DE MARCO v CHIEF COMMISSIONER OF STATE REVENUE (NSW)

Judges: McColl JA

Basten JA
Gzell J

Court:
Supreme Court of New South Wales, Court of Appeal

MEDIA NEUTRAL CITATION: [2013] NSWCA 86

Judgment date: 31 January 2013

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Basten JA

67. This appeal concerns the liability of the appellants to pay land tax in respect of a property owned by them and situated at Arcadia, north-west of Sydney, for the tax years 2004-2008. Although they did not physically use or occupy the land during that period, they relied upon an extension to the exemption for a " principal place of residence " ,as permitted by the Land Tax Management Act 1956 (NSW), s 10(1)(r) and Schedule 1A, cl 8. The appeal should be allowed and the orders proposed by Gzell J should be made.

68. The relevant legislation has been set out in the judgment of Gzell J and need not be repeated. In substance, the relevant exemption operates if the Chief Commissioner is satisfied that the person is the owner of land " that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least six months " , within the terms of cl 8(1)(a) of Schedule 1A. It is accepted that the appellants did in fact reside on the land

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during a sufficient period to engage the exemption; the question was whether, to engage the exemption, the use and occupation must be " lawful " . The Chief Commissioner accepted that the word " lawful " did not appear in the relevant provision, but submitted that the legislation should be construed so that for taxpayers to take advantage of a specified exemption, their qualifying conduct must be lawful. Otherwise taxpayers could obtain a financial advantage from their own wrongdoing. The appellants contended that no such limitation should be read into the legislation.

69. As Gzell J explains, none of the authorities relied on by the parties provide much assistance in resolving the issue. In particular, none was concerned with the Land Tax Management Act , let alone Sch 1A, cl 8 thereof. It is possible to obtain some assistance from the fact that the particular exemption provided by cl 6, also appearing in Schedule 1A, is stated not to apply unless the intended use and occupation of the land is " not unlawful " : cl 6(2)(c). The clause is also excluded in particular circumstances where land is capable of having more than two residences " lawfully built on it " : cl6(7)(c). However, little assistance can be derived from the fact that lawfulness is expressly adverted to in some provisions, but not in others.

70. Land tax is levied on land, the taxpayer being the owner of the land. It is not levied on the person who uses or occupies the land: Land Tax Management Act , ss 7 and 9. The Act contains numerous exemptions, some of which depend on the identity or character of the owner. The exemption relevant in the present case, however, depends on use and occupation of the land for a particular purpose, namely " as the principal place of residence of the owner of the land " :Schedule 1A, cl 2(1). That must be the sole purpose of the use and occupation.

71. The terms " use " and " occupation " may not be synonymous, though in a practical sense they will usually be identified by the same characteristics which, where use and occupation are associated with ownership, will commonly involve the exercise, or at least the intention to exercise, the legal right of control which flows from ownership:
Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1 at 4 (PC, Lord Denning). That fact suggests that the phrase " use and occupation " should be treated as an hendiadys, thus relieving of the need to consider each concept separately.

72. The fact that use and occupation may flow from ownership is not to equate the two concepts. As stated in Royal Newcastle Hospital at p 4, " [ o ] ccupation is a matter of fact and only exists where there is sufficient measure of control to prevent strangers from interfering: see Pollack and Wright on Possession in the Common Law (1888) pp 12, 13 " .That use and occupation involves a factual assessment, without a legal characterisation, indicates that lawfulness or otherwise will require a separate and additional inquiry. That understanding is reflected in statutory provisions which identify the intended use or occupation as being " lawful " or " not unlawful " . For example, Crown land is not " claimable " under the Aboriginal Land Rights Act 1983 (NSW) unless it is " not lawfully used or occupied " : s 36(1)(b).

73. It would have been open to Parliament to impose a requirement of lawful use and occupation in respect of the exemption for a principal place of residence. That step would not have changed the role of the Chief Commissioner or placed an unusual burden on the administration of the Land Tax Management Act . Indeed, determining whether the purpose was lawful might be more straightforward than determining the underlying factual question as to whether residential use and occupation was indeed the sole purpose of the owner in particular circumstances. In any event, the Parliament did not insert the word " lawful " before the phrase " use and occupation " in cl 8 and it is therefore necessary to determine whether that characteristic should be imposed by way of implication.

74. Principles of statutory construction are often more readily identified than applied. Determining whether a condition which does not appear in a statute may be implied requires the resolution of conflicting principles. On the one hand, it may be a practical and sensible approach to effecting a clear legislative purpose which has not been fully expressed; on the other

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hand, it may involve the court purporting to legislate and thus exceeding the bounds of judicial power. The approach consistently adopted by this Court is derived from the formulation of Lord Diplock in
Wentworth Securities Ltd v Jones [ 1980 ] AC 74 at 105-106, based on a purposive construction, mandated in this State by the Interpretation Act 1987 (NSW), s 33. Lord Diplock accepted that it might be permissible to read words into a statute, but only where three conditions were satisfied, namely:

" First, it was possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the bill passed into law. "

75. That language was applied by this Court in
Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at 299 (Hope JA) and 302 (McHugh JA); and see authorities identified by the Victorian Court of Appeal in
Director of Public Prosecutions v Leys [ 2012 ] VSCA 304 at footnote 117. In the present case, it would have been easy for the legislature to insert the word " lawful " if that had been intended. Such a qualification would not arise only in unexpected circumstances. It is therefore difficult to be satisfied that it was inadvertently omitted. Further, as will be discussed below, it is by no means clear that the insertion of the word " lawful " would have assisted the argument for the Chief Commissioner in the present case. Thirdly, again subject to one qualification to be dealt with shortly, it is far from clear that the purpose of the statute requires the insertion of the qualifier " lawful " before use and occupation. In other words, if owners of land in fact use and occupy the land solely for their own residence, whether or not they have complied with planning legislation is not a factor which should necessarily qualify exemption from liability to land tax.

76. To avoid that conclusion the Chief Commissioner relied upon the general principle that no person should benefit from his or her own wrongdoing. It has been described as a " fundamental legal principle " which can be traced back to Lord Coke ' s commentaries on The Laws of England by Littleton , published more than 400 years ago. It was repeated in Broome ' s Legal Maxims (10th ed, 1939) at p 191, as noted by Sir George Baker P in
Puttick v Attorney General [ 1980 ] 1 Fam 1 at 5. A form of the maxim has been applied recently in this State as a basis for taking a " robust " approach to assessing compensation payable by a wrongdoer whose actions have made an accurate determination problematic:
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508 (Hodgson J);
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59D (Handley JA, Mason P and Beazley JA agreeing);
Nicholls v Michael Wilson & Partners Pty Ltd [ 2012 ] NSWCA 383 at [ 124 ] , [ 139 ] (Sackville AJA, Meagher and Barrett JJA agreeing). However, as appears from the discussion in Puttick , where there is a statutory scheme to be applied, the consequences of even repetitive conduct involving fraud, perjury and false pretences is likely to require assessment in the context of the statutory scheme with only limited assistance from legal maxims. That result is inevitable because of the level of generality at which the maxim is stated.

77. There is a further difficulty: " wrongdoing " covers a wide expanse of conduct. At one extreme, it includes deliberate and serious criminality; at the other pole, there may be inadvertent breach of a regulation, or even conduct which is not necessarily unlawful, but might be considered immoral, disreputable, unprofessional or unconscionable - other epithets could be used. Similarly, that which may be described as " unlawful " could involve a broad range of conduct. The kinds of case in which reference is made to the maxim tend to be those involving deliberate meretricious acts. Such conduct is unlikely to engage the land tax exemption. That is because the principal place of residence exemption is defined to mean use and occupation by the owner " as the principal

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place of residence … and for no other purpose " :Schedule 1A, cl 2(1). Any deliberate illegal purpose undertaken on the land will take the use and occupation outside the scope of the exemption. The only possible conduct which might be thought to warrant a reading down of the exemption would be the deliberate use of land for residential purposes, either knowing that such use is prohibited or, although less offensive, knowing that permission for such use is necessary and has not been obtained. Again, however, without more, such conduct would have no clear policy connection with the exemption from land tax.

78. Underlying the Chief Commissioner ' s submission may have been a concern that some conduct, involving a colourable claim for an exemption in circumstances where the use and occupation was not bona fide as a principal place of residence, could ostensibly fall within the scope of the exemption. That, however, was not raised in the present matter and it is unnecessary to consider how such a concern should be addressed.

79. It is sufficient to conclude that:

• (a) the language of cl 8 is satisfied by use and occupation which is, as a matter of fact, as a principal place of residence, and
• (b) the legislative scheme does not call for, and therefore does not permit, the introduction of an additional constraint, namely that the use and occupation must be lawful, in the sense of complying with the requirements of the relevant planning legislation, at least in circumstances where the use and occupation was permissible with consent.

Orders

80. The foregoing reasoning establishes that the Chief Commissioner and the Appeal Panel were in error in concluding that the exemption was not available to the appellants because their use and occupation of the land was unlawful.

81. Nevertheless, final orders disposing of the question of liability cannot be made because there is an outstanding issue. A further element in the definition of the " principal place of residence exemption " is that the land is a parcel of " residential land " : Schedule 1A, cl 2(1)(a). The phrase " residential land " is defined by reference to use and occupation for residential purposes, but in circumstances where that use and occupation is " of a building or buildings designed, constructed or adapted for residential purposes " : cl 3(1). As Gzell J explains, there was a live issue, not addressed below, as to whether the use by the appellants of a caravan or mobile home, apparently not connected to Council services, satisfied the definition of " residential land " in cl 3. Accordingly, final orders cannot yet be made.

82. Although there are circumstances in which determination of a legal issue can be expected to resolve the dispute, thus avoiding the need to call evidence in relation to factual elements, it is often undesirable in circumstances where there are at least two levels of appeal as of right on questions of law to address the legal issue separately and before other issues in the case. Especially is that so in circumstances where there is only one level of appeal, requiring leave, in respect of factual issues, the determination of which at first instance may finally resolve the case.

83. It is, of course, easy to be critical, with the benefit of hindsight, of procedural steps taken at an early stage. All that need be said for present purposes is that the matter will need to be remitted for further hearing in the Tribunal. The Court has power to make " such orders as it thinks appropriate in light of its decision " : Administrative Decisions Tribunal Act 1997 (NSW), s 120(1). Although it is usual to remit the matter to the Appeal Panel from whence the appeal came, I agree that in the present case it is appropriate to remit the matter to the Tribunal as constituted for a first instance hearing.