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High Court of Australia |
BEVELON INVESTMENTS PTY. LTD. v. MELBOURNE CITY COUNCIL [1976] HCA 49; (1976) 135 CLR 530
Constitutional Law (Cth) - Local Government (Vict.) - High Court
High Court of Australia
Barwick C.J.(1), Gibbs(2), Stephen(3), Mason(3), Jacobs(4) and Murphy(5) JJ.
CATCHWORDS
Constitutional Law (Cth) - Imposition of tax on property belonging to Commonwealth - Occupation by Commonwealth under lease of part of building - Municipal rates referable to Commonwealth occupancy not recoverable from Commonwealth - State law requiring rates otherwise payable by Commonwealth to be paid by building owner - Whether imposition of tax on Commonwealth property - Exclusive power of Commonwealth Parliament to make laws with respect to places acquired by Commonwealth for public purposes - Leased premises - Whether place acquired by Commonwealth - Whether State law a law with respect to such a place - The Constitution (63 & 64 Vict. c. 12), ss. 52(i), 109, 114 - Local Government Act 1958 (Vict.), s. 267 (1)(b) - Acts Interpretation Act 1958 (Vict.), s. 3.Local Government (Vict.) - Rating - Rates levied on occupier - Rates levied upon owner where ratable premises occupied by Commonwealth - Validity - Local Government Act 1958 (Vict.), s. 267 (1) (b) - Acts Interpretation Act 1958 (Vict.), s. 3.
High Court - Original jurisdiction - Removal of proceedings from State Supreme Court - Inter se question - Question whether State law infringes s. 52(i) of Constitution - The Constitution (63 & 64 Vict. c. 12), s. 74 - Judiciary Act 1903-1973 (Cth), s. 40A.
HEARING
Melbourne, 1976, May 17; September 28. 28:9:1976DECISION
September 28.
2. The levying of a rate upon occupancy of land within the city of Melbourne
is authorized by ss. 251 and 254 of the Act, read with
other statutes giving
powers to the City of Melbourne. The levy of such a rate upon the Commonwealth
in respect of its occupancy
of the subject premises would offend and be
forbidden by s. 114 of the Constitution. Consequently, by reason of the
operation of s. 3 of the Acts Interpretation Act 1958 (Vict.), the imposition
of a rate upon the
occupancy by the Commonwealth is not authorized by the Act.
(at p533)
3. As the Commonwealth was not liable as an occupier of land to pay any rate
in respect of the parts of the building occupied by
it, the applicant as owner
of the building comprising ratable land became by virtue of s. 267 of the Act
liable to pay the rates
assessed in accordance with the Act. It is not
disputed that, if the applicant is liable to rates in respect of the parts of
the
building occupied by the Commonwealth, the amount claimed by the
respondents is the correct amount payable in accordance with the
Act. (at
p534)
4. The applicant raised before the magistrate the contention that s. 267(1)
of the Act was void in so far as the liability to rates
depended upon the
circumstance detailed in sub-par. (ii) of par. (b), because it was in conflict
with s. 52 of the Australian Constitution and with s. 114 thereof. The
magistrate rejected these contentions and entered judgment for the respondents
for the amount claimed. (at p534)
5. The applicant thereafter applied to the Supreme Court of Victoria for an
order nisi to review the decision of the magistrate
pursuant to the provisions
of Div. 3 of Pt V of the Justices Act 1958 (Vict.). Thereupon the application
for an order nisi was removed into this Court by virtue of s. 40A of
the
Judiciary Act 1903 (Cth), as amended. That application was directed, pursuant
to s. 18 of the Judiciary Act, to be argued before a Full Court. (at p534)
6. The basis of the removal into this Court of the application for an order
nisi to rescind the magistrate's decision was that the
grounds of the
application raised a question inter se within the meaning of s. 74 of the
Constitution and s. 40A of the Judiciary Act. The inter se question was said
to be involved in the challenge made to the validity of s. 267(1)
as being a
law with respect to
a place acquired by the Commonwealth for public purposes
within the meaning of s. 52(i.) of the Constitution: and, further, as being a
law imposing a tax on property of the Commonwealth. (at p534)
7. After consideration, I have come to the conclusion that the submission
contained in the first of these grounds of invalidity
of the State statute did
raise a question inter se. The question whether a State law infringes an
exclusive legislative power of
the Commonwealth does, in my opinion, involve a
question as to limits inter se: Dennis Hotels Pty. Ltd. v. Victoria
[1960] HCA 10; (1961) 104
CLR
529; (1962) AC 25 . That being so, there is no need for me to express any
concluded opinion upon the more difficult
question whether
the submission that
a State law offends a prohibition in the Constitution, e.g. s. 114, does give
rise to a matter inter se of the respective constitutional powers of
Commonwealth and States. It certainly does not do
so in the case of s. 92. In
my opinion, the application for an order nisi was properly removed into this
Court. We now have to consider the submissions made
by the applicant in
support of the application for an order to review. (at p535)
8. The applicant begins with the proposition that the floors of the building
leased by the Commonwealth for a term of five years
constituted a place
acquired by the Commonwealth for public purposes. I might mention in passing
at this point that, by the terms
of the lease, the Commonwealth covenanted "to
pay all telephone gas electricity charges and excess water rates (if
separately metered)
assessed in respect of the premises", such premises being
described in par. 2 of the schedule to the lease as the result of a variation
of the lease as "the area outlined in red on the plans annexed hereto and the
exclusive use areas being each floor from the first
to the fifteenth floor
(both inclusive) and part of the ground floor at Tivoli Court, 235-251 Bourke
Street, Melbourne". The applicant
as lessor covenanted, subject to due
performance by the lessee of its covenants, to "pay all rates taxes charges
costs and expenses
now or hereafter payable in respect of the building ..."
(at p535)
9. It is apparent to me that the Commonwealth did not, in any sense, acquire
the building or any part of it. At most, it acquired
a term in the land. It
may be that such a term is not land within the meaning of the definition of
"land" in the Acts Interpretation
Act. No other definition of land is
available in or with respect to the Act. So to say, however, is not to deny
that as a termor
the Commonwealth occupied land, namely, the premises as
defined in the lease as varied. (at p535)
10. Neither the leasing of those premises nor its occupancy of them would, in
any case, in my opinion, give to the Commonwealth
legislative power to pass an
Act in the terms of s. 267(1). Nor, in my opinion, would s. 52 of the
Constitution on the supposition that the leasehold interest of the
Commonwealth in the premises constitutes a place within that section deny the
State the power to pass s. 267. Whether made by Commonwealth or State, a law
in terms of s. 267 would not be a law with respect to
a place acquired by the
Commonwealth for public purposes. Section 267 is not, in my opinion, a law
about the premises occupied by
the Commonwealth. It is a law, as it affects to
be, imposing a liability to pay rates upon the owner of the ratable property.
Tested
by the usual criteria of the subject matter of a statute, namely, its
substantial relevance to the head of power, such a law is not
upon the subject
matter of the premises subject to the lease, but is upon the subject of rating
ratable property, which, as I have
said, by reason of s. 3 of the Acts
Interpretation Act and s. 114 of the Constitution, cannot include any property
of the Commonwealth. (at p536)
11. In my opinion, therefore, the submission that s. 267 is a law with
respect to a place occupied by the Commonwealth is misconceived
and
insupportable. In other words, whatever the right conclusion whether the
Commonwealth had relevantly acquired any place in the
applicant's building, s.
267 does not in any respect invade the area of exclusive legislative power of
the Commonwealth. (at p536)
12. It will be appreciated that, in the light of that conclusion, I have no
need to decide whether, by taking a lease of premises
for a term of years, the
Commonwealth relevantly acquired a place. But it may be observed that it would
seem that, if by a lease
for a term of years of parts of a building something
can be held to be acquired within the meaning of s. 52(i.), what is acquired,
in my opinion, is no more than a term of years in the defined premises. The
"acquired" term of five years can
scarcely be held to be a place within s.
52(i.). Whatever legislative power the creation of a term in the premises may
attract, it is not, in my opinion, a legislative power with
respect to the
premises which are the subject of the lease as a place acquired. (at p536)
13. The applicant's second submission was that s. 267 infringed s. 114 of the
Constitution. It had, of course, to be conceded that in terms the section did
not impose a tax on any property of the Commonwealth: further, that
it could
not. Certainly it did not in terms purport to tax the Commonwealth in respect
of any property of the Commonwealth. Nor does
the section tax the owner in
respect of the Commonwealth property: it taxes the owner in respect of the
ratable property it owns.
But, according to the applicant's argument, by
taxing the owner because the occupant of the property is not liable to be
taxed in
respect of that occupancy, the statute places an impediment in the
way of the Commonwealth when it needs or desires to lease property.
It was
asserted by counsel as notorious that if the intending lessor was liable to
pay rates in respect of the premises intended
to be leased, the asking rental
would for that reason be higher, at least by the amount expected to be paid
for rates. Of this there
was no evidence. Nor can I accept it as a proposition
judicially known. I suppose the factors which determine rental are
multifarious;
there may possibly be a discount offered rather than a premium
demanded for an occupancy by the Commonwealth of a large number of
floors in a
building under a single lease. But however that may be, by no stretch of
reasoning can it properly be concluded that,
because due to the section an
owner may ask a higher rental than otherwise he might, a tax is thereby
imposed on the intending lessee,
in this instance the Commonwealth, upon or in
respect of the subject matter of the lease. Parenthetically, it may be said
that, in
this case, the agreed rental is fixed upon terms that the applicant
should pay whatever is properly demanded for rates. The relevant
operation of
s. 267(1) ends with the owner being liable for the rate and the Commonwealth
not liable for the rate in respect of the
Commonwealth's occupancy of the
premises under the lease. In my opinion, this submission also should be
rejected. I would refuse
the application for a rule nisi to review the
decision of the magistrate. (at p537)
GIBBS J. The question that falls for decision in this case is whether the
respondent, The Lord Mayor, Councillors and Citizens of
the City of Melbourne,
validly made and levied upon the applicant a rate upon the value of portion of
a building in Melbourne owned
by the applicant but occupied by the
Commonwealth of Australia under a lease from the applicant for a fixed term
expiring on 31st
May 1978 with an option of renewal for a further five years.
Part only of the building (the first to the fifteenth floors) was so
occupied
but it was accepted in argument that portion of a building occupied by a
tenant under a lease is liable to be separately
rated: see In re Horwitz; Ex
parte Boberski (1901) 26 VLR 500 . It was common ground that the Commonwealth
took the lease to enable
the demised premises to be occupied by two
departments of government and by the Australian Postal Commission and the
Australian Telecommunications
Commission. Under s. 267 (1)(b) of the Local
Government Act 1958 (Vict.) (as amended in 1969) ("the Act") every general
rate is to
be levied upon the occupier, but if, inter alia, the occupier is
the Crown in right of the Commonwealth, it is to be levied upon
the owner of
the ratable property. That provision applies to the City of Melbourne - s.
267(2). The applicant's contentions were
(1) that the rate was a tax imposed
by a State on property belonging to the Commonwealth contrary to s. 114 of the
Constitution; and (2) that s. 267 of the Act was a law with respect to a
place acquired by the Commonwealth for public purposes and therefore
with
respect to a subject with respect to which the Commonwealth's legislative
power is made exclusive by s. 52(i.) of the Constitution. (at p537)
2. The respondent obtained judgment for the amount of the rate against the
applicant in the Magistrates' Court at Melbourne and
the applicant thereupon
applied to the Supreme Court of Victoria for an order to review the decision
of the magistrate. No order
was made since the view was taken that the cause
was removed to this Court by virtue of s. 40A of the Judiciary Act. That view
was
correct - the contention that a provision of the State statute was invalid
because it sought to deal with a matter
in respect of
which the Commonwealth
is exclusively vested with legislative power raised an inter se question:
Dennis Hotels Pty.
Ltd. v. Victoria
[1961] UKPCHCA 1; [1961] UKPCHCA 1; (1961) 104 CLR 621; (1962) AC 25 . It is
unnecessary to decide whether a challenge to State legislation on the ground
that it is
contrary to s. 114 also raises an inter se question - it appears to
have been assumed in Municipal Council of Sydney v.
The Commonwealth
[1904] HCA 50; (1904) 1
CLR 208, at p 242 that such a challenge would raise an inter se question, but
the correctness
of that assumption must
be
regarded as very doubtful in the
light of subsequent decisions. (at p538)
3. Neither of the contentions made by the applicant can be accepted. It is
true that the prohibition contained in s. 114 extends
to the imposition of a
tax by a delegated authority, with the consequence that a municipal rate
cannot be levied upon Commonwealth
property: Municipal Council of Sydney v.
The Commonwealth (1904) 1 CLR, at pp 230-231, 240-241 ; Essendon Corporation
v. Criterion
Theatres Ltd. [1947] HCA 15; (1947) 74 CLR 1, at pp 13-14, 17 . Moreover, a rate
is a tax imposed on property within the section
even if it is not
made a
charge
on the land: Municipal Council of Sydney v. The Commonwealth (1904) 1
CLR, at pp 231-232 . But the
question is whether
the rate in
the present case
was a tax on the property of the Commonwealth. (at p538)
4. On behalf of the applicant it was conceded that the Act did not impose any
liability on the Commonwealth to pay the rate. However,
it was said that the
rate was a tax on the land, and that this meant that it was a tax on every
interest in the land, including the
leasehold interest that had been carved
out in favour of the Commonwealth, and that it was therefore a tax on the
property of the
Commonwealth, notwithstanding that the Commonwealth is not
liable to pay it. Reliance was placed on the dicta of Latham C.J. in Essendon
Corporation v. Criterion Theatres Ltd. (1947) 74 CLR, at pp 13-14 in support
of the contention that an interest of a lessee is property
within s. 114. It
is quite unnecessary to discuss whether those dicta should be followed; it may
be assumed (without deciding) that
the leasehold interest was property within
s. 114. However, the Act does not tax that leasehold interest. When s. 267
imposes a tax
on the owner, instead of the occupier, it must refer to the
owner of the freehold. Counsel for the applicant referred to the definition
of
"owner of any property" in s. 3(1) of the Act, namely, "the person for the
time being entitled to receive, or who if the same
were let to a tenant at a
rack rent would be entitled to receive the rack rent thereof". He argued, on
the authority of London Corporation
v. Cusack-Smith (1955) AC 337 , that if
the Commonwealth had taken a lease of the land at less than a rack rent it
would have been
an owner within that definition. It was not suggested that the
land in the present case was not let at a rack rent and it is therefore
difficult to appreciate how this argument would assist the applicant, but in
any case the definition in s. 3 only applies "unless
inconsistent with the
context or subject-matter", and it would defeat the object of s. 267(1)(b) to
construe that provision as meaning
that where the Commonwealth was occupier
under a lease under which less than a rack rent was payable the Commonwealth
should be deemed
to be the owner for the purposes of the paragraph. Section
267(1)(b) expressly states that the rate is levied upon the owner of the
ratable property; it is implicit in this statement that the owner is levied in
respect of his own interest and not in respect of
the interest of someone
else. The applicant is rated by reference to the value of its own property,
and not by reference to the value
of the Commonwealth's leasehold interest. I
should, however, make it clear that I do not suggest that if the rate had been
imposed
by reference to the value of the Commonwealth's interest it would have
been a tax on the property of the Commonwealth. In my opinion
a tax on A,
quantified by reference to B's property, is not a tax on B's property, unless
A stands in some relationship to that property
and the tax is imposed by
reference to that relationship. (at p539)
5. No property of the Commonwealth was charged with the rate in the present
case. Counsel for the applicant drew our attention to
s. 387 of the Act which
provides that all rates which have become due in respect of any property shall
be a charge upon such property.
Clearly the effect of that section was to
charge the property of the applicant and not the leasehold interest of the
Commonwealth.
Counsel also suggested that a municipality, by rating land
leased by the Commonwealth, might indirectly impose a burden upon the
Commonwealth. It is sufficient to answer this contention in the words of
Griffith C.J. in Attorney-General (Q.) v. Attorney-General
(Cth) [1915] HCA 39; (1915) 20 CLR
148, at p 162 : "The question of the ultimate incidence of the burden of
taxation is an interesting
and sometimes
a difficult one, but it has no
bearing on the construction of sec. 114." (at p540)
6. The second of the applicant's contentions depends on the proposition that
the portion of the building leased by the Commonwealth
was a place acquired by
the Commonwealth within s. 52(i.). It was settled by the decision in Worthing
v. Rowell and Muston Pty. Ltd.
[1970] HCA 19; (1970) 123 CLR 89 that the words "places
acquired" in s. 52(i.) refer to places acquired as property, but neither
in
that case,
nor in the cases that have followed it (Attorney-General (N.S.W.)
v. Stocks and Holdings (Constructors) Pty. Ltd.
[1970] HCA 58; (1970) 124 CLR
262 and Reg. v.
Phillips [1970] HCA 50; (1970) 125 CLR 93 ) was it necessary to decide whether portion
of a
building can be a place, or the taking
of a lease an acquisition,
within the
meaning of that section. In Worthing v. Rowell
and Muston Pty. Ltd., Windeyer
J. did discuss
these questions, and there
said (1970) 123 CLR, at p 124 :
"As I understand it, 'places' here means fixed localities.Since in my opinion the doubt expressed by Windeyer J. was well founded, and the Commonwealth does not acquire a place simply by taking a lease of it, I do not need to express any opinion on the further question whether a portion of a building, to which a separate title can be obtained, is a place within s. 52(i.). When the Commonwealth takes a lease of a place it does not "acquire" the place; what it acquires is a leasehold interest. A place will be acquired by the Commonwealth within s. 52(i.) only if the Commonwealth has, in one way or another, acquired the place itself, that is, has acquired full property in respect of the place. The words of s. 52(i.) stand in marked contrast to those of s. 51 (xxxi.). The latter provision refers to the acquisition of "property", a comprehensive term which of course includes leasehold interest. Section 52(i.) refers to "places" which have been "acquired". A constitutional provision whose effect, as has been held, is that when a place is acquired by the Commonwealth for public purposes the State in which the place is situated is deprived of the power to make a law with respect to that place and the operation of State laws formerly applicable within the place is terminated, is not likely to have been intended to apply whenever the Commonwealth obtains a right, however temporary, to occupy a place for public purposes - if the provision had such an application it would tend to throw the administration of the law into great confusion. But apart from that consideration the words "places acquired" do not, in their ordinary and natural sense, have the same meaning as "places in respect of which an interest is acquired". (at p541)
... Whether or not a 'place' must be part of the earth's
surface together with any structures thereon, is an unnecessary
question for the decision of the present case. If I had to
answer it, I would be inclined to think that an upper storey
of a building held by a strata title could be a place acquired
for public purposes. But I doubt the proposition that
obtaining a leasehold interest or a temporary licence to occupy a
place would amount to acquisition in the relevant sense.
Certainly I would not agree that the hiring of a hall for use as a
polling booth on election day - as was mentioned in
argument - or the use of a city park for an afternoon's military
ceremonial would amount to an acquisition of a place by the
Commonwealth for the purposes of s. 52. In short, as I
understand s. 52, 'places acquired by the Commonwealth' means
places which upon acquisition the Commonwealth holds by
virtue of a proprietary right."
7. The grounds on which the applicant seeks an order nisi to review the
decision of the magistrate have not been established and
the order nisi should
be refused. (at p541)
STEPHEN AND MASON JJ. The Chief Justice has set out the circumstances in
which this matter has reached the Court under s. 40A of
the Judiciary Act
1903, as amended, and, in so doing, has expressed the opinion, with which we
agree, that the challenge to the validity
of s. 267(1)(b)
of the Local
Government Act 1958 (Vict.) ("the Act") gives rise to an inter se question to
the extent to which it
is based on the
ground that the sub-section is a law
with respect to a place acquired by the Commonwealth under s. 52(i.) of the
Constitution and is therefore an intrusion into a sphere of Commonwealth
exclusive power. Accordingly, it is unnecessary to consider whether the
challenge, so far as it is based on s. 114 of the Constitution, also gives
rise to an inter se question. (at p541)
2. In our view neither of the two grounds of attack upon s. 267 (1) (b) can
be sustained. Section 114 of the Constitution prohibits, without the consent
of the Commonwealth Parliament, the imposition by a State (or by a municipal
council with the authority
of a State - see Municipal Council of Sydney v. The
Commonwealth [1904] HCA 50; (1904) 1 CLR 208 ) of a tax upon any property of
any kind
belonging
to the Commonwealth. Section 267(1) of the Act provides that
every
general rate shall be made and levied by the
council -
"...
(b) upon every person who occupies any rateable property
whatsoever within the municipal district, or if there is no
occupier, or if the occupier is -
(i) any person or body referred to in paragraph (a) of
sub-section (1) of section 251 and is using the land
exclusively for public or municipal purposes; or
(ii) the Crown in right of the Commonwealth of
Australia or any public statutory body constituted under
the law of the Commonwealth of Australia or any
trustees appointed pursuant to an Act of the
Commonwealth of Australia and is not liable to pay
municipal rates in respect of that occupancy -
then upon the owner of that rateable property." (at p542)
3. No doubt the sub-section was drawn with the decision of Essendon
Corporation v. Criterion Theatres Ltd. [1947] HCA 15; (1947)
74 CLR 1 very
much in mind, the
object of the draftsman being to avoid the perils of s. 114 by throwing the
liability for
rates
upon the owner
of the ratable property where that property
is occupied by the Commonwealth. But for the Byzantine complexity
of the
provisions contained
in Pt X of the Act dealing with "Rates" there could be
little doubt that the draftsman suceeded in his
object
because the rate in
question is not payable by the Commonwealth, nor is it payable out of, or
charged on, the Commonwealth's
leasehold
interest. However,
it has been argued
that when the mysteries of Pt X are explored it emerges that the rate which is
levied
against
the owner of ratable
property is in truth a rate in respect of
the Commonwealth's leasehold interest in that property. The
next step
in the
argument was
to say that such a rate is a tax upon property belonging to the
Commonwealth, notwithstanding that
the Commonwealth
is not liable
for the rate
and that it is not charged on, or payable out of, the Commonwealth's interest
in the
land as lessee. (at
p542)
4. By s. 251 of the Act "All land" is "rateable property" subject to
exceptions which are immaterial for present purposes. "Land"
is not defined by
the Act but it is defined by s. 17 of the Acts Interpretation Act 1958 (Vict.)
so as to include "messuages tenements
and hereditaments houses and buildings,
unless there are words to exclude houses and buildings or to restrict the
meaning to tenements
of some particular nature". "Land" in s. 251 therefore
includes buildings erected on land. (at p542)
5. The rate levied in this case was a rate levied upon the "net annual value"
of each ratable property in accordance with the provisions
of s. 254(14) and
(15) of the Act. In making his valuation under Pt X of the Act of the
premises known as 235/251 Bourke Street,
the valuer was required to divide the
land and building into portions according to its separate occupations because
under s. 267(1)(b)
it is the occupier who is primarily or generally liable for
the rate (see In re Horwitz; Ex parte Boberski (1901) 26 VLR 500, at
pp
507-508 ) and because the Act contemplates that any part of a multi-storey
building which is adapted to separate occupation or
which is separately
occupied, is a single ratable property. See par. (aa) of the definition of
"net annual value" in s. 254 which
is directed to the case of "any single
rateable property being ... a house flat or unit ... " When attention is given
to the definition
of "unit" in the same section, these words must be taken to
apply to a flat or unit in a multi-storey building, separated from other
flats
or units above and below it. (at p543)
6. Consequently that part of the premises which is leased to the Commonwealth
is a separate ratable property. Indeed, if it is adapted
to separate
occupation floor by floor it constitutes a number of separate ratable
properties but that is not a matter which we have
occasion to pursue. (at
p543)
7. The expression "net annual value" of any property, so far as it is
relevant, is defined by s. 254(1) to mean
"(a) except in the case of the lands described in paragraphs
(aa) and (b) -
(i) the estimated annual value of the property; or
(ii) five per centum of the capital improved value of the
property -
(whichever is the greater)." (at p543)
8. The expression "estimated annual value" of any property is defined by the
same section to mean
"the rent at which the property might reasonably be
expected to be let from year to year, free of all usual tenants'
rates and taxes and deducting therefrom the probable annual
average cost of insurances and other expenses (if any)
necessary to maintain such property in a state to command such
rent." (at p543)
9. It was upon this definition that the applicant relied to support his
argument that the levy was imposed in respect of the Commonwealth's
leasehold
interest as a tenant. We are unable to see that the definition supports the
argument. Neither "the rent at which the property
might reasonably be expected
to be let from year to year ... " nor "five per centum of the capital improved
value of the property"
can be regarded as a measure exclusively referable to
the value of the occupier's occupation or leasehold interest computed on an
annual basis. In our opinion each element in the definition of "net annual
value" can be regarded with equal accuracy as a measure
of the net annual
value of the ratable property to the owner. Thus, the definition, when taken
in conjunction with the imposition
of liability for the rate on the owner of
the ratable property, indicates that the levy is imposed not in respect of the
tenancy
or interest of the occupier but in respect of the annual value of the
ratable property to the owner. (at p544)
10. We acknowledge that in Essendon Corporation v. Criterion Theatres Ltd.
Latham C.J., when referring to the similar definition
of "net annual value"
contained in s. 252(2) of the Local Government Act 1928 (Vict.), said (1947)
74 CLR, at p 14 :
"Thus the rates are imposed in respect of what is normallyHis Honour was directing his remarks to s. 265(b) of the 1928 Act which, in his view, imposed a liability for the rate on the Commonwealth as the occupier of land. Where the tenant or occupier is liable for the rate and it is imposed in respect of the annual rental value of the land or on a percentage of the annual capital value, as in City of Montreal v. Attorney-General (Canada), it may be correct to say that the rate is levied upon the interest of the occupier. But it is otherwise where, as here, the occupier is not liable for the rate and the owner is made liable. (at p544)
the value of the land to a tenant occupier. In the present
case, therefore, they would be assessed in respect of the value
of the occupation by the Commonwealth. Even where a tax
is assessed by reference to a percentage of the capital value,
the tax may still be a tax upon the interest of the occupier:
See City of Montreal v. Attorney-General (Canada) (1923) AC 137 ."
11. The view expressed by Latham C.J. was not shared by the other members of
the Court in Essendon Corporation v. Criterion Theatres
Ltd. [1947] HCA 15; (1947) 74 CLR 1 .
As we are confronted with a different question it is unnecessary to examine
the correctness
of what the Chief
Justice said; it is sufficient for present
purposes to say that it is distinguishable and that it does not deny
that in
circumstances
such as the present the rate is a tax on the owner's estate or
interest in the ratable property. (at p544)
12. On this aspect of the case it remains only for us to say that the
provisions of Pt XII of the Act dealing with "Payment and
Recovery of Rates"
do not subject the Commonwealth or the Commonwealth's proprietary interest as
a lessee to any liability for unpaid
rates for which the owner of the ratable
property is liable. Essentially the remedies conferred upon a council where
the owner does
not satisfy his liability enable a council to sue an owner to
judgment, to execute against his estate or interest in the land and
to sell
that estate or interest. (at p545)
13. The conclusion already reached alone disposes of the applicant's case to
the extent to which it is based on s. 114 of the Constitution. Quite
independently of this conclusion we should have decided the point adversely to
the applicant on the ground that even if the
levy was calculated by reference
to the value of the Commonwealth's leasehold interest, the rate was not a "tax
upon property of
any kind belonging to the Commonwealth". A rate may
constitute a tax upon property of the Commonwealth if it is expressed to be
payable
by the Commonwealth or is payable out of, or charged upon, its
property. But if it is a rate which by the statute the Commonwealth
is not
liable to pay or recoup and it is not payable out of, or charged on,
Commonwealth property it cannot in our view constitute
a tax upon property of
the Commonwealth within the meaning of s. 114. (at p545)
14. The second ground of attack upon s. 267(1)(b) may be shortly disposed of.
If part of the building occupied by the Commonwealth
is a "place acquired" by
the Commonwealth within the meaning of s. 52(i.) - and this to our mind is a
doubtful assumption in view of the limited leasehold interest (a term of five
years) which the Commonwealth
has in the premises (see Worthing v. Rowell and
Muston Pty. Ltd. (1970) 123 CLR, at p 124 , per Windeyer J.) - s. 267(1) (b)
is not
a law with respect to that place. In determining in a particular case
what are the limits of the exclusive power which the Commonwealth
enjoys by
virtue of s. 52(i.) one must have regard to the extent of the rights and
powers which the Commonwealth possesses in relation to the place which it has
acquired. The area of exclusivity cannot be divorced from the extent of, and
the limitations affecting, the rights of property which
the Commonwealth has
acquired. Once this is borne in mind it becomes apparent that a law which
authorizes the levying of a rate upon
the owner of ratable property in respect
of his estate or interests in that property is not a law with respect to a
place acquired
by the Commonwealth when the Commonwealth's interest in the
premises is a leasehold interest for a term of five years. (at p546)
15. In the result we would refuse the application for a rule nisi to review
the decision of the magistrate. (at p546)
JACOBS J. The authority of the Melbourne Corporation to make rates derives
from the Act, 27 Vict. No. 178 (Vict.). Section 42 provides
for the making of
an assessment.
"42. From and after the passing of this Act the councils ofSection 43 authorizes the making of rates and requires them to be on the assessment made under s. 42.
the said city and town respectively from time to time, after
estimating as correctly as may be what amount in addition to
the town fund will be sufficient for the payment of the
expenses to be incurred in carrying into effect the provisions
of the several Acts relating to the corporations of the said
city and town respectively, shall have full power and authority
to order and direct an assessment to be made of all land
beneficially occupied in any manner whatsoever within the
limits of the said city or town as the case may be according to
its full fair and average annual value clear of all outgoings,
together with all land not belonging to the Crown within the
said city or town as the case may be although there may be
no building thereon, and all land attached to and held in
conjunction with any building. Provided always that in any such
assessment the annual value of unimproved land shall not be
estimated at a higher rate than Six per centum upon the
average net value of the land."
"43. That upon the assessment so made it shall be lawful
for the said councils, and they are hereby respectively,
empowered, to make such town rates lighting rates and other
rates as to the said councils respectively shall from time to
time seem necessary and such as the said councils are now
by law empowered to order and declare; and that the said
councils of the said city and town shall have all and the like
powers in enforcing rates upon assessments made under the
provisions of this Act as if the same had been made under the
authority and in conformity with the provisions of the
herein-before recited Acts or any of them." (at p546)
2. The "annual value" referred to in s. 42 is by virtue of s. 254 (16) of
the Local Government Act 1958 (Vict.) to be read and
construed and to take
effect as if it were a reference to the net annual value within the meaning of
s. 254(1). (at p546)
3. The assessment i.e. valuation under s. 42 may be made of all land
beneficially occupied together with all land (not belonging
to the Crown)
within the city although there may be no building thereon and all land
attached to and held in conjunction with any
building, but the rate may only
be made on the assessment of that land which is ratable property within the
meaning of s. 251(1).
(at p547)
4. The general rate, which the Corporation is by the Act, 27 Vict. No. 178
authorized to make, is required by s. 267(1) of the Local
Government Act 1958
to be made by it -
"upon every person who occupies any rateable property
whatsoever within the municipal district, or if there is no
occupier, or if the occupier is -
(i) any person or body referred to in paragraph (a) of
sub-section (1) of section 251 and is using the land
exclusively for public or municipal purposes; or
(ii) the Crown in right of the Commonwealth of Australia
or any public statutory body constituted under the law
of the Commonwealth of Australia or any trustees
appointed pursuant to an Act of the Commonwealth of
Australia and is not liable to pay municipal rates in
respect of that occupancy -
then upon the owner of that rateable property." (at p547)
5. This last provision displaces s. 5 of Act, 11 Vict. No. 17 (N.S.W.) which
provided that
"the occupier of any house or other property or person in
possession at the time when such rates shall be demanded, or
in case of a change in such possession in the meantime the
person occupying the premises when the warrant of distress
shall be executed, shall be deemed to be and be the person
primarily liable to the payment of rates under the said recited
Acts in respect of any house or other property assessed; and
in case the premises shall be vacant for a period less than six
months and there shall not be sufficient distress found
there-in, then the proprietor or landlord shall be liable." (at p547)
6. The general or town rate of Melbourne Corporation is thus made on the
assessments and the assessments may, it would appear, be
made on all land. The
word "land" includes "buildings" unless there are words to exclude this
meaning. See s. 17 of the Acts Interpretation
Act 1958 (Vict.). At common law
ownership of land includes prima facie ownership of all buildings there-on.
Laybourn v. Gridley (1892)
2 Ch 53 . Buildings therefore pass on a conveyance
of the land unless a contrary intention appears. If a contrary intention does
appear then there can be a severance in the ownership in fee simple of the
surface of the soil and part of a building from the air
space occupied by a
portion of a building. Coke upon Littleton, 17th ed. (1817), 48b: "A man may
have an inheritance in an upper
chamber, though the lower buildings and soile
be in another, and seeing it is an inheritance corporeall it shall passe by
livery."
Sheppard's Touchstone, 8th ed. (1826), p. 205: "A feoffment may be
made of an upper chamber over another man's house beneath." Such
a part of a
building is capable of ownership as a corporeal hereditament, and by s. 17
"land" includes "hereditament". Therefore
the upper floors of the building are
land within the meaning of s. 251(1). (at p548)
7. There is no express statutory provision which requires any land or
building or part of a building which is separately occupied
to be separately
rated. In the case of an office building the full fair and average net annual
value will be the estimated annual
value or five per centum of the capital
improved value, whichever is the greater. See s. 254(1) and the definitions of
"net annual
value", "estimated annual value" and "capital improved value".
Section 254(3) provides for the determination of the capital improved
value of
part of a property where the property is divided among several occupiers as
follows:
"254. (3) Where it is necessary to determine the capitalThis provision envisages the necessity of determining the value of a portion of a larger property and, taken together with the exigencies of s. 267(1)(b), makes sufficiently clear the legislative intention that portions of a building separately occupied, and possibly those portions adapted to separate occupation, should be assessed separately. (at p548)
improved value, the site value or the unimproved capital
value of any rateable property in respect of which any person
is liable to be rated but which forms portion of a larger
property, the capital improved value the site value and the
unimproved capital value of each such portion shall be as
nearly as practicable the sum which bears the same
proportion to the capital improved value, the site value and the
un-improved capital value respectively of the whole property as
the estimated annual value of the portion bears to the
estimated annual value of the whole property."
8. However, what is assessed and then rated under 27 Vict. No. 178 and s.
251(1) of the Local Government Act 1958 is not the occupancy
but the portion
of the building. Assessment and rating are preliminary to the imposition of an
obligation to pay the rate. Assessment
is not related directly to rents paid
but to full fair and average net annual value. Where there is an assessment
and a rating of
the portion of the building, and the imposition on the
occupier of an obligation to pay that rate, then it may be said that the
assessment
is on the occupancy or the interest of the occupier. Cf. City of
Montreal v. Attorney-General (Canada) (1923) AC 136 ; Essendon Corporation
v.
Criterion Theatres Ltd. [1947] HCA 15; [1947] HCA 15; (1947) 74 CLR 1 . However, in cases where the
obligation is not imposed on the occupier
but on the owner
of the building,
there
is no relation between the portion of the building assessed and rated
and the occupier. The
fact that the
assessment will be made
according to
estimated annual value in certain cases, namely, where the estimated annual
value
exceeds five
per centum of the improved
capital value, provides no such
relation. The estimated annual value has not even a necessary
relationship
to
the rent which happens
to be paid by the particular occupier. (at p549)
9. In these circumstances I am unable to conclude that the rate is a tax on
the leasehold interest, which is property of the Commonwealth.
It is a tax
imposed on the owner by a rate upon the assessment of the value of part of a
building owned by him. It was submitted
that the building or any portion
thereof is the sum of any number of different interests therein, leasehold
interest or mortgage
or other interests, and that a tax on the portion of the
building is a tax on each of those interests. The rate however is on an
assessment of the value not of interests in land but of the land itself
(including in that term buildings or portions thereof). The
fact that land is
not owned absolutely but is held for an estate does not require or justify a
dissection of lesser interests when
the land itself is the subject of a tax
payable by its owner. (at p549)
10. If the tax had been imposed on the leasehold interest itself, and had
been made payable by someone other than the owner of that
interest then
different questions would have arisen upon which I prefer to express no
opinion. (at p549)
11. The next question is whether a place occupied by the Commonwealth under a
lease for five years is a place acquired by the Commonwealth
for public
purposes, so that pursuant to s. 52 of the Constitution the Commonwealth has
exclusive power to legislate therefor during the term of the lease. In my
opinion a place occupied by the Commonwealth
under a leasehold interest which
depends for its existence on the land law of a State rather than the exercise
of Commonwealth legislative
or prerogative power to acquire a place is not a
place acquired by the Commonwealth within the meaning of s. 52. Just as the
Crown may be a lessee of land from an owner who holds the land in fee simple
of the Crown without thereby resuming to
itself the land held in fee so also
the Crown in right of the Commonwealth can be the lessee of land from an owner
who holds in fee
simple of the Crown but does not thereby acquire anything
more than an interest as lessee with a consequent right to occupy the premises
during the term. It does not acquire the place. (at p550)
12. I would refuse the order nisi. (at p550)
MURPHY J. The question is whether s. 267(1)(b) of the Local Government Act
1958 (Vict.) contravenes s. 52(i.) or s. 114 of the Constitution and is
therefore invalid. The matter was automatically removed to this Court under s.
40A of the Judiciary Act as a question arises
(at least in relation to s. 52)
of the limits inter se of the constitutional powers of the Commonwealth and
the State of Victoria.
The application for removal under s. 40 was therefore
unnecessary. (at p550)
2. Section 52(i.) gives Parliament exclusive powers to make laws with respect
to "places acquired by the Commonwealth for public
purposes". Floors one to
fifteen (but not the basement or ground floor) of the building were leased to
the Commonwealth for a term
of five years. Assuming that each or all of the
floors may be regarded as a place within the meaning of s. 52, the place has
not
been acquired within the meaning of s. 52. It would be incongruous for a
lease of this term to bring about the constitutional consequences
of
acquisition of a place decided in Worthing v. Rowell and Muston Pty. Ltd.
[1970] HCA 19; (1970) 123 CLR 89 and Reg. v. Phillips
[1970] HCA 50; (1970) 125 CLR
93 . If the power under
s. 51(xxxi.) of the Constitution is used to acquire real property, it need not
be held as leasehold, freehold or any other modern survival of feudal tenures.
However,
when the Commonwealth has a freehold or perpetual lease under State
law it may be proper (despite the incongruity of the relationship)
to regard
it as a place acquired within s. 52. This does not apply to a lease for a
short term. The words "places acquired" in s. 52 imply permanence. The
applicant's contentions based on s. 52 must be rejected. (at p550)
3. Section 114 provides that a State shall not, without the consent of the
Parliament of the Commonwealth, impose any tax on property of any kind
belonging to the Commonwealth. The municipal rate is a tax imposed by the
State (Municipal Council of Sydney v. The Commonwealth
[1904] HCA 50; (1904) 1 CLR 208 ) but
it is not imposed on the Commonwealth. The legislation deliberately avoids
imposition on the
Commonwealth
by providing that, in relation to those parts
of a building occupied by the Commonwealth, the rate shall be made and
levied
by the
Council upon the occupier (s. 267(1)). (at p551)
4. There may be a tax on the property of the Commonwealth although it is
payable by someone other than the Commonwealth. The tax
is not a charge upon
the property. But, as Griffith C.J. said (1904) 1 CLR, at pp 231-232 :
"All such taxes primarily impose a personal liability uponAs Latham C.J. pointed out in Essendon Corporation v. Criterion Theatres Ltd. (1947) 74 CLR, at pp 13-14 , even a tax assessed by reference to a percentage of the capital value of land which the Commonwealth occupies may still be a tax on the interest of the Commonwealth (he cited City of Montreal v. Attorney-General (Canada) (1923) AC 137 ). In the present case the tax is not levied directly in relation to the leasehold interest of the Commonwealth but upon the place or places. The applicant's contention was that this imposition included (as the whole includes the part) an imposition upon the interest of the Commonwealth. It also contended, and I agree, that the natural tendency is for the burden of the rates to be passed on to the Commonwealth. The broad prohibition in s. 114 should not be defeated by technical differences in concepts of property. What Rich J. said (of the acquisition of property power in s. 51(xxxi.) of the Constitution) also applies to s. 114.
individuals, and it is, in my opinion, immaterial whether the
land does or does not itself become subject to a charge in the
nature of an encumbrance. In either case the tax is in
substance a 'tax of property' in the sense in which these words
are commonly understood, and certainly in the sense in which
they are used in s. 114 of the Constitution."
"The meaning of property in such a connection must be
determined upon general principles of jurisprudence, not by
the artificial refinements of any particular legal system ... "
5. The applicant's submissions on s. 114 therefore have considerable force.
But there is a strong presumption that an Act of Parliament is valid. In my
opinion, that presumption
has not been displaced. Section 267(1)(b) of the Act
is valid. (at p551)
6. The application for order nisi should be refused. (at p551)
ORDER
Application for order nisi to review refused with costs.
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