Jacobs P Hutley and Bowen JJA

12 December 1973 - Sydney

Bowen JA    These three appeals by the Commissioner of Land Tax are against decisions of single judges of the Supreme Court. In each case, it was common ground that there was a house used as a private dwelling house, as defined in s   160C of the Local Government Act 1919 by the taxpayer, who owned the land on which the house was situated. In each case the taxpayer claimed a deduction under s   9(3)(e) of the Land Tax Management Act 1956 as amended and was held by the trial judge to be entitled to the deduction. Section   9(3)(e) provides for the deduction:


" Where, as at midnight on 31 October 1971 or any succeeding year, land owned by a person is used and occupied by that person solely as the site of a single dwelling-house as defined in subsection   (9) of s   160C of the Local Government Act 1919 ... . "

   In each case the Commissioner of Land Tax has appealed against the decision upon the grounds, first, that the trial judge was in error in applying s   9(3)(e) to the whole of the subject land; secondly, that he erred in holding that the whole of the subject land was used and occupied solely as the site of a single dwelling house; thirdly, that he ought to have found that a substantial part of the subject land was not being used and occupied solely or at all as the site of a single dwelling house; and, fourthly, that he ought to have dismissed the taxpayer ' s appeal. These grounds all raise one basic question, namely, whether a part of the subject land is outside the provisions of s   9(3)(e) . This section contains a proviso which is in the following terms:


" This paragraph does not apply to land owned by a person who owns other land ... . "

   The consequence for the taxpayer, therefore, in any case in which it is held that part of the land is outside s   9(3)(e) , is that he loses the right to any deduction because he becomes a person who owns " other land " .

   The broad purpose of s   9(3)(e) is clear enough. It is designed to give a deduction in respect of the taxpayer ' s home. To become entitled to the deduction a taxpayer must show that he owns the land. Nothing turns on ownership here. He must then show that the land is used and occupied by him solely as the site of a dwelling house. The word " solely " is introduced to exclude the deduction where there is also some different or inconsistent use or occupation, such as a use or occupation for commercial purposes. Nothing turns on the word " solely " in any of the present cases; no inconsistent use or occupation is suggested.

   The section does not speak of land occupied by the dwelling house. It speaks of land used and occupied by the taxpayer as the site of a dwelling house. Counsel for the Commissioner quite properly conceded that the deduction is not limited to the area of land actually taken up by the dwelling house, but extends beyond that to land used and occupied by the taxpayer in connexion with the dwelling house (cf Joyce v Commissioner of Land Tax (1973) 1 NSWLR 402 at 410-2; 4 ATR 10 ). It was the nature of the connexion required by s   9(3)(e) which produced differences of view.

   It appears to me that s   9(3)(e) poses a question of fact - was the land at the relevant time used and occupied by the taxpayer as the site of a dwelling house? This is a complex question involving matters of degree. In borderline cases the answer may be difficult; in most cases, once the facts are established, the answer will be clear enough.

   Certain elements in the problem are worth mentioning. The first may be raised by asking: What area of land is capable of falling within the description " the site of a ... dwelling house " ? Once one moves away from the actual area taken up by the building, this becomes a difficult area to define with any precision. In ordinary parlance, one might speak of a hill or of a lakeside as the site of a house, or one might speak of the ordinary suburban block as the site of a house and with a considerable range of variation in size, but one would not speak of the Megalong Valley or a holding of 100 acres in those terms. While I consider it impracticable to lay down limits in advance, the presence of this element is certainly a limiting factor.

   The next may be raised by asking: What is capable of falling within the description of " use " and of " occupation " ? The fact that both have to be demonstrated suggests that there is a difference and that the requirement is cumulative (see Knowles v Newcastle Corporation (1909) 9 CLR 534 at 545).

   " Use " has regard to the purpose to which the land is put. Under s   9(3)(e) it must be shown to have been devoted to the purpose of constituting the site of the dwelling house. Provided there is a unity in the land in question in a physical sense and a unity in what is done in devoting it to the purpose of providing or constituting the site and provided there is a sufficiently proximate and not too remote connexion between the dwelling house and its requirements or the requirements of its users or occupants on the one hand and the whole of the land in question on the other hand, then this element will be sufficiently established to demonstrate " use " as the site of the dwelling house.

   " Occupation " is not synonymous with legal possession. It includes possession, but it also includes something more (see Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 at 500 et seq; on appeal [1959] AC 248 ). It involves an element of control, of preventing or being in a position to prevent the intrusion of strangers (Newcastle City Council v Royal Newcastle Hospital [1959] AC 248 at 255). It is for this reason that physical presence on the land and fencing are evidence of occupation. But continuous physical presence or physical presence on every part of the land does not have to be shown in order to establish occupation. If it were necessary to prove physical presence on every part of a residential block to secure the deduction a substantial proportion of residential blocks could well be denied it. It is not uncommon in our community for there to be portions of such blocks which are rarely or never visited. Indeed, as these present cases illustrate, there may well be portions of such blocks which are precipitous, or are under water or are covered with dense bushland and which are, therefore, in a practical sense difficult if not impossible to traverse physically. This does not mean they are not " occupied " in a legal sense. To hold otherwise, would be to subvert the obvious intent of s   9(3)(e) . Nor, although the presence of fencing may be some evidence of occupation, does the absence of fencing establish that there is not occupation (Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 at 504).

   There was some discussion, in two of the present appeals, of the fact that the land was shown on a deposited plan or elsewhere as subdivided into lots and in one case of the fact that it was comprised in two separate certificates of title. Such considerations appear to me to be irrelevant to the issue of fact to be determined. Apart from the reference to ownership, there is nothing in s   9(3)(e) which suggests a concern with conveyancing details rather than with actual use and occupation (cf Parramatta City Council v Brickworks Ltd (1972) 46 ALJR 254 at 263; Eaton and Sons v Warringah Shire Council (1972) 46 ALJR 380 at 385, 388).

   Counsel for the Commissioner contended there was a further requirement to be met before the deduction could be allowed. He did not contend that the deduction applied only in respect of the land actually occupied by the dwelling house. His submission was that it would include such additional area as was reasonably necessary to permit the building to be used as a dwelling house. This, he suggested, posed a question to be determined not according to what the Commissioner or the taxpayer considered to be reasonably necessary, but according to what the court, taking into account the circumstances of each case, considered objectively was reasonably necessary. When it was pointed out that this might exceed the area which was proved to be actually used and occupied by the taxpayer, he indicated that the taxpayer would have to meet both tests. He would have to demonstrate what land he had in fact used and occupied solely as the site of a dwelling house. He could never get a deduction for more than that. But he would then have to face the issue whether the use and occupation so proved exceeded what the court considered objectively was reasonably necessary. If it did, then the excess would not qualify for the deduction and would, indeed, constitute " other land " within the proviso to s   9(3)(e) with the consequence that the taxpayer would lose his deduction even on the portion in respect of which the use and occupation was held to exist and to be reasonably necessary.

   In support of his submission counsel relied upon some observations of Herron J (as he then was) in Royal Sydney Golf Club v Federal Commissioner of Taxation (1942) ( 6 ATD 235 at 242; on appeal 67 CLR 599 ). In this case his Honour had to consider whether land occupied as the site of the Club House of the Royal Sydney Golf Club qualified for exemption under s   13(g)(3) of the Land Tax Assessment Act 1910-1937 (Cth). The claim for exemption was made in respect of the land actually occupied by the building and some surrounding area, being part, a relatively small part, of the total area of 150 acres, the major portion of which was used for a golf course. The relevant provision in s   13(g)(3) was as follows:


" 13. The following lands shall be exempt from taxation under this Act, namely:


(g) all land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for - (3) a building owned and solely occupied by a society, club or association, not carried on for pecuniary profit;. "

   Without finally deciding what area qualified for exemption his Honour at p 242 said: " As to what area constitutes precisely the site of the building is a matter which I will leave open for further consideration, and upon which evidence may have to be offered, in the absence of an agreement between the parties, to more accurately define it.

   However, it appears to me that the site is not limited to the land upon which the walls of the building stand, and it would extend to the lands reasonably necessary to the use of the building as a club house. It would include a reasonable area for parking and garaging motor cars, a reasonable area of lawns and gardens immediately adjacent to the club house, and the area used for a drive way. "

   The case went to the High Court (67 CLR 599) and there was an equal division on the question whether the exemption under s   13(g)(3) applied. Rich J and McTiernan J were in favour of affirming the decision of Herron J, Latham CJ and Starke J were in favour of reversing it. In the result, by reason of s   23(2) of the Judiciary Act 1903-1940 (Cth), the decision appealed from was affirmed and the appeal dismissed. It is true, as counsel for the Commissioner contended, that the judges of the High Court did not dissent from the observations of Herron J. It is also true, however, that they did not adopt them.

   I do not stay to discuss whether the differences between the New South Wales and Commonwealth Acts and the different considerations affecting a club house and a private dwelling house would render the observations inapplicable. I will assume for present purposes that the differences are immaterial. However, I am not persuaded that Herron J was doing more than giving the parties some useful directions for their negotiations. I do not gain the impression that he was laying down as a positive requirement of s   13(g)(3) an additional test which had to be met. If I am wrong and he was deciding as a matter of interpretation that a taxpayer must in addition to establishing the matter of fact raised by the section, prove that the area in question was " reasonably necessary " to the use of the building as a club house, then his decision is not binding on this court and I am not prepared to accept it as a correct approach to the interpretation of s   9(3)(e) of the Land Tax Management Act 1956.

   Section   9(3)(e) does not express any requirement of reasonable necessity. If it had been intended to introduce this notion it would have been a relatively simple matter to express it. Rather it seems to look to the actuality of use and occupation and to take the population and their residential habits as it finds them. I find no warrant for introducing the concept of a reasonable owner of a dwelling house or the concept of necessity of his use and occupation of the area of a site. Even idiosyncratic use and occupation seems to be permitted by the section, provided a court is satisfied the land is in fact used and occupied solely as the site of a dwelling house. This requirement would appear to be sufficiently stringent to prevent abuse and to serve the revenue raising purposes of the legislation.

   Having discussed the section in general terms I proceed now to a consideration of each individual appeal.Commissioner of Land Tax v Shennen:

   The land the subject of this appeal was purchased by Mr Shennen in a single contract in 1942. In 1946 he erected upon it a dwelling house in which he has since lived as his home. The land has a frontage of 198 feet to Harvey Street, West Seaforth and depths of 183 feet and some inches and a rear boundary of 188 feet. It has been fenced along its boundaries since 1946 and has no internal fences.

   From an original subdivision plan prepared when the title was under the Old System the land was divided into three lots, numbers 52, 53 and 54, each having a frontage of 66 feet to Harvey Street West by a depth of 184 feet. After he acquired the land Mr Shennen brought the title under the Real Property Act 1900 (NSW) and a single certificate of title was issued in respect of it.

   Mr Shennen erected his residence, which was later extended, upon a relatively flat portion of the land. It rests mainly on lot 53 but partly on lot 54. Mr Shennen has built concreted driveways and some other improvements such as a swimming pool around the house. These are on lots 53 and 54, except for perhaps portion of one cemented driveway which encroaches on lot 52 and some steps leading to that driveway. On lot 54 to the west of the improvements there is a cliff face below which the land is unimproved and in a natural condition. To the east of the improvements the land comprising practically the whole of lot 52 has also been left substantially in a virgin condition, although Mr Shennen has removed lantana and placed rock faces around the base of some natural trees in the portion nearer the house. Two natural pathways through the bushland are used, one as a means of access to Harvey Street West. The natural condition of the area is rocky and the soil sandy. The general locale is one where some aesthetic advantages can be said to be derived from the preservation of the natural environment.

   The area is by no means so large as to make it inappropriate to describe it as a site for a dwelling house. It is a unity both in its physical state and in its use and occupation. It is true there would be parts of it probably never visited by Mr Shennen. Nevertheless, I consider the learned trial judge was correct in holding that Mr Shennen was at the relevant time using and occupying the whole as the site of his private dwelling house. Commissioner of Land Tax v Christie:

   The land in question in this appeal has a frontage to Noonbinnia Crescent, Northbridge of 120 feet by a depth on the eastern side of 407 feet and on the western side of 330 feet and is bounded on the north by a creek. It was purchased in 1952 by Mr Christie in a single contract for the purpose of building a home on it. Within a year of purchasing it, Mr Christie erected a house on it and he has since lived in the house as his home.

   In a deposited plan the land was shown as consisting of four contiguous lots, numbers 12, 13, 14 and 15, and there were two certificates of title issued in respect of it, one comprising lots 12 and 13, the other lots 14 and 15.

   When he came to site his house, Mr Christie at first proposed to place it in the centre of the two parcels of land, comprised in the two certificates of title, but considerations affecting the supply of water and connexion to sewerage dictated that he place it on lots 12 and 13 near his frontage. Topography dictated that it be sited towards the southern frontage.

   Having erected it on lots 12 and 13 he made lawns on lots 12 and 13 in front of the house and behind it. He established a garden in the front of those two lots and built a driveway on lot 13. He made paths and constructed a barbecue also to the rear of the house. Some of this development appears to have extended slightly on to lot 14, but none on to lot 15. Except where he has developed the land it is fairly dense natural bushland. To some extent he has cut back the bush near the house on lots 14 and 15 but to the rear of the property it has been left in its natural state.

   The land is unfenced except in the front of lot 12 and part of lot 13 where Mr Christie built a brick fence. Describing the land in evidence, he said: " ... the ground is covered in rock and it is terraced, in as much as it is a natural terrace. I didn ' t build it. It started here and dropped eight to ten to six feet and ran along and dropped again and so it goes all the way down to the creek. I had five children at the time and one of the first things I did was to build pipe railings on top of the rock so that the children wouldn ' t fall over. "

   There were railings on lots 12, 13 and 14 but not on lot 15.

   Little physical use appears to have been made of the northern bushland area of the property. The children when they were young used to play " cops " and " robbers " down there with their friends. Mr Christie had only been down there about half a dozen times in 20 years. Mr Christie being now retired says: " I spend most every day on the deck (his verandah) reading or viewing the trees and the area. It is a delightful spot; beautiful big gum trees. "

   It will be apparent from my general observations above that I do not consider the subdivision into four lots or the division of title into two separate certificates of title is material to the question this court has to determine. Nor do I consider the absence of fences shows that Mr Christie has not used or occupied the land. There is no suggestion there has been any necessity to erect fences to keep out intruders. Moreover, although the land as a whole is a comparatively large block, it is not so large as to be incapable of answering the description " the site of a private dwelling house " . The real matter of substance put against Mr Christie rests in the submission that as to the dense bushland in the northern section he has not " used " or " occupied " it. Implicit in this submission, as it seems to me, is the notion that physical presence upon each part of the land is necessary in order to show use and occupation of that part. I do not think that is so. Land takes a wide variety of forms. In general it may be said that land is used and occupied in a legal sense if it is used and occupied according to its nature. An owner can use land by keeping it in its virgin state for his own special purposes (Newcastle City Council v Royal Newcastle Hospital [1959] AC 248 at 255; [1959] 1 All ER 734 ).

   This is so even where the issue is the rather complex one of whether land is being used and occupied as the site of a dwelling house. Land used and occupied as the site of a dwelling house must be expected to be used according to its nature. When seeking to apply s   9(3)(e) it appears to me necessary to determine whether there is a unity in the land, both in its topography and its use and occupation in determining whether it qualifies as a " site " . If there is this unity, then use and occupation may be demonstrated by physical presence on some portions and by control or enjoyment according to the nature of the land, of other portions.

   I think his Honour was right in holding that Mr Christie was using and occupying all the land in question as the site of his dwelling house.Commissioner of Land Tax v Richmond:

   The land the subject of this appeal was purchased by Mr Richmond in a single contract about 1959. In about 1961, he erected on it a dwelling house in which he has since lived as his home. The land has a frontage of some 245 feet to Hastings Road, Castle Hill and a depth of 890 feet. The dwelling house was erected about 155 feet from the street and in the first third of the block. A carport was erected to one side behind the residence in about the middle of the block.

   The land has been fenced along its boundaries at all relevant times and there is, in addition, an internal fence to the rear running across the block and containing a gate, forming an enclosed paddock where two horses are kept for the recreation and enjoyment of the family.

   Mr Richmond has maintained the front third approximately as a garden consisting of lawn and shrubs with very few garden beds. The rest of the property falls into a creek and levels at the rear where the horses graze and the children play.

   In this case the learned trial judge has, in my view correctly arrived at the conclusion that the whole of the property is used and occupied by Mr Richmond, that is to say, the problem of inaccessible unused portions does not arise. However, the question remains, whether an area as large as this - five acres in all - can appropriately be described as being used as the site of a private dwelling house. His Honour has held that it can and in this, too, I am in agreement with him.

   The district in question is a residential area much in demand but it has the characteristic that by reason of the County of Cumberland Planning Scheme Ordinance it is classed as a Rural Area with the consequence that blocks may not be used and occupied as the site of a private dwelling house unless they are of at least five acres. I consider the trial judge was correct in treating this as one factor to be taken into account, though not a conclusive one, in determining whether the land was used and occupied as the site of a private dwelling house.

   Altogether, I am of the opinion his Honour was correct in holding the taxpayer was entitled to the deduction under s   9(3)(e) .

   In the result, I think that in each case the decision of the trial judge should be affirmed and the appeal dismissed with costs.

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