Coal Cliff Collieries Ltd v Federal Commissioner of Land Tax [1917] HCA 68; (1917) 24 CLR 197 (10 December 1917)

HIGH COURT OF AUSTRALIA

The Coal Cliff Collieries Limited and Another Appellants; and The Federal Commissioner of Land Tax Respondent.

H C of A

10 December 1917

Barton, Isaacs and Gavan Duffy JJ.

Knox K.C. (with him W. A. Parker), for the appellants.

Campbell K.C. (with him Pike), for the respondent.

Knox K.C., in reply.

The following judgments were read:—

Dec. 10

Barton J.

Under sec. 46 (3) of the Land Tax Assessment Act a case has been stated for the opinion of this Court by the Supreme Court of New South Wales (Pring J.). It is unnecessary to repeat in full the facts set out for our opinion. The particular covenant or condition on which the questions arise is substantially identical in the two sets of leases, which were granted respectively under the provisions of the Mining Act Further Amendment Act of 1884 and of the Mining Act 1906 for the purpose of enabling the lessee to mine for coal in the lands demised. The appellant the Coal Cliff Collieries Ltd. on the material dates held all of the leases under transfers. A copy of one lease belonging to each set is appended to the special case and incorporated therein. The respondent assessed the land tax payable by the appellants without including in the assessment any amount to be added to the value of the rent in respect of certain conditions alleged by the appellants to be "onerous conditions" within the meaning of the proviso to sub-sec. 3 of sec. 28 of the Land Tax Assessment Act 1910-1914.

The first question asked is whether the conditions "for expending money on the said lands in the employment of labour thereon" are "onerous conditions" within the meaning of the proviso.

The portion material to the question runs thus: "Provided that, where onerous conditions for constructing buildings, works, or other improvements upon the land, or expending money thereon, are imposed upon the lessee, ... the Commissioner may assess the amount (if any) which ought, for the purposes of this section, to be added to the value of the rent in respect thereof, and the value of the rent shall be deemed to be increased by that amount accordingly." The proviso, as was conceded in argument, applies to both the preceding paragraphs of the section, namely, (a) and (b).

The scheme of sec. 28 is explained, and the section expounded, in the judgments of this Court in the case of Apperly v. Federal Commissioner of Land Tax[1].

I think the covenant in question, as contained in the leases, is distinctly an "onerous condition" according to the meaning given to that term in those judgments. It is a burdensome obligation. The specified number of men are to be employed during the lease for the specified purpose and in all events; it may happen that their work results in a profit, but the condition is still onerous, for it has to be performed whether profit results or not, unless the Secretary for Mines grants permission to suspend work for a period not exceeding six months on proof that the mine cannot be profitably worked. The grant of that permission is purely discretionary, and the non-performance of the condition in the absence of such permission may lead to a declaration of the voidance of the lease. The condition then is clearly onerous. But to entitle the Commissioner to act under the proviso it is necessary that it should be not only onerous, but should be "for constructing buildings, works, or other improvements upon the land, or expending money thereon." The obligation in both leases is to "employ in the construction of the works or in mining operations" the specified number of men. The works are "all necessary works with a view to diligently explore and search for coal," which the lessee is to "make and construct" The men, then, are to be employed either in constructing works for coal-mining on the land, or in mining operations thereon. It is contended that employing the necessary men in mining operations on the land is not within the words "expending money thereon." I cannot agree. It is true that a lessee is allowed to count himself for the purposes of the lease as a workman or miner employed. But all the other men engaged in the mining operations must be paid, unless we suppose a mining community so altruistic as to work without wages. Is not a condition which cannot be performed without the expenditure of money to the extent necessitated for its performance a condition for "expending money"? And is it not here for the expenditure of money on the land demised? I cannot see any alternative to answering these two queries in the affirmative. The expenditure is an absolute necessity, and it is quite visible in these leases, as in all Crown leases of a similar character, that the performance of the conditions generally or mainly by the employment of miners at wages is one of the objects for which the leases are granted, although an equal or greater object may be to open up the mineral treasures of the State and increase her wealth. The attainment of the first of these objects is clearly regarded as necessary to the attainment of the others. As it cannot be denied that the labour condition is a large part of the consideration given for the lease (and see per Higinbotham J. in Barwick v. Duchess of Edinburgh Co.[2]), I have no doubt that the Commissioner may properly exercise his discretion under the proviso if he has not already made any addition to the value of the rent on account of this covenant.

As to question 2 I am not sure that I ought to say in bare terms that the Commissioner should have assessed a sum to be added to the value of the rent in respect of the condition, but I have no hesitation in saying that the case appears to be a proper one for the exercise of his judgment in that regard.

The third question should be answered in the negative, as the appellants' counsel conceded in argument.

Isaacs J.

The proviso we have been considering applies to all leases within the section. Apperly's Case[3] settled the principle for ascertaining whether a given provision in a lease was an "onerous condition" within the meaning of the proviso. Any difference of expression in that case as to the clause for repair were dicta only, and do not affect the actual principle established. Applying that principle to the labour conditions as found in the leases before us, I am clear they are "onerous conditions" within the meaning of the proviso.

Such conditions are constant features in mining leases of Crown lands in Australia. They are designed for three objects: (1) to give employment to miners; (2) to add to the national production; (3) to prove and develop the mines and render their mineral deposits more accessible. Unquestionably the actual sums reserved for rents are affected by reason of the labour conditions, which are universally regarded as important. They are calculated to effect all three objects, and in these leases they necessarily involve the expenditure of money on the land, some portion at least of which the Commissioner may in his judgment think ought, for the purposes of sec. 28, to be regarded in order that something be added to the value of the rent.

It was argued that no condition was one "to expend money" within the proviso unless "money" was specifically mentioned. Thus a covenant to expend £50 in eradicating prickly pear would be such a condition; but a covenant to eradicate all prickly pear at the cost of the lessee would not. In this case it was said that a covenant to expend a given sum in labour would, but that the present covenant does not, answer the description. Thinking the proviso is aimed at substantial justice between landlord and tenant, I am unable to accept the distinction.

The first question therefore ought, in my opinion, to be answered in the affirmative.

The second question, so far as it is a question of law, appears to be included in the first, the answer to which applies.

The third question clearly, and without any dissent from either party, should be answered in the negative.

Gavan Duffy J.

The appellants are owners of leases which contain covenants compelling them to construct certain works on the demised lands, and to employ a prescribed number of competent workmen in the construction of these works or in mining operations on or under such lands. We are asked to say whether these covenants impose onerous conditions for expending money on such lands within the meaning of the proviso to sec. 28 (3) of the Land Tax Assessment Act 1910-1914. In my opinion they do not. I shall assume, without deciding the point, that these are covenants to expend money. If so, are they covenants to expend money on the demised lands? The appellants can satisfy the conditions imposed on them by employing the prescribed number of men in any of the mining operations which they carry on, and a condition that men shall be employed in hewing or carrying coal on or under any of the demised lands is not, in my opinion, a condition for expending money thereon. I think what is contemplated by the words of the proviso is an expenditure of money for the purpose of benefiting or otherwise affecting the land itself. Here neither lessor nor lessee had any such object in view; the covenants are designed to encourage the search for and winning of coal in the demised lands, and the promotion and extension of the coal-mining industry, without any regard to the effect which a compliance with them might produce on the demised lands.

Questions answered as follows:—(1) Yes. (2) It is a proper case for the exercise of the Commissioner's judgment in that regard. (3) The appellants have a taxable interest. Costs to be paid by the respondent.

Solicitors for the appellants, Allen, Allen & Hemsley.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] [1914] HCA 13; 17 C.L.R., 535.

[2] 8 V.L.R. (Eq.), at p. 78.

[3] [1914] HCA 13; 17 C.L.R., 535.