a land tax exemption under s 9(1)(j) of the Act for all of the land. The Court of Appeal held that the land on which buildings were under construction and the land awaiting future development (albeit with some services connected) did not constitute ‘land which is used and occupied as a retirement village and for no other purpose’ within terms of s 9(1)(j) of the Act. Those lands were therefore not exempt from land tax.
A ‘retirement village’ was relevantly defined in s 3(1) of the Act as ‘a complex containing residential premises … predominantly or exclusively occupied by retired persons’. Section 9(1)(j), subject to the Act, exempted from land tax ‘land which is used and occupied as a retirement village and for no other purpose’. Section 9(2AB) provided that if any part of the land were used and occupied as a retirement village and for no other purpose, the unimproved value of the land must be reduced in accordance with a specified formula.
Nettle JA (with whom Chernov and Redlich JJA agreed) observed that ‘the applicant put great store on the fact that the whole of the land was held for the purpose of a retirement village and for no other purpose at the relevant time’.[41] His Honour observed, however, that ss 9(1)(j) and 9(2AB) should be read in conjunction, and the latter expressly recognised that the whole of a piece of land could be held for no other purpose then that of a retirement village, although only a part of it was used and occupied. Therefore, the critical issue was whether the land under construction or development was used and occupied as a retirement village, as opposed to ‘held for the purposes of a retirement village’.
[41](2006) 64 ATR 291, 295.
His Honour stated that the critical question had ‘a temporal aspect to it, which was the consequence of land tax being an annual tax, and so it was to be answered by reference to the state of the land at the relevant time’.[42]
[42]Ibid.
Nettle JA referred to Taylor J’s statement in City of Newcastle, but stated:
But as Gibbs J noted in Gladstone Town Council v Gladstone Harbour Board,[43] in City of Newcastle v Royal Newcastle Hospital Taylor J was dealing with a case where the land was acquired or set apart for a project and wholly devoted to that project which was in fact carried out on the land, although not all the land was physically used.
Contrastingly, in a case like the present where the project is still being developed, the land on which the project is being developed is not being used for the purpose for which it will be used once it has been developed. As Gibbs J put it, a hospital under construction is not being used as a hospital and land purchased for construction of a church at a future date is not being used as a place of worship, and a warehouse undergoing alterations so that it may be used as a bonded warehouse is not being used as a bonded warehouse.
Of course, as Gibbs J said, Newcastle City Council v Royal Newcastle Hospital establishes that land may be ‘‘used’’ although enjoyment is derived from it without physical occupation. Thus, for example, a garden or recreational facility forming part of a retirement village may satisfy the description of land ‘‘used … as a retirement village’’. But even then, what is in contemplation is land which is presently being used in that fashion and not land which simply may or even will be used in that fashion at some time in the future. [44]
[43]Gladstone Town Council v Gladstone Harbour Board [1964] Qd R 505, 525.
[44](2006) 64 ATR 291, 296-7 (citation in original).
His Honour concluded that a comparison of ss 9(1)(j) and 9(2AB) with other exemptions provided in s 9(1) of the Act suggested that the draftsman had deliberately narrowed the exemption under s 9(1)(j) by a specificity of language designed to eliminate any doubt that it was not available unless the land was actually used and occupied as a retirement village at the relevant time. Doubt might otherwise arise from the different views expressed by members of the High Court in City of Newcastle and Eaton & Sons Pty Ltd v Warringah Shire Council[45] on whether land was used for a designated purpose.
[45](1972) 129 CLR 207; [1972] HCA 33.
Nettle JA observed:
Thirdly, because the question of use and occupation is one of fact and degree, each case will turn to a greater or lesser extent on its own facts and circumstances and, therefore, it is impossible to lay down proleptically how much facilities must be used and occupied before they qualify for exemption. Nevertheless, in a case like the present, where a retirement village is being developed in discrete phases, I do not consider that it can be said of land on which a phase is being constructed that it qualifies for exemption until and unless the residences which comprise that phase have been completed to the point that they are available for use and occupation and at least one of them in that phase is in actual use and occupation by a resident. Until then it seems to me that it is simply a case of the phase being developed and therefore not being used and occupied as the thing for which it will be used and occupied once it has been developed.[46]
[46](2006) 64 ATR 291, 299.
Discussion
In my opinion, the learned primary judge’s construction of s 9(1)(g) was correct.
While the appellant contended that its broader construction was essential in order to avoid the frustration of the legislative goals, as his Honour observed, they can only be ascertained from the language of the provision read in its total context. In my opinion, the structure and language of s 9(1)(g) indicate that the legislative goals are those identified by Adam J in Cox, as encouraging ‘the retention of existing out-door cultural sporting and recreational lands and their continued use as such’,[47] as opposed to the mere provision of such land. So much is clear from the addition of the user requirement in s 9(1)(g).
[47][1967] VR 545, 551 (emphasis added).
Section 9(1)(g) effectively prescribes two distinct conditions of exemption from land tax. Under s 9(1)(g), subject to the Act, land will be exempt from land tax if two conditions are satisfied:
1.the land is vested in a particular kind of body, one that exists for specified purposes (providing or promoting cultural or sporting recreation or similar facilities or objectives) which applies the profits to promoting its objectives and prohibits the distribution of dividends to members (‘the first condition’); and
2.the land is used as specified – viz, for out-door sporting recreation or cultural purposes or similar out-door activities (‘the second condition’).
Thus, while the body in which the land is vested must exist for the purpose of providing the relevant facilities or promoting the relevant objectives in order to obtain the exemption, the land must also be used as specified.
The appellant’s statement of the legislative goals tended to conflate the purposes of the existence of the body in which the land must be vested with the distinct, albeit similar, purposes of the user. As the provision of land for sporting or related purposes is neither a necessary nor sufficient condition of the exemption, it is not, in my view, the object of the legislation.
If the legislative goals of s 9(1)(g) are the retention of existing land and its continued use as such, the extension of the land tax exemption to the construction and development phase is unnecessary to their fulfilment.
Further, an analysis of the words of s 9(1)(g) in context supports the construction adopted by the primary judge.
As his Honour stated, decisions on analogous provisions are usually of limited assistance, as their outcomes may depend on even subtle differences in language or factual context.
Few of the authorities relied on by either party concerned a provision with the same structure or the same unusual terminology as s 9(1)(g) of the Act.
City of Newcastle involved the determination of whether the retention of a vacant part of a total holding was ‘used for the purposes’ of an established hospital, which was currently operating.
Educang involved the determination of whether land on which a new school campus was being constructed was ‘used for educational purposes’ and ‘entirely for’ an established and operational school.
Assessor of Area # 10 involved the construction of provisions based on a highly specialised definition of the relevant class of property.
While Cox required an analysis of the prior equivalent provision to s 9(1)(g) (in almost identical terms), it was in relation to a different question and factual context – viz, whether where some parts of a total landholding were already actively used for the specified ‘end’ purpose, other parts used for purposes ancillary to, rather than independent of, that end purpose, were likewise not liable to a general rate under the Local Government Act 1958.
While the appellant’s argument assumed that use of land for the preliminary stage of development or construction required for the specified end purpose invariably constitutes use for that ultimate purpose, the authorities demonstrate that the outcome will depend on the precise wording and context of the relevant provision.
Applewood, on which the respondent relied, also involved wording which differed materially from that of s 9(1)(g). The Court of Appeal there construed the scope of the exemption under s 9(1)(j) of the Act. It opined that land on which residences were being constructed in a ‘phase’ of developing a retirement village would not be exempt under s 9(1)(j) until at least one residence comprising the phase was completed to the point of availability for occupation. Before that, the land would merely be being developed and not yet used and occupied as the thing for which it would ultimately be used and occupied.[48]
[48]See (2006) 64 ATR 291, 299.
In contrast to s 9(1)(g), s 9(1)(j) specifies use and occupation as (rather than for) a retirement village.[49] That wording, and the need to construe s 9(1)(j) in conjunction with another provision of the Act, rendered the reasoning in authorities such as Newcastle Hospital and Meriton inapposite. Further, Nettle JA’s conclusion that land on which buildings were being constructed was being developed, rather than used or occupied as the thing for which it would ultimately be used and occupied, is not applicable to s 9(1)(g), given its different terminology.
[49]Emphasis added.
Unlike s 9(1)(j), s 9(1)(g) has not been narrowed by drafting designed to exclude the uncertainties that attend the determination of whether land is used for a designated purpose. The specific language of s 9(1)(g) nevertheless indicates that it does not cover the preliminary stage of development, principally for the reason emphasised by the primary judge.
As his Honour stated, the phrase ‘for [specified] purposes’ is an element of a composite phrase (‘for out-door sporting recreation or cultural purposes or similar out-door activities’), which must be construed as a whole.
Even if ‘or’ is read in its usual disjunctive sense, the specified purposes and activities are mutually linked by their description as ‘similar’ and the shared adjective ‘out-door’. The phrase ‘for [specified] purposes’ in isolation might import a prospective element covering construction on the land directed towards the ultimate purposes. The specified activities, however, must be current, not future, activities. As the primary judge held, their linkage with the prescribed purposes, to which they are ‘similar’, indicates that the purposes share their current temporal character. As the respondent submitted, the contrary conclusion would require a broader enquiry
(including aims and intentions) when determining the purposes, while the establishment of activities would depend only on matters of fact. Use for the specified purposes in the context of the second condition in s 9(1)(g) is thus, in my opinion, confined to use for, or ancillary and incidental to, the prescribed end purposes and does not cover use for a preliminary activity, such as construction or development preparatory to such use.
That conclusion is fortified by the contrasting use in the first condition of s 9(1)(g) of the ‘purpose’ of the body in which the land is vested to encompass unexecuted or unimplemented purposes, intentions or aims for the future. The appellant’s construction would not render the second condition of use entirely otiose, because it would preclude exemption for the mere holding of land by a body existing for the specified purpose, which would otherwise appear open. Further, the purposes in the first and second conditions of s 9(1)(g) are not identically described. Nevertheless, the structure of s 9(1)(g) and its division into two ‘conditions’ suggests that the first condition contemplates unrealised or unimplemented purposes or objectives, while the second condition is aimed at prescribing the actual current use of the relevant land following any necessary construction or development. The structure of s 9(1)(g) of the Act therefore reinforces the conclusion based on the language of the composite phrase.
Conclusion
In my opinion, the appeals should be dismissed.
BEACH AJA:
I agree with Dodds-Streeton JA.
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