De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86

Date of judgement 18 April 2013 Proceeding No. 2011/226825
Judge(s) McColl JA
Basten JA
Gzell J
Court or Tribunal NSW Court of Appeal
Legislation cited Administrative Decisions Tribunal Act 1997 (NSW), ss 119, 120

A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 40-65, 195-1

Aboriginal Land Rights Act 1983 (NSW), s 36

Electric Lighting (Clauses) Act 1899 (UK), s 27

Environmental Planning and Assessment Act 1979 (NSW), s 109

Income Tax Assessment Act 1936 (Cth), ss 51, 222AKA, 222APE

Interpretation Act 1987 (NSW), s 33

Land Tax Act 1956 (NSW), s 1

Land Tax Management Act 1956 (NSW), ss 4, 7, 8, 9, 10, 10B, 10D, 10E, 10G, 10P; Schedule 1A, cll 1, 2, 3, 6, 7, 8, 9; Pts 2, 3

Local Government Act 1919 (NSW), ss 309, 342T, 342U

Local Government Act 1993 (NSW), s 68

Solicitors Act 1974 (UK), s 31

Solicitors' Costs Information and Client Care Code, r 15

Taxation Administration Act 1996 (NSW), ss 4, 61

Work Health Act 1986 (NT), s 3
Catchwords TAXATION AND REVENUE - land tax - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1A - exemption from land tax where person owns land "used and occupied by the person as his or her principal place of residence" - whether use and occupation must be lawful - where appellants resided on land in a mobile home or caravan - where council approval required - where council approval not obtained

STATUTORY INTERPRETATION - principles - maxim that legislation not intended to permit a person taking advantage of own wrong - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1A - exemption from land tax where person owns land "used and occupied by the person as his or her principal place of residence" - whether maxim requires lawful use and occupation
WORDS AND PHRASES - used and occupied by the person as his or her principal place of residence - Land Tax Management Act 1956 (NSW), cl 8(1)(a) of Schedule 1A
Cases cited Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27

Allen v Bega Valley Council (1994) 85 LGERA 364

Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd [1970] HCA 58; 124 CLR 262

Baulkham Hills Shire Council v Iaria [1977] 2 NSWLR 41

Baulkham Hills Shire Council v Iaria [1978] 1 NSWLR 678

Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292

Braunack v Goers (1979) 23 SASR 1

Carr v Western Australia [2007] HCA 47; 232 CLR 138

Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd [1999] NSWCA 471

Commissioner of Land Tax v Christie [1973] 2 NSWLR 526

Commissioner of Taxation (Cth) v La Rosa [2003] FCAFC 125; 129 FCR 444

Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 87 ALJR 98

Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) [1981] HCA 26; 147 CLR 297

Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1

Deputy Commissioner of Taxation v Craddock [2006] VSC 408, 204 FLR 274

Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450

Director of Public Prosecutions v Leys [2012] VSCA 304

Garbutt v Edwards [2005] EWCA Civ 1206; [2006] 1 All ER 553

Grozier v Tate (1946) 64 WN (NSW) 1

Hall v Jones (1942) 42 SR (NSW) 203

Hayward v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 17

Holden v Nuttall [1945] VLR 171

Hooper v Lane (1859) 6 HL Cas 443

Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46

Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366

LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499

Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307; 141 FCR 299

Nicholls v Michael Wilson & Partners Pty Ltd [2012] NSWCA 383

Paliflex Pty Limited v Chief Commissioner of State Revenue [2003] HCA 65; 219 CLR 325

Pearse v Chief Commissioner of State Revenue [2007] NSWADT 14

Puttick v Attorney General [1980] 1 Fam 1

Re London Celluloid Co (1888) 39 Ch D 190

Reuman v Chief Commissioner of State Revenue [2004] NSWADT 96

Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [2005] NSWCA 443; 12 BPR 23,923

Shah v Barnet London Borough Council [1983] 2 AC 309

Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562

Stephen Bowers Architects Pty Ltd v Waverley Council [2003] NSWLEC 16; 125 LGERA 292

The Firm (Australia) Pty Ltd v South Sydney Council [1999] NSWLEC 5

Thompson v Groote Eylandt Mining Co Ltd [2003] NTCA 5; 173 FLR 72

Vidler v Federal Commissioner of Taxation [2010] FCAFC 59, 183 FCR 440

Vumbaca v Baulkham Hills Shire Council [1979] HCA 66; 141 CLR 614

Wentworth Securities Ltd v Jones [1980] AC 74

Wollongong City Council v Vic Vellar Nominees Pty Ltd [2010] NSWLEC 266, 178 LGERA 445

Woodcock v South Western Electricity Board [1975] 2 All ER 545
Texts cited Broom's Legal Maxims, 10th ed (1939) Sweet & Maxwell Ltd (at 191)

F A R Bennion, Statutory Interpretation, 5th ed (2008) LexisNexis, at 792, 1106, 1107, 1141

F A R Bennion, Statutory Interpretation, 1st ed (1984), Butterworths, at 780

Philip Burgess "Deductions and Illegal Income" (2008) 37 Australian Tax Review 7, 9

Lord Coke's commentaries on The Laws of England by Littleton

D C Pearce and R S Geddes, Statutory Interpretation in Australia, 7th ed (2011) LexisNexis (at [2.41])

Summary

Rochelle De Marco and Brian Hayward (“the taxpayers”) appealed from the decision of the Administrative Decisions Tribunal Appeal Panel, which upheld the first instance decision of Judicial Member Hole, affirming the decision of the Chief Commissioner to assess the Appellants as liable for land tax for the 2004 to 2008 land tax years in respect of a property situated at Arcadia.

The appeal concerned the Chief Commissioner’s decision that the land was not entitled to the principal place of residence exemption on the basis that the use and occupation was not lawful.

The Court of Appeal, by majority decision, (Gzell J and Basten JA, McColl JA dissenting), allowed the taxpayer’s appeal, holding that the legislative scheme applying to the principal place of residence exemption does not require that the use and occupation of a residence must be lawful, in the sense of complying with the requirements of the relevant planning legislation (per Gzell J and Basten JA), at least in circumstances where the use and occupation was permissible with consent (per (Basten JA). The Court remitted the matter to the Revenue Division of the Administrative Decisions Tribunal for determination of the question whether the Appellants' use and occupation of the land satisfied the definition of “residential land”.

Background

The relevant facts, which were not in dispute in the Appeal, were that the Appellants had resided on the property in a caravan and/or mobile home until December 2002, when the caravan was destroyed by a bushfire. The Appellants did not have the required approval from Hornsby Shire Council to reside in the caravan on the property, under s.68(1) of the Local Government Act 1993.

The sole question of law before the Court of Appeal was whether use and occupation of the subject property had to be lawful, in the sense of approved by Council, for the purposes of the principal place of residence exemption and relevant concessions in Schedule 1A of the Land Tax Management Act 1956 (NSW) (“LTMA”).

The Appellants argued that the words of clause 2, clause 3 and clause 8 of Schedule 1A of the LTMA were unambiguous and did not warrant the implication of a lawfulness requirement. Further, the Appellants argued that the express inclusion of a lawfulness requirement in clause 6 of Schedule 1A of the LTMA manifested a legislative intention to introduce a lawfulness qualification for the purposes of clause 6, which did not otherwise apply under Schedule 1A.

The Chief Commissioner argued that a lawfulness requirement should be implied into the use and occupation requirement and definition of residential land in Schedule 1A, for the purposes of the PPR exemption, as that exemption operated against the background of the general law regarding development consents and that such an implication was consistent with the maxim of statutory construction that a construction that allows a person to take advantage of his or her wrong should be avoided. Further, the Chief Commissioner argued that the reference to “unlawful” future intended use in clause 6 was consistent with the Chief Commissioner’s position that actual use, for the purposes of clause 2 and clause 8, must also be lawful.

Decision

Gzell J and Basten JA allowed the appeal and made orders remitting the matter to the Administrative Decisions Tribunal. McColl JA dissented and would have dismissed the appeal.

McColl JA held that the phrase “used and occupied” in clauses 2, 3 and 8 of Schedule 1A of the LTMA should be read as qualified by the word “lawfully”. In doing so her Honour considered a number of authorities in the planning law context, as well as authorities in other statutory contexts, that applied the maxim “nullus commodum capere potest de injuria sua propria”: no person should be allowed to take advantage of his or her own wrong ("the maxim"). McColl JA held that the maxim should apply to the construction of the words “used and occupied” in Schedule 1A in the absence of any clear intention to the contrary. 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. McColl JA distinguished the decision in Commissioner of Taxation (Cth) v La Rosa (2003) 129 FCR 444, in which the Full Federal Court held that the Income Tax Assessment Act 1936 (Cth) applied to tax all taxable income, regardless of whether the income was derived from an unlawful or lawful source, on the basis that this case was not concerned with what the Chief Commissioner could tax, as in La Rosa, but was concerned with a taxpayer seeking an exemption in respect of the unlawful activity.

Basten JA found that little assistance could be derived from the authorities regarding the implication of lawfulness requirements, as none dealt with the LTMA. Basten JA also found that little assistance could be derived from the lawfulness requirement in clause 6. Having regard to the three conditions formulated by Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 which justified reading words into a statute, Basten JA held that it was not clear from the LTMA that it was the purpose of the legislature to qualify use and occupation as being lawful, nor that such a qualification would assist the Chief Commissioner in this case or that the omission of the word lawful could be considered inadvertent.

In respect of the application of the maxim, Basten JA found difficulty in applying this to the LTMA as wrongdoing covers a wide expanse of conduct and the kinds of case in which reference is made to the maxim tend to be those involving deliberate meretricious acts. Basten JA did however state that any deliberate illegal purpose undertaken on the land will take the use and occupation outside the scope of the exemption and that possible conduct which might be thought to warrant a reading down of the exemption would be the deliberate use of land for residential purposes, either knowing that such use is prohibited or knowing that permission for such use is necessary and has not been obtained. Basten JA held that the LTMA did not call for the introduction of a requirement that use and occupation be lawful, and also held that the language of cl 8 is satisfied by use and occupation which is, as a matter of fact, as a principal place of residence.
Gzell J found that the planning law authorities regarding lawful use and occupation were of little assistance in the present case as the Chief Commissioner was concerned with administering taxation and not planning laws and the relevant body who was responsible for administering planning law, being Hornsby Council, was not a party to this case.

Gzell J found that, if the Chief Commissioner's interpretation was upheld, then the Chief Commissioner would be burdened with having to make determinations in respect of whether exemptions should be allowed or rejected in terms of relevant planning laws and instruments, which lies outside the scope of the Chief Commissioner's general administration. Gzell J also found that the use of the words "not unlawful" in clause 6 militated against an implication of a “lawfulness” requirement in other clauses.

The Court (Gzell J and Basten JA, McColl JA dissenting) made orders allowing the appeal on the question of “lawfulness”, set aside the decision of the Chief Commissioner to assess the taxpayers for land tax, and remitted the matter to the Revenue Division of the Administrative Decisions Tribunal for determination of the question whether the Appellants' use and occupation of the land for the land tax years 2004 to 2008 satisfied the definition of residential land in clause 3 of Schedule 1A to the Land Tax Management Act 1956. The Chief Commissioner was ordered to pay the taxpayers’ costs of the appeal.

Link to decision

De Marco & Anor v Chief Commissioner of State Revenue

Last updated: 19 May 2016