McGeoch v Federal Commissioner of Land Tax [1929] HCA 29

McGeoch v Federal Commissioner of Land Tax [1929] HCA 29 - HCA 1929 case summary — Zoe

[55]

of the Parliaments of Queensland and New South Wales on subject. See Queensland Land Acts 2 Edw. VII. No. 18, s inserting sub-division VII., 5 Edw. VII. No. 28, sec. 19, sub-division IX., sec. 162m (1), (7) and (8), and the Prickly j Destruction Acts 1912-1926 ; New South Wales Prickly-Pear 4 No. 31 of 1924 and previous legislation therein mentioned. See al observations of Griffith C.J. and O'Connor J. in Sparke v. Osborne(I It is manifest from the facts stated in the case that the of the lands clear of prickly pear was brought about by the operat of the successive owners or occupiers upon the land, that tho operations resulted in an enhancement of the value of the land, a that the benefit of them still continues. The operations, of cow involved the eradication, destruction and removal of plants u the land. When the special case speaks of keeping the lands of prickly pear, it refers to the work of eradicating, destroying ar removing plants which otherwise would spread and deprive the lat of utility and value. The decision of this Court in Morris Federal Commissioner of Land Taz (2) establishes that these o7 resulted in an improvement within the meaning of the Act. the suggestion which has been advanced that the decision in that ca: is inconsistent with the reasons given by the Judicial Commit Toohey's Ltd. v. Valuer-General (3), it would be unnecessary tos more than that, even if we did not agree with the decision on point in Morrison's Case, as we do, we should feel ourselves bound to follow it as a decision concurred in by five Justices which stood unquestioned for fifteen years and was expressly appro and acted on by a Full Court in Campbell v. Deputy Fed Commissioner of Land Tax (N.S.W.) (4), in Fisher y. Dep Federal Commissioner of Land Tax (N.S.W.) (5) and in Keo v. Deputy Federal Commissioner of Land Tax (N.S.W.) all decided in the year 1915. We think we are justifie assuming that, if these decisions ran contrary to the intention ¢ Parliament in enacting the definition of " unimproved value," th Act would have been amended so far as necessary to ensure # (1) (1908) 7 C.L.R. 51, at pp. 59-60, (3) (1925) A.C. 439. 70-71. (4) (1915) 20 C.LR. 49.

[66]

. OF AUSTRALIA. confer a benefit on the land exceeding the mere cost of effecting them." The New South Wales Act providing for the taxation of unimproved value of land was passed in 1895 and contained a definition of unimproved value corresponding to that applicable in this case. Both in 1895 and in 1910, when the Federal Land Tax Act was passed, it was recognized universally in Australia that the clearing of super- fluous timber from land was an improvement enhancing the value of that land, the benefit of which continued so long as the land was kept in its cleared state. And in many cases the cost of clearing was among the most important items of the expenditure necessary to bring the land to a reasonably productive capacity. As was said by Griffith C.J. in Morrison's Case (1) : - '* Applying these principles, the first question we are asked is whether certain operations are improvements. They are: ringing timber; clearing timber that had fallen in consequence of ringing ; clearing timber that had fallen _ through natural decay or storms; clearing timber that had been _ brought there by floods; actively burning timber on the ground ; actively burning tussocks and other grass; burning by bush fires which, so far as the owners of Killingworth were concerned, were accidental, and which burned off dead and useless timber, and burned tussocks and rank grass; as a result of which operations the land 'was sweetened and became sounder sheep country ; the stocking of the land consolidated to some extent, and otherwise improved it. Anyone familiar with Australia knows that all these operations do improve the value of land, and make it saleable at a higher price. It is also obvious that every one of these operations is only a means toanend. They enable the forces of nature to operate by bringing _ sunshine and rain to the soil. They sweeten the land and produce as important changes as the draining of a swamp." It was argued in that case, as it is now suggested, that the improvements to be taken into consideration were those then visible on the land and did not include the present effect of improvements which had disappeared. In Keogh's Case (2) our brother Rich took into account the effect of improvements which consisted (inter alia) in ringbarking, picking up

[74]

into account in estimating the value of the land, whether improved or unimproved." It appears that Ferguson J. considered that the removal of the prickly pear plants was a benefit to the land, and so an improvement, but that in obeying the statutory requirement and making the assumption " that the improvements (if any) thereon or appertaining thereto . . . had not been made" the valuer was not to assume that the land was in that condition which would inevitably follow from the omission to make the improvement. The reason which Ferguson J. gives for this view is that it is not the destruction of prickly pear which is the improvement but the benefit to the land from the destruction. He says (1) : - ' The fallacy of the contention, I think, lies in the confusion of two distinct things - the destruction of prickly pear and the improvement resulting from the destruction. It is not the act of destroying the plant, it is the consequent alteration for the better in the condition of the land, that constitutes an improvement. If there is no alteration for the better, there is no improvement. A piece of land already free from prickly pear is not improved by reason of the fact that the pear has not been allowed to spread to it, though it may be improved by operations which render the pear less likely to spread to it." This reasoning appears to analyze the conception of improvement into two elements tather than to distinguish something which is not an improvement from animprovement. The improvementis the beneficial alteration in the condition of the land consisting in the absence of the prickly pear plants which were upon the land before their removal. The reason why their absence is a beneficial alteration is that their continued presence was a menace to the utility of the land. Apart from the fact that any appreciable growth of plants means an appreciable impairment of the area where they are, their presence means that a process has commenced which will with ever-increasing rapidity ruin all the land. If you are required to assume that this beneficial alteration has not been made, it seems almost impossible to suppose that the land is not in the condition in which without the beneficial alteration the land must certainly have been: the condition which it was the purpose of the improvement to prevent. This decision

[91]

the Judicial Committee for decision in the case referred to an a perusal of the transcript of the argument before their It is true that in the course of the argument in Toohey's Case (1) some observations were made by Viscount Dunedin with referen to Commissioner of Land Tax v. Nathan (2) to the effect that Court had rightly not gone back to the time when the land was a swamp. His Lordship seems to have been under the impression that the sum of £7,000, the cost of filling in the swamp, was not allowed as a deduction from the improved value of the land. A perusal f the report of Nathan's Case above referred to will show that in fact the £7,000 was allowed. (See the statement of Fra evidence at p. 660 in which, after allowing that amount, he est the unimproved value of the land at £16,935, the amount subsequentl accepted by the Court as the unimproved value.) Viscount D observation seems to have been made merely to suggest a p explanation of what his Lordship otherwise found hard to unde in Nathan's Case. The remainder of the argument contains no allusion direct or indirect to the question now to be decided, whi d indeed was plainly irrelevant to the question before their Lordshiy The question in Toohey's Case (1), so far as we can see, in no touched or related to the definition of the word " improvement. The decision was concerned only with the question whether additional value given by the hotel licence inhered in the site or unimproved land. The argument did not raise or refer to question whether improvements might not consist in or result fron the destruction of undesirable vegetation or alterations not physical additions to the land. In these circumstances we think it is incredible that by such phrase Viscount Dunedin should have intended to decide so imp a matter and to decide it in a sense contrary to the settled view o the Australian Courts settled over a long period of time. : For these reasons we think the decision of our brother Rich on this point in Jowett's Case (3) was right, and that question 1 shoul be answered Yes. iv Question 2. In our opinion this question is concluded by th decision in Toohey's Case (1). Applying that decision, the

[107]

land. An improvement "on " the land, or " appertaining thereto," is a concrete thing, having a recognizable existence and identity distinct from the land on which it is "made," with a locality and extension of its own. An improvement "of" the land has an abstract denotation indicating a better quality or condition of the land itself, but having no independent existence or identity. Tnstances of the former are readily suggested, as a house, a fence, a bank, a wall, a tank, a right of light or water from an adjoining tenement; and so on. The latter is not a thing, but the qualitative result of some act. The removal of scrub, of noxious weeds or vermin, the clearing of stones, the cutting down of a hill, the filling up of a hollow, the drainage of a swamp, the grubbing of stumps, are all acts which leave only beneficial results in the form of an improved condition of the land itself, that is, of the bare land or "site" as it exists at the moment of valuation, but add nothing to it, though they add to its valwe. Lord Dunedin's words seem to me as to this hardly susceptible of doubt; the "plot of land" as contrasted with "nothing on it in the way of improvement." To remove a detriment is, of course, an improvement to the land or of the land, but does not constitute an improvement on, or " appertain- ing to" the land. The force of this may be more fully appreciated when one remembers that after the removal, say, of valuable building timber naturally growing, it would not be correct to say there was a detriment on the land. The land was thereby probably rendered less valuable, but the absence of a given object does not constitute _ the presence of its opposite. To call the mere past removal of an obstruction or any other positive detriment - such as prickly pear - an existing improvement on the land as it exists at the date of valua- tion, is not, I think, consistent with the general understanding of the quoted passage in Toohey's Case (1). The prevention of a detriment is still further removed : it leaves the land precisely as it is. 'The third point is clear, and in effect it cuts away one source of confusion as to improvements. I need say no more about it except this: that it would, in my opinion, be a violation of it to substitute "value of improvement " for "improvement on the land." What Imean is this. It would be a violation of the third point to ask

[152]

and scheme of the legislation. Obviously, however, those cannot lead the way in the present instance. The case of Hi v. Minister for Lands (1) cannot, as I think, be relied on as a sat guide here. It was decided upon a statute that called for the interpretation of the term "improvements the property of th holder," and the Court held by analogy to the Crown Lands decisions (see Minister for Lands v. Kitto (2) ) that " property " not mean property, and therefore the " improvements " did not meat the improvements themselves (3), but, in the words of Pring J (4), "the benefit accruing to the land by reason of the improve ments." That conclusion, as applied to those Acts and the history behind them, as set out in the judgments in Hopkins' Case Kitto's Case, I do not presume to criticize. But I resp 1 decline to accept it as controlling the construction of the Fede Land Taxation Acts, especially as they apply to every State Australia, and not merely to New South Wales. On the other hand, the New Zealand case of Cox v. Public Tru (5) seems to me to assist the Commissioner considerably. did not deal with an analogous statute, and it is pointed out at p.' of the report that the Acts with which it was concerned contained no reference to " unimproved value." The question was what, in ascertaining compensation to a lessee, was meant by " substanti improvements of a permanent character." In other words, how was the land substantially improved? If no definition of "unimproved value" of land is given, then one has to regard thi collocation and scheme in which the phrase occurs, and construe expression accordingly. That it may, and in the surroundings i the New Zealand case probably did, mean the total value given t the land by all the efforts to improve it, is undeniable. But the is a passage in the judgment of the Court which brings out ver prominently the point in this case. At p. 99 it is said : - * a natural state may receive an increase in value from two

one intrinsic, consisting of what has been done on or to the lal itself and may be comprised under the term 'improvements'; h other consisting of extrinsic circumstances, such as public roads 0

At a glance

Court

Decision date

Before

Source

Judgment (170 paragraphs)