DE MARCO v CHIEF COMMISSIONER OF STATE REVENUE (NSW)

Members:
McColl JA
Basten JA
Gzell J

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

MEDIA NEUTRAL CITATION: [2013] NSWCA 86

Decision date: 31 January 2013

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McColl JA

Rochelle De Marco and Brian Hayward, the appellants, appeal from a decision of an Appeal Panel of the Administrative Decisions Tribunal finding in favour of the Chief Commissioner of State Revenue, the respondent, in a dispute concerning the appellants ' claim to an exemption from land tax. The respondent was successful in persuading the Appeal Panel that the appellants ' unlawful use and occupation of the land precluded them from taking advantage of the principal place of residence ( " PPR " ) concession in cl 8(1) of Schedule 1A to the Land Tax Management Act 1956(NSW) ( " LTMA " ), as in force for the 2004 to 2008 tax years:
Hayward v Chief Commissioner of State Revenue (RD) [ 2011 ] NSWADTAP 17 .

2. The facts are set out in Gzell J ' s reasons. I gratefully adopt, and will not repeat, his Honour ' s exposition of the facts and relevant legislation save where contextual necessity dictates.

3. The critical question is whether use and occupation of land for which council approval had not been obtained pursuant to s 68(1) of the Local Government Act 1993 (which it was accepted could be described as " unlawful " ) constituted use and occupation within the meaning of cl 8(1) of the LTMA such as to entitle the appellant to the PPR exemption from land tax: s 10(1)(r), LTMA.

4. For the reasons that follow, I am of the view that the appeal should be dismissed with costs.

The principal place of residence exemption

5. Land tax is levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers, other than land which is exempt from taxation under the LTMA: s 7, LTMA; see also s 9. Land that qualifies for the PPR exemption, as provided by Schedule 1A of the LTMA, is exempt from land tax: s 10(1)(r), LTMA. The calculation of the land tax payable is outlined by the Land Tax Act 1956 (the " Tax Act " ), which is to be read and construed with the LTMA: s 1, Tax Act. The LTMA is also to be read with the Taxation Administration Act 1996 ( " Administration Act " ): s 4,LTMA. Neither party suggested anything turned on either the Tax Act or the Administration Act.

6. Part 2 of Schedule 1A to the LTMA relevantly provided:

• " 2 Principal place of residence exemption
  • (1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act … if the land is:
    • (a) a parcel of residential land …
  • (3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner ' s entitlement to the exemption.
  • (4) The exemption conferred by this clause is referred to as the ' principal place of residence exemption ' .
• 3 Residential land - meaning
  • (1) In this Schedule, ' residential land ' means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes … "

7. The appellants could not qualify for the cl 2(1) exemption for the relevant land tax years because they did not use

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and occupy the land as their principal place of residence after December 2002.

8. Part 3 of Schedule 1A deals with " Concessions in application of principal place of residence exemption " . Clause 8(1) in Part 3, pursuant to which the appellants claimed the PPR exemption, provided in each of the relevant land tax years:

• " (1) If the Chief Commissioner is satisfied that:
  • (a) a person is the owner of land ( ' the former residence ' ) that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least 6 months, and
  • (b) the person uses and occupies other land (whether or not in New South Wales), that is not owned by the person, as his or her principal place of residence,

    the person is taken, for the purposes of the principal place of residence exemption, to continue to use and occupy the former residence as his or her principal place of residence. "

9. Clause 6 which is also found in Part 3 of Schedule 1A should be mentioned. It provides a PPR exemption for unoccupied land for a period of 4 tax years after a person became the owner of land, if the owner intends to use and occupy the land solely as his or her principal place of residence and " the intended use and occupation of the land is not unlawful " : cl 6(2)(c).

10. It was common ground that the appellants owned the land. Their last use and occupation of the land was in December2002 so that, if the PPR exemption applied, the period of their deemed use and occupation ceased in December 2008:cl 8(3)(a).

11. The argument proceeded on the basis that for the purpose of resolving the question of law, the land was " residential land " : cl 3, Schedule 1A. However as Gzell J points out (at [ 165 ] ) the factual issue as to whether the dwellings the appellants occupied fell within the meaning of " building " in cl 3, Schedule 1A, LTMA was not resolved.

Submissions

12. The appellants ' essential submission is simple. Mr I Stanley, who appeared on appeal but not before the ADT, submitted that the words in cl 2(1) and cl 8(1) are unambiguous and do not warrant the implication of a lawfulness requirement. He contended that implying such a qualification would " extend the scope and purpose of the land tax legislation beyond its intended reach as a taxing regime into the realm of planning, building or development law " or, more colloquially, that the respondent is not administering the Local Government Act.

13. Secondly, Mr Stanley contrasted cl 8(1) with the concession for unoccupied land intended to be the owner ' s principal place of residence in cl 6(1) of the LTMA: see [ 9 ] above. Mr Stanley submitted that the inclusion of the words " not unlawful " in cl 6(2)(c) manifested a clear legislative intention to introduce a qualification not otherwise found in Schedule 1A.

14. Mr S Gibb of Senior Counsel, who appeared for the respondents on appeal with Ms C Burnett, but not before the ADT, submitted that the fact that the definition of " residential land " in cl 3 of Schedule 1A applied the PPR exemption to " land that is used and occupied for residential purposes … being use and occupation of a building or buildings designed, constructed or adapted for residential purposes … " meant that the exemption operated against the background of the general law in relation to development consent approvals. Accordingly, whether the use was unlawful from a development control and consent perspective was relevant to determining whether a building was used and occupied for residential purposes.

15. Secondly, Mr Gibb submitted that the express reference to " unlawful " use in cl 6(2)(c) was explained by the fact that that provision " concerns an intended future (i.e. notional) use of unoccupied land " . By contrast, cl 8(1) concerns " land that has previously been used and occupied by the person as his or her principal place of residence. "

16. Thirdly, Mr Gibb submitted that failing to imply a requirement of lawfulness in cl 8(1) would create the curious outcome in which the PPR exemption would be available where the actual

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use and occupation was unlawful, but not where the intended use and occupation was unlawful.

17. Fourthly, Mr Gibb submitted that the purpose of " protecting legitimate home ownership from taxation " is better served by denying the cl 8(1) concession where the use and occupation is unlawful.

18. Finally, Mr Gibb relied on the maxim that courts resist adopting a construction of a statute that would allow a person to take advantage of his or her wrong and that to allow the cl 8(1) concession where the appellants had not obtained council approval for their occupation of the land would flout that approach.

Consideration

19. The LMTA is a taxing statute. However its interpretation must be undertaken in accordance with general principles governing the interpretation of statutes:
Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) [ 1981 ] HCA 26 ; (1981) 147 CLR 297 (at 323) per Mason and Wilson JJ;
Commissioner of Taxation v Consolidated Media Holdings Ltd [ 2012 ] HCA 55 ; (2012) 87 ALJR 98 (at [ 39 ] ) per French CJ, Hayne, Crennan, Bell and Gageler JJ.Thus, " tax statutes do not form a class of their own to which different rules of construction apply " , although " the fact that a statute is a taxing Act … is part of the context and is therefore relevant to the task of construing the Act in accordance with … settled principles " :
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [ 2009 ] HCA 41 ; (2009) 239 CLR 27 (at [ 57 ] ) ( " Alcan " ) per Hayne, Heydon, Crennan and Kiefel JJ.

20. In Alcan (at [ 51 ] ) the plurality emphasised that " [ f ] ixing upon the general legislative purpose of raising revenue carried with it the danger that the text [ does ] not receive the attention it deserves. " They quoted Gleeson CJ ' s admonition in
Carr v Western Australia [ 2007 ] HCA 47 ; (2007) 232 CLR 138 (at [ 6 ] ) ( " Carr " ) in which, illustrating the proposition that " to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose " ( Carr (at [ 5 ] )),his Honour said:

" … [ I ] t may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling . " (Emphasis added)

21. In
Paliflex Pty Limited v Chief Commissioner of State Revenue [ 2003 ] HCA 65 ; (2003) 219 CLR 325 ( " Paliflex " ), which concerned the question whether the LTMA and the Tax Act had valid operation in relation to land Paliflex purchased from the Commonwealth, Gleeson CJ and McHugh, Gummow, Kirby and Hayne JJ observed (at [ 30 ] ) that:

" The Tax Act and the [ Land Tax ] Management Act are not concerned with the uses to which any land within a delineated geographic area may be put. They impose fiscal burdens only upon those ' owners ' who are ' taxpayers ' . "

22. In similar vein, Mason P (with whom Sheller JA agreed) said in
Chief Commissioner of Land Tax v MacAry Manufacturing Pty Ltd [ 1999 ] NSWCA 471 ( " MacAry Manufacturing " ) (at [ 31 ] ) that " the legislative scheme [ created by the LTMA and the Tax Act ] envisaged that ownership would be the criterion of taxability " .

23. The observations in both cases reflect s 7 and s 9(1) of the LTMA.

24. The statement in Paliflex that the LTMA is not concerned with the use to which land can be put was made in the context of distinguishing that case from
Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd [ 1970 ] HCA 58; (1970) 124 CLR 262 . While the plurality ' s statement concerning the primary operation of the LTMA is germane to its construction, it does not distract from the necessity in the present case of determining the construction of the concession afforded by cl 8 by reference to its text, which operates by reference to ownership as well as to use and occupation as a principal place of residence.

25. The legislative purpose apparent from the provisions of the LTMA dealing with the PPR exemption is that owners of land should have at least one property which is exempt from land tax, being their principal place of residence. The use and occupation requirement establishes the parameters within which that exemption can be attracted. The concessions Part 3 of Schedule 1A creates identify the circumstances in which the PPR exemption is available even to those who do not meet the primary criteria of use and occupation in cl 2(2) of Schedule 1A. Further, each Part 3concession operates independently of the others.

26. It was common ground that to qualify for the PPR exemption, the appellants ' land had to fall within the meaning of " residential land " for the purposes of cl 2(1) of Schedule 1A. Thus it had to have been " use and occupation of a building or buildings designed, constructed or adapted for residential purposes " .

27. The terms " use " and " occupation " (and the latter ' s grammatical variations) in Schedule 1A refer to different, but cumulative, requirements:
Commissioner of Land Tax v Christie [ 1973 ] 2 NSWLR 526 (at 533) ( " Christie " ) per Bowen JA (Jacobs P agreeing). " ' Use ' has regard to the purpose to which the land is put " : Christie (at 533); see also
Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [ 2011 ] NSWCA 366 (at [ 21 ] ) per Allsop P (Campbell and Whealy JJA agreeing). " ' Occupation ' … includes possession [ and ] … involves an element of control, of preventing or being in a position to prevent the intrusion of strangers: Christie (at 533). There was no issue as to the appellants ' occupation of the land, albeit it may be inferred that if their use of it was unlawful, so, too, was their occupation.

28. There is force in the respondent ' s submission that the reference in cl 3(1) to the essential attributes of the building claimed to be the primary place of residence directs attention to the necessity that there have been council approval as required for its design, construction or adaptation.

29. The respondent referred in this respect to
Marana Holdings Pty Ltd v Commissioner of Taxation [ 2004 ] FCAFC 307 ; (2004) 141 FCR 299 (at [ 62 ] - [ 63 ] ) ( " Marana Holdings " ) where, in the course of considering whether the sale of a motel was of residential premises used for residential accommodation for the purposes of s 40-65(1), A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the " GST Act " ), the Court (Dowsett, Hely and Conti JJ) said:

" … To say that a building is ' intended ' to be occupied as a residence implicitly describes the intention with which it was designed, built or modified, which intention will be reflected, to greater or lesser extent, in its suitability for that purpose. It is true that this meaning may overlap with the further requirement that the building be capable of occupation as a residence …

[ 63 ] As far as we can see, there is no evidence concerning the physical suitability as at the date of sale … of the premises for use as a residence, as to whether they were then capable of being so occupied or as to whether such use would have then been lawful . As it was apparently necessary to modify the premises, obtain council permission for the change of use and convert the title to strata title, it seems likely that they were neither intended to be, nor capable of being occupied as a residence as at the date of sale … " (Emphasis added)

30. Marana Holdings is persuasive authority. However it was decided in a different statutory context. The definition of " residential premises " in s 195-1 of the GST Act relevantly provided " … land or a building that … (b) is intended to be occupied, and is capable of being occupied, as a residence " . However the case did not turn on lawful use and the passage I have emphasised in [ 63 ] was not essential to the reasoning. Further, the reference in the definition of " residential premises " to the land or building as being " capable of being occupied " arguably conveyed a notion of legality.

31. Nevertheless, independently of Marana , I would accept that the phrase " used and occupied " in, at least, cl 2(1), cl 3(1) and cl 8(1) of Schedule 1A should be read as qualified by the word " lawfully " .

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32. Such construction finds support, as the respondent submitted, in the maxim that no person should be allowed to take advantage of his or her own wrong (see D C Pearce and R S Geddes, Statutory Interpretation in Australia , 7th ed(2011) LexisNexis (at [ 2.41 ] )).

33. F A R Bennion, Statutory Interpretation , 5th ed (2008) LexisNexis (at 1141) states:

" Unless the contrary intention appears, an enactment by implication imports the principle of the maxim nullus commodum capere potest de injuria sua propria (no one should be allowed to profit from his own wrong). "

I shall refer to the principle " no one should be allowed to profit from his own wrong " as the " maxim " in the remainder of my reasons.

34. In the first edition of his work, Bennion commented that " [ t ] he effect [ of the maxim ] is usually that the literal meaning of the enactment is departed from where it would result in wrongful self-benefit " : F A R Bennion, Statutory Interpretation , 1st ed (1984), Butterworths (at 780).

35. As Bennion explained (5th ed, at 792), the maxim is related to the technique of construction in bonam partem which entails that:

" If a statutory benefit is given on a specified condition being satisfied, it is presumed that Parliament intended the benefit to operate only where the required act is performed in a lawful manner. " (Emphasis in original)

36. An illustration of the in bonam partem technique of construction can be seen in
Shah v Barnet London Borough Council [ 1983 ] 2 AC 309 , to which Bennion referred (5th ed, at 792) in which Lord Scarman said (at 343 - 344):

" If a man ' s presence in a particular place or country is unlawful, eg in breach of the immigration laws, he cannot rely on his unlawful residence as constituting ordinary residence (even though in a tax case the Crown may be able to do so) … There is, indeed, express provision to this effect in the Immigration Act 1971, s 33(2). But even without this guidance I would conclude that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully. "

37. Another technique of construction related to the maxim is the principle allegans suam turpitudinem non est audiendus (a person alleging his own wrongdoing is not to be heard). The " essence of [ this ] principle is that the party needs to prove an illegal act in order to succeed " : Bennion (5th ed, at 792, 1106). The learned author observes (at 1107) that:

" The … principle is often applicable where the wrongdoing consists in a contravention of the Act under which benefit is sought. This connection is immaterial however. What matters is reliance on a cause of action which depends on something forbidden by law … The principle does not apply where the illegality is merely incidental … The fact that a statutory requirement has not been complied with does not necessarily render the transaction unlawful and unenforceable. ' What the court has to do is to determine the effect of the requirement as a matter of the true construction of the statutory provision. ' "

38. Bennion extracted the quotation in the last sentence of the previous paragraph from
Garbutt v Edwards [ 2005 ] EWCA Civ 1206 ; [ 2006 ] 1 All ER 553 (at [ 35 ] ). That case concerned the question whether the breach of the requirement in r15 of the Solicitors ' Costs Information and Client Care Code (made pursuant to s 31 Solicitors Act 1974 (UK)) to give an estimate of costs rendered a solicitor ' s contract of retainer unlawful. The Court of Appeal held that it did not because (at [ 37 ] ) the rule requiring that estimate was not automatically breached by a failure to do so, (at [ 38 ] ) the code did not require a costs estimate to be given in every case and (at [ 40 ] ) there were disciplinary sanctions for breach of r 15.

39. Broom ' s Legal Maxims , 10th ed (1939) Sweet & Maxwell Ltd (at 191) states that the maxim that no man shall take advantage of his own wrong is " based on elementary principles " and " admits of illustration from every branch of legal procedure " . In
Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [ 2005 ] NSWCA 443 ; (2005) 12 BPR 23,923 (at [ 20 ] ) ( " Ruthol " ),Giles JA (Santow JJA and Hunt AJA agreeing) after explaining the application of the maxim in the area of contract law,observed that it " founds a like rule of construction of statutes " , for which proposition his Honour cited

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Grozier v Tate (1946) 64 WN (NSW) 1 ;
Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562 and
Allen v Bega Valley Council (1994) 85 LGERA 364 .

40. However, as Giles JA observed ( Ruthol at [ 21 ] ) in
Hooper v Lane (1859) 6 HL Cas 443 (at 460 - 461);
10 ER 1368 (at 1375 - 1376), Lord Bramwell explained the proper application of the maxim, saying:

" … that rule only applies to the extent of undoing the advantage gained [ by the wrongdoer ] , where that can be done, and not to the extent of taking away a right previously possessed … [ the maxim ] means that no one shall gain a right by his own wrong; and not that if he has a right, he shall lose it, or the power of exercising it, by a wrong done in connection with it. "

41. The operation of the maxim was also explained in
Re London Celluloid Co (1888) 39 Ch D 190 (at 206) where Bowen LJ said:

" The maxim that no man can take advantage of his own wrong must be carefully considered, and expressed in more precise terms, before it can be safely applied. It means that a man cannot enforce against another a right arising from his own breach of contract or breach of duty. The observations of Baron Bramwell in
Hooper v Lane on this subject are very instructive … To return to the maxim that a man cannot take advantage of his own wrong, we can see the point where it ceases to be applicable. Construing the maxim as I have said, the first question is, has the right to demand payment in cash been acquired through the breach of contract in question? Was it through non-registration of the contract that the liability to pay in cash arose? In my opinion it was not: the liability arose from taking the shares, although such liability might have been avoided in the one way pointed out by the section. "

The planning decisions

42. The respondent contended that the Court should adopt the approach to the application of the maxim apparent in the authorities decided in the statutory context to which Giles JA referred in Ruthol (at [ 20 ] , see [ 39 ] above) in all of which a requirement of lawfulness has been implied.

43.
Grozier v Tate concerned the question whether a prohibited use of land could be continued pursuant to the existing use exception in s 309(2) of the Local Government Act 1919 which provided for the continued " use of any building for any purpose for which the same was used immediately before … " . Owen J held (at 3) that the section did not protect an unlawful use. His Honour said:

" The subsection is, in my opinion, designed to save rights, not to perpetuate wrongdoing. It is, of course, an elementary principle of interpretation that words should be given their plain and ordinary meaning, but it is an equally sound rule that the Legislature will be presumed, in the absence of some indication to the contrary, not to have intended that wrong-doers should benefit by their wrongdoing … In my opinion the user to which s 309(2) refers means ' lawful user ' , that is to say, a use which is not prohibited by statute or by regulation or proclamation validly made under a statute. "

44. In
Steedman v Baulkham Shire Council [ No 2 ] the court rejected the appellants ' submission that use of a building, work or land for a lawful purpose, as required by s 109(1) of the Environmental Planning and Assessment Act 1979 to exempt the continuance of that use from requiring consent, included an unlawful use. Kirby P (at 570) applied
Grozier v Tate (at 3) to hold that the words " use … for a lawful purpose " in s 109 " should be taken to mean … a lawful use " .Handley JA (with whom Meagher JA agreed) said (at 580):

" There is no reason to suppose that parliament intended to reward illegality in this way … [ T ] he appellants ' construction is contrary to the objects of the Act … and subversive of lawful and orderly planning … If s 109(1) had merely referred to a ' use of … land for a purpose ' with no express requirement that such purpose be lawful the prima facie construction would have been that only lawful purposes were referred to … It would be a remarkable result if an express instead of implied requirement that the use be for a lawful purpose should result in a different construction.

The appellants ' submissions, if correct, would have the result that s 109 operated to legalise all existing contraventions of planning laws which were capable of being regularised by the grant of consent and continued to operate to regularise such contraventions whenever a new environmental planning instrument came into force. There is nothing to suggest that the section was intended to create a potentially large class of deemed unconditional consents in this way. Very clear language would be required to produce such a result. The words of Owen J in
Grozier v Tate (1946) 64 WN (NSW) 1 at 3 are in point. " (Emphasis added)

45. In
Allen v Bega Valley Shire Council (at 369 - 370) the Court (Clarke JA, Kirby P and Meagher JA agreeing) held that cl7(1) of State Environmental Planning Policy 21 ( " SEPP 21 " ), which exempted caravan parks or camping grounds in existence on the day on which SEPP 21 took effect (1 December 1986) from requiring development consent for the placement or use of movable dwellings, only applied to such parks or grounds lawfully in existence at that date. Clarke JA reasoned to his conclusion partly because he was unable to discern " an implied intention to render lawful that which prior to 1 December 1986 had been unlawful " , as well as because of the absurdity of the proposition that " a person who had, prior to December 1986, blatantly set up a caravan park knowing that he or she did not have the necessary development consent could successfully resist legal proceedings that had been instituted by the local council to close down the park relying upon the terms of SEPP 21 " . He also held (at 370), referring to
Grozier v Tate (at 3) and its approval in
Steedman v Baulkham Shire Council [ No 2 ] , that " the submission is contrary to the established principle that, in the absence of a clear intention to the

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contrary, the legislature is to be presumed not to have intended that persons who are in breach would benefit from their illegality. "

46. There are limits on the application of the maxim as can be seen from
Baulkham Hills Shire Council v Iaria [ 1978 ] 1 NSWLR 678 . The owners of land at Kellyville carried on a business of supplying the requirements of landscape and home gardeners in breach of the local planning scheme ordinance. The Council sought declarations and injunctions to prevent further contravention. Before the hearing of the application the local planning scheme ordinance was suspended and replaced by an interim development order which prohibited all " development " other than those particular instances which it specifically permitted, sometimes unconditionally, in other cases subject to consent. The owners ' use of the land could not have commenced after the interim development order came into force.

47. Section 342T(1) of the Local Government Act 1919 (the " LGA 1919 " ) defined " development " for the purposes of the interim development order as meaning, in relation to land use, use " for a purpose which is different from the purpose for which the land … was last being used " . The proviso to s 342U(4) of the LGA 1919 precluded any interim development order from preventing " the continuance of the use of any land or building for the purposes for which such land or building was lawfully used immediately before the coming into operation of the interim development order. "

48. Holland J dismissed the proceedings on the ground that the continued use of the premises did not constitute " development " within the definition in s 342T(1) and that neither the interim development order or the proviso to s342U(4) prohibited the continuance of an existing user that was previously unlawful:
Baulkham Hills Shire Council v Iaria [ 1977 ] 2 NSWLR 41 (at 47).

49. On appeal, Hutley JA (with whom Moffitt P agreed) held (at 683) that the words " last being used " in the definition of " development " in s 342T(1) meant " last user which is legitimate in the eyes of the law. " His Honour referred (at 683) to

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Grozier v Tate (at 3) as one of a number of cases suggesting that it was " a basic assumption of planning law that illegal user is not regarded as giving rise to rights which are given to users. " Reynolds JA reached a like conclusion (at681), observing that " the preservation of existing use rights should not be founded in illegalities. " The consequence was that the owners ' continued unlawful use of the land after the interim development order came into operation, for the same purpose as before, constituted " development " as defined in s 342T(1) when compared with the last legitimate use, and was in breach of the proviso to s 342U(4) and, accordingly, of the interim development order.

50.
Baulkham Hills Shire Council v Iaria was reversed in
Vumbaca v Baulkham Hills Shire Council [ 1979 ] HCA 66 ; (1979) 141 CLR 614 . Stephens J (at 620) referred to Hutley JA ' s reference to the " basic assumption " and said:

" I regard this assumption as irrelevant to the case in point. There is here no question of rights being conferred upon the Vumbacas; the only question is whether they have breached the prohibition of the order. The authorities which are said to proceed upon and to establish this ' basic assumption ' are concerned with the quite distinct situation of a prohibition upon particular uses coupled with an exception in favour of the continuation of any such uses as antedate the prohibition itself . It has been held that only lawful prior use can be thus relied upon:
Grozier v Tate ;
Nash v Stielow ;
Glamorgan County Council v Carter . However the Vumbacas do not rely upon user, lawful or otherwise, prior to the interim development order as bringing them within any exemption: they simply deny the existence of any prohibited ' development ' . If it is only ' development ' , and not particular uses of the land, at which the order ' s prohibition is aimed, the above authorities and the assumption which they are said to support are of no present relevance. " (Emphasis added)

51. Mason, Aickin and Wilson JJ (with whom Barwick CJ agreed) were also unable to derive any assistance from
Grozier v Tate or
Nash v Stielow which they described (at 630) as " concerned with a situation where a planning scheme which had prohibited a certain use was repealed by a later scheme which itself prohibited the same use " . Their Honours regarded " [ t ] hat situation [ as ] very different from the present one where a planning scheme which prohibited a specified use is superseded by an interim development order which prohibits ' development ' , i.e. change of use. "

Other cases

52. A number of cases decided in a non-planning statutory context also illustrate the application of the maxim.

53. In
Holden v Nuttall [ 1945 ] VLR 171 (at 178) Herring CJ held that the word " hardship " in the National Security (Landlord and Tenant) Regulations (Vic) should, if necessary, be limited as a matter of construction " to avoid attributing to the regulation-maker the intention of bringing about an injustice or allowing a man to benefit from his own wrong. "

54. In
Woodcock v South Western Electricity Board [ 1975 ] 2 All ER 545 (at 549) Dunn J held that squatters were not entitled to electricity supply because the word " occupier " in s 27(1) of the Schedule to the Electric Lighting (Clauses) Act 1899 (UK) did not include a person whose original entry on the premises was unlawful and forcible.

55. In
Thompson v Groote Eylandt Mining Co Ltd [ 2003 ] NTCA 5 ; (2003) 173 FLR 72 (at [ 35 ] ) Mildren J (Martin CJ and Thomas J agreeing) held that the definition of " worker " in s 3(1) of the Work Health Act 1986 (NT), which relevantly required the person who sought to be so characterised to be " a PAYE taxpayer " , should not be construed literally so as to enable an employer who, unknown to the worker, had failed to make PAYE deductions, to deny the person was a " worker " and hence take advantage of his own wrong. Accordingly, his Honour concluded " that the words ' employer makes deductions ' in the definition of ' PAYE taxpayer ' includes those employers who are required by law to make such deductions, but who do not do so without the knowledge or authority of the worker. "

56. In
Commissioner of Taxation (Cth) v La Rosa [ 2003 ] FCAFC 125 ; (2003) 129 FCR 444 ( " La Rosa " ) the Full Federal Court considered whether the illegal activities of the respondent who was involved in drug dealing precluded him from claiming a sum of $ 220,000 as a loss or outgoing " incurred in gaining or producing the assessable income, or … necessarily incurred in carrying on a business for the purpose of gaining or producing such income " under s 51(1) of the

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Income Tax Assessment Act 1936 (Cth) ( " ITAA " ). Those monies were the proceeds of his drug-dealing activities and were stolen from him during an intended drug purchase by unknown persons.

57. Hely J (with whom Merkel J agreed) rejected (at [ 46 ] ) the Commissioner ' s contention that " expenditure (other than fines and penalties) which ha [ d ] the requisite nexus with the business operations should nonetheless not be deductible because those operations are unlawful and involve breaches of the criminal law " . His Honour observed:

" [ 55 ] … [ T ] he purpose of the ITAA is to tax taxable income, not to punish wrongdoing. The language of s 17, s 25,s 48 and s 51 of the ITAA is indifferent as to whether the income, loss or outgoing in question has its source in lawful or unlawful activity. Tax is imposed upon taxable income, not upon assessable income. There should not be a higher burden of taxation imposed on those whose business activities are unlawful than that imposed in relation to lawful business activities. Punishment of those who engage in unlawful activities is imposed by the criminal law, and not by laws in relation to income tax. "

58. Carr J (at [ 9 ] ) agreed with Hely J " that punishment of those who engage in unlawful activities is imposed by the criminal law and not by laws in relation to income tax. " His Honour also said (at [ 6 ] ):

" it would be an extraordinary public policy which permitted the Commissioner to bring the retail proceeds of heroin and amphetamine sales into the calculation of assessable income, but to deny the loss here claimed as an allowable deduction. "

59. The underlying rationale for La Rosa was explained by Philip Burgess ( " Deductions and Illegal Income " (2008) 37 Australian Tax Review 7 (at 9)) as follows:

" The policy for [ the La Rosa ] conclusion is best expressed by the Supreme Court of the United States in its reasons for decision in
Commissioner of Inland Revenue v Tellier 383 US 687 (1966) at 691:

' We start with the proposition that the federal income tax is a tax on net income, not a sanction against wrongdoing. That principle has been firmly imbedded in the tax statute from the beginning. One familiar facet of the principle is the truism that the statute does not concern itself with the lawfulness of the income that it taxes . Income from a criminal enterprise is taxed at a rate no higher and no lower than income from more conventional sources. ' [ T ] he fact that a business is unlawful [ does not ] exempt it from paying the taxes that if lawful it would have to pay. '
United States v Sullivan , 274 US 259 , 263 See
James v United States , 366 US 213 . " (Emphasis added)

Conclusion

60. In my view the respondent ' s submissions should be accepted. The words " used and occupied " in cl 2(1), cl 3(1) and cl8(1) must be taken to mean lawfully " used and occupied " . The maxim applies absent " clear intention to the contrary " (
Allen v Bega Valley Shire Council (at 370)). I discern no contrary intention. Rather, in my view, application of the maxim affords a rational construction of the PPR exemption: Carr (at [ 5 ] ) per Gleeson CJ. A literal reading of the PPR exemption which is indifferent to whether or not the use and occupation was lawful is not, in my view, a construction the Court would attribute to the legislature. Rather I would infer that the LTMA was enacted on the presumption that the Court would apply the maxim and permit owners of land to take advantage of a statutory benefit the PPR affords only if the qualifying conditions are performed " in a lawful manner " .

61. This is not a case of applying the maxim to take away a right the appellants previously possessed. Rather the appellants are seeking to gain a right, the PPR exemption, the benefit of which flows from use and occupation of land " as the principal place of residence " , in circumstances where that use and occupation was unlawful. In the planning cases the maxim applies to deny the benefit of lawful use to those whose use had hitherto been unlawful. Similarly, in the present case, the LTMA should not be construed so as to permit the appellants the benefit of an exemption which turns on use and occupation of residential premises when they did not have statutory approval to so use the premises.

62.

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ATC 14795

On the appellants ' argument the PPR exemption would be available even if the zoning of the land on which the owner constructed a residence did not permit use for residential purposes, so that building approval could never be given by the local government authority, so that the use and occupation could never be lawful. It would be absurd to attribute such an intention to the legislature.

63. La Rosa is clearly distinguishable. In that case the Commissioner was seeking to tax illicit earnings. If his argument that the taxpayer could not deduct the expenses and losses incurred in earning it was correct, the taxpayer would have been deprived of a deduction generally available for business expenses. The Commissioner was empowered to tax taxable income, no matter how it was earned. The corollary was that the taxpayer was entitled to claim deductions notwithstanding that the expenditure was derived from illegality.

64. Here the respondent is not seeking to impose a tax by reference to the appellants ' unlawful use and occupation of the land. The respondent seeks to impose land tax by virtue of the appellants ' ownership of the land: Paliflex; MacAry Manufacturing . It is the appellants who seek the statutory benefit cl 8 of Sch 1A affords. It is they who have the burden of proving the facts necessary to claim the cl 8 concession:
Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450 (at 457) per French J (as his Honour then was). To do so they seek to rely upon unlawful use and occupation of the land. As the foregoing discussion of the maxim indicates, the Court will presume that the legislature did not intend the benefit of the cl 8 concession to operate in such circumstances.

65. The presence in cl 6(2)(c) of the reference to " unlawful " use does not detract from that conclusion. That concession refers to intended use whereas the references in cl 2(1), cl 3(1) and all the concessions in Part 3, save that provided by cl 6, are to actual use and occupation. The legislature was dealing with a different subject matter from the actual use and occupation provisions. I would not infer, accordingly, a legislative intention that the absence of express reference to lawful use and occupation in the remaining provisions of Part 1A demonstrated a legislative intention that the maxim did not apply.

66. Finally it would be an absurd construction of the LTMA to conclude that a PPR exemption was available where the actual, albeit past, use or occupation of land was unlawful, but not if an intended use could be so described. As Jordan CJ said in
Hall v Jones (1942) 42 SR (NSW) 203 (at 208), " a Court is entitled to pay the Legislature the not excessive compliment of assuming that it intended to enact sense and not nonsense. "