Re Restaurants of the Rocks Pty Ltd and Others and Chief Commissioner of State Revenue

70 ATR 788
[2008] NSWADT 20

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(Judgment by: M Hole, Judicial Member)

Re Restaurants of the Rocks Pty Ltd and Others
vChief Commissioner of State Revenue

Court:

Judge:
M Hole, Judicial Member

Legislative References:
Taxation Administration Act 1996 (NSW) - 34
Land Tax Management Act 1956 (NSW) - 1; 3AH; 3AI; 10CA; 21C(2); 29
Strata Schemes (Leasehold Development) Act 1986 (NSW) - The Act

Case References:
Paliflex Pty Ltd v Chief Commissioner of State Revenue - [2003] HCA 65; 2003 ATC 4983
Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) - [2004] ALMD 525; [2004] ALMD 60; 54 ATR 304; 202 ALR 376; 219 CLR 325; 78 ALJR 87
Mills v Meeking - (1990) 169 CLR 214; 64 ALJR 190; 45 A Crim R 373; 91 ALR 16; 10 MVR 257
Top of the Cross Pty Ltd v Federal Commissioner of Taxation - (1985) 75 FLR 388; 16 ATR 795; 85 ATC 4263
L & T (Sales) Pty Ltd v Chief Commissioner of State Revenue - [2007] NSWSC 1061; 67 ATR 569
L & T (Sales) Pty Ltd v Chief Commissioner of State Revenue (NSW) - 2007 ATC 5064
Osborne v Commonwealth - (1911) 12 CLR 321
R & McG 486 - 17 ALR 242

Hearing date: 29 October 2007
Judgment date: 9 January 2008

Sydney

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Judgment by:
M Hole, Judicial Member

Cur adv vult

[1] The applicants have applied for a review of the decision of the respondent to disallow the objection by the applicants to the assessment for land tax for the 2001-2005 land tax assessments. A letter was forwarded to each of the applicants by the respondent dated 18 September 2006 and it is in respect of the decision of the respondent referred to in those letters that this appeal is made. The applicants will be referred to as follows: Restaurants of the Rocks Pty Ltd, Memule Pty Ltd and Glasshouse Investments Pty Ltd.

Facts

[2] Each of the applicants was a lessee from the Sydney Cove Redevelopment Authority. On 1 February 1999, the property subject of the leases was vested in the Sydney Harbour Foreshore Authority. Glasshouse has operated a restaurant at the premises subject of the relevant lease since September 2002. Memule has operated a restaurant at the premises subject of the relevant lease since 1981 and Restaurants on the Rocks has operated a restaurant at the premises subject of the relevant lease since 1992 and a further restaurant subject of a lease since 1979. Restaurants on the Rocks operated a restaurant subject of a lease prior to selling it to Glasshouse in 2002. The leases of which the applicants Restaurants on the Rocks and Glasshouse are the lessees commenced on 1 July 2000 and are each due to terminate on 30 June 2015. The lease of which Memule is the lessee commenced on 1 April 2001 and is due to terminate on 31 March 2011.

[3] A letter dated 29 April 2005 was forwarded by the Commissioner to each of the applicants requesting that each of the applicants respond to a questionnaire which was enclosed which would be considered as an approved return in terms of s 34 of the Taxation Administration Act 1996 (NSW). Restaurants on the Rocks completed the questionnaire and returned it to the Commissioner. It is probable that Glasshouse also completed the questionnaire and returned it to the Commissioner. Memule did not complete the questionnaire or return it to the Commissioner.

[4] In May 2005, the applicants received a letter from the Commissioner for Land Tax indicating that the applicants may be liable for land tax as a consequence of s 21C(2) of the Land Tax Management Act 1956 (NSW).

[5] The Commissioner issued land tax assessments for the years 2001-2005 to each of the applicants on 21 and 22 December 2005. Each of the applicants lodged objections to the assessments with the Commissioner.

[6] At the time that each of the leases was entered into there was a disclosure statement directed to the lessees at that time which disclosed an amount of land tax as part of outgoings. The terms of the leases disclosed that the lessee's proportion of lessor's outgoings was to be 100% subject to cl 2.3(b) of the lease. Clause 2.3(b) of the lease is apparently a reference to cl 2.3(b) of memorandum 5864063.

[7] Clause 2.3(b) of memorandum 5864063 is in the following terms:

"(b)

"Lessor's Outgoings' means (to the extent to which the same are not specifically payable from time to time by any lessee or licensee of any part of the Building under the terms of its occupancy thereof) the total costs of all outgoings and expenses of the Lessor now or hereafter properly and reasonably assessed, charged or chargeable, paid or payable or otherwise incurred upon or in respect of the Building or upon the Lessor in relation thereto or in the conduct management and maintenance (but not the structural maintenance or repair) of the Building and includes:

(i)

All taxes including any land tax payable in relation to the Land (but excluding income tax if any payable by the Lessor on its income and capital gains tax). In this paragraph the reference to the liability of the Lessee to contribute to payments on account of land tax is subject to land tax being calculated in accordance with the following criteria:

A.

the Land is the only land owned by the Lessor;

B.

the Land is not the subject of a special trust (within the meaning of the Land Tax Management Act, 1956 (NSW)); and

C.

the Lessor is not a company classified under s 29 of the Land Tax Management Act 1956 (NSW) as a non-concessional company."

[8] On 12 February 1998 the Sydney Cove Authority forwarded a letter to a person at Restaurants on the Rocks. This letter indicated that land tax would be payable in respect of the leased premises now the subject of the separate leases to the 3 applicants and that land tax would be payable by Restaurants on the Rocks in an indicated amount for the 1998 land tax year.

[9] Following various items of correspondence between the applicants' representative and the respondent, which ensued after the letters dated 29 April 2005, a letter was forwarded on behalf of the respondent to the representative of the applicants advising that:

"... Sydney Harbour Foreshore Authority was formed upon the dissolution of the Darling Harbour Authority and the Sydney Cove Redevelopment Authority. At the time Sydney Harbour Foreshore Authority took over the responsibilities of the Darling Harbour Authority and Sydney Cove Redevelopment Authority, these authorities were treated differently in terms of who was liable for land tax. In some instances the lessee was liable, in others the lessor was liable.

Understandably, this situation was confusing for all parties involved and lead to uncertainty amongst lessees about whether the lessee or Sydney Harbour Foreshore Authority was liable for the land tax. In response, the Office of State Revenue approached the Treasury to develop a uniform approach towards dealing with lessees of land owned by Sydney Harbour Foreshore Authority.

A decision was made by the Treasury in 1999 to make all lessees of Sydney Harbour Foreshore Authority liable for land tax: see s 10CA of the Land Tax Management Act 1956 (NSW). The primary reason for this is that lessees would be able to apply for exemptions where the lessee was an exempt body or where the land was used for an exempt purpose.

This decision was to take effect from the 2001 land tax year. At this time, the Office of State Revenue did conduct education programs for lessors about these changes.

The Office of State Revenue cannot comment on arrangements made between Sydney Harbour Foreshore Authority and individual lessees. Any concerns regarding this will need to be discussed with Sydney Harbour Foreshore Authority."

[10] The applicants objected to the assessments and as a consequence of the objections the assessments have been adjusted resulting in new assessments being issued dated 18 September 2006 and including various amounts in respect of interest. It is in respect of these assessments that these applications are made.

Legislation

[11] The relevant sections of the Land Tax Act 1956 (NSW) are set out as follows:

"Long Title

An Act to impose a land tax upon the taxable values of certain lands; and for purposes connected therewith.

1. Name of Act and construction

This Act may be cited as the Land Tax Act 1956 (NSW) and shall be read and construed with the Land Tax Management Act 1956 (NSW), in this Act hereinafter referred to as the Principal Act.

2A. Definition

In this Act:

"tax threshold' means:

(a)

in relation to a land tax year before the 2005 land tax year - the tax threshold determined in accordance with section 62TB of the Principal Act, and

(b)

in relation to the 2006 land tax year or any subsequent land tax year - the tax threshold determined in accordance with section 62TBA of the Principal Act.

3AH. Levy of land tax after 31 December 1999 and before 31 December 2004

(1) Except as provided by subsection (2), in respect of the taxable value of all the land owned by any person at midnight on 31 December in any year (commencing with 1999 and ending with 2003) there is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act, land tax for the period of 12 months commencing on 1 January in the next succeeding year and at the rates set out in Schedule 9.

...

(3) If the total amount of land tax payable pursuant to this section by any person in any year would, but for this subsection, be less than $200, no land tax is payable.

...

3AI. Levy of land tax after 31 December 2004 and before 31 December 2005

(1) Except as provided by subsection (2) , in respect of the taxable value of all the land owned by any person at midnight on 31 December 2004 there is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act, land tax for the period of 12 months commencing on 1 January in the next succeeding year and at the rates set out in Schedule 10.

(2) In respect of the taxable value of all the land owned by a person at midnight on 31 December 2004 where:

(a)

the owner is a company classified under section 29 of the Principal Act as a non-concessional company, or

(b)

the land is subject to a special trust,

Land tax for the period of 12 months commencing on 1 January in the next succeeding year is, except as provided by section 27(2A) of the Principal Act, to be charged, levied, collected and paid as referred to in subsection (1) at the rate of 1.4 cents for each $1 of the taxable value.

2. Construction

This Act shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the State to the intent that where any provision of this Act, or the application thereof to any person or circumstance is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances shall not be affected.

3. Definitions

(1) In this Act, unless the context or subject-matter otherwise indicates or requires:

Crown includes a statutory body representing the Crown.

...

Owned and similar expressions have a meaning corresponding with that of owner.

Owner includes: ...

(b)

in relation to any leasehold estate in land, whether legal or equitable (other than under any lease to which section 21C or 21D applies), a person, or a person who is a member of a class or description of persons, prescribed for the purposes of this paragraph, and

(c)

a person who, by virtue of this Act, is deemed to be the owner.

Special Trust has the meaning given by Section 3A.

Tax year or Land tax year means a period of 12 months starting on 1 January for which land tax is leviable and payable.

Taxpayer means any person chargeable with land tax.

..."

[12] The relevant sections of the Land Tax Management Act 1956 (NSW) are:

"7. Land tax on taxable value of land

Land tax at such rates as may be fixed by any Act is to be 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 this Act).

8. Date of ownership for purposes of land tax

Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied.

In this section year means the period of twelve months commencing on the first day of January.

9. Taxable value

(1) Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act.

(2) The taxable value of that land is the total sum of the average value of each parcel of that land.

(3) The average value of a parcel of land is to be calculated, as provided for by section 9AA, on the basis of the land value of the land.

10CA. Taxation of land owned by Sydney Harbour Foreshore Authority

(1) Nothing in this Act operates to exempt from land tax, or to otherwise affect the liability to land tax of, a lessee of any land:

(a)

that is owned by the Sydney Harbour Foreshore Authority, and

(b)

that was owned by the Sydney Cove Redevelopment Authority immediately before its dissolution on 1 February 1999, and

(c)

in respect of which the Sydney Cove Redevelopment Authority was, immediately before 1 February 1999, liable for land tax under section 10C of this Act as then in force for the land tax year starting on 1 January 1999,

while that land remains in the ownership of the Sydney Harbour Foreshore Authority.

(2) For the purposes of this section, it is immaterial whether the lease was entered into before, on or after 1 January 1991.

(3) This section applies to and in respect of land tax chargeable on land for the land tax year starting on 1 January 2001 and subsequent land tax years.

21C. Liability of lessees of land owned by Crown or council

(1) The Crown, a local council or a county council is not liable for land tax in respect of land it owns (except as specifically provided by Part 3).

(2) A lessee (other than a sub-lessee) of land or part of land owned by the Crown, a local council or a county council is for land tax purposes deemed to be the owner of a parcel of land (the notional parcel) consisting of the land or part leased. The Crown, local council or county council is then not to be considered owner of the notional parcel.

(3) ...

(4) For the purposes of determining the lessee's land tax liability when the notional parcel consists of a part of land, the land value of the notional parcel is:

(a)

unless paragraph (b) applies, the land value calculated in accordance with the following formula:

(b)

if the Chief Commissioner is not satisfied that the land value obtained in accordance with paragraph (a) is fair and reasonable, such proportion of the land value of the entire parcel as the Chief Commissioner considers fair and reasonable.

...

21D. Liability of lessees of leasehold strata lots

(1) The lessee of land that is a leasehold strata lot is taken to be the owner of the leasehold strata lot for land tax purposes. The lessor of the lot is not to be considered to be the owner of the lot (unless the lessor is the lessee for the purposes of the Strata Schemes (Leasehold Development) Act 1986 (NSW))."

[13] Both parties agreed on the factual material submitted and then relied on their particular interpretation of the applicable legislation. The factual material discloses that there is some tension between the applicants and the lessors in respect of the issues considered in these applications.

Applicants' submissions

[14] The representative of the applicants provided comprehensive written submissions and oral submissions. Those submissions are summarised as follows.

[15] The applicants objected to the assessments relying on s 21C(2) of the Land Tax Management Act 1956 (NSW), deeming land leased from the Crown to be owned by the lessee, did not operate to change the ordinary meaning of land "owned" by a person as used in ss 3AH and 3AI of the Land Tax Act 1956 (NSW). Suggesting that there is a lacuna in the Land Tax Act 1956 (NSW) by its failure to define the expression "owned" in the manner in which that expression is defined in the Land Tax Management Act 1956 (NSW). The applicants submit that the Land Tax Act 1956 (NSW) imposes legal obligation to pay land tax whilst the Land Tax Management Act 1956 (NSW) sets out machinery provisions for levying and collecting land tax.

[16] Attention was drawn to the amendment of s 3AH of the Land Tax Act 1956 (NSW) in 2004 whereby s 3AH of the Land Tax Act 1956 (NSW), for the purposes of the 2001-2004 land tax years is as set out at [11] above and then for the land tax year 2005 the amended s 3AI applies:

"3AI. Levy of land tax after 31 December 2004

(1) Except as provided by subsection (2), in respect of the taxable value of all the land owned by any person at midnight on 31 December in any year (commencing with 2004) there is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act, land tax for the period of 12 months commencing on 1 January in the next succeeding year and at the rates set out in Schedule 10."

[17] An analysis of certain provisions was submitted:

"(1) "... First, by s 1, the Land Tax Act 1956 (NSW) is to be "read and construed with the Land Tax Management Act 1956 (NSW), in this Act hereinafter referred to as the Principal Act." Conversely, the Land Tax Management Act 1956 (NSW) does not explicitly refer to the Land Tax Act 1956 (NSW), although, s 7 identifies the relevant rates of land tax as those "as may be fixed by any Act." The reference to "any Act" in s 7 encompasses the Land Tax Act 1956 (NSW) since that Act does, by ss 3AH and 3AI, amongst others, fix rates of land tax.'

(2) "Secondly, the definitions in s 3(1) of the Land Tax Management Act 1956 (NSW) are designated by that section to operate "In this Act." They are not designated to operate in any other Act.'

(3) "Thirdly, ss 3AH and 3AI of the Land Tax Act 1956 (NSW) each provide that in respect of "all the land owned by any person at midnight on 31 December ... there is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act, land tax ... ." In similar language s 7 of the Land Tax Management Act 1956 (NSW) provides that "Land tax ... is to be levied and paid on ... all land situated in New South Wales ..." while s 8 provides "Land tax shall be charged on land as owned at midnight on the thirty-first day of December ... ." Thus both Acts purport to provide for land tax to be charged, levied and paid, while only the Land Tax Act 1956 (NSW) provides for land tax to be collected. ...'"

[18] Therefore in order to have successfully imposed land tax the legislature must have done so under the Land Tax Act 1956 (NSW), the critical words of imposition in ss 3AH and 3AI of the Land Tax Act 1956 (NSW) being "in respect of the taxable value of all the land owned by any person at midnight on 31 December ..." there is "to be charged ... land tax. ..."

[19] Sections 7, 8 and 9 of the Land Tax Management Act 1956 (NSW) do not perform the function of imposing a liability for land tax, that is done by ss 3AH and 3AI of the Land Tax Act 1956 (NSW) which apply to land "owned" by a taxpayer. As the land subject of these applications is, as a matter of fact, owned by Sydney Harbour Foreshore Authority at the relevant times the deeming provision in s 21C(2) of the Land Tax Management Act 1956 (NSW) cannot impose the liability as that section is only effective for the purposes of the Land Tax Management Act 1956 (NSW) and not some other Act. So that the words "land owned by" as used in ss 3AH and 3AI mean what they say and not what some other Act deems them to mean.

[20] "Whatever other effect s 21C(2) might have, it does not have the effect of imposing on a lessee of land from Sydney Harbour Foreshore Authority an obligation to pay land tax, being an obligation imposed, if at all, by ss 3AH and 3AI of the Land Tax Act 1956 (NSW). A lessee does not, in ordinary parlance, own the leased land and it is ordinary parlance, not deeming, which the Land Tax Act 1956 (NSW) uses."

[21] The 2 following propositions were put that:

1. The Land Tax Act 1956 (NSW) imposes Land Tax:

the Land Tax Management Act 1956 (NSW) provides a regime for collection:

•

if the Land Tax Act 1956 (NSW) is ineffective then no land tax is imposed;

•

the Land Tax Management Act 1956 (NSW) cannot make good failure to impose; and

2. The Land Tax Act 1956 (NSW) does not import the definition of "owner" from the Land Tax Management Act 1956 (NSW).

[22] In support of the propositions an analysis of each of the sections of the Acts set out in the legislation referred to above was undertaken. The decision of the High Court in Paliflex Pty Ltd v Chief Commissioner of State Revenue [2003] HCA 65;Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) [2004] ALMD 525; [2004] ALMD 60;Paliflex Pty Ltd v Chief Commissioner of State Revenue (2003) 2003 ATC 4983;Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) 54 ATR 304; 202 ALR 376; 219 CLR 325; 78 ALJR 87 was discounted on the basis that the court did not analyse the statutes.

Respondent's submissions

[23] The representative of the respondent supplied comprehensive written submissions and further submissions at the hearing. Those submissions are summarised as follows.

[24] Section 1 of the Land Tax Act 1956 (NSW) requires that the Land Tax Act 1956 (NSW) be " read and construed with the Land Tax Management Act 1956 (NSW), in this Act hereinafter referred to as the Principal Act." Section 1 of the Land Tax Act 1956 (NSW) links the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW). Section 4 of the Land Tax Management Act 1956 (NSW) provides that the Land Tax Management Act 1956 (NSW) should be read and construed with the Taxation Administration Act 1996 (NSW) and s 4 of the Taxation Administration Act 1996 (NSW) includes both the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW) as taxation laws for the purposes of the Taxation Administration Act 1996 (NSW).

[25] The Land Tax Act 1956 (NSW) would be incapable of operation unless it is read and construed with the Land Tax Management Act 1956 (NSW) as, for example, the term "taxable value" is not defined in the Land Tax Act 1956 (NSW) without importing the meaning given to the term by s 9 and following the Land Tax Management Act 1956 (NSW) would be incapable of definition.

[26] The Land Tax Act 1956 (NSW) fixes the rates at which land tax will apply and ss 3AH and 3AI of Land Tax Act 1956 (NSW) connect the rates set out in the relevant schedule to that Act with liability imposed "under the provisions of the Land Tax Management Act 1956 (NSW)." Where the Land Tax Act 1956 (NSW) refers to land tax being levied paid or charged it does so merely to identify the type of liability to which the rates set out in the relevant schedule are to be applied.

[27] On examination of the language of ss 7, 8 and 9 of the Land Tax Management Act 1956 (NSW); s 7 imposes land tax "on the land value of all land situated in New South Wales which is owned by taxpayers;" s 8 determines the time and date on which the land tax is to be imposed and s 9 imposes the obligation to pay land tax on the owner of the land and determines the method by which the taxable value of that land is to be calculated. These sections describe the mechanism or procedure for achieving the imposition of land tax.

[28] The function of the Land Tax Act 1956 (NSW) is to set the rates of land tax to be "charged, levied, collected and paid under the Principal Act." Section 7 of the Land Tax Management Act 1956 (NSW) draws the Land Tax Act 1956 (NSW) into the land tax system as it provides that the rates of land tax to be imposed are those "as may be fixed by any Act."

[29] In Paliflex (at CLR 337 [8]; ATR 307 [8]; ALJR 89 [8]; ATC 4985 [8]; ALR 379 [8]), their Honours Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ said:

"The scheme of the New South Wales legislation was that the tax was imposed by the Land Tax Act 1956 (NSW) in respect of the taxable value of land owned at midnight on a specified date and a detailed regime for assessment and collection was provided by the Land Tax Management Act 1956 (NSW). The tax was both imposed and charged upon the land immediately on that date and did not wait upon the issue of an assessment."

[30] Then in a later decision by Gzell J in Paliflex Pty Ltd Anor v Chief Commissioner of State Revenue [2004] NSWSC 1105;Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) [2005] ALMD 5623; [2005] ALMD 5889; [2005] ALMD 5890;Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) (2004) 58 ATR 27; 215 ALR 681, his Honour said:

"The land was owned by the Commonwealth of Australia when the Land Tax Management Act 1956 (NSW) and the Land Tax Act 1956 (NSW) were enacted. The former levied tax on all land situated in New South Wales that was owned by a taxpayer. The latter fixed the rates of tax."

[31] Therefore the only issue is whether the applicants fall within the ambit of ss 3AH and 3AI of the Land Tax Act 1956 (NSW) which relevantly provide that there is to be charged, levied, collected and paid under the provisions of the Principal Act (the Land Tax Management Act 1956 (NSW)) land tax upon "the taxable value of all land owned by any person at midnight on 31 December 2004."

[32] Attention was drawn to the Second Reading Speech in respect of the Land Tax Management Act 1956 (NSW) wherein it was indicated that regard had been had to the Commonwealth land tax legislation and to similar legislation in other States noting that certain principles were found to be common in almost all the land tax measures and that:

"... the tax was levied on the unimproved value of the land; and the tax itself was on a progressive scale. These principles have been incorporated in the bill before the House, and in the taxing bill to follow."

Further that:

"It is difficult to appreciate the significance of the bill without some reference to the rates of taxation proposed in the separate taxing bill."

And further that:

"... the tax is levied on ownership of land but because of the complexities associated with tenures of land it is necessary to define in some detail the various types of ownership or interests which attract tax. These are contained in cll 20-32 of the bill. ..."

thus indicating that it was not just a registered proprietor's interest that attracted the definition of ownership.

[33] When the Land Tax Management (Further Amendment) Bill 1985 (NSW) and the Land Tax (Further Amendment) Bill 1985 (NSW) were considered on 26 November 1985, comment was made in the Second Reading Speech that:

"The Government has also decided that persons occupying crown land pursuant to a crown lease or a licence should be deemed to be land owners for the purpose of land tax liability.

At present only crown land which is occupied in perpetuity creates a liability for land tax."

[34] Following enactment of the Land Tax Management (Further Amendment) Act 1985 (NSW) the definition of "owner" as set out in s 3(1)(c) and (d) applies to the applicants.

[35] A further amendment was made to the definition of owner by the Land Tax Management (Amendment) Act 1988 (NSW) to include local council areas.

[36] The explanatory note to the Land Tax Management (Amendment) Act 1988 (NSW) provides, amongst other things, that one of the objects was to amend the Land Tax Management Act 1956 (NSW) to:

"(j) to extend liability for tax to non-exempt lessees of land owned by public authorities, councils and local councils, with effect from the 1991 tax year ..."

and:

"... amends the Principal Act so as to extend liability for land tax to lessees of land owned by a ... or public authority. Currently that land is exempt from land tax. The amendment does not operate until the 1991 tax year. For the purposes of land tax the lessee is regarded as the owner."

[37] The explanatory note to the Land Tax Management (Amendment) Bill 1991 (NSW) noted that an object of the bill was to amend the Land Tax Management Act 1956 (NSW):

"(h) to clarify and consolidate provisions concerning the land tax treatment of lessees of land owned by the Crown, councils or public authorities; ..."

[38] There is also an explanatory note included in the Land Tax Management (Amendment) Act 1991 (NSW) which notes that:

"... The new provisions generally have the same effect as the provisions they replace in that the lessee is made the owner of the land for land tax purposes while the true owner (the Crown etc) is exempt. ..."

[39] In the Second Reading Speech of the Land Tax (Amendment) Bill 1991 (NSW) reference is made to:

"... The most important of these relate to the way in which lessees of land owned by the Crown ... or a public authority are taxed. The bill provides for the existing provisions, which are contained in several different sections of the Act, to be consolidated into one section. ... These extensions have been granted because of concern that some lessees of land owned by councils and public authorities were not aware of the new land tax liability when they entered into leases, and therefore did not take land taxes into account when negotiating lease payments. ..."

[40] That the purpose of the amendments referred to above paras [32]-[39] inclusive was to deem a lessee to be an owner of land for purposes of imposing land tax, that the amendments also disclosed that the Land Tax Act 1956 (NSW) must be read and construed with the Land Tax Management Act 1956 (NSW) as they only make sense if construed together. To construe them separately would create an absurd or capricious result and this should not be a preferred construction.

[41] The respondent relies on the authorities in relation to interpretation of the Land Tax Management Act 1956 (NSW) and the Land Tax Act 1956 (NSW) in that there must be a good reason to depart from the ordinary and grammatical meaning of a statute. Crocker J commented in Mills v Meeking (1990) 169 CLR 214; 64 ALJR 190; 45 A Crim R 373; 91 ALR 16; 10 MVR 257 that:

"... But, if the language is not ambiguous or uncertain, a court will apply its ordinary and grammatical meaning unless to do so will give the statute an operation which obviously not intended: see generally, Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation: ..."

[42] Attention was drawn to the decision in Top of the Cross Pty Ltd v Federal Commissioner of Taxation (1985) 75 FLR 388; 16 ATR 795; 85 ATC 4263 and the comment by Enderby J that:

"I need no authority for the proposition that a court in interpreting legislation will do its utmost consistent with the proper cannons of interpretation to avoid producing an absurd result."

[43] Attention was also drawn to L & T (Sales) Pty Ltd v Chief Commissioner of State Revenue [2007] NSWSC 1061;L & T (Sales) Pty Ltd v Chief Commissioner of State Revenue (NSW) (2007) 2007 ATC 5064;L & T (Sales) Pty Ltd v Chief Commissioner of State Revenue 67 ATR 569 wherein Gzell J considered the definition of s 21C(1) of the Land Tax Management Act 1956 (NSW) in relation to an agreement to lease from a local council and concluded that the lessee was deemed to be the owner of the land upon operation of s 21C(2) of the Land Tax Management Act 1956 (NSW).

[44] The High Court of Australia in Osborne v Commonwealth (1911) 12 CLR 321; R & McG 486; 17 ALR 242 has considered the position regarding the enactment of one Act which does not impose a tax without the aid of a second Act which prescribes what rates of tax shall be payable. Higgins J commented that:

"But there is one argument to which I should like to refer in particular to avoid any misapprehension. It is urged that the Assessment Act - Act No 22 - is, either alone or in conjunction with the Act No 21, a "law imposing taxation;' that it deals with more than one subject of taxation; and that it is therefore altogether void by virtue of s 55 of the Constitution (second clause). The plaintiff has to establish the 3 propositions in order to succeed. Personally, I am inclined to agree with the plaintiff as to the first; for Act No 21 does not impose taxation without the aid of Act No 22. Act No 21 prescribes what rates of taxation shall be payable; but it does not prescribe who is to pay. Even assuming it to be possible to have a tax without a taxpayer - a person under a direct obligation to pay - it is clear that in this case there was to be a taxpayer, and the taxpayer is fixed by Act No 21. This essential part of the imposition of the tax was left for the Act No 22."

Reasons for decision

[45] The Land Tax Act 1956 (NSW) is required to be read and construed with the Land Tax Management Act 1956 (NSW) which is described as the Principal Act in the Land Tax Act 1956 (NSW). In order that land tax may be imposed and collected at a prescribed rate the legislature has enacted 2 acts being the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW). Section 4 of the Land Tax Management Act 1956 (NSW) requires that the Land Tax Management Act 1956 (NSW) be read and construed with the Taxation Administration Act 1996 (NSW) and s 4 of the Taxation Administration Act 1996 (NSW) includes both the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW) as taxation laws for the purposes of the Taxation Administration Act 1996 (NSW).

[46] The definition of "owner" is to be found in s 3 of the Land Tax Management Act 1956 (NSW). In this situation where the estate is a leasehold estate (where the lessor is the Crown) the definition of owner is deemed to include, by application of the provisions of s 21C(2) of the Land Tax Management Act 1956 (NSW), the lessee. Each of the applicants is a lessee from the Sydney Harbour Foreshore Authority, being a statutory corporation constituted by the Sydney Harbour Foreshore Authority Act 1998 (NSW), thus being the Crown.

[47] Section 19CA of the Land Tax Management Act 1956 (NSW) clarifies the situation regarding the position of the Sydney Harbour Foreshore Authority and in respect to the commencement date of leases and that the land tax is chargeable for the land tax year starting on 1 January 2001 and thence subsequent years.

[48] Sections 3AH and 3AI of the Land Tax Act 1956 (NSW) establish that land tax is to be as set out in the schedules to that Act and that the land tax is to be "charged, levied, collected and paid under the provisions of the Principal Act ... ." The Principal Act being the Land Tax Management Act 1956 (NSW).

[49] Section 7 of the Land Tax Management Act 1956 (NSW) establishes that land tax at a rate fixed by any Act is to be levied and paid. Section 8 of the Land Tax Management Act 1956 (NSW) establishes that the land tax is to be charged on land owned at a particular time (31st day of December). Section 9 of the Land Tax Management Act 1956 (NSW) establishes that the land tax is payable by the owner. By definition as referred to at [40] this includes the applicants.

[50] The applicants have sought to rely on an interpretation of the various provisions to demonstrate that if the land tax is not imposed by the Land Tax Act 1956 (NSW) then the defect as identified by the applicants cannot be remedied by the Land Tax Management Act 1956 (NSW). Further that if Land Tax Management Act 1956 (NSW) does adopt a defined term then it can only do so in respect of the Act itself. Relying on the comment referred to (at [44]) by Higgins J in Osborne v Commonwealth it is clear that both the Land Tax Act 1956 (NSW) and Land Tax Management Act 1956 (NSW) must be read and construed together.

[51] The references to the various reading speeches referred to above disclose the intention of the legislature to levy land tax on the taxable value of the landowner as at midnight 31 December. This intention has been set out in the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW) when read and construed together. To construe otherwise would have the possible effect of disallowing the charging, levying, collection and payment of land tax generally which would be giving the statutes an operation that was certainly not intended and would lead to an absurd and capricious result.

[52] In Paliflex their Honours Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ considered the scheme of the New South Wales legislation and commented as set out (at CLR 344 [29]; ATR 312-313 [29]; ALJR 92-93 [29]; ATC 4988-4989 [29]; ALR 384-385 [29]). The applicants have sought to establish a deconstruction of the legislation in an ingenious manner which would be contrary to the construction set out in Paliflex (at [29]) and to that as set out in the 2 Acts: Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW).

[53] The propositions put on behalf of the applicants as set out at [21] cannot be supported.

[54] The combined effect of the sections of Land Tax Act 1956 (NSW) and Land Tax Management Act 1956 (NSW) result in the liability of the owners, as so deemed by s 21C(2) of the Land Tax Management Act 1956 (NSW), being liable to assessment for payment of land tax in the relevant years.