Patterson v Farrell [1912] HCA 43; (1912) 14 CLR 348 (19 June 1912)

HIGH COURT OF AUSTRALIA

Patterson Plaintiff, Appellant; and Farrell Defendant, Respondent.

H C of A

On appeal from the Supreme Court of Victoria.

19 June 1912

Griffith C.J., Barton and Isaacs JJ.

Irvine K.C. (with him Arthur), for the appellant.

Mitchell K.C. (with him Winneke), for the respondent.

Irvine K.C., in reply.

Griffith C.J.

As this case now presents itself to the Court it resolves itself into a question of the interpretation of clause 13 of the conditions of the contract. The contract was made on 12th October 1910, before the passing of the Land Tax Assessment Act 1910, and possession of the land was given on 8th December 1910, shortly after the passing of that Act. The first payment of land tax became due in the following May. Clause 13 of the conditions provided that:—"The purchaser shall be liable for all rates taxes and insurance premiums accruing or falling due from and after the date of possession but all annual outgoings and insurance premiums in respect of the property sold shall be apportioned between the vendor and purchaser up to such date." The clause is not very clear, but some things seem tolerably plain. After the purchaser goes into possession all rates and taxes accruing or falling due upon the property are to be paid by him in the first instance. That leaves it uncertain whether as to any such charges payable in respect of the period antecedent to possession being taken he is to bear the burden absolutely. Then the second part of the clause provides that all "annual outgoings" in respect of the property "shall be apportioned between the vendor and purchaser up to such date." A fair bargain to make in the case of an annual outgoing which is payable in respect of a period during one part of which the vendor has the enjoyment of the property, and during the other part the purchaser, would be that the burden should be shared in proportion to their times of enjoyment. That would be a fair bargain, and I think that it is consistent with the language of the clause, and does not lead to so many difficulties as any other construction.

Then the only question is, is land tax an "annual outgoing"? There is no doubt that if an ordinary person were asked whether land tax is an annual outgoing he would say "Yes." Nobody disputes that. I have come to the conclusion, therefore, that the term "annual outgoings" applies to land tax. The purchaser is bound to pay the amount of the land tax in one sense, but he is to be relieved of that burden as between himself and the vendor, so far as the burden is attributable to the period antecedent to delivery of possession. So construed, it is impossible to say that the contract is obnoxious to sec. 63 of the Act as altering the incidence of land tax. The whole scheme of the Act is that the burden of land tax shall fall upon the beneficial owner. That is clearly shown by sec. 37. The matter then works out in this way:—The land was taxed in the hands of the vendor at the rate of 1d. +40820/30000d., because the total unimproved value of all his land property was £45,820; but the property sold has an unimproved value of £29,870 only. Then, can clause 13 be contrued to mean that the purchaser shall be liable to pay his share of the land tax at the higher rate which the vendor had to pay in respect of the land sold because of his ownership of other land? I think not. Such a contract might be made, but it would require very clear words to express such an intention. The fair construction is that the purchaser agreed to bear his share of the land tax then in contemplation, calculated on the value of the land he was buying, that is, £29,870, subject to a deduction of £5,000. That, then, is the amount to be apportioned, and the apportionment should be made in proportion to the length of enjoyment of possession. Thus, the appellant must bear the apportioned share up to 8th December, and the respondent must bear the apportioned share for the remainder of the twelve months ending on 30th June 1911. And the latter amount is the sum which the appellant, who has paid the whole, is entitled to recover from the respondent.

As to the interesting questions sought to be raised, whether sec. 63 of the Land Tax Assessment Act 1910 is ultra vires of the Constitution, and whether a contract made for valuable consideration by a person liable to pay land tax with another person that that other shall pay the tax is a contract which alters the incidence of the land tax, it is not necessary to express any opinion, and I offer none.

Barton J.

I am of the same opinion. There is an ambiguity in clause 13, and I think the more reasonable construction is that which the Chief Justice has stated. The final words of the clause mean that the date of delivery of possession is to be the dividing line of apportionment.

Isaacs J.

I agree.

Appeal allowed. Judgment appealed from discharged. Judgment for the plaintiff for proportion of land tax payable on land of an assessable value of £24,870 attributable to the period from 8th December 1910 to 30th June 1911 with costs of action.

Solicitors, for the appellant, Darvall & Horsfall.

Solicitors, for the respondent, Brahe & Gair.