Case G72

Judges: N Dempsey M

G Thompson M

Court:
No. 3 Board of Review

Judgment date: 27 November 1975.

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G. Thompson (Member): In this reference the taxpayer is a company which carries on a business of what, for the purposes of this decision, I may describe as certain mining operations. In respect of the year ended 30th June, 1972, the taxpayer claims a deduction under the provisions of sec. 122 of the Income Tax Assessment Act 1936 as amended. The deduction is claimed in respect of certain capital expenditure upon a manager's

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residence situated some twenty-eight miles away from the mine site. The taxpayer company claims that this expenditure on the dwelling house provided for its manager comes within the statutory definition of ``housing and welfare'' under sec. 122(1) of Division 10 of the Act.

2. The definition of ``housing and welfare'' in the above sub-section reads as follows: -

```housing and welfare', in relation to a taxpayer, means -

• (a) residential accommodation provided by the taxpayer at, or at a place adjacent to, the site of prescribed mining operations carried on by the taxpayer, being accommodation provided for the use of employees of the taxpayer employed for the purposes of the operations of the taxpayer on that site or operations of the taxpayer connected with those operations, or for the use of dependants of such employees.''

The crucial words of this statutory definition, for present purposes, are at a place adjacent to the site of prescribed mining operations carried on by the taxpayer.

3. It was argued by the learned Solicitor and Deputy Chairman of the taxpayer company, that the said dwelling house was adjacent to the site of the mine within the meaning of this definition. In view of the result which I have reached in this case. I do not find it necessary to set out details of the capital expenditure and the amount claimed as a deduction.

4. The taxpayer operates its mining works under a special mineral lease some shorter distance from a very small township B. Some workers reside in this small township and a large number are transported by bus to the mine from the provincial city twenty-eight miles away. The manager, who resides in the said residence in that provincial city, has certain duties to perform there and at the mine works which, as I have indicated, are twenty-eight miles distant. The Managing Director of the company also resides in that provincial city and the registered office of the company and its Secretary are both located there. All principal administrative and costing functions of the company are also carried out there, and it is essential for the manager to have ready contact with the managing director and secretary for personal consultation in that place. More than half of the employees of the company who reside in the provincial city leave by bus at an early hour to travel to the mining works and it is one of the important duties of the manager to ensure that a full complement of the workers is available each day in order to keep the mine in operation. The central issue for decision is, therefore, whether the manager's residence can be held to be adjacent to the said mining works.

5. On behalf of the taxpayer, reference was made to the description of the term ``adjacent'' in Stroud's Judicial Dictionary, 4th ed. p. 63, which reads as follows: -

``Adjacent is not a word to which a precise and uniform meaning is attached by ordinary usage. It is not confined to places adjoining, and it includes places close to or near. What degree of proximity would justify the application of the word is entirely a question of circumstance. (
Wellington v. Lower Hutt (1904) A.C. 773 ) where 2 boroughs in New Zealand six (6) miles apart at their closest were held to be `adjacent' for the purpose of making statutory contributions to the cost of building a bridge. `Adjacent' is not a word to which a precise and uniform meaning is attached by ordinary usage and it is entirely a question of circumstances what degree of proximity will justify application of the word. (
Stanward Corpn. v. Denison Mines Ltd. (1968) 67 D.L.R.(2nd) 743 ).''

[sic]

6. Reference was also made to the interpretation of the term ``adjacent'' in Halsbury's Laws of England, 3rd ed. Vol. 39 p. 792, which reads:

``The word `adjacent' has a more vague meaning Wellington Corpn. v. Lower Hutt Corpn., (1904) A.C. 773, P.C.;
Birmingham Corpn. v. Allen (1877) 6 Ch.D. 284 , than `adjoining', and when used in contradistinction to that word means that which lies near but is not in actual contact, but the degree of proximity must depend on the circumstances of each case,
Re Ecclesiastical Commissioners for England's Conveyance , (1936) Ch. 430 , at p. 441 , per Luxmoore J.; see also Wellington Corpn. v. Lower Hutt Corpn., (1904) A.C. 733, [ sic ] P.C., at p. 775; in one case it has been held not to include a distance of four miles
Kimberley Waterworks Co. v. De Beers Consolidated Mines , (1897) A.C. 515 P.C. , at p. 518 (South Africa), and in another case to include a distance of six miles

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(Wellington Corpn. v. Lower Hutt Corpn. (1904) A.C. 733, [ sic ] P.C.; and see
Anderson v. Lochgelly Iron and Coal Co. (1904) 7 F.(Ct.of.Sess.) 187 .''

7. The case of Mayor of Wellington v. The Borough of Lower Hutt (1904) A.C. 773, referred to in the above quotation from Stroud's Judicial Dictionary and from Halsbury op. cit. was a case which went from the Court of Appeal, New Zealand to the Privy Council. In that case, the issue concerned a section of a statute which empowered the construction of bridges by a municipal council and provided that the local authorities of an adjacent district should contribute to the cost. The appellant city was over six miles distant from the boundary of the respondent borough and three other local divisions intervened. The question for the opinion of the Judicial Committee was whether the two local authorities were adjacent within the meaning of the statute in question.

8. At pp. 775 to 776, their Lordships said:

``... `Adjacent' is not a word to which a precise and uniform meaning is attached by ordinary usage. It is not confined to places adjoining, and it includes places close to or near. What degree of proximity would justify the application of the word is entirely a question of circumstances. There is not much in the context or in the surrounding circumstances to throw light upon the sense in which it is employed in the present instance.''

Their Lordships went on to say that they could not properly advise His Majesty to interfere with the decision appealed against since they were not clearly satisfied that it was wrong. The principle which emerges from this case is that the meaning of the term adjacent depends upon the broad context and is entirely a question of circumstances.

9. The case of Stanward Corporation et al. v. Denison Mines Ltd. (1968) 67 D.L.R. (2nd) 743, also referred to by the learned solicitor for the company, was a case which was decided by the Full Bench of the Supreme Court of Canada. In that case, there were twenty-one uranium mining claims owned by the respondent the closest of which was approximately 1 ¼ miles west of certain other uranium claims. It was held by the whole court that these claims were not adjacent to those other claims within the meaning of an agreement entitling the respondent to receive royalties....on any of the claims which (the respondent) may acquire adjacent thereto. Reference was made by that Court to the opinion of the Privy Council in City of Wellington v. Borough of Lower Hutt (supra), and to the principle that it was entirely a question of circumstances as to what degree of proximity would justify the application of the word adjacent.

10. At the hearing, reference was also made to certain other cases such as
Waratah Gypsum Pty. Ltd. v. F.C. of T. (1965) 112 C.L.R. 152 , where McTiernan J. decided that certain localities where housing and welfare existed, the furthest of which was up to nine miles away from the mining operations, were properly deductible under sec. 122 of the Act. The other localities involved were some two to three miles and four to five miles distant from the mining site. Again, this case is but an instance of a decision according to the particular context, which was, one might observe, in a somewhat isolated mining area. Other instances of the application of the term ``adjacent'' are to be found in the case law, which all depend upon the particular context of the case and the meaning and purpose of the legislation involved. See hereon:
English Clavs Lovering Pochin & Co. Ltd. v. Plymouth Corporation (1974) 2 All E.R. 239 , where the Court of Appeal affirmed the judgment of Goulding J. reported at (1973) 2 All E.R. 730, wherein it was held that the land about two miles away from the subject site could not be considered as adjacent to that site.

11. The object or purpose of sec. 122 of the Act, as discerned from its language, appears to me to allow a prescribed deduction in relation to the housing and welfare facilities over the life of a mine in circumstances where those facilities would normally be abandoned on the completion of the working of the mine, or would be, for practical purposes, valueless. The deduction appears to me to have been meant to afford relief to the owners and operators of mines in distant or remote areas where it is necessary to attract workers to carry on the operations of the mine. In any other particular case, close regard must be had to the particular situation and the circumstances of the mining operations. I am, unfortunately, unable to hold that the dwelling house, situated in a provincial city some twenty-eight miles distant from the mining site, in the particular

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circumstances of this case, answers the description of housing and welfare in the statutory definition of that composite term in sec. 122(1) of the Act. It seems quite probable that even after the working life of the particular mine, this dwelling house could be used as a residence for ordinary domestic purposes and may even have risen in value rather than deteriorated in value. I think that the deduction to be allowed under sec. 122 is meant to relate to what are known as wasting assets at or near the site of a mine, or in more remote areas, perhaps at some reasonable distance from the particular site, depending on the circumstances.

12. After giving close consideration to the whole of the circumstances obtaining in this case, and with the best will in the world, I feel unable to hold in favour of the taxpayer. I am therefore constrained to uphold the decision of the Commissioner upon the taxpayer's objection.

Claim disallowed