Appeal Panel - Internal CITATION: Ford v Chief Commissioner of State Revenue (RD) [2010] NSWADTAP 41 Appellant: Simon John Ford PARTIES: Respondent: Chief Commissioner of State Revenue FILE NUMBER: 099047 HEARING DATES: 10 February 2010 DATE OF DECISION: 9 June 2010 BEFORE: Needham J SC - Deputy President; Hole M - Judicial Member; Bennett C - Non-Judicial Member CATCHWORDS: Land Tax – principal place of residence exemption – whether several owners fall within definition of "joint owner" – Interpretation - to promote purpose of the Act – whether the principle of promotion of statutory purpose can be applied where one construction less available than another DECISION UNDER APPEAL: Simon John Ford v Chief Commissioner of State Revenue [2009] NSWADT 192 FILE NUMBER UNDER APPEAL: 096005 Land Tax Management Act 1956 Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Real Property Act 1900 Conveyancing Act 1919 Interpretation Act 1987 Duties Act 1997 Ford v. Chief Commissioner of State Revenue [2009] NSWADT 192 Ryan v. Commissioner of Land Tax [1982] 1 NSWLR 305 CASES CITED: Aoun Investments Pty Ltd v. Chief Commissioner of State Revenue [2006] NSWSC 1394 Hoystead v. Federal Commissioner of Taxation (1921) 29 CLR 537 Chief Commissioner of State Revenue v. Coleman [2007] NSWSC 713 TEXTS CITED: Osborn's Concise Law Dictionary,10th ed Land Law, Butt, 3rd ed Appellant Representative: S. Ingate, Solicitor REPRESENTATION: Respondent Representative: I. Mescher, instructed by Crown Solicitor, NSW ORDERS: The decision of the Commissioner of 30 July 2008 refusing the exemption from land tax on the basis of the principal place of residence exemption is affirmed. REASONS FOR DECISION The Appeal 1 Mr Ford, the appellant, appeals from the decision of Mr Handley, Judicial Member in Ford v. Chief Commissioner of State Revenue ([2009] NSWADT 192), in which the learned Tribunal member dismissed his application for review of a decision by the Chief Commissioner for State Revenue, the respondent, relating (inter alia) to the 2008 tax year. The decision disallowed Mr Ford's objections to notices of assessment for land tax in relation to a property for which Mr Ford claimed the principal place of residence exemption pursuant to Section 10(1)(r) and Schedule 1A of the Land Tax Management Act 1956 ("the Land Tax Act"). 2 The appeal was made on a question of law only and no application to extend the appeal to the merits pursuant to s 113(2)(b) of the Administrative Decisions Tribunal Act 1997 was made. The questions of law were identified in the Notice of Appeal (which was filed on 19 August 2009) as:- "a) Applying the wrong statutory provision to the facts of the case; and/or b) Applying the wrong judicial provision to the facts of the case; and/or c) Misinterpreting the words in a statutory provision; and/or d) Making a finding of fact where there is no evidence to support that finding; and/or e) Such other questions of law as the Appellant may raise in the appeal." 3 The appeal proceeded on the question of whether, for the 2008 land tax year only, Mr Ford was entitled to the principal place of residence exemption in relation to the parcels of land owned by him. The hearing below also related to the 2007 tax year, which decision was not pressed on this appeal. 4 As at the relevant taxing date, 31 December 2007, the land in question was owned by Mr Ford together with his wife. The relevant land was contained in a single title; of that title, Mr Ford owned a specified part of land, and his wife owned the other part. The question in the appeal is whether Mr Ford's ownership of part of the lot – which was contended by the respondent to be ownership in severalty with Mrs Ford - satisfies the provisions of the Land Tax Act in order to ground a "principal place of residence" exemption from land tax. The Facts 5 The facts are not particularly controversial. They set out below (the below summary is taken partly from the judgment and partly from the respondent's submissions where they are succinctly expressed). a. Mr Ford, together with his wife, Julie Ford, own land situated at the corner of two streets in Greenwich, Sydney. They acquired four properties over a period of time. They purchased a property at 5 George Street in their joint names in November 1993. In September 1995, they transferred the property into Mrs Ford's name alone. In September 1996, Mr Ford purchased 1 George Street. In September 1999, he purchased the adjacent property 1 Gother Avenue, and in November 2004, he purchased 3 George Street. These four properties form a block which comprises the land at the corner of George Street and Gother Avenue, Greenwich. b. Initially, Mr and Mrs Ford and their children occupied 5 George St as their family home. They were absent from Sydney for some years but they returned in about January 2006. On their return, they recommenced living at 5 George Street, where they continue to live, and due to their requirement for more living space, made plans to extend to extend the house and garden. The houses on other blocks were demolished over time, and a final development application lodged with the local Council. c. The development application for the extension of the house on 5 George St onto 3 George Street was approved by May 2007 and excavation of the site commenced on 20 June 2007. Building work continued through 2008 and was finally completed by late December 2008. On 2 July 2009, the Council issued an interim occupation certificate. d. On 18 July 2007, the Department of Lands registered the consolidation of the parcels of land for 3 and 5 George St and 1 Gother Ave as lot 2 in DP (Deposited Plan) 1112148 ("Lot 2"). 1 George St, the corner block, was not included in the consolidation and continues to be identified separately as lot 1 (although there appears to have been a small adjustment of the boundaries between the former 3 George St and 1 George St). The title to Lot 2 was held:- i) by Mrs Ford as to the part formerly comprising 5 George St; and ii) by Mr Ford as to the part formerly comprising 3 George St and 1 Gother Ave. e. The form of ownership of Lot 2 is known as "in severalty" rather than the more commonly encountered joint tenancy, or tenancy in common. That is, of the one lot which forms Lot 2, Mrs Ford owns that part which was previously known as 5 George Street solely, and Mr Ford owns the part formerly known as 3 George Street and 1 Gother Avenue. The title to the land is not expressed as being either joint tenancy, or tenancy in common. f. 31 December 2007 was the taxing date for the 2008 tax year. At this point the ownership of Lot 2 was on the basis as set out in paragraphs (d) and (e) above. g. On 30 June 2008, the title to Lot 2 became held jointly held by Mr and Mrs Ford as joint tenants by the means of transfers to and from each other and subsequent registration with the Department of Lands. h. Mr Ford was assessed as being liable for land tax in relation to the 2007 land tax year, and his objection was disallowed. While that decision was originally contested before the Tribunal, by the time the matter came to a hearing it was no longer contended that he was entitled to the principal place of residence exemption for his several ownership of part of the land in Lot 2. Mrs Ford's ownership of the former Lot 3 was assessed as being entitled to the exemption. i. Mr Ford was again assessed for land tax on his several ownership of part of Lot 2, which was the former 3 George Street and 1 Gother Avenue, in relation to the 2008 tax year. Mr Ford's objection to this assessment, lodged on 4 September 2008, was disallowed on 14 November 2008. j. On 13 January 2009, Mr Ford applied to the Tribunal for a review of both the 2007 and 2008 Land Tax assessments. The Decision 6 The decision of the learned Tribunal member canvassed the applicable legislation in a manner which was not contended to be in error, and so the relevant paragraphs of the Land Tax Act are set out here (note that the reference in the decision in paragraph [14] to "Schedule 1" has been corrected to read "Schedule 1A"):- 13 ..... Pursuant to sections 7, 8 and 9 of the LTMA, Land Tax was chargeable on the taxable value of land that was not exempt based on the ownership of the land as at midnight on the 31 December of each preceding year for which Land Tax was to be levied. Thus, Mr Ford, being the registered owner of 3 George St, was presumed to be liable for Land Tax on that land for the 2007 and 2008 Land Tax years based on his ownership of the land on 31 December of each preceding year, unless the land was exempt from tax. 14 Section 10(1) of the LTMA provides, relevantly, that except where otherwise provided in the Act, certain lands shall be exempted from taxation under the Act, including: (r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1 A . 15 The following definitions are included in section 3(1): " principal place of residence " of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person. "Joint owners" means persons who own land jointly or in common , whether as partners or otherwise, and includes persons who have a life or greater interest in shares of the income from the land and persons who by virtue of this Act are deemed to be joint owners. 16 Schedule 1A of the LTMA provides relevantly: Part 1 - Preliminary 1 Definitions (1) In this Schedule: "principal place of residence exemption" – see clause 2. "residential land" - see clause 3. "strata lot" means a lot under the Strata Schemes (Freehold Development) Act 1973 or the Strata Schemes (Leasehold Development) Act 1986 . "taxing date" - means midnight on the thirty-first day of December. (2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners . Part 2 - Principal place of residence exemption 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, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is: (a) a parcel of residential land, or (b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots. (2) Land is not used and occupied as the principal place of residence of a person unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or (b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. 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, ... 17 Clause 12 provides that for the purposes of the PPR exemption, only one residence may be treated as PPR of all members of the same family. 'Family' is defined as meaning a person and his/her spouse, and the dependent children who ordinarily reside with them. (the disputed provisions as to "owner" are emphasised by the Appeal Panel – underlining not present in original). 7 After dealing with a jurisdictional issue which is not the subject of this appeal (paragraphs [19] to [23]), the learned Tribunal member reviewed the evidence given by Mr Ford and that tendered on behalf of the respondent pursuant to s 58 of the ADT Act. In paragraphs [30] to [35], the learned Tribunal member noted that the review of the decision not to exempt Mr Ford's land for the 2007 tax year was no longer contested, and Mr Ford's submissions were then reviewed. The submissions thereby raised in relation to the decision of the Supreme Court in Ryan v. Commissioner of Land Tax [1982] 1 NSWLR 305 are essentially those raised in this appeal, and will be dealt with below. Those submissions centre on the meaning of the word "undivided" in the context of Ryan and the peculiar form of ownership of Lot 2 in DP 1112148. 8 The learned Tribunal member then summarised the submissions of the respondent in paragraphs [36] to [41]. 9 In the section of the decision entitled "Consideration" (paragraphs [42] to [47]), the learned Tribunal member opened, "Central to this matter is whether the principles set out by Hunt J in Ryan apply". The learned Tribunal member held that "the principles in Ryan apply in this matter so that to constitute a parcel of "residential land" title to the land must be undivided" (see par [45]). He excluded clause 1(2) of Schedule 1A on the basis that Mr and Mrs Ford were not, at the relevant taxing dates, "joint owners" of land. The expression "joint owners" was construed as a reference to a person who holds the whole of the land as joint tenants, or tenants in common; whereas Mr and Mrs Ford each owned parts of the land in severalty (see par [46]). 10 Further, the learned Tribunal member held that the land was not, from June 2007:- "when excavation work on the site commenced, until late December 1998 ( sic – 2008) when the construction work was completed, the land formerly comprising 3 George Street was not "residential land" within the meaning of this term in clause 3(1) of Schedule 1A" (see par [47]). It is this factual finding which is the basis of the ground of appeal as to an unsupported factual finding (see ground 3d) above). 11 The appeal was argued as per the grounds of appeal set out in paragraph 2 above, but the grounds fell into different categories, and it is more convenient to deal with them in this way. Submissions relating to the consequences of the land being held in severalty, and the meaning of "owner" 12 Several of the grounds of appeal contended for by the Appellant fall to be determined by the construction of the provisions relating to "owner" in the Land Tax Act and the application of those provisions to the concept of land held in severalty; accordingly, they have been dealt with together under this omnibus heading. 13 The appellant contended that Part 2 of Schedule 1A of the Land Tax Act (set out above, referring to "a parcel of residential land") applied to the ownership by Mr and Mrs Ford of Lot 2. It was contended that the learned Tribunal member was in error in so holding (see Aoun Investments Pty Ltd v. Chief Commissioner of State Revenue [2006] NSWSC 1394), since there was, in the present case, a single block of land, rather than (as in Ryan), contiguous blocks of land. The applicant submitted that the application of Ryan to the 2008 tax year was in error, and that as at 2008 the holding of Lot 2 was "undivided" in that there was only one lot, undivided by physical separation, and in use, occupation and title (see Ryan, p 310). 14 The appellant submitted that the learned Tribunal member erred in applying Aoun to the Land Tax Act, because that decision was one on the provisions of the Real Property Act and the Duties Act, and does not refer to the provisions in question under the Land Tax Act. By applying Aoun to the current circumstances, it was submitted that the Tribunal applied s 30 of the Duties Act rather than the correct section, which was 3(1) of the Land Tax Act. 15 Further, the appellant submitted that the finding that the word "joint" in s 3 and Schedule 1A to the Land Tax Act did not apply to the co-ownership of Mr and Mrs Ford and misapplied s 33 of the Interpretation Act (NSW) 1987. That section mandates a construction which would promote the purpose or object underlying the Act" over one which did not. The appellant submitted that, in finding that the Act did not envisage a tenancy in severalty (by use of the word "joint"), the learned Tribunal member preferred a construction which would have defeated the "purpose or object" of the Act. That purpose was identified as one which exempts from land tax the principal place of residence of persons which would otherwise be liable for that tax. 16 The appellant submitted that the definition in s 3(1) failed to use the term "tenancy", but rather used the word "joint owners", and thus, due to the fact that the section of the Duties Act which was considered by Gzell J in Aoun used the word "tenancy", imported a completely different meaning. The appellant submitted that "section 30 (of the Duties Act) raises legal issues of "tenancy". Section 3 (of the Land Tax Act) does not" (see written submissions in reply, par 3.1). 17 In reply, the respondent submitted that the findings of the Tribunal as to the 2008 tax year are contained in paragraph [46] of the decision, rather than in paragraphs [42] to [45] which deal with Ryan in relation to the 2007 tax year (which was no longer in dispute). That much is clear, it was submitted, by the express words of paragraph [45] which provide:- "In my view, the principles in Ryan apply in this matter so that to constitute a parcel of 'residential land' title to the land must be undivided. This was not the case on either of the relevant Land Tax dates, 31 December 2006 or 31 December 2007. The title to the land formerly comprising 3 George St, which from 18 July 2007 comprised part of lot 2 in DP 21112148, was not consolidated until 30 June 2008". 18 It was submitted by the respondent that the reference to the 2008 tax year in the context of the submissions as to Ryan dealt with a submission in the Tribunal below that the property 1 George Street (which is not, and was not, part of Lot 2) may be the subject of the review (see written submissions of the respondent, paragraphs 29 and 30). The appellant, in reply, sought to adopt these submissions and to confine the appeal – as the Appeal Panel always understood him to be doing – to the 2008 tax year in relation to Lot 2. Accordingly, Ryan was not a relevant concern. 19 Paragraph [46], it was submitted by the respondent, is the heart of the finding dealing with the 2008 tax year. It was submitted that "the Tribunal's findings at paragraph 46 of the decision below had nothing to do with Ryan". 20 Paragraph [46] deals with the definition of "owner" in clause 1(2) of Schedule 1A, which is set out above in paragraph 7 and emphasised for convenience. The respondent submitted that the reason the Appellant failed in his bid for land tax exemption in the 2008 tax year is that he was not the "owner" of the whole of Lot 2 as at 31 December 2007. In fact, it was submitted, there was not an "owner" within the meaning of the definition in Schedule 1A of the whole of Lot 2 at the relevant taxing date. There were two owners of distinct parts of this lot, neither of whom was an "owner" of the whole of Lot 2. 21 The respondent further submitted that the ownership in severalty did not satisfy the definition of "joint owner" in schedule 1A because the term "joint owner" has a specific meaning in law, which does not cover the type of several ownership enjoyed by the Fords as at the relevant taxing date. A "joint owner" is seised of the whole of the property jointly with some other person or persons; Mr Ford did not own the whole of the property. An owner in common is seised of an undivided part of the whole, and so cannot exclude a co-owner from the whole of the property; again, Mr Ford's part of the property was divided and determined. 22 As to the application of Aoun, the respondent submitted that the reference to "joint owners" in s 3(1) of the Land Tax Act "includes persons who own land as joint tenants or tenants in common and, relevantly, does not include persons who own land in severalty". That submission relies upon the use of what was submitted to be technical legal expressions which are fixed in their meaning (see Hoystead v. Federal Commissioner of Taxation (1921) 29 CLR 537 at 557 per Higgins J), and which explicitly or impliedly exclude ownership in severalty. Further, the lack of use of the term "tenancy" does not invalidate the reference by both Gzell J and the learned Tribunal member to the settled meaning of the terms "joint tenancy" (or "joint owners") and tenants (or owners) in common. Consideration of the severalty and "owner" issues 23 It is clear that Mr and Mrs Ford were neither tenants in common of Lot 2 as at the relevant taxing date, nor were they joint tenants of it. The meaning of those terms are indeed fixed, having their genesis as they do in the mediaeval land law concept of subinfeudation (see Butt on Land Law, ch 14). "Each expression has a technical legal meaning" (Aoun at [21]). A tenant in common has a proportionate, yet undivided interest in land – the technical term is "aliquot". A joint tenant has no "distribution of seisin"; a joint tenant owns the whole of the land jointly with one or more persons. 24 Tenancy in severalty occurs when a share of property is ascertained, as opposed to joint ownership, ownership in common, and ownership in co-parcenary (where the owners hold undivided shares) – see Osborn's Concise Law Dictionary,10th ed. Ownership in severalty is an unusual form of ownership, much less common than joint tenancy or tenancy in common, the two forms most usually encountered. 25 The nature of a several tenancy was explored in Aoun, a decision of Gzell J. In that decision his Honour held that "In my view, the expression "joint proprietors" as used in the Real Property Act 1900, s 100(1) connotes some form of co-ownership of property and is to be distinguished from the situation in which two or more persons are owners of particular parts of property, even though those parts are included in a single certificate of title" (at [29]). 26 The decision in Aoun, is it clear, revolved around the dutiable nature of an instrument which purported to effect partition; the Court held that as "partition" was limited to the holding of land as joint tenants or tenants in common, and the tenancies in this case were in several, no partition took place and so ad valorem duty applied. The Supreme Court, while looking at legislation which was clearly not the Land Tax Act, nonetheless was making a finding as to the meaning of the word "joint" in the context of its settled legal meaning and the fact that the legislation was differently phrased does not impact the inherent logic of applying settled land law terms to those terms used in legislation dealing with land. The learned Tribunal member, in applying the reasoning in Aoun, was not applying definitions in the Duties Act; rather, he was making a finding of fact as to the kind of ownership (in severalty) which was also considered in Aoun, and applying the principles also applied there to the current case. 27 As to the Interpretation Act point, the learned Tribunal member said:- "I am not satisfied that this interpretation – which is by reference to the two usual forms of joint ownership – is one that defeats the purpose or object of the [Land Tax Act]" (par [46]). 28 It seems to the Tribunal that the definition in s 3(1) of the Land Tax Act is sufficiently clear in that it refers to either joint tenancy of land or tenancy in common of land so that the alternative interpretation – that those terms include ownership in severalty – must be excluded. Accordingly, it is doing a disservice to the clear language of s 3(1) to prefer the alternative interpretation above the clear one on the basis of the "promotion of the purpose or object" of the Land Tax Act. Nothing was brought forward by the appellant which would incline us to the view that the two interpretations were equally available. Equally, nothing was brought forward during the appeal to convince us that any particular purpose or object was in fact not so promoted by this interpretation. 29 Accordingly, it is the Appeal Panel's view that an owner in severalty does not fall within the definition of "owner" within the meaning of s 3(1) of the Land Tax Act, and accordingly there was, in this circumstance, no "owner" of Lot 2 who would be eligible for the principal place of residence exemption. It was noted that this situation applied, relevantly, only for the 2008 tax year, and that the title to Lot 2 is now held jointly, so that this finding does not affect the liability for land tax on this ground alone going forward. 30 By the close of oral argument on this appeal, it was clear that nobody was contending that Ryan was relevant to the finding as to the 2008 tax year, and so no further consideration of the written submissions on this point is warranted. Submissions on "A Parcel of Residential Land" 31 The appellant submitted that the learned Tribunal member erred by finding that the former 3 George Street portion of Lot 2 was not "residential land" as at 31 December 2007 because the construction work was not completed by this date. It was submitted that this was irrelevant because part of Lot 2 was in fact used as the principal place of residence of Mr and Mrs Ford, and that if Lot 2 was the "parcel", then the finding that it was not "residential land" was not supported by the evidence. 32 The respondent noted that the finding as to whether 3 George Street was "residential land" was supported by the facts set out in the decision at paragraph [47] and that the finding was that as at 31 December 2007 there was a "dual use" of the land. In any event, it was submitted, if the appellant failed on the question of "ownership" then nothing turned on this finding. 33 After considering the submissions of the parties, the Appeal Panel is of the view that this question does not fall to be decided, given the finding on the meaning of "owner". In any event, there appears to be ample evidence upon which the Tribunal could make a finding that the portion of the land owned by Mr Ford was a construction site at the relevant date. Application of Coleman 34 The appellant made submissions as to whether the learned Tribunal member properly applied the decision of the Supreme Court in Chief Commissioner of State Revenue v. Coleman [2007] NSWSC 713. 35 The Appeal Panel notes that this finding appears in paragraph [44] of the judgment and so is restricted to the 2007 and earlier tax years, when the blocks were not consolidated into one title. Accordingly, this ground does not fall to be determined on this appeal. Clause 12(1) and (5) of Schedule 1A 36 The appellant submitted that "to the extent that the Tribunal has applied (cl 12 of Schedule 1A) to the facts of the case, it has done so incorrectly" (see par 7.1 of the appellant's written submissions). The appellant pointed out that "there are not two separate "residences" owned by a family. There is only one residence; that residence partly constructed and partly unconstructed on that parcel of land known as Lot 2 ...". 37 The appellant went on to submit that, should the appellant not succeed, then the learned Tribunal member should have applied clause 12(5) of Schedule 1A by which the Fords between them were entitled to elect the property which was to be treated as their principal place of residence for land tax purposes. 38 The respondent submitted that clause 12(1) was not relevant to the learned Tribunal member's decision. There was clearly only one residence. 39 In relation to cl 12(5), the respondent submitted that where there was only one residence, clause 12(5) was not applicable. 40 The Appeal Panel, having considered the submissions and the way in which those clauses were dealt with by the learned Tribunal member, agrees with the respondent that as there was only one residence at any one time, clause 12(1) was not relevant and clause 12(5) was not raised below. Conclusion 41 The decision of the Commissioner of 30 July 2008 refusing the exemption from land tax on the basis of the principal place of residence exemption is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.