Morrison v. Federal Commissioner of Land Tax

17 CLR 498

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(Decision by: Griffith CJ) Court:

Judges:
Griffith CJBarton J
Isaacs J
Powers J
Rich J

Hearing date: 13 March 1914; 16 March 1914
Judgment date: 16 March 1914

MELBOURNE

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Decision by:
Griffith CJ

The question to be decided in this case, although one of considerable importance to many people in this Commonwealth, does not seem to present any very serious difficulties. The question is as to the interpretation of the provisions of the Land Tax Assessment Act relating to the unimproved value of land which is the subject matter of taxation under that Act. The unimproved value of land is the subject matter of taxation in several, if not all, of the States of the Commonwealth, and the definition of unimproved value varies in different States, but we are only concerned in this case with the definition in the Commonwealth Act, which differs materially from that in some, at least, of the State Acts. "Improved value" 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." There is no practical difficulty in understanding that definition. Then "unimproved value" is defined as meaning "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"-so far repeating the words of the definition of "improved value,"-"assuming that them improvements (if any) thereon or appertaining thereto and made or acquired by the owner or his predecessor in title had not been made." Then, by way of supplement, the term "value of improvements" is defined to mean "the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements." It seems plain enough that that means that the value of improvements is the present enhancement of the value of the land attributable to the operations of man upon the land the benefit of which still continues, including also in some cases improvements not actually effected upon the land itself, to which qualification it is not necessary to refer for present purposes. What operations of man are improvements? When I say "operations of man," I think the term should be limited to what is done by the owner for the time being, that is, after the land has ceased to be Crown land. Any operation of man on land which has the effect of enhancing its value comes within the definition of "improvement." When one considers the nature of land in Australia, and how lately it has passed from its primitive condition, it is obvious that all sorts of operations may tend to enhance its value. Take, for instance, a jungle so dense that it is almost impenetrable by four-footed animals, even the smallest. Compare it with the same land after the lapse of-say-10 years, when it presents the appearance of a meadow clothed with grass and carrying dairy herds. What is the value of the improvements in that case? Surely, the difference between the value of the land as jungle and its value in the condition in which it is when found. That difference clearly comes within the definition of "value of improvements," "the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements." In such a case as I have mentioned-and it applies with variation to a great part of Australia-the improvement is effected not merely by the immediate acts of man in cutting down trees, ring-barking, destroying tussocks of grass, and so on, but by all the operations of nature which could not take place without the prior operations of man. It is the combined effect of what man has done and of the operations of nature which are only effectual by reason of what man has done. And it is provided that the cost of doing it is not to be the test. The only questions, therefore, are: What would be the value of the land if it had continued in a state of nature, and what is its value now? It follows that the value of the improvements is a "constant," which is to be deducted from the improved value, which is a "variable."

I am, of course, speaking of operations the full effect of which has been obtained, as, for instance, in the case of land which was originally covered with stones and thereby unfit for agriculture, and which by their removal has become fit for it. That operation has been completed and the benefit remains, and so far as the benefit continues the value of the improvement is a "constant." While the improvements or the consequent operations of nature are still going on, the value of the improvements may, of course, increase from year to year, just as, in the case of some improvements, it may be exhausted. It is in that sense that I use the term "a constant."

Applying these principles, the first question we are asked is whether certain operations are improvements. They are: ringing timber; clearing timber that had fallen in consequence of ringing; clearing timber that had fallen through natural decay or storms; clearing timber that had been brought there by floods; actively burning timber on the ground; actively burning tussocks and other grass; burning by bush fires which, so far as the owners of Killingworth were concerned, were accidental, and which burned off dead and useless timber, and burned tussocks and rank grass; as a result of which operations the land was sweetened and became sounder sheep country; the stocking of the land consolidated it to some extent, and otherwise improved it. Anyone familiar with Australia knows that all these operations do improve the value of land, and make it saleable at a higher price. It is also obvious that every one of these operations is only a means to an end. They enable the forces of nature to operate by bringing sunshine and rain to the soil. They sweeten the land and produce as important changes as the draining of a swamp. The only one of the enumerated operations as to which there may be some doubt is the burning off by accidental bush fires. With respect to this it may be that the benefit is divisible. Suppose that PD1,000 has been added to the value of the land by an accidental bush fire, and that it would have cost the owner PD10 to have produced that result, then the benefit he could claim would be PD990, and not PD1,000. As for the rest, I have no difficulty in saying that all the matters mentioned are improvements within the meaning of the definitions in s. 3.

The other point raised is as to whether the definition of the value of improvements ought to be regarded in construing the definition of unimproved value. It is impossible to contend that you may not read the whole context of a section in order to interpret any part of it. Three phrases are defined-"improved value," "unimproved value," and "value of improvements." Obviously it is proper to read all three before determining what any one of them means.

Another question sought to be raised does not arise in this case.