Cam & Sons Pty Ltd v Commissioner of Land Tax

In some of the contracts the second of these alternatives was struck out, in others both alternatives were left but no particulars of tenancies or rents were given. In fact in all cases the land sold was and at all relevant times remained vacant in the sense that it was not in fact used or occupied by anyone.

The respondent Commissioner assessed the appellant to tax under the Land Tax Management Act, 1956-1961 N.S.W.. That Act makes land tax payable by the "owner" of land (s. 9 (1)) and, by s. 3, "owner" is defined to include a person who is "deemed to be the owner" by virtue of the Act. By s. 26 (1) it is provided that "Where an agreement has been made for the sale of land, whether the agreement has been completed by conveyance or not - (a) the purchaser shall be deemed to be the owner of the land (though not to the exclusion of the liability of any other person) so soon as he has obtained possession of the land; (b) the vendor shall be deemed to remain the owner of the land (though not to the exclusion of the liability of any other person) until possession of the land has been delivered to the purchaser and at least fifteen per centum of the purchase money has been paid; (c) the vendor shall be deemed to be the owner of the land (though not to the exclusion of the liability of any other person) where - (i) (ii) under the provisions of the agreement for sale or under any arrangement with the purchaser he secures the use of the land, or receives the rents and profits of the land or the income from any business carried on on the land." In each of the present cases at least fifteen per cent of the purchase price had been paid by the purchaser but in no case had he taken actual physical possession of the land or put it to any use and it was in reliance upon s. 26 (1) (b) that the Commissioner assessed the appellant to tax.

The appellant appealed to the Supreme Court and the appeals were heard, in the first instance, by McClemens J. His Honour was of opinion that on the true construction of the form of contract used and in particular by reason of Special Condition No. 2 possession of the land had been delivered to and obtained by the purchaser upon the signing of the contract and that the latter was therefore to be deemed to be the owner under s. 26 (1) (a). Accordingly he upheld the appeals. The Commissioner appealed to the Full Court which, by a majority, reversed his Honour's decision. In the course of his judgment, Sugerman J. expressed the view that "possession has been "delivered" and "obtained" in the statutory sense", that is to say in the sense in which those words are used in s. 26 (1) (a) and (b), "when the vendor, himself retaining no vestige of possession, has done all that it is necessary for him to do to enable the purchaser to assume actual occupation of the land or receipt of its rents and profits, and when, there being no obstacle in the way such as adverse occupation by a third party, it rests solely with the purchaser to decide whether and when he will do so. When and whether he chooses to enjoy its profitable use or its returns are matters entirely for him. He has "obtained possession", and the vendor has "delivered possession" to him, in the intended senses of those expressions" [1] . With that statement we agree. His Honour went on to consider whether the effect of cl. 11 of the contracts of sale was to entitle the purchaser upon signing the contract to enter into possession of the land or of the rents and profits thereof. He thought that it did not. The clause went no further than to require the vendor to hold such rents and profits as he might receive after the signing of the contract as trustee for the purchaser and to account for them to the latter upon completion. His Honour was of opinion further that if Special Condition 2 showed that the intention of the parties was that the purchaser should be entitled upon the signing of the contract to assume possession of the land the receipt by the vendor of the "rent" payable under that clause brought s. 26 (1) (c) (ii) into operation with the result that the latter must be deemed to be the "owner" under that provision and liable to tax accordingly. He considered therefore that the appeals should be allowed. Wallace J., who was of the same opinion, also based his decision upon s. 26 (1) (c) (ii). Walsh J., the dissenting member of the Court, agreed with the passage from the judgment of Sugerman J. which we have quoted earlier, but took the view that cl. 11 when read with Special Condition 2 was intended to confer upon the purchaser a right to assume immediate possession of the land. Section 26 (1) (c) (ii) had, he thought, no application because what was described in Special Condition 2 as "rent" was in reality part of the purchase price. The purchaser was therefore to be deemed to be the "owner" under s. 26 (1) (a).

From what we have said, it is apparent that the decision of the majority of the Court was greatly influenced by a consideration of the provisions of s. 26 (1) (c) (ii).

Before this Court the appeals took a different course. For some reason the notices of assessment had not been put in evidence before McClemens J. and when attention was drawn by the Bench to this fact some discussion ensued in which reference was made to s. 26 (3) and to s. 33 of the Act under which provision is made to prevent double taxation in cases in which both purchaser and vendor are made liable for tax, the former as the primary and the latter as the secondary taxpayer liable only to the amount of tax assessed in accordance with s. 33. As a result of this discussion, the learned Solicitor-General later informed us that his client, the Commissioner, had not acted under s. 26 (1) (c) (ii) nor assessed the appellant in accordance with s. 33 and that the question whether the appellant was rightly assessed depended solely on s. 26 (1) (b). He placed, he said, no reliance on s. 26 (1) (c) (ii). His submissions were that under the form of contract of sale, the purchaser had no right to possession until completion or, alternatively, that if upon its true construction it could properly be said the purchaser had obtained possession of the land in the sense explained by Sugerman J. that possession was obtained by him as tenant only and not in the capacity of purchaser.

The first of these submissions was based upon cl. 19 but when that clause is read with cl. 11 and Special Condition 2 we think it must be taken as merely defining the nature of the possession to which the purchaser was to be entitled upon completion. And if it were not for Special Condition 2, cl. 11 would not, in our view, give any right to the purchaser to assume possession before completion: Strahorn v. Strahorn [1] . But, when cl. 11 is read in the light of the special condition, we agree with Walsh J. that the proper conclusion is that it was the intention of the parties that the purchaser should have the right to assume possession of the land immediately upon the signing of the contract. Unless that was the effect of cl. 11 the special condition would serve no purpose and it must be taken, we think, to have been inserted because it was intended that the purchaser should be entitled under cl. 11 to assume possession upon the making of the contract.

In these circumstances, the purchaser's possession was "referable to the agreement for the sale of land": Highlands Ltd. v. Deputy Federal Commissioner of Taxes (S.A.) [2] , per Starke J. [3] . It was a possession "obtained in intended execution of the agreement of sale", per Dixon J. [4] . He obtained possession in the sense earlier described not merely as a tenant but as a purchaser pursuant to the contract and this is sufficient to satisfy the requirements of s. 26 (1) (a): Rhodes v. Commissioner of Taxes [5] ; Yule v. Commissioner of Taxes [6] .

1. (1931) 47 C.L.R. 191. 2. (1931) 47 C.L.R., at p. 199. 3. (1931) 47 C.L.R., at p. 201. 4. (1910) 29 N.Z.L.R. 725. 5. [1918] N.Z.L.R. 890.

Cam & Sons Pty. Limited have appealed against a decision of the Full Court of the Supreme Court of New South Wales reversing a decision of McClemens J., who allowed appeals from land tax assessments made on the footing that the appellant was, by reason of s. 26 (1) (b) of the Land Tax Management Act, to be deemed to be the owner of lands which it had previously sold. For a proper understanding of s. 26 (1) (b), it is also necessary to look at s. 26 (1) (a). These provisions are as follows: - "26. (1) Where, before or after the commencement of this Act, an agreement has been made for the sale of land, whether the agreement has been completed by conveyance or not - (a) the purchaser shall be deemed to be the owner of the land (though not to the exclusion of the liability of any other person) so soon as he has obtained possession of the land; (b) the vendor shall be deemed to remain the owner of the land (though not to the exclusion of the liability of any other person) until possession of the land has been delivered to the purchaser and at least fifteen per centum of the purchase money has been paid".

It is common ground that at least fifteen per cent of the purchase money had, at the date of the assessments, been paid and it is now agreed by the parties that the only question to be determined by this Court is whether, by the relevant dates, possession of the land sold had been delivered to the purchasers. Other matters argued before the Full Court, such as the application of s. 26 (c) (i), have by the agreement of the parties been excluded from our consideration.

There was no evidence that any purchaser had taken physical possession of the vacant land which had been purchased from the appellant, and the question falls to be determined upon certain provisions in a large number of agreements for sale upon terms, all of which may be taken to have provided as follows: - "11. The Vendor shall be entitled to the rents and profits, and shall pay or bear all rates, taxes and outgoings up to the date of (c) Contract on and from which date the Purchaser shall be entitled to or shall pay or bear the same respectively, and any necessary apportionment thereof shall be made and adjusted on completion." "19. Vacant possession of the property sold shall be given on completion " "Special Condition 2. The Purchaser hereby attorns tenant to the Vendor from month to month of the property sold from the date hereof until the balance of purchase money and interest has been paid in full at a monthly rent of Five Pounds such rent to be paid monthly if demanded but if not then on the days appointed for payment of instalments of Purchase Money. The production of this Agreement and of the duplicate of any notice to quit shall as between the Vendor and the Purchaser and all persons claiming through or under him or them be deemed to be conclusive evidence in any proceedings in any court for the recovery of the possession of the premises of the creation of the tenancy and the determination thereof. All sums paid as rent hereunder shall be accepted in or towards satisfaction of interest and the balance in satisfaction of the Purchase Money. Provided always that the Vendor may at any time determine the tenancy hereby created either by a week's notice in writing to the Purchaser or by entering and taking possession of the said property without any notice." It was decided nearly sixty years ago that a provision like cl. 11 does not entitle the purchaser to the possession of the land sold: Strahorn v. Strahorn [1] . The position is, therefore, that apart from Special Condition 2, the purchaser, under such a contract as we have here, is not entitled to possession until completion: Lysaght v. Edwards [1] , and cl. 19 of the agreement. It would seem, therefore, that if possession of the land had been delivered to the purchaser, this would have happened only by virtue of the attornment. For the respondent it was contended that possession merely as a tenant was not possession for the purposes of s. 26 (1) (b) because the delivery of possession there referred to was possession as a purchaser, and Highlands Ltd. v. Deputy Federal Commissioner of Taxes (S.A.) [2] was cited to support this contention. There, Rich J., speaking of a provision similar to s. 26, said of the expression "so soon as he has obtained possession of the land" appearing in what corresponded with s. 26 (1) (a), that it "refers to possession in the character of purchaser" [3] . Starke J. said: " "Possession" here spoken of is a de facto possession referable to the agreement for the sale of land, and not the right to possess, or to have legal possession" [4] . Dixon J. said [5] : "The material portion of s. 37" - that is, the section corresponding with s. 26 here - "requires that, where an agreement has been made for the sale of land, the buyer shall be deemed to be the owner of the land so soon as he has obtained possession of the land. This appears to me to mean possession as purchaser obtained in intended execution of the agreement of sale The provision is, no doubt, intended to include cases where the vendor has been in possession by himself, and cases where he has been in possession by his tenants. Accordingly, it includes not only cases in which the buyer obtains vacant possession, but cases in which he is put in receipt of the rents and profits. Further, "by possession is meant possession of that character of which the thing is capable" (per Lord Fitzgerald, Lord Advocate and North British Railway Co. v. Young [6] ".

1. (1905) 5 S.R. (N.S.W.) 382; 22 W.N. 119. 2. (1876) 2 Ch.D. 499. 3. (1931) 47 C.L.R. 191. 4. (1931) 47 C.L.R., at p. 196. 5. (1931) 47 C.L.R., at p. 199. 6. (1931) 47 C.L.R., at pp. 201, 202. 7. (1887) 12 App. Cas. 544, at p. 556.

It seems to me, however, that in this case possession as a tenant under the attornment clause forming part of the contract of sale should be regarded as possession under the contract of sale. Furthermore, the attornment clause itself created a tenancy and once the purchaser has, as part of the carrying out of the contract of sale, become a tenant of vacant land by virtue of the contract of sale, it seems to me that "possession of the land has been delivered to the purchaser" for the purpose of s. 26 (1) (b) - even if the delivery be but constructive delivery - and that cl. 19, which deals with the kind of possession to which the purchaser is entitled upon completion, cannot be regarded as negativing the purchaser's actual possession as a tenant under the attornment clause up to the time of completion - that is, when the purchase money and interest have been paid in full.

Because the appeal before us has taken a very different course from that which it took before the Full Court, where s. 26 (1) (c) loomed large, I have refrained from a close analysis of the judgments of the Full Court. Upon the isolated question argued before us, it seems to me, however, that the conclusion I have formed accords with that of Walsh J. and is not inconsistent with the judgment of Wallace J. Furthermore, although Sugerman J. did conclude that "the taxpayer must be deemed at relevant times to have remained the "owner" of the subject land pursuant to s. 26 (1) (b) of the Act or to have been its "owner" pursuant to s. 26 (1) (c) (ii)", this conclusion was greatly influenced by the application of s. 26 (1) (c) (ii) and it was because of this provision that his Honour distinguished Yule v. Commissioner of Taxes [1] , which supports the view that commends itself to me. There Hosking J. decided that the kind of possession necessary to satisfy provisions like s. 26 (1) (a) and (b) is "possession by a person who is a purchaser" [2] , and the learned judge further decided that a lessee in possession under a lease containing a compulsory purchase clause was such a purchaser in possession.

1. [1918] N.Z.L.R. 890. 2. [1918] N.Z.L.R., at p. 894.

It is for the foregoing reasons that I am of the opinion that the appeal should be allowed and the judgment of McClemens J. restored.

The question in this Court was not the same as that which the Supreme Court had to consider in this case. It appeared during the course of the argument that s. 26 (1) (c) (ii) of the Land Tax Management Act was in the circumstances irrelevant. The question for us was thus simply whether possession of the subject land had, within the meaning of s. 26 (1) (b), been delivered to the purchaser.

Unless the contract otherwise provides, an unpaid vendor is entitled to retain possession pending payment of the full purchase price. Clause 11 of this contract does not, of itself, alter this position. It does not give the purchaser a right to go into possession as from the day of sale. It contemplates rather that the vendor is to remain in possession until completion but is to receive the rents and profits in the meantime as trustee for the purchaser: Strahorn v. Strahorn [1] and see Williams and Bradley v. Tobiasen [2] . But the presence of this clause in the contract does not mean that the purchaser is thereby precluded from having possession before completion if that be the true intent of the contract. It must be read as a whole and in relation to its subject-matter. The subject-matter here is a vacant allotment of land, part of a tract of vacant land that the appellant had subdivided. The appellant's occupation and possession of this tract of land was simply for the purpose of subdivision and the sale of allotments. The subject property in Strahorn v. Strahorn [1] on the other hand was a station being carried on by the vendors. As A. H. Simpson C.J. in Eq. pointed out, to allow the purchaser into possession in that case would have given him control of the management of the station before the date fixed for completion. There was nothing in the contract to authorize that. Here the nature of the subject land does not suggest that it was not the intention of the vendor that purchasers of allotments should not be entitled at once to enter upon and occupy their allotments. And Special Condition 2, the attornment clause, seems to me to presuppose that upon the execution of the contract the appellant as vendor delivered possession of the subject allotment to the purchaser. The idea of an attornment seems to me inappropriate, and the clause meaningless unless it depends upon an assumption that upon the execution of the contract possession was to be treated as being delivered to the purchaser who thereupon immediately attorned tenant to the vendor. The purpose of such a clause is, I assume, to enable the vendor if the purchaser makes default to recover the land in his capacity as landlord under the landlord and tenant legislation. But the clause as a whole, and in particular the provision for the vendor entering and taking possession, seems to me incompatible with the proposition that the purchaser had not obtained possession. It seems to me to assume that he obtained possession or a right to possession not as a tenant of the vendor but otherwise by virtue of the contract and that he thereupon acknowledges his vendor to be his landlord on the terms set out. Such a view seems to me necessary to give some meaning to the phrase "attorns tenant" in this context.

1. (1905) 5 S.R. (N.S.W.) 382; 22 W.N. 119. 2. [1955] S.A.S.R. 50. 3. (1905) 5 S.R. (N.S.W.) 382; 22 W.N. 119.

Clause 19 seems quite out of place in this contract. It is not a well considered instrument and I do not think cl. 19 should be read as meaning that the vendor retains possession until completion. Rather it means I think that, whatever occupants there may be when the purchaser takes possession, the vendor will ensure that they are out before the date of completion.