SUPREME COURT OF NEW SOUTH WALES
Trustees of the Estate of S R McCUTCHEON v COMMISSIONER OF LAND TAX (NSW);
S R McCUTCHEON & SONS PTY LTD v COMMISSIONER OF LAND TAX (NSW)
21 August 1974 -
Sheppard J To be dealt with are three appeals by taxpayers against assessments of land tax by the Commissioner of Land Tax and a summons for declaratory relief filed on behalf of the taxpayers in the Equity Division of the Court. In the way that the matter has been argued the issues between the parties will be resolved by the determination of the appeals and it will be unnecessary for me to consider, except in one respect, the summons.
At all material times there was in existence a partnership, the members of which were the trustee of the estate of the late S R McCutcheon, Mrs Coddington, Mr A H McCutcheon, Miss E McCutcheon, Mr S J O McCutcheon and Miss J McCutcheon. The partnership has carried on business since 1 July 1965. On 1 June 1973 Mrs Coddington retired from it but her retirement occurred after any of the events relevant to the determination of the matters in dispute between the parties to these proceedings.
The partnership has two main sources of income, namely, a large earth-moving plant and a farming and grazing business. The earth-moving business is operated from a building situated on land owned by a company, S R McCutcheon & Sons Pty Ltd, a party to these proceedings, and the farming and grazing business is carried on upon rural land owned by a number of persons and companies. In all there are eight separate allotments of land on which the partnership carries on business. The first is owned by Mr A H McCutcheon, the second by Mr S J O McCutcheon, the third by S R McCutcheon & Sons Pty Ltd, the fourth by the trustees of the estate of the late S R McCutcheon, and the fifth, sixth, seventh and eighth by companies known respectively as Anglebone Pty Ltd, Mullah Park Pty Ltd, Mullarah Pty Ltd and Kalamullah Pty Ltd
Each of the last four companies to which I have referred is incorporated in the Australian Capital Territory and was not at any relevant time registered as a foreign company in New South Wales. Each company has now become registered as a foreign company in this State but that registration did not occur until late 1973 and early 1974. The four companies are hereinafter referred to as "the Canberra companies".
On 8 May 1967 meetings were held of the directors of each of the five companies to which I have referred (that is the Canberra Companies and S R McCutcheon & Sons Pty Ltd) and resolutions were passed at each meeting providing for the terms upon which each company would allow the partnership, S R McCutcheon & Sons, to use its land for the purposes of farming and grazing. It is unnecessary to set out the terms of the resolutions, but since their passing the partnership has used the lands of the companies pursuant to agreements which contain terms similar to those set out therein.
On 24 February 1967 the Commissioner had written letters to the owners of the lands, that is Mr A H McCutcheon, Mr S J O McCutcheon, the trustees of the estate of the late S R McCutcheon, S R McCutcheon & Sons Pty Ltd and the Canberra companies, requiring them to furnish returns in respect of lands held by them at midnight on 31 October 1965 and 31 October 1966. The letters were addressed to the persons to whom I have referred jointly. Pursuant to the Commissioner's requirements returns were lodged. The copy of the 1965/66 return which is before me, is undated. It is a return made by the partnership of S R McCutcheon & Sons. Schedule 2 of the return is headed "Particulars of Land held in Partnership or Joint Ownership and of Land owned severally and used by Partnership - Sections 27and 28". In that schedule the partnership is named and under the instructions to state the names and addresses of the partners, eight names are listed. The names comprise those of the persons to whom I have above referred as the members of the partnership S R McCutcheon & Sons, and, as well, "S J O McCutcheon, trustee for Sidney E McCutcheon and Paul McCutcheon" and "A H McCutcheon trustee for Robert McCutcheon and Jill McCutcheon". No copy of the 1966/67 return was made available at the hearing. The returns for the years 1967/68, 1968/69, and 1969/70 were again lodged by the partnership and in schedule 2 of each return, which is headed similarly to the heading of that schedule in the 1965/66 return, the following statement was made, "All land used by the Partnership S R McCutcheon & Son irrespective of ownership." Assessments of land tax issued in respect of the years 1967/68 and 1968/69 were not tendered. These were replaced by amended assessments which, together with an assessment for the year 1969/70, issued on 16 March 1972. Each of the assessments, that is the two amended assessments and the assessment for the 1969/70 year, was addressed to the land holders jointly and not to the members of the partnership but at the end of the names of the persons to whom the assessments were addressed appeared the words, "T/A S R McCutcheon & Sons". I assume that the abbreviation "T/A" stands for "trading as".
It is against these assessments that the appeals are brought.
Land tax returns for the 1970/1971 and 1971/72 years have been lodged in a form similar to the earlier returns but no assessments in respect of these returns have yet issued.
The notices of objection which the Commissioner disallowed are each headed with the names of the land owners to whom the assessments are addressed and there then follow the words "T/A S R McCutcheon & Sons". The notices are each in similar form, that in respect of the 1967/68 year being as follows:
"I refer to your amended Notice of Assessment of Land Tax and Adjustment Schedule attached thereto (No 26201-File No 41417) issued on 16 March 1972 for the 1967/68 Tax year in respect of land owned by the undermentioned persons and Companies and used by the partnership of S R McCutcheon & Sons:
Estate late Sidney Richard McCutcheon Allan Hubert McCutcheon Sidney Joseph Oliver McCutcheon S R McCutcheon & Sons Pty Ltd Mullah Park Pty Ltd Anglebone Pty Ltd Mullarah Pty Ltd Kallamullah Pty Ltd
The taxpayers are dissatisfied with such aforesaid amended assessment made by the Commissioner under the Land Tax Management Act 1956, as amended and the Land Tax Act, 1956 as amended and object to this amended assessment on the following grounds:
"1. Land owned by all the above owners, with the exception of small parcels of town land, and included in Land Tax return lodged in respect of 1967/68 tax year is used exclusively for primary production and therefore entitled to additional rebate of Land Tax in accordance with rebates of Land Tax allowed for lands used for primary production under the Land Tax Management Act 1956, as amended, and the Land Tax Act 1956 as amended.
"2. The following companies are exempt Proprietary Companies as defined by the Companies Act of 1961 as amended, and therefore entitled to rebate as referred to in paragraph of [sic] 1, above:
S R McCutcheon & Sons Pty Ltd Mullah Park Pty Ltd Anglebone Pty Ltd Mullarah Pty Ltd Kallamullah Pty Ltd"
The notices were signed by the partnership accountant.
The appeals and the summons for declaratory relief were argued before me on 6 June last. They were argued on the basis that the assessments in question had issued to the members of the partnership and not to the owners of the land. When I came to prepare my judgment I noticed that the assessments were directed to the land owners and thereupon invited counsel to make further submissions if they wished. Further submissions were made by them in writing on 21 and 27 June last.
The principal matters argued before me at the hearing on 6 June last related directly to the grounds of objection numbered 1 and 2 in the notices of objection. I propose to deal with the matters which directly arise for consideration by reason of those grounds before going on to deal with matters which were raised in the written submissions to which I have referred.
The essence of the complaint which is made by the appellants is that they have been denied the benefit of rebates provided for in s 3(1B) of the Land Tax Act, 1956 (NSW), as amended. In its original form that subsection, which was introduced into the Act in 1967, provided so far as it is material as follows:
"(1 B) Notwithstanding the provisions of this or any other Act, the amount of land tax payable on land used for primary production by any owner in respect of the period of twelve months commencing on the First day of November in the year One thousand nine hundred and sixty-seven or any succeeding year shall be the amount which but for the provisions of this subsection would otherwise be assessed under subsection s 3one of this section less -
(a) where all land owned by the owner is land used for primary production - a deduction equal to three-twentieths of such amount:
(b) where part only of the land owned by the owner is land used for primary production - a deduction equal to the sum of the following amounts-"
There then follow provisions as to the calculation to be made and the subsection continues, so far as it is relevant:
"This subsection does not apply to (a) land owned by a company; ... (d) land in respect of which a company is jointly assessed with any other person.
In this subsection 'company' means a company not being (i) ... (ii) an exempt proprietary company as defined by the Companies Act 1961, as amended by subsequent Acts."
The subsection was amended by Acts No 62 of 1968 and No 69 of 1969 but not materially for the purposes of the submissions to be considered.
The first argument advanced by the appellant was that each of the companies was an exempt proprietary company, as referred to in paragraph (ii) at the end of the subsection, so that although the companies were jointly assessed with other persons in the assessment the exception provided for in paragraph (d) of the subsection did not take away the deductions provided for therein.
The plaintiffs also submitted that if, contrary to their first argument, the Canberra companies registered in the Australian Capital Territory were not exempt proprietary companies within the meaning of the subsection, the Commissioner should nevertheless have afforded to S R McCutcheon & Sons Pty Ltd, which was incorporated in New South Wales, and the appellants, the trustees estate late S R McCutcheon, and Messrs A H and S J O McCutcheon the benefit of the deductions provided for in the subsection.
I am clearly of opinion that the four Canberra companies are not exempt proprietary companies for the purposes of the subsection. The argument relied upon by the plaintiffs was that the subsection, where it referred to an exempt proprietary company as defined by the Companies Act 1961 (NSW), was not referring only to exempt proprietary companies incorporated under that Act but to companies which were structured, so far as their shareholding was concerned, in the same way as was provided for in the New South Wales Act in respect of companies incorporated under that Act.
Section 5 of the Companies Act 1961 defines an exempt proprietary company to mean a proprietary company no share in which is, by virtue of sub sections (7) and (8) of s 5, deemed to be owned by a public company. Subsections (7)and (8) contain elaborate provisions dealing with the circumstances in which a proprietary company is to be deemed to be owned by a public company. The expressions "proprietary company" and "public company" are used extensively throughout the subsections and of course those expressions are also used in the definition to which I have referred. "Public company" in the Companies Act 1961 is defined as a company other than a proprietary company. The word "company" itself means a company incorporated pursuant to the Act or pursuant to any corresponding previous enactment, that is, the word "company" is applied to companies incorporated in New South Wales and not elsewhere. In this way it is to be distinguished from the word "corporation" where used in the Act which is defined to mean any body corporate formed or incorporated whether in this State or outside it. It is also to be distinguished from the word "company" where used in other parts of the Land Tax Act and the Land Tax Management Act, the word "company" in the latter Act being defined so as to include all bodies or associations corporate or unincorporate.
It is conceded by the defendant, although there is no evidence to this effect, that each of the Canberra companies is an exempt proprietary company for the purposes of the Companies Ordinance of the Australian Capital Territory and that the provisions of that Ordinance are not materially different from those of the Companies Act 1961. This is the foundation for the plaintiffs' submission that the use of the words "as defined" in the relevant paragraph of sub section (1B) of s 3 of the Land Tax Act do not require more than that the company, to be an exempt proprietary company for the purposes of the subsection, be structured in the same way as a company incorporated in New South Wales would be structured. I reject the submission firstly because I think that the use of the words "as defined" was intended to apply the subsection only to companies incorporated under the New South Wales Act, or one of its predecessors, and, secondly, because the definition of the word "company" in that Act and the extensive use of the expressions "public company" and "proprietary company" make it clear that what is being referred to is a company incorporated in New South Wales and not any other company.
My rejection of the plaintiffs' first argument necessarily involves the rejection of their second argument as well. The New South Wales company and the individuals assessed are assessed jointly with companies which are not exempt, namely, the Canberra companies. Paragraph (d) of the sub section prevents the benefit of it applying in such a case. The two submissions made on behalf of the plaintiffs are therefore rejected.
I next turn to submissions which were made in relation to the form of the assessments. The significance of these submissions is that if, as the appellants submitted, the Commissioner should have issued separate assessments to each land owner, each, except the Canberra companies, would have been entitled to the benefit of the rebate provided for, it being denied to them by reason of the joint assessment.
I put on one side, for the moment, the question of whether it was open to the appellants to contest the joint assessment of the taxpayers in one assessment by reason of the provisions of s 35 of the Act, which provides for the full and detailed statement by an appellant of the grounds on which he relies. The Commissioner sought to justify the joint assessment primarily by reason of the provisions of s 27 of the Act dealing with the assessment of joint owners of land. That section provides that joint owners of land shall be jointly assessed and liable in respect of the land as if it were owned by a single person without regard to their respective interests therein or to any deductions to which any of them may be entitled under the Act and without taking into account any land owned by any one of them in severalty or as joint owner with any other person. The expression "joint owners" is defined in s 3 of the Act to mean, inter alia, persons who by virtue of the Act are deemed to be joint owners. Section 28 of the Act provides that where separate parcels of land are owned by different persons and such parcels are occupied, controlled or used by a partnership whereof all such persons are members either by themselves or together with other persons such persons shall for the purposes of the Act be deemed to be joint owners of such parcels and to hold such parcels in such shares or proportions as the Commissioner may determine. The difficulty about applying the provisions of s 27 in the light of the provisions of s 28 is that only three of the partners are land owners, namely, the trustees of the estate of the late S R McCutcheon and Messrs A H and S J O McCutcheon. At the most the provisions of s 27 would justify the issue of an assessment jointly to the members of the partnership and not to the companies who are not members of it.
There was argument as to whether the expression "such persons", where secondly appearing, in s 28, referred only to the persons by whom the separate parcels of land were owned or to those persons together with any others who were members of the partnership but not land owners. Although I incline to the view that the expression refers to land owners only, I do not find it necessary to express a concluded opinion on the point because on no basis can an assessment issued to all the land owners be justified pursuant to the operation of ss 27and 28. If only the land owners are assessed they must also be partners and the only persons falling into this category are the trustees of the estate of the late S R McCutcheon and Messrs A H and S J O McCutcheon. If one has regard to all partners, whether land owners or not, the assessment could not include S R McCutcheon & Sons Pty Ltd nor any of the Canberra companies because they are not members of the partnership.
Alternative arguments put forward on behalf of the Commissioner were based on ss 30and 32 of the Act but in my opinion these do not justify the joint assessment of persons who own separate parcels of land even though each allows his land to be used by the same person or persons.
A further argument relied upon by the Commissioner was that there was a partnership separate and distinct from the partnership S R McCutcheon & Sons consisting of the Canberra companies, S R McCutcheon & Sons Pty Ltd and the partnership S R McCutcheon & Sons. The basis for this argument was that the resolutions of the directors of each of the companies passed at the meetings held on 8 May 1967, provided for profit-sharing between the five companies and S R McCutcheon & Sons in the circumstances mentioned in para (f) of each resolution. The evidence does not satisfy me that such a partnership is in existence. If, contrary to my view of the evidence, there were such a partnership and if my tentative view of the meaning of the expression "such persons", where secondly appearing in s 28 of the Act, were correct, a joint assessment would be justifiable by reason of the provisions of ss 27and 28 because the persons assessed would be deemed to be joint owners for the purposes of s 28, it not being appropriate to include in the assessment those members of the partnership of S R McCutcheon & Sons who were not land owners.
The Commissioner, however, submitted that this point is not open on the hearing of the appeals because the ground was not taken. Although grounds of appeal should not be construed narrowly or technically (Heath v Commissioner of Land Tax (1964) 81 WN (NSW) (Pt 1) 409 at 415-6), s 35(1) does oblige an objector to state fully and in detail the grounds on which he relies. Section 37(2) provides that a taxpayer shall be limited on the hearing of an appeal to the grounds stated in his objection. It is contended by the appellants that their grounds of objection are sufficiently wide to enable this point to be raised, but in my opinion the two grounds are directed only to the disallowance by the Commissioner of the rebates which were available and the failure by him to treat the Canberra companies as exempt proprietary companies under the Act. There is nothing in the notices which indirectly, let alone directly, suggests that the objection is to joint assessment.
Furthermore, in the return for the 1965/66 year the names of the partners said to constitute the firm S R McCutcheon & Sons are listed. As previously noted, they included two sets of trustees not said to be partners in the affidavit filed in support of the application for declaratory relief. However, that matter can be put on one side. The returns for the later years refer only to the partnership and do not again list the partners, thus, by implication, referring the Commissioner back to the earlier return. Notwithstanding that the members of the partnership were so named, the accountant who signed the notices of objection adopted what was implicit in the objections, namely, that the partnership comprised, not the persons referred to in the 1965/66 return, nor in the affidavit, but the trustees of the estate of the late S R McCutcheon, Messrs A H and S J O McCutcheon, S R McCutcheon & Sons Pty Ltd and the Canberra companies. The heading to the letter lists these persons and companies and, like the assessments, concludes with the words "T/A" (meaning, as I have previously assumed, "trading as") "S R McCutcheon & Sons". This may have been a mere picking up of the Commissioner's reference, but the use of it and the absence of any express indication that joint assessment was objected to makes it impossible, in my opinion, to read the objections as, by implication, raising an objection on that ground. I say this notwithstanding the express reference to the land being owned by the persons and companies specified in the letters (their names are the same as the names of the persons who are said to trade as S R McCutcheon & Sons) and "used by the partnership of S R McCutcheon & Sons". If the partners were as stated in the Commissioner's assessments and in the headings to the letters of objection, the statement in the body of the letters to which I have just referred could still have been correct. Only a reference to the 1965/66 return, the assessment issued pursuant to which was not in question, would have alerted the Commissioner to the possibility of any error. The adoption by the accountant of the Commissioner's statement of the names of the partners would have made it unlikely that the Commissioner would take any such course. Despite the listing of the names in the earlier return there is, therefore, nothing to draw the Commissioner's attention to any difference between the identity of the land owners and the identity of the partners and nothing which could really have led him to think there was an objection to joint assessment.
The appeals are therefore dismissed.
It has been argued on behalf of the plaintiffs in the summons for declaratory relief that, if I should be of the view that the appeals should be dismissed, I should nevertheless make a declaration to the effect that the land owners were entitled to be separately assessed so that each, apart from the Canberra companies, would be entitled to the benefit of the rebate provided for in the Act. The Commissioner has strenuously opposed the making of any declaration both on jurisdictional and discretionary grounds. He relies on the fact that there is a system of appeal set up by the legislation which is under consideration and contends that a taxpayer is not entitled to relief against an erroneous assessment otherwise than by pursuing the right of appeal which is conferred upon him.
I do not find it necessary to deal with this broad argument because the plaintiffs' claim can be disposed of on narrower grounds. Section 16 of the Act provides for the amendment of assessments. So far as it is relevant, it is in the following terms:
"16.(1) Subject to the provisions of this section, the Commissioner may, of his own motion or upon an application received from a taxpayer, amend any assessment by making such alterations in or additions thereto or such further alterations in or additions thereto as he thinks necessary to ensure its completeness and accuracy.
"(2) An amendment may be made under this section- (a) where an application by a taxpayer under this section is made within three years after the service of notice of the assessment or any amendment thereof and the taxpayer has supplied to the Commissioner within that period or such further period as the Commissioner may allow all information required for the purpose of deciding the application - at any time;
(b) ... (c) in any other case - within three years after the service of notice of the assessment or of any amendment thereof.
"(3) Where any amendment of an assessment has been made in accordance with this section and a period of more than three years has elapsed since the service of notice of the original assessment any further amendment of the assessment shall, subject to the provisions of this section, be limited to the matter the subject of such prior amendment, notice of which was served within the previous three years."
Three years have elapsed since the original assessments in respect of the years 1967/68 and 1968/69 were issued. There is no evidence as to the matter which was the subject of the amendment so that I am unable to say whether the provisions of sub sections (2)and (3) of s 16 of the Act permit any further amendment of the assessments issued in respect of those years. Because of the state of the evidence I should take the view that no further amendment is permissible. Whatever my jurisdiction to grant declaratory relief and whatever other arguments may be available to the Commissioner on the question of my discretion, the provisions of the Act are, therefore, such as to make it inappropriate to make a declaration in respect of the 1967/68 and 1968/69 years.
The position is otherwise in the case of the 1969/70 year because a period of three years from the date of the assessment issued in respect of that year will not elapse until 16 March 1975. Despite the fact that it would be open to the Commissioner to amend the assessment issued in respect of that year, the time provided for in s 16 of the Act not having expired, I have reached the conclusion that whether the Commissioner's arguments as to my jurisdiction to make a declaration are sound or not, I ought not to exercise such jurisdiction as I may have. A joint return was lodged in the name of the partnership and, for reasons already mentioned, the Commissioner was misled by the notice of objection which was lodged into thinking that the members of the partnership were the persons whose names appeared in the Commissioner's assessment. The Commissioner has acted on the basis that the assessment, subject to the express matters raised in the notice of objection, was correct and in all the circumstances I do not think it would be appropriate at this stage to make a declaration which would compel the Commissioner to amend the assessment by issuing separate assessments to each land owner.
The Commissioner of course is free to issue fresh assessments if he thinks that the circumstances warrant this course but it is a matter entirely for him as to whether he does or not.
It has occurred to me since the conclusion of the argument that it might be said that no valid assessment has been issued in respect of any of the three years because it was inappropriate to issue joint assessments. No argument to this effect was put to me and I have not therefore considered the implications that such a submission might have.
The Commissioner in the written submissions made on his behalf, referred to the provisions of s 29 of the Act which enable in the circumstances there mentioned the joint assessment of companies which consist substantially of the same shareholders. It is unnecessary for me to express any view as to whether the Commissioner is entitled to rely upon the provisions of that section or not, and again I have not considered that matter.
In the result each appeal is dismissed and the application for a declaration is refused. The appellants and the plaintiffs must pay the Commissioner's costs of the appeals and of the application for a declaration.
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