EAPL's submissions
52 In contrast to the Commonwealth, EAPL submitted that its method of valuing "those parts" should be preferred because it most closely followed what would have been required by the Land Tax Acts, had they applied. There is also much to be said for that construction. EAPL contended that the passages I have set out from the reasons of Handley AJA in Helicopters Pty Ltd supported its construction rather than that advanced by the Commonwealth. The essence of EAPL's case was that the 2005 Land Tax Act (and the 1958 Land Tax Act) taxed land identified by a certificate of title owned by a taxpayer. It did not, save in limited cases, permit land tax to be payable on only part of land described in a certificate of title.
53 EAPL relied upon the decision of Croft J in Lotus Projects Pty Ltd v Commissioner of State Revenue [2017] VSC 63; (2017) 105 ATR 252. That case concerned a liability to pay land tax on land used in part for a golf course and clubhouse and in part for residential development. In each of the tax years in question, the land was the subject of a single certificate of title. The taxpayer contended that the part of the land used for the golf course and clubhouse was exempt pursuant to s 71(1) of the 2005 Land Tax Act. That provision was (and still is) in the following form:
(1) Land vested in a person or body is exempt land if the Commissioner determines that -
(a) it is leased for outdoor sporting, outdoor recreational, outdoor cultural or similar outdoor activities and is available for use for one or more of those activities by members of the public; and
(b) the proceeds from the leasing are applied exclusively by the person or body for charitable purposes.
The issue in the proceedings was the meaning of "[l]and vested in a person or body". This was said to turn on whether "land" referred to all of the land described in the certificate of title on which the taxpayer was identified as the registered proprietor, or whether it was capable of referring only to that part of the land which was leased for use as a golf course and clubhouse. The Commissioner submitted that it referred to the land owned by the taxpayer as described in the relevant certificate of title. The taxpayer submitted that it referred to any identifiable piece or part of land. The Commissioner was successful.
54 After noting the broad definition of "land" in s 3(1) of the 2005 Land Tax Act, Croft J placed emphasis on s 10(1)(a) of that Act which is in the following terms:
(1) The following persons are owners of land for the purposes of this Act -
(a) a person entitled to land for a freehold estate in possession;
A similar definition existed in s 3 of the 1958 Land Tax Act.
55 His Honour then reasoned at [30]-[31] as follows:
… liability to land tax is imposed (subject to express statutory exceptions) on the "owner" of land within the meaning of s 10 of the Act, which relevantly includes "a person entitled to land for a freehold estate in possession". The reference to the freehold estate naturally directs attention to the land described in a certificate of title, by which a person now obtains legal ownership of land in fee simple as the registered proprietor, or to the land described in a conveyance of general law land in fee simple.
…
Significantly, the term "land" is used in s 71(1) of the Act as part of a composite expression "[l]and vested in a person or body". While the meaning of the word "vested" varies with the context, it is generally construed as meaning legal ownership of an estate in fee simple, such that land is "vested" in its registered proprietor notwithstanding that the land is subject to a lease. Again, this naturally directs attention to the land described in the certificate of title. It is, in my view, of no significance that the Act does not contain any express reference to "Torrens title". The identification of the land which is "vested" in an owner is capable of application in the context of the system of land registration established by the Transfer of Land Act 1958. This approach to the meaning of the word "land" as used in s 71(1) of the Act does not involve reading any additional words into this sub-section but, rather, gives meaning to the words "[l]and vested in a person or body". Nor does it involve any "qualification" or limit on the operation of s 71(1), and to suggest otherwise does beg the central question of construction.
(Footnotes omitted.)
56 At [34] his Honour concluded:
In summary, for the preceding reasons, I accept the position put by the Commissioner that neither the ordinary meaning of "land", nor the extended meaning in s 3(1) of the Act are of direct assistance in this proceeding. The text and grammatical structure of s 71(1) strongly support the Commissioner's construction that the exemption is applicable to the "land vested" in the Plaintiff, as opposed to the part of that land the subject of the Lease, which is leased to Black Bull. On the other hand, the Plaintiff's position, though purporting to apply the principles of statutory construction that give primacy to the text and its surrounding context, essentially ignores or gives no operation to the word "vested" in s 71(1), and fails to address the broader context of the Act in which Parliament has given an express indication whenever it intends to refer to a "part of land" for the purposes of the imposition and assessment of land tax.
57 His Honour's reasons focus, at least in part, on the phrase in s 71(1) "[l]and vested in a person or body". However, his conclusion concerning the meaning of "land" was not confined to the meaning of that word in s 71(1). Croft J went on to consider the "broader context" and found that the word "land" more generally meant, for the purposes of the 2005 Land Tax Act, a reference to land identified in a certificate of title (or in a conveyance for general law land). Thus, at [37]-[38], his Honour said:
In the context of the Act, there are numerous examples of the use of the term "land" in contexts which are consistent with the Commissioner's construction, and inconsistent with a construction that "land" can mean any identifiable part of the land described in a certificate of title (for example, the land identified in a lease).
(a) There are many provisions in the Act which refer to a "part of land" or an equivalent expression. Such provisions would arguably be otiose if the meaning of "land" was sufficiently ambulatory to encompass any discrete identifiable portion of the earth's surface. The provisions are premised on there being a distinction between "land" (or "the whole land") and a "part" of land, so that "land" cannot be treated as itself meaning any discrete or identifiable part thereof. The provisions also suggest that, in those cases where Parliament intended that the use of a "part" of land for a particular purpose was sufficient to attract an exemption, it made express provision to that effect. The exemption contained in s 71 does not do so.
(b) There are also several provisions of the Act that use the concept of a "parcel" of land - which is defined to mean any land owned by the same person that is contiguous or separated only by a road, railway or other similar area across or around which movement is reasonably possible. The concept of a "parcel" of land is consistent with the relevant components of that parcel being the land described in two or more certificates of title. If "land" was capable of meaning any discrete identifiable piece of land, the scope of the term "parcel of land" would become uncertain and potentially problematic as it could encompass any contiguous parts of land, even within a single certificate of title.
(c) The provisions of the Act which provide for partial exemptions in respect of a principal place of residence (see ss 62 and 62A) would be otiose if "land" could mean something other than the land described in a certificate of title. Similarly, in providing an ancillary exemption for land which is contiguous to and enhances principal place of residence land, s 54(3) does not suggest any differential treatment for land tax purposes of different parts of that contiguous land.
(d) In relation to "home units", the special definition of "land" in s 12(3) of the Act would probably be otiose if "land" could encompass any discrete identifiable piece of land. If that were the case, it would be open to treat the "land" in question as the land on which the home unit is situated without the need for any special definition, because that land would be readily "identifiable" as a discrete physical area.
(e) Sections 96 and 97 of the Act provide for the registration of a charge in respect of unpaid land tax on the land on which the tax is payable. The charge is recorded on the certificate in the Register (s 97(2)). This further supports a construction of "land" as referring to the land which is described in a certificate of title.
(f) Both s 22 (taxable value of parts of land not separately valued) and s 46 (land tax on parts of land) draw a distinction between a "part of land" and "the whole land". The latter can only mean the land described in a certificate of title. The distinction is difficult to reconcile with a construction of "land" which is capable of encompassing any identifiable piece or part of land.
The word "leased" also appears in several provisions of the Act, none of which use the word to qualify the meaning of "land" or to inform the manner in which land is to be identified. To the contrary, each of these provisions uses language that refers to "land or part" of land being leased. A reference to a "part" of land being leased is absent from s 71(1).
(Footnotes omitted.)
58 The presence in the 2005 Land Tax Act of provisions addressing the payment of land tax on "part" only of land in ss 22 and 46(1) made no difference to the foregoing conclusion. If anything, Croft J found that they supported his views. Section 46(1) is in these terms:
If it is necessary to assess land tax (other than vacant residential land tax) on a part of land, the land tax applicable to that part is the proportion of the land tax, assessed on the taxable value of the whole land, that the taxable value of the part bears to the total taxable value of the whole land.
His Honour reasoned at [39]:
Section 46 of the Act makes provision for the assessment of land tax on a part of land, namely by reference to the proportionate taxable value of the part relative to the whole land. Section 22 of the Act deals with the situation in which it is necessary to determine the taxable value of part of land where that part has not been separately valued. Both provisions only apply if "it is necessary" to assess land tax on a part of land or to determine the taxable value of part of land. The Commissioner submits that having regard to the provisions of the Act as a whole, it is plain that "it is necessary" to do so only when the Act makes express provision to that effect. For example, the Commissioner submits, the Act contains numerous provisions which expressly provide that land tax is assessable on a part of land, and that s 22 is to apply if necessary for that purpose. Thus, the Commissioner says that there is no occasion to resort to s 22 or s 46 unless there is express provision for the assessment of land tax on a part of land; referring to Dixon J in R v Wallis, where his Honour said: "an enactment in affirmative words appointing a course to be followed usually may be understood as importing a negative, namely, that the same matter is not to be done according to some other course". Whilst I accept these submissions in general terms, I do not regard these provisions as impinging on the proper construction of s 71(1). Rather, the position is, in my view, that, were I to accept the Plaintiff's construction of s 71(1), it would follow that the application of these provisions would become "necessary".
(Footnotes omitted.)
59 Here, EAPL submitted that the "land" which would be taxed if EAPL had in fact been liable to pay land tax could only have been that described in the certificates of title that comprised the Airport Site. Relevantly, that required, as a starting point, valuing the land so identified and then apportioning value in accordance with s 22 or perhaps s 46(1) of the 2005 Land Tax Act to give effect to a payment "in lieu of" of land tax in respect of "those parts".
60 EAPL supported its contention by emphasising that the concept of "land" in the 2005 Land Tax Act is closely tied to the concept of its ownership by an owner. It pointed out that the "owner of taxable land is liable to pay land tax": s 8. A taxpayer is to be assessed for land tax by reference to the taxable value of all land held: s 36. "Taxable value" of land is an amount equal to its "site value" as at the relevant date: s 19. "Site value" is defined as having the same meaning given in the VLA (set out above): s 3(1). That meaning refers to the value of land "if it were held for an estate in fee simple".
61 EAPL relied upon this definition as indicating that site value can only be ascertainable if land is capable of being sold as an estate in fee simple. Necessarily, it was submitted, that meant land expressed and identified in a "certificate of title" (or in a conveyance for general law land). One cannot sell a part of land so identified. In support of that contention, EAPL relied upon a decision of Wells J in Harry v Valuer-General (1975) 12 SASR 446. That authority concerned a similarly worded definition of "site value" in the Valuation of Land Act 1971 (SA). In that case, land held pursuant to one certificate of title was subject to 166 different leases. The Valuer-General issued 166 assessments of land tax. Wells J decided that this approach was misconceived. His Honour held that the statutory language contemplated a valuation of land "in a defined form capable of being sold".
62 EAPL's argument was said to be supported contextually by cl 26.2(a) of the Lease and the definition of "rates" in that agreement. That definition refers to rates imposed on land or on owners "or occupiers of land". In context, the definition of "land tax" in the Lease refers to taxes levied "on land". It was said that this reflected the legislative scheme whereby rates were calculated on an occupancy basis, whereas land tax was calculated by reference to the unimproved value of an estate in fee simple.
63 EAPL also relied upon the decision of Emerton J in Port of Melbourne Corp v Melbourne City Council & Valuer General Victoria [2015] VSC 714; (2015) 213 LGERA 152. That case concerned a dispute over the site value, for the purposes of the VLA, of certain land comprising a port. The dispute turned upon whether the land should be valued as a whole and then by carrying out an apportionment of that value in respect of individual occupancies or tenancies within the land, or whether each occupancy should be valued separately on a stand-alone basis. The Port of Melbourne ("PoMC") contended that the starting point was to value the land as a whole. It principally relied upon s 2(3) of the VLA which expresses a rule for valuing land that "forms part of a larger property". It is in the following terms:
If it is necessary to determine the capital improved value or site value of any rateable land in respect of which any person is liable to be rated, but which forms part of a larger property, the capital improved value and site value of each part are as nearly as practicable the sum which bears the same proportion to the capital improved value and site value of the whole property as the estimated annual value of the portion bears to the estimated annual value of the whole property.
In contrast, the Melbourne City Council said that the starting point was to undertake valuation on an occupancy basis which required each tenancy to be valued on a stand-alone basis. It relied upon s 13DC(1) of the VLA which relevantly provided at the time:
In every valuation for the purposes of the Local Government Act 1989, each separate occupancy on rateable land must be computed at its net annual value, its capital improved value and, if required by a rating authority, its site value ...
64 Emerton J undertook a thorough, and, if I may respectfully say, authoritative, analysis of the legislative history. Her Honour observed that historically in Victoria the concept of site value for land tax purposes had been based on ownership and not occupancy. In contrast, in determining council rates, value was historically based on occupancy. The VLA integrated both tests. Section 2(3), set out above, reflected this integration. But the starting point for valuation remained, not occupancy, but title. In that respect, her Honour rejected the Council's reliance upon s 13DC(1). It did not address the method of apportionment to be used when valuing only part of land. This was the work of s 2(3). At [136]-[137], her Honour said:
[The precursor provision to s 2(3)] is a product of the need to adapt for rating purposes determinations made by the Commissioner for Taxes of the unimproved value of land on a single title. When used for rating purposes, the Commissioner's determination had to cater for the existence of multiple occupancies on the title and the provision contained a formula to enable this to occur.
The "starting point" for the valuation exercise for "unimproved capital value" was therefore title rather than occupancy. Although what had to be given a value for rating purposes was the unimproved capital value of each separate occupancy, the valuer commenced by determining the unimproved capital value of the fee simple and proceeded from there to derive values for each occupancy by way of an apportionment.
Emerton J decided that each tenancy at the Port of Melbourne was part of a larger property for the purposes of s 2(3) which had first to be valued. Her Honour concluded at [148] in the following terms:
In summary, while rates in Victoria have been returned on an occupancy basis since the late nineteenth century, land tax has been calculated on the basis of the unimproved value of the unencumbered estate in fee simple. When, in 1914, councils were given the option of using unimproved capital value as the basis for the imposition of rates upon occupiers of land, the legislature devised a way to convert the unimproved capital value of the estate in fee simple into the unimproved capital value of any portion of the land under separate occupancy. The predecessor provisions to s 2(3) sought to reconcile the requirement to rate on a basis other than title or ownership with title or ownership-based valuations. The "starting point" was the valuation for site value purposes of land held under common ownership, now the "larger property". The 1991 amending Act, which introduced the requirement to compute "each separate occupancy" for the values specified in s 13DC(1) did not change this. The extrinsic materials do not reveal any intention to effect substantive change to the approach to the valuation methodology for site value which preceded the 1991 amendment, namely, the valuation of the larger property, followed by the computation of the site value for each occupancy.
65 Emerton J decided that whether an area of land formed part of a "larger property" was a question of fact having regard to the highest and best use of the land. In the case before her Honour, that was using the land as a port. Emerton J decided that there was a "larger property" being used for that purpose. Her Honour said at [174]-[176]:
… In my view, because of its control over land use, roads, railways, services and waterways, PoMC's management and development of the port was critical to the day to day operations of the port users and to the actual use that could be made by the tenants of the port of Melbourne land and waters.
I find, as a matter of fact, that the port of Melbourne land was planned, managed, operated and used as a "larger property" and that the occupancies formed part of this larger property.
The statutory and regulatory framework that governed the use and development of the port required it to be managed and developed strategically to serve the interests of the State as well as the tenants. Because of the capital expenditure required, the nature and scale of port development and the need for long term strategic planning, land use plans for the port were made and implemented over lengthy periods. Like its predecessors, PoMC was required to (and did) exercise stewardship over the port of Melbourne land to ensure that the necessary investment in channels and infrastructure, both land-side and water-side, occurred. PoMC was required to (and did) secure the land, waters and infrastructure necessary for the development of the port in order to ensure that the port could accommodate projected growth in trade along with changes in trade composition and ship size, and that the port was effectively integrated with other transport networks in the State. The use that could be made of the port of Melbourne land by the tenants depended on this strategic management and development.
66 EAPL also relied upon the decision in Lamanna v Commissioner of State Revenue [2005] VSC 436; (2005) 61 ATR 467. That case concerned a four-storey building. Each floor was separately leased but was not subdivided into separate titles. Hollingworth J held that land tax had to be assessed by valuing the entire land and then apportioning that value to each occupancy.
67 EAPL did not rely upon s 2(3) of the VLA for the purposes of this proceeding. It submitted that the provision could not be made to work. That is because it depended on the calculation of the "estimated annual value" of the whole property as well as each portion of that property. Section 2(1) of the VLA defines that term as follows:
estimated annual value of any land, means the rent at which the land might reasonably be expected to be let from year to year (free of all usual tenants' rates and taxes) less -
(a) the probable annual average cost of insurance and other expenses (if any) necessary to maintain the land in a state to command that rent (but not including the cost of rates and charges under the Local Government Act 1989); and
(b) the land tax that would be payable if that land was the only land its owner owned
68 It was said that the definition could not be made to work because the amount of land tax payable formed part of the formula for determining "estimated annual value". EAPL instead relied upon s 22 of the 2005 Land Tax Act, as set out above.
69 Finally, EAPL also submitted that the effect of the Commonwealth's construction is that the "taxable value" attributed to "those parts" of the Airport Site of $348,900,000 (based on an area of between 14% and 18% of the Airport Site) is more than seven times the "taxable value" attributed to the Airport Site as a whole of $48,477,228 (using Mr Brown's valuation). EAPL argued that if more of the Airport Site were to be developed (as envisaged in the 2013 Master Plan), what constitutes the exigible land under cl 26.2(b) would increase and, on the Commonwealth's approach, the value of "those parts" would eventually exceed the site value of the Airport Site as a whole. To illustrate the purported flaw in the Commonwealth's approach, EAPL produced a table based on Mr Cations' valuation and then produced a table extrapolating the consequential increase in site value of "those parts" of the Airport Site - referred to as "EGLT Area" - as a result of increased development of the Airport Site: