Plaintiffs v Defendants

Supreme Court of Victoria|2005-08-08|Before: OSBORN J

PRELIMINARY QUESTIONS OF LAW - Underground gas pipeline -What constitutes "land" - Section 140 Gas Industry Act 2001 - Space containing pipeline rateable - Pipeline not a fixture.

1 During the rating periods in issue in this case the plaintiffs have been the owners of an underground pipeline known as the Eastern Gas Pipeline ("EGP") which runs from the Longford gas terminal in Victoria to Horsley Park in New South Wales.

A. A declaration that the EGP is not and was not at relevant times land.

B. A declaration that the EGP is not and was not at relevant times rateable.

C. A declaration that the resolutions and each of them so as to impose rates on the EGP are and were invalid.

D. An order in the nature of certiorari setting aside the resolution or resolutions of the defendants to impose the rates on the EGP.

8 The defence joins issue with the plaintiffs' claim at a series of levels, but with a view to potentially expediting resolution of the proceeding the parties have agreed and I have ordered pursuant to O.47.04 of the Rules of the Supreme Court that the following preliminary questions be determined on the basis of a statement of agreed and assumed facts.

(1) Does s.140 of the Gas Industry Act 2001 (Vic) have the effect that the EGP identified in paragraphs 5(a) and (c) of the amended statement of claim is not land for the purpose of Part 8 of the Local Government Act 1989 (Vic)?

(2) Did s.49 of the Gas Industry Act 1994 (Vic), or alternatively s.140 of the Gas Industry Act 2001 (Vic), have the effect that the EGP was not land at all times after 30 June 2000 for the purpose of Part 8 of the Local Government Act 1989 (Vic)?

(3) If no to question (2), during what period or periods was the Eastern Gas Pipeline land for the purpose of Part 8 of the Local Government Act 1989 (Vic)?

Part 8 of the Local Government Act 1989

9 The impugned power of the defendants to impose rates with respect to the EGP is dependent in the first instance upon the terms of s.154 of the Local Government Act 1989 ("the LGA").

10 Section 154(1) provides:

"Except as provided in this section all land is rateable."

11 The LGA does not define "land" however s.38 of the Interpretation of Legislation Act 1984 provides:

"In all Acts and subordinate instruments, unless the contrary intention appears -

...

land includes buildings and other structures permanently affixed to land, land covered with water, and any estate, interest, easement, servitude, privilege or right in or over land; ... "

12 It was not submitted that s.154(1) should be construed as evincing a contrary intention in terms of s.38.

13 Section 154(2) goes on to provide that certain specified lands are not rateable land. Such lands include:

"(a) land which is unoccupied and is the property of the Crown or is vested in a Minister, a Council, a public statutory body or trustees appointed under an Act to hold that land in trust for public or municipal purposes; ..."

14 These provisions have long standing origins. As the judgment of the Privy Council in Melbourne Tramway and Omnibus Company v Mayor of Fitzroy[1] records:

"The statutes of Victoria have followed the English statutes in defining the principles on which property is to be rated. By Act No. 1112, s. 246, it is enacted-

'All land shall be rateable property within the meaning of this Act and of the Acts relating to the incorporation of the city of Melbourne and town of Geelong, save as is next hereinafter excepted - that is to say, land the property of Her Majesty which is unoccupied or used for public purposes ... land vested in or in the occupation of or held in trust for the municipality or the council thereof.'." [2]

15 The Melbourne Tramway case concerned the question whether the provider of a utility within public roadways could be said to occupy land within the meaning of the then Local Government Act. The Privy Council concluded:

"It is true that the company has not acquired any right other than that of user of the roads on which it lays its tramway, and that the rate is leviable on nothing but the use of the tramway. But their Lordships do not find in these provisions any indication of a departure from the principles of municipal rating established alike in England and in Victoria. The use of the tramway is the occupation of the tramway. The position of the Pimlico Tramway Co. resembles that of the present appellant. The enactments defining the position of the two companies are almost identical. The Pimlico Company was held to be an occupier, rateable as such, and not the less so because its occupation was restricted to a particular purpose, nor because the public also had rights over the same ground." [3] (Citation omitted)

16 As Harris J observed in Gas & Fuel Corporation of Victoria v Williamstown[4]:

"Their Lordships did not expressly say that the space occupied by the tramway was 'land', but the conclusion they expressed shows that they must have held that it was."

17 In Glebe v Lukey[5] the High Court specifically considered the rateability of gas mains pursuant to the analogous New South Wales legislation. Griffith CJ stated[6]:

"The question of the liability of the company to be rated depends entirely upon the terms of the Municipalities Act of 1897, clause 137 of which defines rateable property thus:--

'All lands, houses, warehouses, counting houses, shops, and other buildings, tenements, or hereditaments within any municipality shall be rateable property within the meaning and for all the purposes of this Act, save as it is next hereinafter excepted,'

and then enumerates certain exceptions within which the property in question is not included. Under that section the first question which arises is whether that portion of the soil occupied in this way by a gaslight or any similar company, for the purpose of carrying its mains, is 'land' within the meaning of the definition, and the second question is whether, if it is primâ facie 'land' within the meaning of that definition, there are other provisions in the Act which require a more limited construction."

18 It can be seen that the current scheme of s.154 of the LGA may be said to continue to raise the same two preliminary issues. The first question is whether that portion of the soil occupied by the EGP is "land" and the second is whether it falls within the exceptions provided to the general rule that all land is rateable.

19 The decisions in the Melbourne Tramway case and Glebe v Lukey were applied by Harris J in the Gas Corporation case. His Honour concluded after a full and careful analysis of the authorities that space occupied by the plaintiff's gas mains laid under the streets of the municipality was "land" within the meaning of the then s.251(1) of the Local Government Act 1958.

20 His Honour commenced his analysis by stating:

"What the Local Government Act 1958 provides is that 'all land shall be rateable property within the meaning of this Act', except for the particular exceptions which are then set out (s251(1)). The question whether gas mains laid beneath public streets were 'land' and therefore 'rateable property' under rating legislation has been considered by courts since as long ago as 1823 ... . The conclusion has always been that the space occupied by the pipes is 'land' and that the gas company is in 'occupation' of this land ..."[7] (Citations omitted)

21 He then identified the Melbourne Tramway case and Glebe v Lukey as binding on this Court, and after analysing those decisions and referring to other authority concluded:

" ... I find that the plaintiff's gas mains which are laid under the streets of the defendant municipality are 'land' within the meaning of s251(1) of the Local Government Act 1958. In my opinion, the authorities to which I have referred also lead to the conclusion that other plant, such as syphons and valves which are in the soil, are also 'land' within the meaning of the Act. Strictly speaking, perhaps one should say that it is the space occupied by the mains which is land, but the matter can be stated, and has been stated, in terms of the mains themselves. I add that, on so far as the mains have developed encrustations on their exterior, I find that these become part of the mains and therefore part of the 'land' and that, in so far as mains have been laid in sand, the same principle applies as applies to the mains, so that this sand is also 'land'."[8] (My emphasis)

22 Following this decision legislation was introduced which had the effect of excepting from the category of rateable land, land used for the purposes of the Gas & Fuel Corporation other than for the purposes of trading in gas appliances.[9] The questions now raised before me do not, however, turn upon the construction of the current provisions for exception by reference to the purposes for which land is used, they turn upon the terms of s.140 of the Gas Industry Act 2001.

23 Before turning to the provisions of that Act it is appropriate to refer briefly to some other key provisions of Part 8 of the LGA in order to set out more fully the context in which the preliminary questions are to be considered. Section 155 provides that a Council may declare rates and charges of different kinds on rateable land being general rates, municipal charges, service rates, service charges, special rates, and special charges as respectively provided for in subsequent sections of the Act.

24 Section 156 provides for the liability to pay rates and charges and in the first instance states:

"(1) The owner of land is liable to pay the rates and charges on that land.

(2) If the owner cannot be found or identified, the occupier of, or the mortgagee in possession of, the land is liable to pay the rates and charges."[10]

25 Section 157 provides that a council may use the site value, net annual value or capital improved value system of valuation. Such systems are further provided for by the Valuation of Land Act 1960. Section 13DC(1) of the Valuation of Land Act provides:

"(1) 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."

26 In the present case the rate notices state a net annual value, capital improved value and site value. The rates levied by the defendants were assessed on the basis of capital improved value.

Section 140 of the Gas Industry Act 2001

27 Section 140 of the Gas Industry Act 2001 falls within Part 7 of that Act which is headed "Gas Company Property and Works". It is the first section within Division 1 of this Part, which division is in turn headed "Pipelines Generally". Section 140 provides:

"140. Certain pipelines are not part of land

A transmission pipeline or distribution pipeline -

(a) is not part of the land through which it runs; and

(b) is personal property."

28 The facts which are agreed and assumed for the purposes of the preliminary questions lead to the conclusion that the EGP falls within the terms of s.140.

29 In my opinion s.140 is declaratory of the property characteristics of a pipeline caught by its terms. As such it is conclusive generally of the questions of law with which it is concerned. A pipeline of the type referred to is as a matter of law not a fixture and remains personal not real property. In terms of the definition contained in s.38 of the Interpretation of Legislation Act such a pipeline is not to be regarded as "land" because it is a "structure permanently affixed to land".

30 The difficulties in applying traditional concepts of property law to the characterisation of a gas pipeline forming part of an extended system installed and operated pursuant to a scheme of statutory regulation were addressed by the High Court in North Shore Gas Company v The Commissioner of Stamp Duties[11].

31 In the first North Shore case the Court was required to determine whether an agreement for the sale of the whole of the assets and undertaking of the gas company as a going concern was an agreement for the sale of "goods, wares or merchandise" within the meaning of a proviso exempting such an agreement from duty under the then New South Wales Stamp Duties Act. Dixon J identified the peculiarity of the case as deriving from the fact that although the gas mains were embodied in the soil on a permanent basis "under the company's statutory powers the mains and service pipes are placed in soil in which the company has no estate or interest and retains both the property in and control of the mains and pipes"[12]. Dixon J stated[13]:

"The mains and service pipes are embedded in the soil of the streets as a permanent means of providing the gas supply of the frontagers. The reticulation forms an artificial but normal or ordinary adjunct of the suburban street. There is therefore no doubt about the purpose, the degree nor the enduring nature of fixation of the pipes or their identification with the soil. So much of the earth as the pipes displace formed a space in the occupation of the company and that space constitutes land. The company's occupation of the space is as of right and is exclusive.

The right to remove the pipes arises from a particular statutory power. Unless it is exercised the pipes must remain in situ as part of a widespread system or apparatus which can be transferred only as an entirety. It is interconnected and radiates from a plant consisting of fixtures. Every physical characteristic, therefore, tends to place the mains and service pipes in the same category as the soil from which, without disintegration or disconnection, they are inseparable. Two legal qualities belong to the pipes which ordinarily do not belong to part of the soil, viz., the existence of independent ownership in another person and removability. But these qualities arise from statutory provisions, and removability at all events is a well-known characteristic of tenants' fixtures, which until removal are considered part of the realty. I do not think that these statutory legal qualities are enough to put the buried apparatus out of the classification to which otherwise it would belong.

The mains and service pipes are fixtures, and in my opinion are not chattels personal."[14]

32 It can be seen that but for s.140 of the Gas Industry Act 2001 the application of like reasoning to the EGP would be likely to lead to the conclusion that it constituted a fixture and thus formed part of the land through which it passed (recognising always that such an analysis would require a detailed evaluation of the individual circumstances of the EGP).

33 Section 140 determines and declares that a pipeline such as the EGP is not to be so regarded.

34 Moreover, the subsequent decision of the High Court in Commissioner of Main Roads v North Shore Gas Company Ltd[15] demonstrates that the application to a particular situation of the concepts addressed by Dixon J may not be free of controversy.

35 The second North Shore case concerned the right of the gas company to claim compensation for loss suffered as a result of the compulsory acquisition by the Commissioner of Main Roads of land comprising gas mains. The entitlement to the compensation claimed turned upon the question of whether the gas company had an interest in the land acquired. The joint judgment of Barwick CJ, McTiernan, Kitto and Taylor JJ states with respect to the judgment of Dixon J in the first North Shore case:

"We doubt whether it was strictly necessary for the purposes of that case to decide, not only that mains and service pipes were not 'goods, wares and merchandise', but also that they, or the space which they occupied, constituted an interest in land and we also doubt the correctness of this final conclusion. Differences of opinion from time to time have arisen concerning the true meaning and operation of the principle expressed in the maxim quicquid solo plantatur, solo cedit ..., but, primarily, it is applied to determine the right of the owner of land to things affixed to or embedded in the soil. Whatever is fixed to the freehold is said to become part of it and is subjected to the same rights of property as the land itself ... The presumption is said to be rebuttable and, it seems to us, it must be so when a statute empowers someone other than the owner of land to affix to or embed things in the soil and yet retain ownership of the things so affixed or embedded. In such circumstances why should it be assumed that the exercise of a specific statutory right to lay and maintain pipes, as in the present case, operates to vest in the donee of the power an interest in the land in which the pipes have been laid? The conclusion that it does seems to us to result from a lawyer's inherent tendency to assimilate such a right to some category known to the common law. It is, of course, a very special right. The exercise of the right to lay pipes in another's land is not intended to make, and does not make, for the better and fuller enjoyment of the land and the right, when exercised, confers a right to occupy some part of the land in a very limited and special way."[16] (Citations omitted)

36 The joint judgment goes on to adopt the conclusions of Evershed J in Newcastle-under-Lyme Corporation v Wolstanton Ltd[17], that the interest of the providers of a public utility in pipes and cables laid under the land of others pursuant to a special statutory power, "must be that of licensees without any title, legal or equitable, in the land itself."

37 In a separate judgment Windeyer J observed:

"It seems to me futile really to try to classify and describe the respondent's rights in respect of mains and pipes under streets and roads according to the traditional categories and terminology of the law of real property."[18]

"And to say that the space which a gas main or pipe occupies is "land" is not to say that the gas company has an estate in that land. All that the decisions about rating really establish is that while a gas-pipe is embedded in the soil the land where it is is in the occupation of the gas company."[19]

39 In the Gas Corporation case Harris J observed of the conclusions reached in the joint judgment in the second North Shore case:

"It was unnecessary for them to consider the different point, namely, whether the space taken up by the gas mains was "land" "occupied" by it for rating purposes. It was put by Mr Gifford, QC (who, with Mr Sundberg, appeared for the plaintiff) that, in his decision, the High Court impliedly overruled Borough of Glebe v Lukey, ..., but I am quite satisfied that it did not."[20]

40 It may also be observed that because the analyses in the second North Shore case turned in large part upon the significance of statutory powers, its reasoning may not necessarily be directly applicable to the factual circumstances in which a particular gas pipeline is installed.

41 Nevertheless, it can be seen that the questions of whether, and in what sense, underground gas pipelines are to be regarded as the subject of an interest in land, are of sufficient potential difficulty to make it entirely understandable that Parliament may wish to place the matter beyond doubt with respect to a particular class of pipeline by a provision such as s.140.

42 Section 1 of the Gas Industry Act 1994 Act stated:

"The purpose of this Act is -

(a) to restructure the gas industry; and

(b) to establish Gas Transmission Corporation and GASCOR; and

(c) to provide for the technical regulation of the gas industry; and

(d) to provide for the transfer of property, rights and liabilities from the Gas & Fuel Corporation of Victoria and for the transfer of staff."

43 Section 49 of the 1994 Act was relevantly equivalent to s.140 of the current Act.[21] It facilitated the transfer of property, rights and liabilities from the Gas & Fuel Corporation of Victoria to private instrumentalities and introduced the first equivalent to s.140 in this context. Section 140 of the current Act continues to facilitate the preservation of private rights with respect to pipelines of the type specified.

44 If the above analysis is accepted, the effect of s.140 is that although the space occupied by the EGP constitutes land within the meaning of s.154 of the LGA the pipeline itself is not land.

45 I do not accept that in the present case having regard to the terms of s.140 the distinction between the pipeline and the space occupied by the pipeline is a "mere play on words".[22]

46 The further provisions of the Gas Industry Act 2001 and associated legislation to which arguments were addressed are entirely consistent with this conclusion.

47 Section 202 of the Gas Industry Act 2001 makes specific provision with respect to the rateability of land vested in Victorian Energy Networks Corporation ("VENCorp")[23]. Section 202 excepts such land from the category of rateable land just as the LGA and its predecessors have since the provisions discussed in the Melbourne Tramway case.

48 Section 52 of the Gas Industry (Residual Provisions) Act 1994 likewise provides:

"Land of the Crown and land vested in fee in a gas company which is unoccupied or used for the purposes of this Act is not, and is deemed never to have been, rateable land within the meaning of the Local Government Act 1989."

49 Unlike these provisions, s.140 of the Gas Industry Act 2001 is concerned with what constitutes land and not whether land of a particular class is rateable.

50 Section 145 of the Gas Industry Act 2001 in turn provides:

"Despite anything to the contrary in the Local Government Act 1989, land is not occupied land for the purposes of that Act merely because there is on or under that land any pipe or system of pipes for, or incidental to the conveyance of gas for sale by retail."

51 This section is an evidentiary provision bearing on the question of whether land is occupied for the purposes of provisions such as ss.154(2) and 156(2) of the LGA. It does not in my view materially inform the construction of s.140.

52 It was submitted in argument on behalf of the plaintiffs that "for decades now the Parliament has demonstrated an intention that gas pipelines should be free of rates." I accept that in broad terms this is true, but such exemption has been provided by extending the categories of public purposes which have always been provided for as exceptions to the prima facie provision of the Local Government Act 1989 and its predecessors that "all land is rateable". The proposition contended for does not support a different construction of s.140 to that which I have sought to elaborate.

53 I return then to the preliminary questions and in particular question (1).

"Does s.140 of the Gas Industry Act 2001 (Vic) have the effect that the Eastern Gas Pipeline ... is not land for the purpose of Part 8 of the Local Government Act 1989 (Vic)?"

54 It became apparent during argument that this question contains an inherent ambiguity. The plaintiffs' counsel argued the matter on the basis that the Eastern Gas Pipeline referred to constituted the pipeline itself. The defendants' counsel put their case upon the basis that the Eastern Gas Pipeline was to be regarded as comprising the space occupied by the pipeline.[24] I have come to the conclusion that the proper manner in which to answer this question is one which responds to the alternative senses in which the reference to the Eastern Gas Pipeline may be understood. To do otherwise will materially reduce the potential usefulness of any answer to the preliminary questions.

55 In my opinion the answer to Question 1 is that the effect of s.140 of the Gas Industry Act 2001 is that the Eastern Gas Pipeline is not land for the purposes of Part 8 of the Local Government Act 1989 insofar as the physical components of the pipeline are concerned. Thus the pipeline itself cannot be rated in the same manner as the oil pipeline forming the subject of decision in Esso Exploration v President Councillors & Ratepayers of Morwell[25]. Conversely, the space occupied by the Eastern Gas Pipeline is land for the purpose of Part 8 of the Local Government Act 1989 and is rateable.

56 Like conclusions follow with respect to question (2).

57 It is unnecessary to answer question (3) and neither party submitted that I should do so.

58 I will hear the parties further as to the consequential orders which should be made for the further disposition of the proceeding.

[1] [1901] AC 153; a case concerning the old cable tramway system which operated between the City of Melbourne and the City of Fitzroy ("the Melbourne Tramway case")

[2] Ibid at 167

[3] Melbourne Tramway case at 169

[4] [1978] VicRp 64; [1978] VR 677 at 681 ("the Gas Corporation case")

[5] [1904] HCA 8; (1904) 1 CLR 158

[6] Ibid at 171

[7] The Gas Corporation case at 680

[8] Ibid at 682

[9] The Gas & Fuel Corporation (Municipal Rates) Act 1978

[10] "Owner" is defined by s.3 of the LGA to mean "the person who is entitled to receive the rack rent for the land or who, if the land were let at a rack rent, would be entitled to receive the rent;"

[11] [1940] HCA 7; (1939) 63 CLR 52 ("the first North Shore case")

[12] Ibid at 68

[13] Ibid at 69

[14] McTiernan J agreed with Dixon J, Rich J came to the same conclusion for similar reasons. Starke and Evatt JJ adopted different chains of reasoning although ultimately coming to the same conclusion as to the disposition of the appeal as the other justices.

[15] [1967] HCA 41; (1967) 120 CLR 118 ("the second North Shore case")

[16] Ibid at 126-127

[17] [1947] CH 92

[18] The second North Shore case at 131

[19] Ibid at 132

[20] The Gas Corporation case at 682

[21] s.49(1) provided:

"Certain pipelines are not part of land

(1) A pipeline to which this section applies-

(a) is not part of the land through which it runs;

(b) is personal property.

(2) This section applies to-

(a) pipelines owned by GFCV before the commencement of this section;

(b) transmission pipelines;

(c) distribution pipelines."

[22] cf the Gas Corporation case at 687

[23] Section 202 provides: "Land of the Crown and land vested in fee in VENCorp which is unoccupied or used for the purposes of this Act is not, and is deemed never to have been, rateable land within the meaning of the Local Government Act 1989."

[24] It was not put by either party that the Eastern Gas Pipeline as referred to in the preliminary question was to be understood as comprised by the easements and areas defined by agreement with the Governor-in-Council through respective parts of which the pipeline runs.

[25] [1986] VicRp 29; [1986] VR 289

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