Mourched v Chief Commissioner of State Revenue

1. [1]

   By an amended summons filed 8 March 2023 the plaintiffs seek leave to appeal from parts of the decision of the Appeal Panel of the NSW Civil and Administrative Tribunal: Mourched v Chief Commissioner of State Revenue [2022] NSWCATAP 362 (“Appeal Panel Mourched”). The decision of the Appeal Panel dismissed an appeal brought by the plaintiffs from the Administrative and Equal Opportunity Division of NCAT: Mourched v Chief Commissioner of State Revenue [2022] NSWCATAD 180. The proceedings before the Division challenged a land tax assessment notice dated 20 February 2020 by the first defendant, the Chief Commissioner of State Revenue, in respect of land there identified as PID3864500, Parcel B, being part of the land Lot 105 DP 1041416 known as 297 Bringelly Road, Leppington.

2. [2]

   The plaintiffs had claimed an exemption under s 10(1)(u) of the Land Tax Management Act 1956 (NSW) (“LTM Act”) on the basis that the plaintiffs’ land was:

3. [3]

   The other part of the land comprising 297 Bringelly Road was identified as PID3866335, Parcel A. That land was determined by the Chief Commissioner to be exempt because it fell within s 10(1)(u). The plaintiffs lodged an objection to the assessment in respect of Parcel B. The Chief Commissioner disallowed the objection on 11 June 2020, and on 3 July 2020 the plaintiffs sought a review determination, it being agreed that the decision the subject of the review was the assessment and not the disallowance.

Proceedings before the Tribunal

1. [4]

   The plaintiffs claimed before the Senior Member constituting the Division, and again before the Appeal Panel, that Parcel B should also be exempt, because situated on Parcel B was a septic system used for the childcare centre, and that was said to be the only current use of Parcel B. The plaintiffs submitted that the childcare centre could not be operated without the septic system.

2. [5]

   In essence, the plaintiffs were seeking a review by the tribunal of the determination by the Chief Commissioner that the land at 297 Bringelly Road was made up of two separate valuation lots. Section 14A of the Valuation of Land Act 1916 (NSW) (“VOL Act”) enabled the Valuer-General to value separately different parts of the same parcel of land and, in such a case, the VOL Act applied to each such part as if it were a separate parcel of land.

3. [6]

   The Senior Member rejected a submission by the plaintiffs that it was the whole of Lot 105 that had to be considered for the purpose of determining whether a relevant exemption from land tax arises. He held that this was contrary to the VOL Act.

4. [7]

   The Senior Member held that in order to succeed the plaintiffs had to show on the balance of probabilities that the sole use of Parcel B at the relevant date (31 December 2019) was a place where children were educated or cared for by an approved provider. He said that there was no dispute that a condition of the development approval for the septic system was that a fence be erected to keep the children off the land comprising Parcel B. He said that the issue before the Tribunal was what Parcel B was actually being used for at a certain date. Merely having evidence of an approval did not mean that the approval was being utilised and that the utilisation was the only use being made of the subject property.

5. [8]

   The Senior Member held that he was not satisfied that the land which comprised Parcel B was solely used as the place where children were educated or cared for.

6. [9]

   The plaintiffs lodged an internal appeal to an Appeal Panel. Such an appeal is only on a question of law unless leave is given on other grounds: s 80(2)(b) Civil and Administrative Tribunal Act 2013 (NSW) (“CAT Act”). The grounds of appeal were as follows:

7. [10]

   The relevant parts of the decision of the Appeal Panel are as follows:

8. [11]

   The appeal grounds now put forward by the plaintiffs are as follows:

9. [12]

   The defendant has filed a response asserting that none of the grounds of appeal raises a question of law, but saying that even if the question identified in paragraph 1B is a question of law, leave to appeal should not be granted because the plaintiffs have not demonstrated that this case involves principles warranting a grant of leave to appeal. The response says that there is no general public importance, nor is there any injustice where the applicability of the exemption provided for in the statutory provision turns solely on findings of fact made at first instance in relation to these plaintiffs.

Leave to appeal

1. [13]

   Section 83(1) of the CAT Act provides:

2. [14]

   It is not sufficient, therefore, that a question of law is identified. A party seeking to appeal should show why leave should be granted.

3. [15]

   In John Maiolo t/as M & N Peninsular Kitchens & Joinery v Chiarelli [2017] NSWSC 982 I said:

4. [16]

   In Targeted Property Investments Pty Ltd v Look Up Technologie Pty Ltd (No 2) [2023] NSWSC 416, Griffiths AJ, when speaking of s 83, said at [33]:

5. [17]

   His Honour then went on to say:

Submissions

1. [18]

   The plaintiffs submitted, on the question of leave, that the proper construction of s 10(1)(u) of the LTM Act is of general importance, it having not been the subject of any decision of the Court. The two aspects were whether the defendant could assess tax on separate parcels of the land as designated by the Valuer-General pursuant to s 14A(4) of the VOL Act, and whether land used as providing a service that assists in, or is indispensable to, the provision of an approved education and care service, is similarly exempt from land tax. The plaintiff submitted further that a determination for the tax year under consideration will have ongoing importance, and in that way a refusal of leave would work an injustice to the plaintiffs.

2. [19]

   The plaintiffs submitted that the Appeal Panel erred in its proper construction of the exemption by limiting the scope of the exemption to the part of the premises comprising the childcare centre and failing to apply the exemption to the premises as a whole.

3. [20]

   The plaintiffs submitted that in construing the word “land” in the exemption the Appeal Panel did not have regard to the totality of Lot 105 being the parcel of “land” upon which the childcare centre is located. Rather, the Appeal Panel erred by taking separate parcels established for valuation purposes under s 14A(4) of the VOL Act as the basis for ignoring the one land title and the one parcel and treating them as two separate parcels.

4. [21]

   The plaintiffs submitted that the Appeal Panel erred by treating the infrastructure connected to and affixed to the childcare centre building as other than part of the building itself and therefore as part of the childcare centre. The plaintiffs submitted that the exemption should have been construed as encompassing any land reasonably necessary to the use of the parcel which undoubtedly carries the exemption, as long as the use is ancillary or incidental to the purposes that attract the exemption.

5. [22]

   The plaintiffs submitted that, having regard to the statutory context, the reference to “place” in the exemption should be construed broadly by reference to the premises where the childcare services are being undertaken together with the services which permit the childcare centre to have functionality.

6. [23]

   The plaintiffs submitted that the Tribunal, by having regard to the exhibits which identified land works early in 2019, took into account irrelevant considerations. The plaintiffs submitted that there was no evidence that any other use was being made of Parcel B apart from its use for the septic system which was indispensable to the operation of the childcare centre. In both of those ways, the plaintiffs submitted that the issue of whether the plaintiffs had shown sole use of the land for the purpose in s 10(1)(u) was a question of law.

Legislation

1. [24]

   Section 9 of the LTM Act provides:

2. [25]

   The Register referred to in that section is defined in s 3 as meaning “the Register of Land Values kept under section 14CC of the Valuation of Land Act 1916 (NSW)”.

3. [26]

   Section 14CC of the VOL Act provides:

4. [27]

   Section 10 of the LTM Act deals with land that is exempted from tax. It relevantly provides:

5. [28]

   Section 14A of the VOL Act provides:

6. [29]

   It should be noted that neither “parcel” nor “parcel of land” is generally defined in the VOL Act, although “parcel of land” is defined for the purposes of s 26A in relation to the Strata Schemes Development Act 2015 (NSW).

7. [30]

   The evidence discloses that there are two parcels of the land in the Register at the address 297 Bringelly Road, Leppington being Lot 105 in DP 1204146. One parcel of land, identified as PID3866335, is 3,116 square metres (Parcel A) and the other, identified as PID 3864500, is 2.021 hectares (Parcel B).

Consideration

1. [31]

   The grounds of appeal do not clearly articulate the issues argued before the Appeal Panel and in this Court. The way the matter was argued suggest to me that there are three issues for determination on the appeal as follows:

   1. (1)

      Is land tax able to be assessed on the parts of land as valued by the Valuer-General in accordance with s 14A(4) of the VOL Act?

   2. (2)

      Is Parcel B, on the assumption that its only use is for the septic system, entitled to the exemption in s 10(1)(u) of the LTM Act?

   3. (3)

      Did the Appel Panel err by determining that the plaintiffs had not proved that the sole use of Parcel B was for the septic system?

2. [32]

   The Commissioner submitted that there were two questions only, being (a) whether the whole of Lot 105 should be assessed as one parcel, and (b) whether the land was used solely for the provision of the childcare service and that that land was the place where the children are educated for cared for. Nothing turns on the difference between those two questions and the three I have identified for any result in the proceedings, but it seems to me the issue of whether land used for an ancillary use to exempt land is capable of being exempt itself for that reason, is a separate and preliminary question to whether the land is solely used for the particular purpose.

3. [33]

   The plaintiffs accepted that the Amended Summons did not clearly identify this point as a separate ground of appeal, but it was said to be caught up in the grounds put forward. The point was argued before the Senior Member in the Division and before the Appeal Panel. As noted earlier, submissions have been made in this Court on the point.

4. [34]

   The question is a pure question of law, as the Commissioner appears to accept, since it concerns the proper construction of s 9 of the LTM Act and its relationship to s 14A of the VOL Act. The matter is of general importance, sufficient to justify the grant of leave to appeal to this Court.

5. [35]

   The main point made by the plaintiffs is that the scope of s 14A is for valuation purposes and not for exemption purposes. However, ss 9 and 10 of the LTM Act must be read together. Section 9 provides for the assessment of land tax based on the Valuer-General’s valuation, but s 10 provides a series of exemptions. It is difficult to see why the Register would cease to be relevant for exempting land from tax where it provides the basis for the imposition of tax in the first instance.

6. [36]

   The interplay between s 9 of LTM Act and ss 14A and 14CC of the VOL Act is a complete answer to the plaintiffs’ submission noted at [20] above (paragraph 8 of the plaintiffs’ written submissions). The defendant is able to assess the land tax payable on any parcel of land entered into the Register by the Valuer-General: Leppington Pastoral Co Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 9 at [46]. In the present case, the land being Lot 105 consists of two parcels as described. There can be no basis for the suggestion that where “land” is referred to in s 10 of the LTM Act, it should be treated differently from where it appears in s 9. It is a general rule of statutory construction that where a word is used consistently in a single piece of legislation, it should be given a consistent meaning unless there is a reason to do otherwise: The Registrar of Titles of the State of Western Australia v Franzon (1975) 132 CLR 611 at 618; D151 v New South Wales Crime Commission (2017) 94 CLR 738 at [72]. Accordingly, land tax may be assessed on, and an exemption may apply to, a parcel of land contained in the Valuer-General’s Register even though it is less than a single lot of land.

7. [37]

   The thrust of the submission made to the Appeal Panel on the construction of s 10(1)(u) of the LTM Act was that the defendant should have assessed the land for tax as one lot by reason of the services on Parcel B being indispensable to the conduct of the business in Parcel A.

8. [38]

   In my opinion, the answer to the plaintiffs’ submission that the whole of land should have been treated as one title and assessed accordingly, is what is provided in s 9(4) of the LTM Act. In that regard, I entirely agree with the remarks of the Senior Member constituting the Administrative and Equal Opportunity Division in Australian Native Landscapes Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 189 at [30]-[33]:

9. [39]

   I do not think the decision in McMillan v Commissioner of Land Tax [1972] 1 NSWLR 545 compels a different conclusion. The legislation was in a different form, and the question was whether the taxpayer owned “other land” by reason of the other parcel which was not “separated by physical severance nor in title nor by use nor by occupation” (at 556).

10. [40]

    There is also force in the Commissioner’s submission, made below and in this Court, that if the plaintiffs were disputing the division of the land into the two parcels, their approach ought to have been to the Valuer-General. I endeavoured to ascertain, during the hearing, how it came about that the land was divided into the two parcels. I was taken to emails and to a lease between the plaintiffs and the childcare centre in 2007, and it was suggested that the division came about by reason of the part of the land leased. The lease was for five years, and registered under the Real Property Act 1900 (NSW), although it is not clear how that was effected when the lease itself does not appear to specify what “part” of the whole land, then being FI 100/1051963, was being leased. Ultimately, it does not matter why two separate parcels were created by the Vauler-General.

11. [41]

    There was no error in the determination of the Appeal Panel that the land in Parcel B could be separately assessed under the LTM Act.

12. [42]

    This question seems to me to amount to a question of law. The question is whether the land, that is, Parcel B, is the place where children are educated or cared for by the approved education and care service. Determination of the question involves the construction of the exemption, and in particular, the meaning of “land” and “place”: Industry Research and Development Board v Bridgestone Australia Ltd (2001) 109 FCR 564 at [50], [53]-[54].

13. [43]

    Although “land” is not defined in the LTM Act or the VOL Act, it is defined in s 21 of the Interpretation Act 1987 (NSW) as follows:

14. [44]

    The question is, therefore, whether the “land” in Parcel B falls within the exemption in s 10(1)(u). Certainly, the exemption requires that the land must be used “solely” for the purpose stated, but before considering that issue it must first be determined if the land is used for the stated purpose at all. Both counsel indicated that there was no authority where this exemption has been considered. There are, however, a number of cases which deal with similar issues, and they can provide guidance on the present enquiry.

15. [45]

    In Penrith Rugby League Club Ltd v Commissioner of Land Tax (NSW) [1983] 2 NSWLR 616, the taxpayer was a club which owned a building used for its members’ activities. On the other side of the road (League St) from the club was further land owned by the taxpayer which was used as a carpark by club patrons and for other carparking purposes associated with the taxpayer’s objects. The taxpayer claimed that the car parking area was exempt from land tax under what was then s 10(1)(g)(iii) of the LTM Act, as land used as the site for a building owned and solely occupied by a club.

16. [46]

    The Commissioner did not allow an exemption for the area and the taxpayer appealed to the Supreme Court against the assessment. It was contended by the Commissioner that the concept of a “site” in the exemption could not include land which was physically separated from the land on which the actual building stood.

17. [47]

    Section 10(1)(g)(iii) exempted from land tax:

18. [48]

    Justice Hunt said (at 619):

19. [49]

    His Honour said also (at 622):

20. [50]

    In Commissioner of Land Tax v Christie; Commissioner of Land Tax v Shennen; Commissioner of Land Tax v Richmond [1973] 2 NSWLR 526 each of the taxpayers owned land consisting of more than one lot or parcel of land on which their houses were situated. Section 9(3)(e) of the LTM Act then provided:

21. [51]

    The question was whether the parcels or portions of land where the dwelling house was not situated constituted “other land” to deprive the taxpayer of the deduction.

22. [52]

    Justice Bowen (with whom Jacobs P agreed) said (at 533):

23. [53]

    Both Hunt J and Bowen JA in their respective cases had made reference to what was said by Herron J in Royal Sydney Golf Club v Federal Commissioner of Taxation (1942) 15 LGR (NSW) 57 at 63:

24. [54]

    Although that case went to the High Court, the four judges who sat were equally divided, with the result that s 23(2) of the Judiciary Act 1903 (Cth) meant that the decision appealed from was affirmed. The judges in the High Court did not either dissent from what Herron J had said nor they did adopt his remarks.

25. [55]

    However, in Commissioner of Land Tax for the State of New South Wales v Joyce (1974) 132 CLR 22, Stephen J (who gave the principal judgment) appeared to endorse a similar sentiment to what Herron J had said, by making reference to another High Court judgment of Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610. In Joyce there was a hall on land at Ashfield which was used solely as a meeting place for members of a Christian sect known as the Brethren, with the remainder of the land being used for purposes ancillary to and dependent upon the use of the hall. The exemption in s 10(1)(g) of the LTM Act was one for:

26. [56]

    Land tax had been assessed on the whole of the Ashfield land and the question was whether the land was exempt by reason of paragraph (g). Justice Stephen (with whom Gibbs and Mason JJ agreed) said (at 35):

27. [57]

    Although the word used in the LTM Act in relation to the exemptions in those cases was “site”, I do not consider there is any difference in the application of those authorities to the word “land” in the present exemption under consideration.

28. [58]

    Although the evidence about the use of Parcel B was left in a somewhat unsatisfactory state at the hearing (a matter particularly relevant to considering the third question), the proceedings were conducted on the basis that there was a septic system on Parcel B which serviced the building on Parcel A: Appeal Panel Mourched at [6]. At the hearing of the present appeal, the Commissioner accepted that that was so.

29. [59]

    The Commissioner submitted that the authorities to which I have made reference, and others identified by the plaintiffs, concerned other revenue matters or dealt with the issue of a principal place of residence which involved different type of exemptions from what is contained in s 10(1)(u). In that way, it was submitted that they were distinguishable and did not assist in the proper construction of s 10(1)(u).

30. [60]

    Whilst it is true that the wording of the exemptions in those cases differed slightly from the exemption under consideration here, the main question in each case was what constituted either the site or the land, and whether such terms should be confined. In my opinion, when regard is had to the definition of “land” in the Interpretation Act, and to what emerges from those cases in ascertaining whether associated land was exempt from land tax, those cases assist me to conclude that where the term “land” and the term “place” in s 10(1)(u) are used, they include land containing ancillary services to the land in respect of which there is an unchallenged exemption. In reaching that view, I have had particular regard to what French J said in Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450 at 457:

31. [61]

    Accordingly, if it is established that Parcel B is only used for the septic system, it is entitled to an exemption under s 10(1)(u) of the LTM Act because of its connection with the building on Parcel A.

32. [62]

    Under s 100(3) of the Taxation Administration Act 1996 (NSW) the applicant for a review has the onus of proving the applicant’s case, and as French J said in Diethelm at 457:

33. [63]

    It was therefore necessary for the plaintiffs to satisfy the Tribunal that the land, that is, Parcel B, was used solely for the provision of an approved education and care service. The highest the evidence rose in proof of this matter consisted of two letters written by lawyers acting for the plaintiffs to Revenue New South Wales.

34. [64]

    On 8 October 2019 Brown Wright Stein Lawyers wrote saying (inter alia):

35. [65]

    In a letter of 28 November 2019 from the law offices of Dr Dion Accoto, the following was said:

36. [66]

    The development application referred to in the letters was for the construction of a commercial commuter carpark, as the Appeal Panel noted at [33] of its decision. In response to those letters the Commissioner tendered exhibits which were identified as R3, R4 and R5, to demonstrate that the plaintiffs had carried out preliminary steps in commercial land development, including test trenches, bore holes and proposed further excavation works. The Commissioner contended before the Tribunal that this evidence contradicted the proposition that Parcel B was not used at all other than for the use for the sewerage treatment facility (Appeal Panel Mourched at [33]).

37. [67]

    In response to the evidence contained in those exhibits, the plaintiffs did not adduce any further evidence. The position was, therefore, that there was evidence of preparatory exploratory work in relation to the development application that had been conducted early in 2019. It was accepted that, although the issue concerned the use of the land on 31 December in any given year, a consideration of the land’s use during a reasonable period preceding and following the 31 December date is relevant, and six months either side may be a reasonable period: Leda Manorstead v Chief Commissioner [2010] NSWSC 867 at [4].

38. [68]

    The Appeal Panel accepted at [47] from what had been said in Leda Manorstead, that for the purposes of s 10AA of the LTM Act, preparatory work for a particular use could amount to the land being used for that purpose. Section 10AA concerns exemption for land use for primary production, but the principle is equally applicable in relation to other uses for exemptions in s 10(1).

39. [69]

    The Tribunal at first instance said at [54]:

40. [70]

    Whilst that was certainly an unfortunate way of expressing the problem for the plaintiffs, this Court is not concerned about the reasons of the Tribunal at first instance but about whether an error of the Appeal Panel gives rise to a question of law. In a similar manner, the Appeal Panel said at [53]:

41. [71]

    That was also an unfortunate way of making a finding on the issue because, as the plaintiffs submitted, it involved speculation on the part of the Appeal Panel.

42. [72]

    The Appeal Panel’s conclusion is better expressed at the following paragraphs:

43. [73]

    It may be accepted that, in the circumstances, the plaintiffs had the usual difficulty of proving a negative, but instead of endeavouring to do that, at least by an affidavit from one of them providing information about what, if anything, had happened after the preliminary work ceased, they adduced no further evidence, when it was their onus to prove what Parcel B was used for. Even allowing for the fact the rules of evidence did not apply to the proceedings before the tribunal, it is not surprising that the tribunal considered that mere assertions in letters by the plaintiffs’ lawyers did not satisfy their burden of proof.

44. [74]

    What is of greater significance is the conclusion of the Appeal Panel at [54] and [62], where the Appeal Panel correctly says that the question of the current use of Parcel B at the relevant time was a question of fact and not a question of law.

45. [75]

    The plaintiffs submitted, however, that the question is one of law on the basis that the Tribunal took into account irrelevant considerations, being the evidence of the use of the land in the early months of 2019, and, secondly, that on the facts, the only conclusion open on the evidence was that the land was used solely for the provision of an approved education and care service within the exemption of s 10(1)(u).

46. [76]

    In my opinion, no question of law was or is involved. The onus was on the plaintiffs to demonstrate what the land was used for on 31 December 2019, having regard to an approximate six month period on either side of that date in accordance with Leda Manorstead. The only evidence that the Tribunal had was the evidence contained in exhibits R3, R4 and R5. Whilst it may be accepted that the rules of evidence did not apply before the Tribunal, that does not have the effect of elevating the assertions contained in the letters of 8 October 2019 and 28 November 2019 to evidence. The proceedings were adversary proceedings and the plaintiffs bore the onus of proof.

47. [77]

    In the face of evidence of what was occurring on the land in early 2019, it was open to the Tribunal to conclude that the plaintiffs had failed to discharge their onus that the land was used solely for the provision of an approved education and care service, even accepting that the septic system should be regarded as part of the “land” for the purposes of the exemption. Characterising what the Tribunal did as taking into account irrelevant considerations cannot elevate the question of fact into a question of law. Nor can it be found, on the paucity of evidence available, that the only conclusion open was that the land was used solely for that use.

48. [78]

    In Council of the Municipality of Randwick Corporation v Rutledge (1959) 102 CLR 54 Windeyer J (with whom Dixon CJ, Fullagar J and Kitto JJ agreed) said (at 93):

49. [79]

    That decision was followed by Isaacs J in McMillan v Commissioner of Land Tax [1972] 1 NSWLR 545 at 558 in a case involving land adjoining exempted land under the LTM Act.

50. [80]

    Accordingly, the Appeal Panel was correct in refusing leave to appeal in the circumstances. Nor was the Appeal Panel in error in upholding the Tribunal’s decision that it was not satisfied on the balance of probabilities that Parcel B was solely used as a place where children were educated or cared for. It did so on the basis that the question was one of fact in the first instance, and even when the facts were examined, the tribunal’s conclusion was not shown to be in error.

51. [81]

    The ultimate question which the Tribunal and the Appeal Panel had before it was whether the land was used solely for the provision of an approved education and care service. That was a question of fact, and there is no right of appeal to this Court from such a determination.

Conclusion

1. [82]

   Accordingly, I make the following orders: