[2004] VCAT 1563

2 In substitution of the decision, the whole of the land described in Certificate of Title Volume 10385 Folio 187 is exempt from land tax pursuant to s 9(1)(j) of the Land Tax Act 1958.

Mr C Caleo of counsel instructed by the solicitor for Commissioner of State Revenue

1 The applicant is the registered proprietor of the whole of the land in Certificate of Title Volume 10385 Folio 187 which land is known as Applewood and situate at 13-10 Tram Road, Doncaster (the land).

2 The applicant, at the time it purchased the land, intended to develop the same into a retirement village. On 16 November 2000, a planning permit was issued in respect of the land by the City of Manningham.

3 On 31 December 2002, the whole of the land was encumbered by a statutory charge pursuant to s 29 of the Retirement Village Act.

4 It will be noted that the planning permit provided for the land to be developed in stages. It also provided that prior to the completion of stage 1, the permit applicant was to construct a number of works :

b A roundabout at the intersection of Malcolm Crescent and Neel Street

c Underground drainage works with appropriate sediment/litter traps.

5 It was also required that before development starts, a landscape master plan had to be prepared.

6 At the relevant time, ie on 31 December 2002, the applicant was in the process of developing the land as a retirement village having completed and received certificates of occupancy in relation to stages 1, 2 and 3A of the 14 stages planned. Stages 2A and 3B were under construction. Stage 2A was 80% complete, while 3B consisted of 36 units under construction. It is also noted that in the completed stages of the development, the same were occupied by residents that fitted the definition of people who may reside in a retirement village. It is noted that several areas under development and which had not yet been developed were fenced off from the areas that were occupied. However, the occupants as at the relevant date, had access to areas 8, 9 and 10.

7 On 7 March 2003, the respondent issued the applicant with its 2003 Land Tax Assessment Notice (the assessment) by which the land was assessed for land tax on the whole of its unimproved value of $13,372,200 which is based on the (2000 level) site value of $11,628. The land tax assessed was $588,490.

8 By an objection dated 6 May 2003, the applicant objected to the assessment. By a letter of 28 July 2003 the applicant, referring to the objection, advised the respondent that stages 1, 2 and 3 of the development were complete and a further stage of 36 units was almost complete at the time of the objection.

9 By a notice of decision dated 1 October 2003 (the decision), the respondent partly allowed the objection by exempting those parts of the land for which an Occupancy Certificate had been issued at the relevant time. By a letter dated 28 November 2003, Gadens Lawyers, for the applicant, requested that the matter be referred to the Victorian Civil and Administrative Tribunal. By that letter, the applicant contended that, at the relevant time, the whole of the land was entitled to the exemption under s 9(1)(j) of the Land Tax Act 1958 (the Act). The letter also stated that the respondent in applying the partial objection in s 9(2AB) of the Act did not apply the formula prescribed in that section.

10 The parties have agreed that the issues to be decided by me are :

Does the exemption available in section 9(1)(j) of the Land Tax Act apply to exempt the whole of the Land at the Relevant Time? If only a partial exemption applies, how should the exemption be applied and calculated pursuant to section 9(2AB) of the Land Tax Act?

11 Mr Delany SC, on behalf of the applicant, recited a number of facts which I find to be correct :

(a) the development permitted and partially complete at 31 December 2002 provides for 68.12% open space and 29.28% site coverage by buildings

(b) so far as actual buildings comprising part of the Retirement Village complex are concerned, as at 31 December 2002 :

* Stage 1, 4 units, 2 display units, 1 community centre was complete (18 March 2002)

* Stage 2, 17 units were complete (24 September 2002)

* Stage 3A, 28 units and landscape zone was complete (5/12/02)

* Stage 2A, 57 apartments, 1 community centre and community facilities and pool and bowling green was under construction

(c) certificates of occupancy had been issued for 4 units in stage 1, 17 units in stage 2 and 28 units in stage 3A at 31 December 2002. The units for which certificates of occupancy had issued were occupied by retired persons pursuant to lease agreements. Other units under construction were in some case the subject of agreement to lease incorporating the standard lease agreements

(d) the following constitute the facts and circumstances in relation to the Applewood land as at 31 December 2002 :

* The permitted use of the Applewood land was 'retirement village'

* A number of units forming part of the building development comprising the retirement village complex had been constructed as had parts of the landscaping and community facilities

* So far as the complex contained residential premises for which certificates of occupancy had issued, such residential premises were predominantly or exclusively occupied by retired persons

* The occupancy by retired persons was in pursuance of lease agreements

* The whole of the title to the Applewood land was encumbered by a statutory charge in favour of actual occupants and certain potential occupants

* The owner of the parcel of land had obtained a beneficial private tax ruling covering the period based upon use and development of the whole of the land as a single project retirement village development which ruling applied to the whole of the land

* So far as part of the land comprised land in the course of development by building or other works such building or other works was for or ancillary to the purpose of the whole retirement village

* the whole of the retirement village being the Applewood title land was fenced and so far as staged development had not commenced on part of the land such land was not used or occupied for any purpose other than for retirement village purposes.

12 The lease used by the respondent for occupants of the retirement village, by clause 1.1.9 thereof defines common areas to mean

All those areas of Applewood set aside by the Owner from time to time for the common use of all the residents in Applewood excluding the Dwellings but including the buildings or parts of the buildings at Applewood that are not occupied by the manager or a third person, or are not leased or to be leased, or available for leasing by, a third person.

13 Section 3 of the Act defines retirement village as follows :

'retirement village' means a complex containing residential premises (whether or not including hostel units) predominantly or exclusively occupied by retired persons in pursuance of -

(a) a residential tenancy agreement or any other lease or licence; or

(c) the ownership of residential premises subject to a right or option of repurchase on conditions restricting the subsequent disposal of the premises.

14 Pursuant to the Act, land tax is payable on the unimproved or site value of the land. However, s 9 of the Act makes certain land exempt from tax.

15 As at 31 December 2002, s 9(1)(j) of the Act states as follows :

(j) land which is used and occupied as a retirement village and for no other purpose -

16 Two further sub-sections in s 9 of the Act, as it was then, are also relevant :

(2AA) Land does not cease to be used and occupied for the purpose of a retirement village merely because any building or improvement on the land is used or occupied for a purpose ancillary to that purpose.

(2AB) If the Commissioner is satisfied that part only of land is used and occupied as a retirement village and for no other purpose, the unimproved value of the land must be reduced for the purposes of land tax by an amount calculated in accordance with the formula R = A x B where -

B is the area of the land used and occupied as a retirement village and for no other purpose

17 Mr Delany, on behalf of the applicant, submitted that the whole of the land in question comes within the definition of retirement village in the Act. It is the whole of the land which constitutes the complex. He stated that within the complex there must be residential premises but it is not just those premises to which the exemption applies. It is the whole of the land comprising the complex which is entitled to the benefit of exemption. In this particular instance, Mr Delany pointed out that the residential premises are entirely or predominantly occupied by retired persons in pursuance of a lease which was tendered in the hearing before me.

18 Mr Delany also pointed out the fact that to the extent that certificates of occupancy had issued, the buildings could be correctly described as residences and they were occupied by retired persons. In relation to the staged development of the land, Mr Delany said :

In circumstances where there is a staged development of the whole of the land for retirement village purposes, and such staged development is being undertaken at the relevant date, in accordance with that staged development plan it is plain that the whole of the land is used and occupied as a retirement village and for no other purpose. Where building works or development is being carried on upon the land, provided that work is for the purposes of a retirement village, which is the fact here, the land remains exempt, such direct use or purpose being ancillary to that of a retirement village. Section 9(2AA) makes clear that any use or occupation of land for ancillary purposes means that the land so used or occupied, not just the land upon which the buildings are constructed and in which persons reside, is itself exempt.

19 Mr Delany also stated that so far as the land is vacant but within the retirement village, that land also falls within s 9(1)(j) because it is land held for the requisite purpose. He stated that even if no physical use were made of that part of the land prior to 31 December 2002, it is an integral part of the retirement village as identified for future staged development. It is not at that time used or occupied for some other purpose, other than that of retirement village.

20 Mr Caleo, on behalf of the respondent, submitted that only that part of the land which is both physically used and occupied as a retirement village at the relevant time is entitled to an exemption. He supported this submission by stating the word used refers to some form of use other than actual occupancy : see Ryde Municipal Council v Macquarie University [1978] HCA 58; (1978) 139 CLR 633 at 637. Further, when the Act refers to land which is used, it is referring to the actual use to which the land is put by the persons who in law control it for the time being : see Randwick Corporation v Rutledge ([1959] HCA 63; 1959) 102 CLR 54 at 88.

21 Mr Caleo also referred to the use of the word as in s 9(1)(j) as opposed to the word for. He stated that the word as gives a narrower requirement that the land be used for the purposes of some particular activity. He contrasted the word as used in s 9(1)(j) with the word for as used in s 9(1)(d) or s 9(1)(fa). In support of this submission, Mr Caleo referred to Educang Limited v Brisbane City Council (2002) QSC 347 at para 8 where her Honour Judge White stated :

As will be immediately apparent, the writer seems to regard 'for' and 'as' as interchangeable which they very clearly are not.

22 Mr Caleo also referred to the High Court decision in Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493. That case concerned rate exemptions which were given to public hospitals, the relevant clause stating : land which belongs to any public hospital ... and is used or occupied by the hospital ... for the purposes thereof (emphasis supplied). At p 515, his Honour Taylor J stated :

But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land. In my opinion where a hospital acquires or sets apart, for a project which may properly be described as a purpose of a public hospital, a tract of land which it considers is the minimum requirement for its contemplated project and thereupon proceeds to carry out that project it, thereby, uses the whole of the land.

23 Mr Caleo also referred to the word complex in the definition of retirement village and referred to the Macquarie Dictionary meaning of that word as a complex whole or system, a complicated assembly of particulars : a shopping complex, a complex of ideas.

24 Mr Caleo further stated that the applicant bears the burden of satisfying the exemption relied upon. He stated that at the relevant time, the parts of the land in dispute were either a building site or utterly unused or awaiting development. He therefore concluded that no retired person was using or occupying the assessed areas as a retirement village at the relevant time.

25 In this particular instance, the land in question in fact has no other purpose other than a retirement village. The part of the land containing buildings in partial state of construction is being used as a retirement village and is ancillary to that part of the retirement village which is presently being occupied by retired persons. That is, it is part of the whole development. The same applies to the vacant land that is awaiting development, that is also part of the entire complex and ancillary to that complex. It is awaiting construction. In my view, it would be quite artificial to divide one block of land in the way that is suggested by Mr Caleo. It is noted that many of the services of that part of the retirement village which is currently occupied goes through other parts of the retirement village, viz, sewer connections, drainage and roadways. It would be quite artificial to take a single block of land and divide it up into different uses or occupations simply because a particular portion had not reached a particular stage of development. The whole of the land comes within the definition of retirement village because even the part of the land under construction and that which is vacant forms part of the complex within the meaning of the definition.

26 The situation would be entirely different, if part of the land was used for something quite unrelated to a retirement village. For instance, if part of the land was being used for a school, factory or even for residential purposes for people that do not fit the requirement of the persons that need to occupy retirement villages. But that is not the situation here.

27 Under these circumstances, I find that the whole of the land is used and occupied as a retirement village and for no other purpose.

28 To attempt to draw a distinction between the word as used in s 9(1)(j) with the word for used in other parts of that section, in my view, looking at the section as a whole is quite artificial. In some Acts, that are obviously carefully drawn, such a distinction may be appropriate. However, I notice that s 9 of the Act appears to be drawn in a very haphazard way, and has had many amendments thrown in throughout its life. I also noticed that s 9(2AAA) precedes s 9(2AA). This is clearly an illustration of the haphazard way in which the section is drawn. To try and interpret a section that is drawn in such a manner, by attempting to distinguish words such as as with the word for, in my view, is likely to lead to error.

29 Member Gibson in Burwood Terrace Pty Ltd v Commissioner of State Revenue [2002] VCAT 183 (unreported 15 March 2002) was required to look at the same sections that I have looked at in relation to this particular proceeding. The difference in that proceeding was that part of the retirement village was built but not yet occupied while other parts were occupied. There the Commissioner sought to assess the unoccupied part of the village. Member Gibson found that the unoccupied parts of the complex together with the occupied parts of the complex were in fact exempt. In my view, there is little distinction between part of the complex being built and yet unoccupied and part of the complex being in various stages of construction including land waiting for a building to be erected upon it. In the Burwood Terrace case, Member Gibson at paragraphs 9-12 and 14 observed :

As I followed it, the argument turned only on the last of these issues, s. 9(2AB). There was no dispute that there was a "retirement village" on this land, either according to ordinary usage or according to the definition in the Act. We are talking of a complex that contains residential premises. It may also contain, as this complex does, other facilities, such as the bowling green and lounge facilities. Those facilities will be predominantly if not exclusively used by retired persons, but it might require a stretch of language to say that they - the bowling green or the lounge - are occupied by retired persons, either predominantly or at all. That requirement in my opinion attaches to the residential premises, and not the balance of the complex. So you have in the very definition of "retirement village" two distinctions - there are the residential premises and then there is the rest of the complex; there is the requirement that the residential premises be predominantly or exclusively occupied by retired persons but no such requirement in respect of the balance. There was no dispute about the right of occupation deriving from one of the three sources of rights referred to in the definition.

In my view, a retirement village does not cease to be a retirement village within the meaning of the Act simply because some of its residential premises are not occupied. I do not think you need something like Part 11A to get to that result. In my view the requirement of predominant or exclusive occupation by retired persons is a requirement in respect of premises that are occupied, and not those that are not occupied at all. The requirement of occupation by retired persons has an obvious enough purpose, but I do not think that the definition should be narrowly interpreted so as to deprive retirement villages of the protection of the exemption just because the project has not filled up.

If the relevant land was occupied by a retirement village, as defined, does s. 9(2AB) operate so as to reduce the exemption or, to look at it another way, impose the tax? One answer may be to say that I am satisfied that all of the land is used and occupied as a retirement village and for no other purpose - in the sense that I am satisfied that the whole of the land is only used or occupied as a retirement village. No other purpose was identified, or could have been identified, on behalf of the Commissioner. Rather it was said that I could not be satisfied that all of the land is used and occupied in the manner indicated because some of the units and some parts of the land were not occupied at all.

If I am correct in looking at how the definition of retirement village should be applied, then it might seem odd if that conclusion were to be defeated by a narrow, literal interpretation of another part of the Act. I do not think this should be the case. In my view, on its proper interpretation, the exception to the exemption in s. 9(2AB) applies where part of the land is being used for a purpose other than that of a retirement village - not where part of it is just not used or occupied at all. So read, the provision is not unnecessary. It plainly has a function to perform - in dealing with, say, retail operations on the land or even the hiring out of a tennis court or bowling green to people other than retired persons - but it does not operate so as to go to the heart of the exemption on grounds of policy that are difficult to isolate. It would not in my view be right as a matter of principle to seek to extend this exception in such a way as to defeat the exemption unless that result is reasonably plain and unless the calculations referred to in the formula - which relate to unimproved value of the land - can be sensibly performed. I may also say that I see no warrant for the interpretation being contended for by the Commissioner in the Explanatory Memorandum.

It follows that I specifically reject two submissions made on behalf of the Commissioner. The first of these submissions is that the term "used for no other purpose" includes "not being used for any purpose at all". I do not think this is correct, either as a matter of language or from a consideration of the scheme of the law. The requirement that land be used for no other purpose is in my view contravened by using the land for some other purpose, and not by failure to use the land for any purpose at all. A provision in a statute or a lease that a shop must be used as a massage parlour but not as a brothel would not be contravened if the owner ceased business and did nothing at all with the shop. A proscription of doing X is not a proscription of doing nothing - if you want to require someone positively to do something, you have to say so. Take the example of s. 9(1)(ha) (considered in the case referred to by the Commissioner of Abbott v Commissioner of Land Tax [1985] VicRp 15; [1985] VR 164). The exemption is for land "used solely or primarily for the business of primary production". It is one thing to build a golf course on a farm. But what if the farmer just decides to leave half of her paddocks empty and not use them? Would she be using the land for some other purpose? Should she lose her exemption? The answer to each question in my opinion is no.

I agree with the comments of the learned member and believe they are appropriate to this situation.

30 Mr Caleo sought to limit the use of the word used in both s 9(1)(j) and s 9(2AA). In the Educang Limited case referred to above( see para 21), at para 2, her Honour commented on the word used, and there quoted from the quotation at p 515 of Council of the City of Newcastle and Royal Newcastle Hospital which I have referred to above (see para 22). In my view, applying the principle there stated, it is clear to me that in the context of this case, the word used should be given its very widest meaning.

31 I also note the fact that all the land in question is not used for any other purpose other than a retirement village. That being the fact, in my view, it will be quite artificial to suggest that the word used can be broken down into such sub-category as buildings under construction and vacant land awaiting construction.

32 The word used was also considered by the Privy Council in a subsequent appeal in Newcastle City Council and Royal Newcastle Hospital (1959) 59 AC 248 at 254 ff. There the Privy Council stated :

There is no doubt that the hospital acquired all the land for the purposes of the hospital. Indeed, when the latest portion of it (220 acres) was compulsorily acquired in 1946, the Government Gazette expressly stated that it was 'resumed for the purposes of the Newcastle Hospital'. According to the evidence these purposes were to keep the atmosphere clear and unpolluted: to prevent building upon the land and so act as a barrier against the approach of factories and houses: to provide quiet and serene surroundings for the patients: and to give room to expand the activities of the hospital. The land was undoubtedly acquired and owned for those purposes. But was it used or occupied for those purposes? That is the question.

Their Lordships are of opinion that it was used for those purposes. Mr MacKenna submitted that an owner of land could not be said to use the land by leaving it unused: and that was all that had been done here. Their Lordships cannot accept this view. An owner can used land by keeping it in its virgin state for his own special purposes. ....

In these circumstances it is unnecessary for their Lordships to consider whether the 291 acres were 'occupied' by the hospital: but in view of the argument submitted to them, their Lordships would say a few words on it. The hospital was undoubtedly in legal possession of the 291 acres; for the simple reason that, where no one else is in possession, possession follows title. But legal possession is not the same as occupation. Occupation is mater of fact and only exists where there is sufficient measure of control to prevent strangers from interfering ... There must be something actually done on the land, not necessarily on the whole, but on part in respect of the whole. No one would describe a bombed site or an empty unlocked house as 'occupied' by anyone: but everyone would say that a farmer 'occupies' the whole of his farm even though he does not set foot on the woodlands within it from one year's end to another. Their Lordships have some doubt as to whether these 291 acres were 'occupied' by the hospital, because they were not fenced in or enclosed in any way. And it is difficult to say they were so much linked with the hospital grounds as to form part of an entire whole. ....

33 In this particular instance, not only in my view is it possible to say that the land was used for a retirement village within the definition of retirement village in the Act, but applying the test that their Lordships did in the Newcastle Hospital case, it would appear to me that it was occupied by the retirement village. The retirement village was clearly exercising possession over the whole of the land. The whole of the land had been fenced and there were services running throughout the land that in my view would be artificial to break up into one section or another. It was clearly a whole project that was divided into stages. This is a similar situation to the example given by their Lordships of a farmer who occupies the whole of the land even though, he may not set foot on part of it from one year's end to another.

34 Under these circumstances, in my view, the whole of the land comes within the meaning of the words used in s 9(1)(j) and it is unnecessary for me to even consider the amplification contained in s 9(2AA). However, that amplification fortifies the view that I have already come to that the whole of the land is exempt within s 9(1)(j) because even if I am wrong in saying the whole of the land comes within s 9(1)(j), the whole of the land is used for the purpose of a retirement village or purposes ancillary to that purpose within the meaning of s 9(2AA).

35 Mr Caleo submitted that the Tribunal should look at the actual use of the land which he submitted was for construction purposes and future construction. He relied upon a decision of the High Court in Council of the Municipality of Randwick v Rutledge and Others (1959) 101 CLR 54 at 88 where Windeyer J stated :

If, instead of considering in what ways the land might lawfully be used, we consider how in fact it is used and has been used, the respondents are in no less difficulty. There is no suggestion that they and their tenant the club are not acting in accordance with the trusts and conditions of the grant and in accordance with the Australian Jockey Club Act. But is the land used for a public reserve? 'This provision', as Dixon J, as he then was, said in a similar matter, 'looks to the actual use ... of the land' (Stephen v Federal Commissioner of Land Tax [1930] HCA 46; (1930) 45 CLR 122 at 140. The only way in which the trustees use the land is by leasing it to the club, to be used by it as a racecourse in accordance with the grant and the Australian Jockey Club Act. Indeed the land is not really used by the trustees at all, for they have parted with the use and occupation of it for the term of the lease. ... When the Act speaks of land used for a public reserve it is referring to the actual use to which the land is put by the persons who in law control it for the time being.

36 In this case, in fact, the actual use of the whole land is a retirement village, and as I have already stated, it is not appropriate to divide it into portions, because that would be artificial particularly as a number of essential services of the retirement village, such as sewers and roads, are running through other parts of the land. In any event, the construction of the retirement village and the land to be constructed for the retirement village is ancillary to the whole project as are the services running through the other parts of the land, ie ancillary within the meaning of s 9(2AA). I agree with the submission of Mr Delany referred to in paragraphs 18 and 19 hereof.

37 During argument, Mr Caleo commented that the applicant had the burden of proving the exemption in s 9. While in this particular instance, in my view, even if the applicant did have that burden, it has discharged such burden, the submission made by Mr Caleo is not correct. It has been stated many times, by superior courts, that tribunals when exercising the review jurisdiction should arrive at the correct or preferable decision. In TAC v Bausch (1998) 4 VR 249 at 263 Tadgell JA sitting in the Court of Appeal stated :

It is now well established that the Commonwealth Administrative Appeals Tribunal (and those State and Territorial tribunals established by cognate legislation, as in Victoria) are obliged by statute, when reviewing a primary administrative decision, to be satisfied whether or not that decision was, on the material before the tribunal, the correct or preferable one : Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; ... It has been said that the tribunal is required to undertake its task regardless of the form which the parties' submissions take : McKeown v Repatriation Commission (1995) 39 ALD 30. An error of law may be committed by the tribunal through ignoring a central issue, even if no submission at all is directed to it on the point : ...

38 Both parties have addressed me on s 9(2AB). However, having come to the conclusion that the whole of the land is exempt from land tax, it necessarily follows that apportionment cannot be relevant to this situation.

39 Under these circumstances, I set aside the decision of the respondent and in place thereof substitute a decision that the whole of the land is exempt from land tax pursuant to s 9(1)(j).