Perilya Broken Hill Limited v Valuer-General

SUBMISSIONS

1. In summary, Perilya submitted that s 6A(1) does not require land value to be determined on the assumption that minerals are privately owned for two reasons: 1. mineral reservations in a Crown grant (such as those out of which Perilya's titles arise) are exceptions to the Crown grant and are treated in law as not part of "the land" granted. Consequently, they are not part of "the land" to be valued under s 6A(1). The extent of the estate of the fee simple owner that comes into tax should not be construed as including that which that owner never had. 2. In any event, the Crown lands statutes that have reserved certain minerals to the Crown in New South Wales in all Crown grants since 1894 are public laws of general application which must be taken into account in determining land value pursuant to s 6A(1). This precludes an interpretation of s 6A(1) that requires minerals to be treated as privately owned.
2. In summary, the Valuer-General submitted that the s 6A phrase "the fee-simple of the land" means full ownership in the eyes of the law free of all restrictions and encumbrances on title. The hypothetical sale of the pure fee simple comes into tax, for rating and taxing purposes. Whether minerals have in fact been reserved to the Crown or not in any particular case is irrelevant. Section 6A(1) necessarily assumes all minerals to be privately owned, irrespective of their actual ownership. Legislation reserving minerals to the Crown is irrelevant because it is not legislation of general application affecting the use and enjoyment of the land to which regard has to be had under s 6A(1).

CONSIDERATION

1. In these proceedings in Valuer-General v Perilya Broken Hill Ltd, the Court of Appeal per Leeming JA said in obiter at [36] and [83] that, flowing from the application of the principles in Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13, 91 CLR 610 and Gollan v Randwick Municipal Council [1961] AC 82, 6 LGRA 275: …there is force in the proposition advanced by the Valuer-General that the land is treated as a fee simple without any mineral reservation, so that the minerals are privately owned. … On one view, s 6A requires the valuation to proceed on the basis that the minerals are privately owned, but this court has been asked not to determine this and I do not do so.
2. Thus, the issue the subject of the separate question was left for determination by this Court.
3. The issue is one of statutory construction of s 6(1) of the Valuation of Land Act. The task of statutory construction must begin with a consideration of the text itself. No particular theory or rule of statutory interpretation, including that of purposive construction, can obviate the need for close attention to the text and structure of the relevant provision: Valuer-General v Fivex Pty Ltd [2015] NSWCA 53 at [26] per Leeming JA citing Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41, 239 CLR 27 at [47] and Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58, 224 CLR 193 at [30]. Under s 6A(1), the exercise of determining the land value of the "fee-simple of land" is a highly artificial one. The real world is not introduced until s 6A(2) (with which this case is not concerned): Valuer-General v Fivex at [48], [50] and [55].
4. The concept of the "fee-simple of land" is seeped in history. Following the Norman Conquest, on the premise that William the Conqueror was the paramount lord of all the land in England, the basis of English land law has been that all land is owned absolutely by, and only by, the Crown. Under this feudal pyramid with the Crown at its apex, all land in England, except for a small part occupied by the Crown itself, is occupied by tenants holding either directly or indirectly (through an intermediate lord) from the Crown. Thus, no land is allodial; that is, owned by a subject and not "held of" some lord. The subject does not own the land itself but owns an estate in the land, which originated in a Crown grant (actual or theoretical) of an estate in the land. An estate in land is a separate thing from the land itself. This doctrine of estates is the legacy of feudalism in English jurisprudence. Estates are divided into freehold and leasehold estates. There were three freehold estates: fee simple, fee tail and life estate, but the fee tail can no longer be created in England and has been abolished by statute in NSW. The fee simple was the most substantial estate. Over the centuries, the right of the fee simple owner to freely alienate his estate was recognised, and estates shed the encrusted services and incidents of feudal tenure. Consequently, the owner of the fee simple now enjoys all the advantages of absolute ownership, except the form. Although the feudal doctrine of ownership still hovers like a ghost over English land law, it has ceased to be of practical consequence. See Harpum, Bridge & Dixon, Megarry & Wade The Law of Real Property (8th ed, 2012, Sweet & Maxwell) 22, 37-39, 52-56; Megarry & Wade, The Law of Real Property (2nd ed, 1959, Steven & Sons) 41, 69-70; Butt, Land Law (6th ed, 2010, Lawbook Co) [4.09]-[4.25].
5. In Australia, however, the English feudal doctrine of ownership has been of great practical consequence because, as was early established, upon the reception of English law after English settlement, it enabled the Crown to claim ownership of all the land in Australia and to make land grants "in fee simple": Attorney-General v Brown (1847) 2 SCR (NSW) App 30, 1 Legge 312 (Full Ct, SC/NSW); Butt, Land Law (6th ed, 2010, Lawbook Co) at [1.02]-[1.05], [4.12], [4.42]-[4.43]. In modern times, this has been qualified by recognition of native title, although it is extinguished by a Crown grant of an estate in fee simple: Mabo v Queensland (No 2) [1992] HCA 23, 175 CLR 1 at [69], [89], [110]; Fejo v Northern Territory of Australia [1998] HCA 58, 195 CLR 96 at [43]-[45].
6. The nature and effect of an estate in fee simple was explained in Commonwealth v State of New South Wales [1923] HCA 34, 33 CLR 1 at 42 per Isaacs J quoting Sweet, Challis's Law of Real Property (3rd ed, 1911, Butterworth & Co) 218: A fee simple is the most extensive in quantum, and the most absolute in respect to the rights which it confers, of all estates known to the law. It confers…every act of ownership which can enter into the imagination, including the right to commit unlimited waste; and, for all practical purposes of ownership, it differs from the absolute dominion of a chattel, in nothing except the physical indestructibility of its subject. Besides these rights of ownership, a fee simple at the present day confers an absolute right, both of alienation inter vivos and of devise by will.
7. In Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45, 177 CLR 635 at 656 Brennan J said: While the theory of our land law is that the radical title of the Crown lies between the physical land and a freehold estate in it, the ownership of the freehold estate has long been, for almost all practical purposes, the equivalent of full ownership of the land. As a result, the freehold estate is, as a matter of legal and popular language, commonly treated as the land itself.
8. In Fejo v Northern Territory of Australia [1998] HCA 58, 195 CLR 96 at [43] the joint judgment said: An estate in fee simple…simply does not permit of the enjoyment by anyone else of any right or interest in respect of the land unless conferred by statute, by the owner of the fee simple or by a predecessor in title.
9. "Land" is defined in s 21 of the Interpretation Act 1987 (NSW) as including corporeal hereditaments, of any tenure or description, and whatever may be the estate or interest therein. "Corporeal hereditaments" mean land and things that are part of or fixed to land, including minerals: Harpum, Bridge & Dixon, Megarry & Wade The Law of Real Property (8th ed, 2012, Sweet & Maxwell) 8.
10. An ancient maxim holds that the owner of the fee simple in land owns everything up to the sky and down to the centre of the earth. The maxim still has value for encapsulating, in simple language, a proposition of law that has commanded general acceptance. Nevertheless, it is inaccurate, as it applies to airspace only to such height as is necessary for the ordinary user of the land (thus avoiding the absurdity of a trespass committed every time a plane or satellite passes over land): Bocardo SA v Star Energy UK Onshore Ltd [2010] UKSC 35, [2011] 1 AC 380 at [26]; Bernstein of Leigh (Baron) v Skyviews & General Ltd [1978] QB 479; Di Napoli v New Beach Apartments Pty Ltd [2004] NSWSC 52, 11 BPR 21,493 at [17]-[18]; Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464 at 470 (Bryson J). As regards ownership to the "centre" of the earth, logic suggests a similar need for some depth limitation: Bocardo SA v Star Energy UK Onshore Ltd [2009] EWCA Civ 579, [2010] Ch 100 (CA) at [60] (otherwise "landowners all have a lot of neighbours"); Butt, ibid 14.
11. Ownership of the fee simple in land certainly extends downwards sufficiently to include minerals under the surface, except for gold and silver (the so called royal metals) for (normally) they still belong to the Crown under ancient royal prerogative recognised by the common law whereby they are automatically excluded from any Crown grant of land unless the grant expressly includes them: Wade v New South Wales Rutile Mining Co Pty Ltd [1969] HCA 28, 121 CLR 177 at 186 per Windeyer J; Cadia Holdings Pty Ltd v State of New South Wales [2010] HCA 27, 242 CLR 195 at [13]-[26] per French CJ. Thus, in a case concerned with resumption by the Commonwealth from a State of land the property of the State, the phrase "land the property of a State" was held to cover "the whole soil from the surface to the centre and everything which is physically incorporated in it including the royal metals": Commonwealth v State of New South Wales at 22.
12. Before the Crown Lands Act 1884 (NSW), Crown grants of land in New South Wales did not usually contain any express reservation of minerals, although gold and silver were reserved by the common law: Colon Peaks Mining Co NL & Bartlett v Wollondilly Shire Council [1911] HCA 70, 13 CLR 438 at 443 per Griffiths CJ; Cadia Holdings Pty Ltd v State of New South Wales at [69]-[70].
13. Crown grants of land that do "reserve" minerals in the land to the Crown create an exception to the grant and therefore the minerals never pass to the grantee. The term "reserve" or "reservation" in strict usage identify something newly created out of the land granted rather than an exception to the grant. But those terms are often used to mean an exception to the grant; "and so they are to be understood and have long been understood in the Australian law of real property": Wade v New South Wales Rutile Mining Co Pty Ltd at 194 per Windeyer J; see also Wik Peoples v State of Queensland [1996] HCA 40, 187 CLR 1 at 200-201 per Gummow J; Minister for Mineral Resources v Brantag Pty Ltd [1997] NSWCA 206, 8 BPR 15,815 at 15,818 and 15,823 per Mason P; Cadia Holdings Pty Ltd v State of New South Wales at [40] per French CJ; Attorney General v Brown at 322-3. Reserved minerals physically remain "a part of the land", though "severable from the land": Attorney-General v Brown at 323; Commonwealth v State of New South Wales at 20, 22. In Wade, Windeyer J's history of Australian mining law included the following description of reserved minerals as an exception from a Crown grant, at 194 (citations omitted): Apart from gold and silver, in respect of which the Crown's rights are founded on ancient prerogative, the words "reservation of minerals", in Crown grants, and in the Act "minerals reserved to the Crown" refer to an exception from the grant. And the corresponding phrase "land held without reservation of minerals" refers to grants - without an exception of minerals. In a strict legal sense reservations are not equivalent to exceptions. But the words "reservation", "reserving" etc. are often used to mean a keeping back of a physical part of a thing otherwise granted: and so they are to be understood and have long been understood in the Australian law of real property…
14. In New South Wales, the reservation of minerals in Crown grants has been regulated by statute since at least the Crown Lands Alienation Act 1861, which provided that a grant of the fee simple of conditionally purchased Crown land was to be made "with reservation of any minerals which the land may contain" (s 18): see further Minister for Mineral Resources v Brantag Pty Ltd at 15,821; and Valuer General v Perilya Broken Hill Limited [2013] NSWCA 265, 195 LGERA 416 at [23]-[26].
15. Relevantly to the Perilya land, the statutory definition of "minerals" has included silver and galena at all times since 1884 and has included lead and zinc at all times since 1922, as the following legislative history shows.
16. The Crown Lands Act 1884 provided that: "All grants of land issued under the authority of this Act shall contain a reservation of all minerals in such land…" (s 7). The definition of "minerals" in s 4 included silver and "galena" (the principal ore of lead).
17. The Crown Lands Consolidation Act 1913 s 235(3) contained a "reservation of all minerals" in language similar to s 7 of the 1884 Act, and the definition of "minerals" in s 5 also included silver and galena. In 1922, lead and zinc were proclaimed to be minerals pursuant to s 5 of the 1913 Act: New South Wales Government Gazette No 160, 17 November 1922, p 6183.
18. The current Crown Lands Act 1989 s 171(1) provides for the exclusion of minerals from any sale, lease or other disposal of land by the Crown: A sale, lease or other disposal of land by a reserve trust under Part 5 of this Act or by the Crown under this Act or the Crown Lands (Continued Tenures) Act 1989 does not include the sale, lease or disposal of any minerals contained in the land, being minerals within the definition of mineral in section 3 (1) at the time when the land is contracted to be sold, the lease is commenced or the disposal takes place.
19. Section 3(1) of the 1989 Act defines "mineral" as: (a) in relation to land not in a special land district, any substance prescribed as a mineral for the purposes of this Act, or (b) in relation to land in a special land district, mineral within the meaning of the Mining Act 1992. Lead, zinc, silver and galena are minerals within both s 3(1)(a) and (b): Crown Lands Regulation 2006 cl 5 and Schedule 2; and Mining Regulation 2010 cl 5 and Schedule 1.
20. The phrase "the fee-simple of land" in s 6A(1) is a hypothetical and artificial concept adopted for rating and taxing purposes: Valuer-General v Fivex Pty Ltd [2015] NSWCA 53 at [44]. It enables the government to bring the first estate of land into tax irrespective of how the estate in the land may in fact be divided between various estate holders and interests.
21. When the definition of "land value" in s 6A speaks of "the fee-simple of land" it does not mean (notwithstanding the definite article) the estate in fee simple that has been granted. The expression "the fee simple of land" naturally means the hypothetical fee simple as the highest state unencumbered and subject to no conditions or reservations: Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13, 91 CLR 610 at 623. That leading case was concerned with the interpretation of provisions in a federal statute, the Land Tax Assessment Act 1910 (Cth) (since repealed), relevantly similar to those in the Valuation of Land Act 1916 (NSW), at a time when the Commonwealth rather than the States collected land tax upon unimproved values. The High Court held unanimously per Dixon CJ, McTiernan, Webb, Fullagar and Kitto JJ, at 623: It seems clear enough that the fee simple here means an unencumbered fee simple. Encumbrances upon land or estates in reversion appear to have been regarded as giving to reversioners or encumbrancers beneficial interests to be enjoyed by them. But the owner of the first estate of freehold was selected as the taxpayer who was to represent all persons beneficially entitled to the land. The value upon which he was to be taxed was the unimproved value of the fee simple, that is to say the capital sum which the fee simple might be expected to realize. It seems evident that the fee simple mentioned must be taken as free from encumbrances which, if they impaired the value of his estate, nevertheless operated to confer upon some other person or persons an estate or interest in the land. Were it otherwise the taxable value of the land would be diminished but the correlative estate or interest would not come into tax, unless by some chance it were an interest falling under some specific provision imposing liability. When the definitions of "unimproved value" in s 3 speak of "the fee simple" they cannot mean, notwithstanding the definite article, that estate in fee simple which has been granted. For under s 26 the hypothesis is that there has not been a Crown grant. In the Act as it stood before the enactment of the Land Tax Assessment Act 1914, s 27 applied to leases from the Crown where there was no fee simple: yet s 27(4)(b) in conjunction with the definitions of "unimproved value" required that a fee simple should be assumed. The expression "the fee simple of the land" naturally means the fee simple as the highest estate unencumbered and subject to no conditions. Doubtless estates in fee simple may be granted by the Crown subject to conditions or reservations which operate only in the public interest. The corresponding advantages which ensue may be enjoyed only as of public right: they are not an interest in land enjoyed by a specific person or persons. But the Act does not draw any distinction based upon this possibility. The general policy was reflected in a general rule. The interpretation of the Act which seems best to accord with the policy appearing from its provisions and also to flow from its language is that in assessing the unimproved value an estate in fee simple must be taken as the hypothesis unencumbered and subject to no condition restricting the use or enjoyment of the land. [emphasis added]
22. The High Court continued its analysis by distinguishing planning legislation affecting the enjoyment and use of land independently of all questions of title and ownership, on the one hand, from restrictions on title, on the other. The Court held that the former (in that case the County of Cumberland Planning Scheme Ordinance) must be taken into account, but the latter must not, at 624: But it is one thing to say that a hypothetical fee simple unencumbered and subject to no condition restricting enjoyment or use must be taken and another to say that laws of the State which affect the value of land are not to be taken into consideration. The federal Act adopts the hypothesis of an estate in fee simple to which State law attaches a fasciculus of rights. What those rights are, how far they extend and what measure of enjoyment they give must depend on the law of the State. This would hardly be denied in the case of a general law governing all fee simples in land throughout the State. But it is difficult to distinguish between such a law and one operating in part of a State or in a defined area only. There is all the difference between a public law affecting the enjoyment of land and a restriction of title. It is not difficult to imagine a law made by a State restricting the cultivation of land in some particular way. Such a law might well operate to prejudice the value of land which had no profitable use except for cultivation in the manner restricted. Would it matter for the purposes of the definitions of "unimproved value" that the law operated only in part of the State or within a very confined area? There remains the question how the distinction which is drawn above applied in this case to the County of Cumberland Scheme. Do the restrictions which it imposes upon, threatens to or suspends over land within the areas in the scheme, particularly that coloured dark green, amount to nothing but an encumbrance or condition or restrictive obligation affecting the titles to specific parcels of land? Is it not rather a law operating over an area of country within the State which, though not large, is chosen independently of all questions of title or ownership and controlling the use to which owners in fee simple or for any less estate or interest occupiers, licensees and indeed even trespassers may put the land? Its nature and purpose seem to bring the restrictions flowing from the scheme under the second description. However the title may be derived and whatever may be the form of ownership, occupation or enjoyment, the use of all land within the scheme is affected actually or contingently, presently or in the future, but in varying degrees and subject to varying conditions. In the case of land within the area coloured dark green the restriction, if not more proximate, is at all events more stringent. But it is nevertheless a restriction which arises from the law affecting an area in which the land lies, and not something altering the hypothesis upon which the Federal statute requires the land to be assessed. It must be taken into account in ascertaining the unimproved value of the land. The first question in the case stated should therefore be answered that in arriving at the unimproved value under the Land Tax Assessment Act of the land the subject of the appeal the land should not be valued without regard to the provisions and effect of the County of Cumberland Planning Scheme. [emphasis added]
23. This principle in Royal Sydney Golf Club was applied in Sydney City Council v Valuer-General (1956) 1 LGRA 229 at 230-234 where Sugerman J held that the restrictions in the County of Cumberland Planning Scheme Ordinance must also be taken into account when ascertaining value for the purpose of the Valuation of Land Act 1916 (NSW). Both decisions were approved and applied by the Privy Council in Gollan v Randwick Municipal Council [1961] AC 82, (1960) 6 LGRA 275, and recently affirmed by the Court of Appeal in Valuer-General v New South Wales Golf Club [2012] NSWCA 355, 192 LGERA 105 at [36] per Preston CJ of LEC, Hoeben JA and Ward J agreeing at [1] and [52].
24. In Sydney City Council v Valuer-General the subject land was part of a public park held by Sydney City Council as trustee under statute. The land was subject to two classes of restrictions. First, restrictions imposed by a planning law, the County of Cumberland Planning Scheme Ordinance. Secondly, restrictions resulting from the land being a public park dedicated by the Crown for public recreation and declared to be a public park, pursuant to statutes. Applying the descriptions in Royal Sydney Golf Club at 623-4, Sugerman J held that (a) the first class of restrictions was part of "the laws of the State which affect the value of land" and must be taken into account (at 230, 236); but (b) the second class of restrictions was "nothing but an encumbrance or a condition or restrictive obligation affecting the titles of specific parcels of land" which must not be taken into account (at 231, 236). Sugerman J indicated that the subject of the inquiry was not the "actual fee simple" - that is, the owner's estate or interest in the land - but a "hypothetical fee simple": at 230. His Honour held that the expression "fee simple of the land" is "intended to comprehend all estates and interests which could exist on the land, subject only to" planning legislation restrictions: at 235.
25. In Gollan at 282 the Privy Council held that the considerations that led the High Court in Royal Sydney Golf Club to treat unimproved value under s 3 of the Land Tax Assessment Act as involving the hypothesis of "a fee simple unencumbered and subject to no conditions" can be applied to unimproved value under s 6 [now see s 6A] of the Valuation of Land Act, and that "the fee simple of the land" as referred to in that section- ...does not refer to the actual title vested in the owner at the relevant date but to an absolute or pure title such as constitutes full ownership in the eye of the law": at 282-3.
26. In my opinion, these authoritative principles are fatal to Perilya's submissions summarised above at [12]. To reiterate, Perilya submitted, first, that as reserved minerals are an exception from a Crown grant, they are treated in law as not physically part of the land granted and therefore, upon the proper construction of s 6A(1), the fee simple of "the land" does not include minerals that were never part of any grant of "the land". I do not accept the submission. In fact, minerals are physically part of land, albeit severable if excluded from the grant of the fee simple estate: above at [26] citing Attorney-General v Brown at 323 and Commonwealth v State of New South Wales at 20, 22. "Land" is defined in s 21 of the Interpretation Act 1987 as including incorporeal hereditaments, which include minerals: above at [22]. The "fee simple of the land" in s 6A(1) does not refer to the actual fee simple vested in the owner but to a hypothetical absolute or pure fee simple such as constitutes full ownership in the eye of the law.
27. Perilya made the related submission that, on close textual analysis of Royal Sydney Golf Club at 623 (quoted above at [34]), the High Court intended this hypothesis to only be referable to the phrase "fee simple" and not the composite phrase "the fee simple of the land". I disagree. It is necessary to be cautious about a textualisation of precedent; that is, about construing the terms of a judgment as if they were the words of a statute. The concern is not with the meaning and application of particular words used by a judge, so much as with understanding the concepts to which expression was sought to be given: Comcare v PVYW [2013] HCA 41, 250 CLR 246 at [15]-[16]; Leeming JA, Farah and its progeny: comity among intermediate appellate courts (2015) 12 (2) TJR 165 at 185. I do not read the quoted passage from Royal Sydney Golf Club as being confined in the way Perilya suggested. I cannot see why the High Court would have intended to confine it in that way, nor where it takes the matter; and if the High Court had intended to so confine it, one would expect it to have said so explicitly. In any case, the subsequent decisions in Sydney City Council v Valuer-General and Gollin confirm that the legislation is concerned not with the actual title of the owner but with a hypothetical absolute or pure fee simple such as constitutes full ownership in the eye of the law.
28. Perilya further submitted that the various Crown lands statutes referred to above at [27]-[32] have to be taken into account as laws of general application affecting the use or enjoyment of land, and therefore its value, under the principle in Royal Sydney Golf Club at 624 quoted above at [35]. I do not accept the submission. Under s 6A(1) of the Valuation of Land Act, statutes affecting value by affecting enjoyment or use of land independently of all questions of title or ownership are to be taken into account, but restrictions on title or ownership are not. Planning statutes comprise, or are the prime example of, the former category and therefore have to be taken into account. Planning statutes do not affect title or ownership. In contrast, the Crown lands statutes under discussion affect a restriction on title or ownership. Therefore, in my opinion, regard cannot be had to them under s 6A(1).
29. I conclude that the expression "the fee simple of the land" in s 6A(1) includes publicly owned minerals in the land and therefore requires them to be treated as though they are privately owned. Accordingly, the separate question set out above at [1] must be answered in the affirmative.
30. The decision of the Court on the separate question is that: Under s 6A(1) of the Valuation of Land Act 1916, the land value of land containing publicly owned minerals, as defined in the Mining Act 1992, is to be determined on the assumption that the minerals are privately owned.

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