Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13; (1955) 91 CLR 610 (23 March 1955)

HIGH COURT OF AUSTRALIA

ROYAL SYDNEY GOLF CLUB v. FEDERAL COMMISSIONER OF TAXATION [1955] HCA 13; (1955) 91 CLR 610

Land Tax

High Court of Australia
Dixon C.J.(1), McTiernan(1), Webb(1), Fullagar(1) and Kitto(1) JJ.

CATCHWORDS

Land Tax - Land - Golfcourse - Golf club - Facilities and amenities - Use by members - Unimproved value of land - Valuation - Regard to provisions and effect of County of Cumberland Planning Scheme - "Vacant land" - "Built-up land" - Restrictions - "Land upon &which there are no buildings" - Land Tax Assessment Act 1910-1950, ss. 3, 10, 13, 25, 26, 27, 31, 33, 44M (8) - Local Government Act 1919-1951 (N.S.W.), ss. 342G, 342N, 342AA, 342AB, 342AC - Local Government Act 1951 (N.S.W.), s 2 - County of Cumberland Planning Scheme Ordinance, cll. 8, 10, 11 (1) (2) (3), 14, 17.

HEARING

Sydney, 1954, December 2, 3.
Sydney, 1955, March 23. 23:3:1955
CASE STATED.

DECISION

March 23, 1955.
THE COURT delivered the following written judgment:-
This is a case stated under s. 44M(8) of the Land Tax Assessment Act appeal against an assessment of land tax. The assessment was with respect to land owned as at 30th June 1951. Since that date the Land Tax Assessment Act and the Land Tax Act 1910-1952 have ceased to be in force, as a result of the Land Tax Abolition Act 1953. The appellant is the Royal Sydney Golf Club. It is the owner in fee simple of an area of land at Rose Bay comprising 142 acres, 3 roods, 13 perches, all of which is occupied by and used for the purposes of the Club. A little over seven acres of the land forms the site of the club house and its appurtenances and of the lawn tennis courts and bowling green. This area was exempt from land tax under s. 13 of the Land Tax Assessment Act: Federal Commissioner of Taxation v. Royal Sydney Golf Club [1943] HCA 26; (1943) 67 CLR 599 . The remainder of the land was assessed to land tax by the assessment against which the club appeals. (at p618)

2. As at 30th June 1951 the whole of the land assessed was affected by the operation of the County of Cumberland Planning Scheme, which forms the schedule to the Local Government Amendment Act 1951 (N.S.W.) (Act No. 18 of 1951). In making his assessment the Commissioner of Taxation has estimated the unimproved value of the land without regard to the provisions of the planning scheme and the actual or potential effect of the scheme on the value of the land. The first question raised by the case stated is whether in arriving at the unimproved value the effect of the scheme ought so to be disregarded. If the restrictions which the planning scheme contemplates must be taken into account in assessing the unimproved value then a second question arises. It relates to the manner in which the County of Cumberland Planning Scheme applies to the land. The scheme draws a distinction, with reference to the area of which the land assessed forms part, between built-up land and vacant land. The restrictions differ. The question in effect is whether the presence of the club house and other buildings means that all the land falls under the description of built-up land or on the other hand so much of the land as is used for golf courses and perhaps tennis courts and the like is to be considered "vacant land" within the meaning of that scheme. (at p618)

3. The land owned by the Club is the site of an eighteen-hole championship golf course and of a nine-hole course called "the short course". It also includes the site of a club house with a drive leading to it, lawns, garages, parking area, tennis courts, bowling greens and squash racquet courts. The sites of the buildings, drive, garage, tennis courts, bowling greens, etc., form the exempt land. The whole of the land, exempt and non-exempt, is used by the appellant Club for its various social activities and recreations, including lawn tennis, bowls, and squash racquets and, of course, golf. The members of the Club who use the golf courses avail themselves of the facilities which the club house provides and are entitled to avail themselves of all other amenities. At various positions about the land devoted to golf there are structures used in connection with the use and management of the golf links. If it matters there stand outside the area exempt from tax a fernery, machine shed and tool shed used in connection with the tennis courts, bowling greens and gardens. (at p619)

4. The County of Cumberland Planning Scheme was introduced by the Local Government (Amendment) Act 1951 having force as on the date that Act was assented to, namely 27th June 1951. By s. 2 of that Act it is established as the scheme which Div. 8, Pt. XIIA of the Local Government Act 1919-1949 requires to be prepared. It is under the provisions of this Part that power is conferred to establish the Cumberland County District and to delegate to its council the requisite powers and duties of the councils in relation to town planning: s. 342AA. Section 342AB had cast the duty upon the Cumberland County Council of preparing and submitting to the Minister a scheme in respect of all land within the County District but, as has been said above, the Act of 1951 substituted the scheme set out in the schedule to that Act. The nature and purpose of such a scheme appears from the provisions of Pt. XIIA of the Act of 1919-1949. It is to contain provisions for regulating and controlling the use of land and the purposes for which land may be used: s. 342G. Then there follows a long list of particular matters for which the planning scheme may provide. The scheme is to specify a responsible authority (s. 342N) and that authority has the responsibility of enforcing the scheme. If an estate or interest in land to which a scheme applies is injuriously affected by the coming into operation of any provisions of the scheme or by the restrictions imposed by or under the scheme the person entitled to the estate or interest may, within a time limited, obtain compensation from the responsible authority. There are other grounds for compensation but they are not here material: s. 342AC. (at p619)

5. The County of Cumberland Planning Scheme Ordinance as scheduled names the Cumberland County Council as the responsible authority for its purposes. The details of the scheme are marked on a scheme map identified as the County of Cumberland Planning Scheme as prepared and submitted by the Cumberland County Council and amended by the Minister. On this map the areas of land are shown in different colours. The colours have a significance in relation to the manner in which the land in the respective areas is affected by the scheme. All land coloured dark green on the map is subject to stringent reservation. The whole of the land of the appellant Club is within the area marked dark green. (at p620)

6. The exact purpose for which the land so coloured is reserved differs if it is vacant land within the definition of that expression or built-up land. The expression "built-up land" is defined by cl. 8 of the scheme to mean all land other than vacant land. "Vacant land" is defined by the clause to mean all land upon which immediately before the appointed day, that is to say 27th June 1951, there are no buildings or no buildings but fences, green-houses, conservatories, garages, summer-houses, private boat-houses, fuel sheds, tool houses, cycle sheds, aviaries, milking bails, hay-sheds, stables, fowl-houses, pig sties, barns or the like. If the land is vacant within the meaning of this definition then it is reserved for the purpose of parks and recreation areas: cl. 10. If land within an area coloured dark green on the scheme map is built-up land it cannot, without the consent of the responsible authority, be used for any purpose other than the purpose for which the land was used immediately before the appointed day: cl. 14. Whether the land is vacant land or built-up, if the result of the scheme is that the erection of any building or the carrying out of any work of a permanent character or the making of any permanent excavation is prohibited or in the case of any land reserved on which the responsible authority has refused to approve of the erection of a building or the carrying out of any work of a permanent character or the making of any permanent excavation, the owner by notice in writing may require the responsible authority to acquire such land: cl. 17. Upon vacant land within the area coloured dark green no person may erect a building or carry out work of a permanent character or make any permanent excavation other than a building or work or excavation required for or incidental for the purpose for which the land is reserved; and no person may spoil or waste such land so as to destroy or impair its use for the purpose for which it is reserved: cl. 11(1). There is a qualification enabling the responsible authority to approve of the erection of buildings and the carrying on of works or excavation of land if the reason for which it is reserved cannot be carried into effect immediately after the appointed day, but the approval may be made subject to the condition that the buildings be removed or the land reinstated: cl. 11(2) and (3). (at p621)

7. It is needless to go into further details in relation to the scheme or to the provisions of the Local Government Act 1919-1951 which affect its operation. What has been already said makes it clear enough that the existence and application of the scheme must have had, as at 30th June 1951, a not inconsiderable effect upon the market-selling value of all land which, like that of the appellant Club, is comprised within the area coloured dark green. (at p621)

8. But for the commissioner it is contended that this is immaterial. His case is that land tax was imposed upon the unimproved value of a hypothetical estate in fee simple free from encumbrances and from all specific restrictions upon enjoyment. He treats the County of Cumberland Planning Scheme as an example of such a specific restriction upon enjoyment, which must be ignored in valuing the fee simple. Accordingly any diminution of the actual value of the land brought about by the scheme is irrelevant. Stated in other words the argument is that what the Land Tax Assessment Act taxed is the unimproved value of an unencumbered fee simple without regard to any restrictions imposed upon its enjoyment by State law or to any reservation in the Crown grant or to any easement, encumbrance or restriction imposed by any transaction between subject and subject. The contention for the appellant Club is that what has to be ascertained is the unimproved value of the actual fee simple, subject to whatever restrictions or encumbrances operate upon it in the hands of the taxpayer. For this contention reliance is placed upon the judgments of Isaacs C.J. and Starke J. in Stephen v. Federal Commissioner of Land Tax (1930) 45 CLR, at pp 134, 137, 138 . (at p621)

9. The contention of the commissioner appears to go too far in rejecting all restrictions upon the use or enjoyment of the land which may result from the operation of any State law which affects it. To take an extreme example, if the law has a general application to all fee simples and is not concerned specifically with the particular land or the title to it, it surely must be taken into account. The commissioner may well be right in his view that the Land Tax Assessment Act postulated a fee simple free from encumbrances, reservations, easements and restrictive covenants and yet go too far in his claim that the Act excluded from consideration the operation of State law restricting the enjoyment of land even within a very limited area. An example is afforded by the familiar by-laws and ordinances creating residential areas. On the other hand, the contention of the taxpayer, notwithstanding the support it receives from the two judgments mentioned, is gravely open to question. It is convenient to begin by inquiring whether it is consistent with the true policy and meaning of the Land Tax Assessment Act. Section 10 of that statute provided that, subject to the provisions of the Act, land tax should be levied and paid upon the unimproved value of all lands owned by taxpayers and not exempt from taxation. The word "owned" possessed a meaning corresponding with that of "owner" under the definition section (s. 3) and "owner" is defined to include every person who jointly or severally, whether at law or in equity, is entitled to the land for any estate of freehold in possession, or is entitled to receive or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise. The expression included also every person who, by virtue of the Act, is deemed to be an owner. But that is not important. By s. 25 the owner of any freehold estate less than the fee simple, with an immaterial exception, was to be deemed to be the owner of the fee simple to the exclusion of any person entitled in remainder. Section 31 provided that there should be no deduction from the unimproved value of land in respect of any mortgage or unpaid purchase money and the mortgagor should be assessed and liable for land tax as if he were the owner of the unencumbered estate. Section 33 provided that a person in whom land is vested as a trustee should be assessed and liable as if he were beneficially entitled to the land. There were provisions which related to equitable owners and vendors and purchasers and to joint owners, but the sections which have been mentioned suffice to show that the general policy of the Act was to impose the tax on the owner of the first estate of freehold in possession and to make him liable independently of the rights of any reversioner, mortgagee or holder of security in respect of the unimproved value of the land. By s. 3 "unimproved value" is defined in relation to improved land to mean the capital sum which the fee simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming at the time as at which the value is required to be ascertained for the purposes of the Act, the improvements did not exist. There is a long definition of "improvements" which it is unnecessary to consider. "Unimproved value" in relation to unimproved land is defined to mean the capital sum which the fee simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bona fide seller would require. (at p622)

10. It seems clear enough that the fee simple here means an unencumbered fee simple. Encumbrances upon land or estates in reversion appear to have been regarded as giving to reversioners or encumbrancers beneficial interests to be enjoyed by them. But the owner of the first estate of freehold was selected as the taxpayer who was to represent all persons beneficially entitled to the land. The value upon which he was to be taxed was the unimproved value of the fee simple, that is to say the capital sum which the fee simple might be expected to realize. It seems evident that the fee simple mentioned must be taken as free from encumbrances which, if they impaired the value of his estate, nevertheless operated to confer upon some other person or persons an estate or interest in the land. Were it otherwise the taxable value of the land would be diminished but the correlative estate or interest would not come into tax, unless by some chance it were an interest falling under some specific provision imposing liability. When the definitions of "unimproved value" in s. 3 speak of "the fee simple" they cannot mean, notwithstanding the definite article, that estate in fee simple which has been granted. For under s. 26 the hypothesis is that there has not been a Crown grant. In the Act as it stood before the enactment of the Land Tax Assessment Act 1914, s. 27 applied to leases from the Crown where there was no fee simple: yet s. 27 (4) (b) in conjunction with the definitions of "unimproved value" required that a fee simple should be assumed. The expression "the fee simple of the land" naturally means the fee simple as the highest estate unencumbered and subject to no conditions. Doubtless estates in fee simple may be granted by the Crown subject to conditions or reservations which operate only in the public interest. The corresponding advantages which ensue may be enjoyed only as of public right: they are not an interest in land enjoyed by a specific person or persons. But the Act does not draw any distinction based upon this possibility. The general policy was reflected in a general rule. The interpretation of the Act which seems best to accord with the policy appearing from its provisions and also to flow from its language is that in assessing the unimproved value an estate in fee simple must be taken as the hypothesis unencumbered and subject to no condition restricting the use or enjoyment of the land. Stephen v. Federal Commissioner of Land Tax [1930] HCA 46; (1930) 45 CLR 122 is not an authority standing in the way of this conclusion. For the question touching the point (question 3) was answered as the result of an equal division of opinion and that creates no precedent for the Court pronouncing the decision: Tasmania v. Victoria [1935] HCA 4; (1935) 52 CLR 157, at pp 183-185 . But it is one thing to say that a hypothetical fee simple unencumbered and subject to no condition restricting enjoyment or use must be taken and another to say that laws of the State which affect the value of land are not to be taken into consideration. The federal Act adopts the hypothesis of an estate in fee simple to which State law attaches a fasciculus of rights. What those rights are, how far they extend and what measure of enjoyment they give must depend on the law of the State. This would hardly be denied in the case of a general law governing all fee simples in land throughout the State. But it is difficult to distinguish between such a law and one operating in part of a State or in a defined area only. There is all the difference between a public law affecting the enjoyment of land and a restriction of title. It is not difficult to imagine a law made by a State restricting the cultivation of land in some particular way. Such a law might well operate to prejudice the value of land which had no profitable use except for cultivation in the manner restricted. Would it matter for the purposes of the definitions of "unimproved value" that the law operated only in part of the State or within a very confined area? (at p624)

11. There remains the question how the distinction which is drawn above applied in this case to the County of Cumberland Scheme. Do the restrictions which it imposes upon, threatens to or suspends over land within the areas in the scheme, particularly that coloured dark green, amount to nothing but an encumbrance or condition or restrictive obligation affecting the titles to specific parcels of land? Is it not rather a law operating over an area of country within the State which, though not large, is chosen independently of all questions of title or ownership and controlling the use to which owners in fee simple or for any less estate or interest occupiers, licensees and indeed even trespassers may put the land? Its nature and purpose seem to bring the restrictions flowing from the scheme under the second description. However the title may be derived and whatever may be the form of ownership, occupation or enjoyment, the use of all land within the scheme is affected actually or contingently, presently or in the future, but in varying degrees and subject to varying conditions. In the case of land within the area coloured dark green the restriction, if not more proximate, is at all events more stringent. But it is nevertheless a restriction which arises from the law affecting an area in which the land lies, and not something altering the hypothesis upon which the Federal statute requires the land to be assessed. It must be taken into account in ascertaining the unimproved value of the land. (at p625)

12. The first question in the case stated should therefore be answered that in arriving at the unimproved value under the Land Tax Assessment Act of the land the subject of the appeal the land should not be valued without regard to the provisions and effect of the County of Cumberland Planning Scheme. (at p625)

13. This answer makes it necessary to consider the second question, which is subsidiary and consequential. It concerns the application of the scheme to so much of the land as is used as a golf course or courses or the use of which is not immediately connected with the buildings. The question in effect, although not in form, is whether so much of the land as excludes the buildings, and what may be described as the curtilage of the buildings, is vacant land. On the side of the commissioner it is said that the whole area is owned, occupied and used as a unit, that the buildings serve a necessary part in the use of the land considered as a whole, and that it is therefore not land of which it can be said that immediately before the appointed day there were no buildings upon it or no buildings except the structures enumerated in the definition of "vacant land": it falls outside that definition and accordingly is built-up land. The difference is that as vacant land it would be reserved for parks and recreation areas only, but as built-up land it may be used for the purposes for which it is already in use, and with the consent of the responsible authority for any purpose. The definition of "vacant land" speaks of the land upon which there were no buildings or only buildings consisting in the subsidiary or minor structures specified. What is meant by land upon which there were no buildings? Except in city streets it is usual for buildings to stand on land greater in area than the actual building. It is seldom that there is not at least a curtilage to a building. Indeed in conveyancing the expression "messuage" means not only the house itself but the outbuildings, courtyard, garden and adjacent land used and occupied with it. But buildings may be used in connection with a very large area of land all in one occupation and otherwise free from any building. The actual site of the buildings may be a very small fraction of the whole. It hardly seems credible that in such a case the whole of the land is to be considered "built-up" for the purpose of the scheme. How do you identify "the land" upon which there were buildings? The scheme supplies no immediate answer to the question. Yet if you consider land independently of man-made boundaries shewn upon the ground or upon paper, it stretches from one piece of water to the next uninterruptedly. In constructing the definition the draftsman does not seem to have adverted to the problem. Was it meant that you were to identify the parcel of land as that on which there was or was not a building, by unity of the existing occupation of the land, by the fact that it was contained in one title deed, by enclosure by fences, by the fact that it was continuous but in one ownership, or by the fact that it is used by one occupier for a single purpose or combination of purposes? One thing only seems certain about the meaning of the phrase "land upon which, immediately before the appointed day, there were no buildings" and that is that it cannot refer only to the exact area on the earth's surface on which buildings literally stand. And yet if that meaning must be rejected what criterion must be adopted to define the area of land which is sufficiently connected with the building to be land on which there is a building? Many suggestions to solve this problem have been made but perhaps the least unsatisfactory is one that makes the existing buildings the cardinal factor and inquires what land really belongs to them in the sense to be explained. Any building, whether it is a habitation or has some other use, may stand within a larger area of land which subserves the purposes of the building. The land surrounds the building because it actually or supposedly contributes to the enjoyment of the building or the fulfilment of its purposes. A garden, however large, belonging to a dwelling house is there as an amenity contributing to the use of the building as an abode. But if you find a caretaker's or gardener's cottage in a park, it is evident that it is put there for the better care, management and use of the park. The park is not an incident of the cottage, the cottage is an incident of the park. No one would say that the cottage made the park built-up land. In the same way no one would regard a farm as built-up land because the farmer's house stood on some part of it. If anyone were required to say how much of the land was built-up because of the farm-house he would do his best to fix upon an area which was seen to comprise all that was really devoted to the better use or enjoyment of the house as a dwelling or place of residence, what was incidental to it. He might find out-houses, a fence, a piece of garden and so on, but whatever marginal doubts might exist, it would be possible to fix on some area which really "belonged" to the house, an area "on" which the farm-house might fairly be regarded as built. (at p626)

14. The test may be applied without much difficulty to the present case. The golf courses cannot be said to be incidental to the club house, the greenkeeper's cottage, the professionals' shop and so on. In applying the test the exempt land need not, of course, be considered. To apply it, however, to the remainder means that, except land which forms part of the curtilage of the club house and land on which are erected the professionals' shop, the greenkeeper's and groundsman's cottage, the caddies' shed, the store erected by the Water Board and the like, and any curtilages to these structures, the appellant's land under assessment is vacant land which therefore falls under Div. 2 of Pt. II and in particular under cl. 10 of the County of Cumberland Planning Scheme Ordinance. The consequence is that the second question must be answered that it is open to the learned judge to find that the land, except the respective sites of the buildings thereon (not being buildings of the class of which examples are given in the definition of "vacant land") and the respective curtilages thereof, is vacant land within the meaning of Pt. II of the County of Cumberland Planning Scheme Ordinance. (at p627)

ORDER

Questions answered as follows:-

1. In arriving at the unimproved value under the Land Tax Assessment Act of the land the subject of the appeal such land should not be valued without regard to the provisions and effect of the County of Cumberland Planning Scheme Ordinance.
2. It is open to the learned judge to find that the said land, except the respective sites of the buildings thereon (not being buildings of the class of which examples are given in the definition of "vacant land") and the respective curtilages thereof, is vacant land within the meaning of Pt. II of the County of Cumberland Planning Scheme Ordinance.

Costs of the case stated reserved for the judge disposing of the appeal.