BBLT Pty Ltd v Chief Commissioner of the Office for State Revenue

59 As I have pointed out, the Land Tax Management Act 1956, s 9C was introduced in 1990. There is no reason to suppose that s 9C(3)(e) was a response to Kilcare. Furthermore, the exclusion of companies from other concessions under the legislation pre-dated Kilcare. In any event, there is no justification for confining the general terms of s 9C(3)(e) to the circumstances that arose in that case. 60 The plaintiffs sought to distinguish Macary on a number of grounds. In addition to the argument that the judgment was confined to a discretionary trust, it was argued that the decision was limited to the principal residence exception. 61 A "special trust" is defined in the Land Tax Management Act 1956, s 3A(1) to mean a trust, the trust property of which includes land of which the trustee is the owner of the legal estate that is not a fixed trust. The taxable value of land the subject of a special trust is subjected to a higher rate of tax under the Land Tax Act 1956, s 3AH(2)(b). The respondent's attempt in Macary to vest the trust so that it became a fixed trust failed. Its other argument, which also failed, was that it was not the owner of the land. That question turned on the meaning of the definition of "owner" in s 3(1). For the reasons already expressed, that issue applies equally to the use of the term in s 9C(3)(e). 62 It was submitted that Macary could be distinguished on the basis that none of the beneficiaries in that case were owners and there was no scope for the operation of the Land Tax Management Act 1956, s 9C. That is a point of difference but it does not lead to a distinguishing feature with respect to the definition of the term "owner". 63 The land value of No 9 exceeded the premium tax threshold. It was submitted that the Premium Property Tax Act 1998 was a code that did not apply to the circumstances in Macary. 64 However, the Premium Property Tax Act 1998 refers back to the Land Tax Management Act 1956. Relevantly for present purposes, the Premium Property Tax Act 1998, s 7(1) provides that if the value of the allowable proportion determined in accordance with the Land Tax Management Act 1956, s 9C(2) is not less than the premium tax threshold for a land tax year, the flat is taken for the purposes of both Acts to be land having a land value equal to the value of the allowable proportion. Section 7(2) provides that land tax is payable by the owner of the flat on this land value as if the flat were the only land owned by the owner. 65 Whether or not land is subject to an allowable proportion is determined in accordance with the Land Tax Management Act 1956, s 9C and not under some different regime established by the Premium Property Tax Act 1998. 66 The plaintiffs submitted that Macary was wrongly decided because it was inconsistent with the decision of the High Court in Sendall v Federal Commissioner of Land Tax (1911) 12 CLR 653. 67 The Land Tax Management Act 1956, s 25 provides that the owner of any equitable estate or interest in land is liable in respect of land tax as if he or she were the legal owner of the estate or interest. The equivalent provision considered by the High Court in Sendall went on to provide that the owner of the lesser interest should be taxed on a hypothetical best rent obtainable for the land basis rather than on the value of the lesser beneficial interest. This concession only applied to settlements made before 1 July 1910. 68 The appellants were the trustees of a will of a deceased who died before the relevant date having devised to the appellants all his real estate upon trust to pay the income to his widow for life and after her death to reversionary beneficiaries. Land tax was raised against the appellants in reliance upon the equivalent of the Land Tax Management Act 1956, s 24 which provides that any person in whom land is vested as a trustee shall be assessed and liable in respect of land tax as if he or she were beneficially entitled to the land. 69 The High Court held that the appellants were only liable to be assessed for the amount of tax that would be payable by the widow as life tenant. At 659-660, Griffith CJ said of this provision: "For the purpose of the assessment of land the trustee stands in the place of the cestui que trust . He does not incur a different and independent liability. He is liable in the same way as if he were the person beneficially entitled: no more and, generally speaking, no less. The contention for the Commissioner, however, is that, where land is held on trust, the trustee is to be taxed in respect of the whole unimproved value of the land whether the beneficiaries are liable to pay tax or not. It would be a very singular result if the trustee should be bound to make an expenditure out of the trust funds for the cestui que trust which he is declared to be not liable to pay. As I have said, the plain meaning of the section is that the trustee stands in the place of the cestui que trust ". 70 There is an attraction in the proposition that the Chief Commissioner should not be entitled to collect a greater tax against a trustee than the tax to which he would be entitled by assessing the beneficiaries. In Cooper v Federal Commissioner of Land Tax (1941) 65 CLR 320 at 332, Williams J cited Sendall for the proposition that if there is a beneficial owner the Chief Commissioner cannot, by assessing the trustees, levy a greater tax than he would obtain if he assessed the beneficial owner. 71 On the other hand, Sendall was heavily criticised by Isaacs and Rich JJ in Kuhnel & Co Ltd v Deputy Federal Commissioner of Taxation (SA) (1923) 33 CLR 349 at 360: "We are aware that in Sendall v Federal Commissioner of Land Tax (1911) 12 CLR 653 it was held that under words substantially identical a trustee was to be assessed as if he were not, but as if some other person were, beneficially entitled. In that case it was the Land Tax Assessment Act 1910 which was under consideration, and the words were "as if he" (the trustee) "were beneficially entitled to the land," which we take to mean the whole land and every interest in it. It was certainly held by two Judges that, nevertheless, a trustee must be assessed as if he stood in the position of the beneficial owner of some limited interest who was being assessed for his limited beneficial interest. We are, with the deepest respect, utterly unable to follow the reasoning that led to that conclusion; and the Acts being different Acts we do not feel bound to adopt the conclusion even though the decision referred to should stand on the terms of the Land Tax Assessment Act ." 72 Sendall was also referred to in Commissioner of State Revenue (Vic) v Famajohn Nominees Pty Ltd 99 ATC 5077. In that case a trustee was the registered proprietor of adjoining blocks consolidated under a single certificate of title. It held one block as trustee for an individual and the other as trustee for that individual's discretionary family trust. It was held that while the trustee was the owner of different lands, they were not held in trust for different beneficial owners with the consequence that the trustee was bound to make an expenditure out of trust funds for land tax in respect of a piece of land in which no beneficiary presently had an interest. 73 The taxpayer submitted that the philosophy of the legislation was that the beneficiary should bare the ultimate burden of tax and the Commissioner's interpretation would have the effect of imposing on the trustee the burden of the aggregate valuation of the land and the consequent payment of higher tax while depriving the trustee of the ability to recover that amount from the beneficiaries. At 5083-5084, having quoted the above passage from Sendall, Balmford J remarked that Griffith CJ would find it to be a very singular result for a trustee to be bound to make expenditure for a beneficiary who was not liable to pay the tax but concluded that such expenditure was an incidental expense of the holding of land by a trustee of a discretionary trust. 74 The attraction of the proportion that a trustee ought not to be liable for a greater amount of tax than the agglomerated liability of the beneficiaries assumes that there is a liability in the beneficiaries and that it is a lesser liability than that to which the trustee is liable. 75 There are two things to be said about that proposition. First, the structure of the Land Tax Management Act 1956 is to place the primary liability upon the trustee and a secondary liability upon the beneficiaries who are to be given credit for any payment made by the trustee under s 25. The Act does not expressly provide for the situation in which the liability of the secondary taxpayers is less than that of the primary taxpayer. 76 Secondly, it presupposes a concessional entitlement in the secondary taxpayers which, for the reasons already given, I am of the view does not exist in this case. 77 Sendall was considered and distinguished in Macary. At 312 Mason P pointed out that in the case before the court, the trustee conceded that if it were an owner, there was no objection based on the proposition that the beneficiaries might have been exempt if they had been assessed as such. His Honour said the concession was properly made and Sendall did not suggest to the contrary because it was a special case imposing a concessional tax on life interests that arose before 1910. Mason P pointed out that the High Court held that that exemption could not be circumvented by assessing the trustee and relying upon provisions corresponding to the Land Tax Management Act 1956, s 24 and s 25. 78 Furthermore, as Sheller JA had pointed out in Opalfield at 4175, even if one were to treat the company as standing in the place of the shareholders, they were not entitled to the principal residence exemption under the Land Tax Management Act 1956, s 10(1)(r)(ii) because the property was owned by a company. In my view Macary was not wrongly decided. 79 The plaintiffs submitted that the reasoning process in Macary was outdated in light of the decision of the High Court in Maurici v Chief Commissioner of State Revenue (2003) 77 ALJR 727. In that case, the appellant objected to the unimproved value attributed to his improved land. His objection centred on the valuation's almost exclusive reliance on sales of vacant parcels of land in the relevant area. The appellant argued that those sales were inflated because of the scarcity of vacant land in the area and were thus unreliable as comparable sales. 80 It was held that the method adopted by the respondent was unduly selective, that the sales relied upon were not representative of sales in the relevant area and the sales evidence needed to be relevant and sufficient in volume. At 731 the Court observed that the valuer, not only valued the subject land as if its improvements had been shorn from it, but also as if it was a notionally unimproved and, therefore, vacant site as scarce as the vacant sites the subject of the sales to which he had regard. The Court pointed to the paradox that if every improved parcel of land was required to be treated in that way, the consequence would be that all parcels were notionally vacant and there would no longer be any scarcity of vacant land. 81 The plaintiffs submitted that that approach to the instant circumstances require an operation of the Land Tax Management Act 1956, s 9C to reduce the land value of BBLT to nil by attributing land values to the flats occupied by the children of the second plaintiff. In my view there is nothing in Maurici that compels this result. 82 While the Chief Commissioner did not reject the plaintiffs' application under the Land Tax Management Act 1956 s 9C, I am of the view that if consideration had been given to the question, he must have rejected it. No 9 was not mixed development land and, BBLT being an owner, the owner of the land was a company for the purposes of s 9C(3)(e), thereby excluding the right of reduction to any of the owners of No 9. 83 The court is not bound to make an order in the nature of mandamus. It has a discretion to refuse to make an order if good reason is shown for a discretionary refusal (R v Kelly; Ex parte The Victorian Chamber of Manufactures (1953) 88 CLR 285 at 309. In my view, good reason is shown if the only possible result is that the Chief Commissioner must reject the application. In these circumstances, an order in the nature of mandamus would lack utility. I therefore decline to make such an order. In my view, none of the plaintiffs is entitled to the benefit of the Land Tax Management Act 1956, s 9C. 84 BBLT claimed in the alternative to the Land Tax Management Act 1956, s 9C that s 21B(1) applied. That section requires land to be owned by joint owners. BBLT did not own the land jointly with any other party. The four children of the second plaintiff were beneficiaries of a fixed trust. That they are treated as if they were the legal owners of their equitable interests under s 25(1), does not constitute them joint owners with BBLT. That argument was rejected in Woodlock. 85 The Premium Property Tax Act 1998, s 6(1) provides that in the case of land that is a principal place of residence and would be exempt from taxation under the Land Tax Management Act 1956, s 10(1)(r) but for the fact that the land has a land value of not less than the premium tax threshold, land tax is payable by the owner as if it were the only land owned by the owner. 86 That provision only comes into operation if a principal place of residence exemption is available. The exemption was not available in the instant circumstances because the Land Tax Management Act 1956, s 10(1D)(a) as it then stood provided that for the purposes of s 10(1)(r) residential land meant land 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, not being land that was owned by a company. 87 Since BBLT was an owner of No 9, the principal residence exemption was not open. The reasoning of the Court of Appeal in Woodlock that where one of a number of owners of land is a company, the land is owned by a company for the purpose of the then Land Tax Management Act 1956, s 10(1)(p)(a) applies equally to the former s 10(1D)(a)(i). 88 In their further amended summons, the plaintiffs claimed that the Chief Commissioner erred in the imposition and/or calculation of interest. 89 The Taxation Administration Act 1996, s 21(1) provides that if a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid. On the view I hold of the matter, a tax default occurred with respect to BBLT. The Chief Commissioner is, however, empowered to remit interest by any amount in such circumstances as he considers appropriate. 90 For reasons that appear hereafter, I am of the view that the second plaintiff is not entitled to interest on the amount of $137,849 refunded to her. Those moneys were paid by the second plaintiff with respect to the land tax liability of the owners of No 9. I have found that that liability rested with BBLT. 91 It follows, that the Chief Commissioner was not totally out of pocket with respect to the liability of BBLT. He had received amounts totalling $137,849. 92 In my view, the Chief Commissioner should remit portion of the interest of $34,364.65 raised against BBLT to take account of the receipt of moneys from the second plaintiff. 93 In my view, apart from partial remission of interest, BBLT has failed to make out any case for the relief it seeks. 94 The third and fourth plaintiffs obtained the principal residence exemption for the 1998 and 1999 years based on their intended use and occupation of No 8 solely as their principal place of residence in terms of the Land Tax Management Act 1956, s 10T(1). Section 10T(4) limits the exemption to the two tax years following the commencement of ownership unless the Chief Commissioner extends its operation on the basis of an acceptable delay. 95 That concept is defined in the Land Tax Management Act 1956, s 10T(5) to mean a delay in the commencement or completion of the building or other work necessary to enable the intended use and occupation of the land to become its actual use and occupation that the Chief Commissioner is satisfied is due primarily to reasons beyond the control of the owner. The Chief Commissioner did not accept that there were reasons beyond the control of the third and fourth plaintiffs. 96 Neither the third nor the fourth plaintiff had any capacity to pay for the construction of the dwelling on No 8. It was always understood that the moneys would come from the second plaintiff. Construction was commenced in 2003 at the expense of the second plaintiff in order to protect the approval of the development application. 97 It was submitted on behalf of the Chief Commissioner that there was no evidence that the third and fourth plaintiffs had requested the second plaintiff to provide moneys to commence construction of the residence and she had refused. 98 I do not regard the lack of that evidence as significant. The second plaintiff delayed till the last moment the commencement of construction. That moment was defined by the time at which the approval of the development application would lapse. The inference is clear. Had either the third or fourth plaintiff requested money from his mother to commence the construction, it would have been refused. 99 The point is that the delay in the commencement of construction was beyond the control of the third and fourth plaintiffs. It was in the control of the second plaintiff. In my view, the Chief Commissioner should have acted under the Land Tax Management Act 1956, s 10T(4) to extend principal residence exemption under s 10(1)(r) for the 2000, 2001 and 2002 years. 100 The third and fourth plaintiffs lodged an application for an unutilised value allowance for the 1999 to 2002 years with the Chief Commissioner in May 2002. The Land Tax Management Act 1956, s 62K(1) provides that the owner of land may apply to the Chief Commissioner for an utilised value allowance to be ascertained for the land value of the land. 101 When that application was lodged, the Land Tax Management Act 1956, s 62K(1A) provided that if satisfied that the land to which such an application related satisfied the description in any of the paragraphs of s 62J(1), the Chief Commissioner must refer the application to the Valuer-General for determination of an unutilised value allowance. 102 The Chief Commissioner did not communicate any satisfaction that the Land Tax Management Act 1956, s 62J(1) applied. As with the application under s 9C, he forwarded it to the Valuer-General. 103 Again, any complaint in this regard is not the subject of review under the Taxation Administration Act 1996, s 97(1)(a) because there was no objection by the third and fourth plaintiffs to the Chief Commissioner's failure to determine whether s 62J(1) applied and there was no decision by the Chief Commissioner on such an objection. But, again, the question arises whether an order in the nature of mandamus should be made against the Chief Commissioner. 104 For the 1999 to 2001 years, the Land Tax Management Act 1956, s 9A(1) provided that if there was an unutilised value allowance entered in the register in respect of the land value of land, a person liable to pay land tax was entitled to a postponement of part of the tax as provided by the section. For the 2002 year, s 9A(1) provided that the section applied to land if an unutilised value allowance was entered in the register in respect of the land. 105 In Gaffey v Chief Commissioner of State Revenue 2000 ATC 4342, the taxpayers sought to postpone part of the land tax pursuant to the Land Tax Management Act 1956, s 9A for the years 1987 to 1999. The application was made in 1999. The Chief Commissioner obliged for the 1996 to 1999 years but said he had no authority in relation to the 1995 and earlier years. Young J held that the taxpayers were not entitled to a postponement of land tax in any of the years under review, since there was no entry of an unutilised value allowance on the register. 106 At par 13, his Honour said that the word "is" in the section plainly referred to the land tax year in question and that, unless the land had an attributed part value from the Valuer-General at that time, the section was inapplicable. 107 That must be so in the instant circumstances. Under either version of the Land Tax Management Act 1956, s 9A(1) what was required was an entry in the register for the year in question. In none of the years in question was that the case. 108 Counsel for the plaintiffs conceded that a claim to an unutilised value allowance in the years in question was not sustainable in light of the decision in Gaffey. In my view that concession was correctly made. 109 It follows that no utility would be served in issuing an order in the nature of mandamus for the Chief Commissioner would be duty bound to determine the matter against the third and fourth plaintiffs. 110 BBLT and the third and fourth plaintiffs argued that various kinds of estoppel arose against the Chief Commissioner. As I have dealt with each claim for relief, either under review under the Taxation Administration Act 1996, or in terms of the Supreme Court Act 1970, s 65 or s 69, those issues do not arise. 111 It should be noted, however, that with few exceptions the courts have concluded that estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast upon it by the legislation (Federal Commissioner of Taxation v Wade (1951) 84 CLR 105, AGC (Investments) Ltd v Federal Commissioner of Taxation 91 ATC 4180, Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466, Bellinz v Federal Commissioner of Taxation (1998) 84 FCR 154, Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax 98 ATC 5051). 112 In Federal Commissioner of Taxation v Winters 97 ATC 4967 and in Remuneration Planning Corporation Pty Ltd v Federal Commissioner of Taxation 2001 ATC 4130 the courts refused summary termination of proceedings in reliance upon the principle preferring that the matter be debated at trial. 113 The second plaintiff's claim to interest is based on the Taxation Administration Act 1996, s 105 or the Supreme Court Act 1970, s 94. As to the former, it provides that in addition to an amount refunded under Div 3 of Pt 10, the Chief Commissioner is required to pay interest. Division 3 applies if a taxpayer's objection is allowed in whole or in part, or a taxpayer's application for review is successful. The Chief Commissioner must refund any amount paid in excess of a requirement for payment under the relevant taxation law. 114 In Citivale Pty Ltd v Office of State Revenue (1998) 100 LGERA 127, the taxpayer had paid land tax but subsequently submitted, successfully at first instance, that it was not liable for the tax. It was held that the statutory provisions for refund of land tax were exhaustive and since there was no provision for interest applicable to the case, no interest was payable. 115 In so finding, the court followed Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347 in which a Full Court of the Federal Court held that there was no interest payable on the refund of overpaid sales tax on the ground that the statutory regime in relation to such refunds was exhaustive. 116 The Commissioner succeeded in his claim that there was no exemption from land tax in Chief Commissioner of State Revenue v Citivale Pty Ltd (2000) 107 LGERA 338. There was no cross appeal on the question of interest. 117 In The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 a majority of the High Court held that a restitutionary right to the recovery of interest could not succeed because the entitlement to refunds was derived under the Customs Act which provided for the payment of refunds without interest. 118 These principles apply equally in the instant circumstances. In my view, the second plaintiff had failed to establish an entitlement to interest on the moneys repaid to her by the Chief Commissioner. 119 Save in respect of the remission of interest with respect to BBLT and save in respect of the principal residence exemption with respect to No 8 for the years 2000, 2001 and 2002, the plaintiffs are not entitled to any of the relief they claim. I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

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