High Court of Australia Kitto J. Queensland Television Ltd v Commissioner of Taxation (Cth) [1969] HCA 41 ORDER Each of these appeals is dismissed with costs. Usual order with respect to exhibits. Cur. adv. vult. Sept. 5 Kitto J. delivered the following written judgment:— By consent of the parties I have heard together six appeals, under ss. 187 (b) and 197 of the Income Tax and Social Services Contribution Assessment Act 1936 Cth as amended, against assessments of income tax payable by the appellant. They relate to the years of income ended on 30th June of the years 1961, 1962, 1963, 1964, 1965 and 1966 respectively. The first three appeals may be considered together and the last three together, as I shall proceed to explain. The assessments appealed against in respect of the first three years were all amended assessments, each of which was made within six years from the date upon which the tax became due and payable under the original assessment. The amendments increased the appellant's liability, and were made otherwise than to correct any error in calculation or any mistake of fact. The appeal in each of the three cases therefore involves two questions: (1) whether the amended assessment, if valid, properly increased the appellant's liability, and (2) if so, whether the original assessment was made after a full and true disclosure to the Commissioner of all the material facts necessary for the assessment: s. 170 (3). The original assessment in respect of income derived in the year ended 30th June 1961 was made in 1962. In making it the Commissioner allowed as a deduction under s. 80 an amount of $15,648 as a loss incurred by the appellant in the year ended 30th June 1960. The figure had been arrived at by treating as an allowable deduction under s. 88 (2) in respect of the 1960 year an amount of $21,391 as being a proportionate part of expenditure incurred in making, with the written consent of the lessor, improvements not subject to tenant rights on land of which the appellant claimed to have been in that year a lessee and which it had used in that year for the purpose of producing assessable income. The Commissioner also allowed as a deduction under s. 88 (2) an amount of $34,696 in respect of similar expenditure in the 1961 year itself. The two amounts so allowed were, of course, not allowable deductions if, in the respective years, the appellant in fact held no lease of the land on which the improvements had been made. The amended assessment, made in 1967, was made on the basis that there was no such lease, and for that reason the abovementioned deductions were disallowed. The amended assessments in respect of the 1962 and 1963 years disallowed for the same reason deductions that had been allowed under s. 88 (2) in the original assessments for those years. The assessments appealed against in respect of the second three years were all original assessments. In the year ended 30th June 1964 the appellant purported to surrender the lease which, in claiming deductions under s. 88 (2) in respect of the first three years, it had claimed to have held. In its return for the 1964 year the appellant, on the footing that the lease had existed and had been surrendered, claimed a deduction under s. 85 of certain amounts as having been paid by it to acquire the lease and in effecting improvements upon the land alleged to have been the subject of the lease—these amounts being reduced in accordance with sub-s. (3) by the amounts which the appellant had up to that time been allowed in the original assessments for the first three years. If the deductions thus claimed under s. 85 were allowable, a loss for the year resulted, and in respect of the two following years the appellant claimed to be entitled under s. 80 to carry over that loss. The Commissioner, however, disallowed the claimed deductions in respect of all three years, taking the view that the appellant had never validly acquired the lease it alleged and that therefore it has not had a lease to surrender or leased land upon which to make the relevant improvements. The land to which all the appeals relate consisted of two parcels at the summit of Mt. Coot-tha, upon which, from 14th January 1959 onwards, the appellant, as a commercial television transmission company, erected improvements consisting of a steel transmission tower some 500 feet high and set on concrete foundations, a garage, an underground water storage tank, and a studio and administration building. The garage and tank were on the more northerly parcel, while the tower and the studio and administration building straddled the boundary between the parcels. On 14th January 1959, when the appellant entered upon the land, the northerly parcel was vested, as part of a larger area, in the Brisbane City Council for an estate in fee simple, having been granted to the Council under the provisions of s. 8 of The Land Acts, 1910 to 1932 Q., and was held free of any trusts. On that date the southerly parcel, also as part of a larger area, was vested in the Council for an estate in fee simple, having been granted to the Council under s. 180 of The Land Acts, 1910 to 1927 Q. "upon trust as a site for a Public Park and for no other purpose whatsoever". The appellant had applied to the Council for a tenancy of a site on Mt. Coot-tha as early as 4th November 1958, and on 10th December 1958 the Council had informed it that "a building lease" would be granted on certain terms and conditions, subject to the approval of the Governor-in-Council, the area to be determined by the chief engineer and manager, Department of Works, and defined by survey. One of the terms mentioned was that the appellant should bear the cost of providing an adequate water supply and making available a supply of electricity. Negotiations ensued, and they continued until 1963. In the meantime the appellant erected the contemplated buildings and entered into occupation of the general area on which they stood, though without any lease in writing. On 14th January 1959 the appellant wrote to the Council in reference to "a proposed lease for the purpose of setting up a television transmitter station and studio", substantially agreeing to the Council's terms. In particular it agreed to pay the cost of providing the water supply, then estimated at £15,000, and offered to join with another television company in contributing £13,000 towards the cost of making available a supply of electricity. This offer the Council accepted, but as regards the water supply a change was agreed upon which was recorded in a letter of 15th April 1959 from the appellant to the Council, namely that the Council should provide this water supply and the appellant should pay the Council a premium of £16,500 for the lease. In June 1959 it was agreed that the commencing date for the lease should be 14th January 1959, which was regarded as the date of acceptance of the Council's offer to lease. On 3rd May 1960 the Council sent the appellant's solicitors a draft lease and pointed out that as part of the land was registered in the name of the Council as trustee the approval of the Minister for Public Lands was necessary under s. 185 (2) of The Land Acts, 1910 to 1959. The appellant's solicitors replied on 30th August 1961, suggesting various amendments to the draft and asking the Council to have the relevant area excised from the grant in trust so that no question of any breach of trust or reversion to the Crown might arise. But no one seems ever to have adverted subsequently to the Council's letter of 10th December 1958 to any need for the approval of the Governor-in-Council. This approval was necessary because s. 32 (4) of The Local Government Acts 1936 as amended prior to 1964 provided that where any land is vested in a local authority (a term which included the Council by force of s. 36 (6) of The City of Brisbane Acts, 1924 to 1960) for an estate in fee simple, whether such land was or was not held by the local authority upon trust for public purposes, and not being a public park, the local authority might, "with the approval of the Governor-in-Council", grant to any person a lease of the land for any term not exceeding thirty years for the erection thereon of buildings to be used for business or residential purposes. This affirmative provision as to the granting of a building lease with the Governor's approval plainly implied that no building lease should be granted without such approval. (I read it as meaning also that even with Executive approval no building lease of a public park should be made, but I do not find it necessary to pursue this topic.) In September 1961, no formal lease yet having been executed, a change in the situation occurred. The appellant and other television operators applied to the Council to be allowed to purchase the lands they respectively occupied; and in order to enable this course to be followed as regards the southerly parcel, which the Council held upon trust, it was arranged between the Council and the Minister for Public Lands that the trust land should be surrendered to the Crown and that the Crown should grant the appellant a special lease which the appellant could then convert to a freehold at a price to be determined. This might be done under s. 175B of The Land Acts, 1910 to 1959, which became s. 207 of The Land Act of 1962. The appellant, however, asked on 23rd July 1962 that the lease which had been agreed to between the Council and itself should be executed "so as to provide formal written evidence of the lease arrangements as they have subsisted to date". The appellant offered to surrender the lease after execution, and to pay £15,355 for the purchase of the land. To this the Council agreed on 22nd January 1963; and the lease, expressed to run from 14th January 1959, was executed by the appellant on 19th March 1963 and by the Council on 20th June 1963. No approval by the Governor-in-Council was obtained. Then the plan changed again. It was arranged between the Council and the Land Administration Commission (see letters of 14th and 15th May 1963) with the assent of the appellant (expressed in a letter from its solicitors of 8th May 1963) that when the Council should have surrendered its grant of the southerly (trust) parcel the contemplated special lease should be issued not to the appellant but to the Council, so that the conversion to freehold should be by the Council. The purpose may have been to enable the Council to receive the purchase price from the appellant after having become beneficial owner of the land and so without danger of being held guilty of a breach of trust. The price to be paid by the appellant to the Council and by the Council to the Crown was £9,667 11s. 11d. The Council then surrendered the trust lease on 18th June 1963, but although the grant of a special lease had been authorized by the Governor-in-Council on 30th May 1963 it seems never to have been made. On the footing that it had been made, however, a new grant in fee simple (of a slightly reduced area) was made to the Council on 11th July 1963. On the next day the appellant executed a surrender of its lease from the Council and the latter executed it on 5th August 1963. Two days later the Council executed a transfer of both parcels of land to the appellant. In the details I have set out and others that I have not, counsel for the Commissioner found reason for making two submissions: first, that if there was a valid lease for which the alleged premium was paid and under which the relevant improvements were effected it was entered into as part of an arrangement which is void as against the Commissioner by force of s. 260 of the Income Tax Assessment Act; and secondly, that the lease and surrender upon which the appellant relies were shams, and as such should be disregarded. The first submission I need not consider, for I have reached the conclusion that, apart altogether from s. 260, no valid lease of the relevant land ever came into existence. The same applies to the second submission, but I should add a little about it. In my view both the appellant and the Council intended the instrument of lease primarily as a mere record of the terms which the parties were retrospectively treating (not quite accurately) as having been agreed upon ever since 14th January 1959; but it was intended nevertheless to create a leasehold interest in the land, and the surrender was intended to operate according to its tenor. I do not think it is correct to describe these instruments as shams. I should add, in view of some of the discussion that took place during the argument, that I specifically reject all suggestion of improper conduct in regard to the matter on the part of the appellant or the Council or any of their officers or their solicitors. Even apart from special statutory provisions, the instrument of lease could not operate retrospectively to create a tenancy before the date of its execution by the Council. The habendum for thirty years from 14th January 1959 could not give the lessee any interest in the land before 20th June 1963: Cadogan (Earl) v. Guinness [1] ; Colton v. Becollda Property Investments Ltd. [2] ; Perpetual Trustee Co. Ltd. v. Morley [3] ; and the improvements in question in these appeals had been completed long before then. But the appellant, having entered on the land on or before 14th January 1959, had paid rent during the whole of the period, and but for s. 32 (4) of The Local Government Acts the law would have inferred from this a tenancy from year to year, since rent was paid on the basis provided for in the drafts of the proposed lease, namely that of an annual sum payable by monthly instalments: cf. Turner v. York Motors Pty. Ltd. [4] . The drafts had provided for the construction of the improvements, and indeed this was basic to the whole purpose of the negotiations. The implication in these circumstances clearly would be, I think, that the yearly tenancy was for the erection on the land of buildings to be used for business purposes, and therefore was a lease to which s. 32 (4) applied. 1. [1936] Ch. 515, at pp. 517, 518. 2. [1950] 1 K.B. 216, at p. 225. 3. (1968) 43 A.L.J.R. 24. 4. (1951) 85 C.L.R. 55. On the interpretation which I have placed upon s. 32 (4) such a lease, in my opinion, is void. A provision superficially similar was referred to in Tweed Motors (Queensland) Pty. Ltd. v. Moran Motors Pty. Ltd. [5] and the question was there left undecided whether a lease was void if granted without the Minister's approval as required by that provision. But s. 32 (4) is different in nature and purpose, and in my opinion it operates to prevent the grant, without Executive approval, of any building lease of land held by a public authority in fee simple: cf. Rhyl Urban District Council v. Rhyl Amusements Ltd. [6] . I should be of the same opinion in regard to s. 185 of The Land Acts, 1910 to 1951 (see now ss. 344-348 of The Land Act of 1962) so far as the former trust land was concerned, but I need not enlarge upon that aspect of the case. 1. (1965) 39 A.L.J.R. 279. 2. [1959] 1 W.L.R. 465, at pp. 473-474; [1959] 1 All E.R. 257, at p. 265. It follows that in my opinion there never was a lease of the subject land to the appellant, either for thirty years or from year to year, and, as a consequence, there never was a surrender of a lease. The appellant was therefore not entitled to the deductions which are the subject of these appeals. As regards the first three years the question remains, whether the original assessments were made after a full and true disclosure of all the material facts necessary for the assessment. Clearly they were not; for the Commissioner was not told, or given any reason to think, that the Executive consent to the alleged lease was necessary and had not been obtained. In the absence of specific information on the point his natural assumption would be that if there was any necessary condition of that kind upon the Council's power of leasing it had been fulfilled. In these circumstances I hold that the assessments appealed against have not been shown to be excessive and that accordingly each appeal should be dismissed. The appellant must pay the Commissioner's costs of each appeal, but of course they will be taxed so as to avoid duplication.