Royal Sydney Golf Club v Commissioner of Taxation - [1957] HCA 31 - HCA 1957 case summary — Zoe

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Royal Sydney Golf Club v Commissioner of Taxation

[1957] HCA 31

High Court of Australia|1957-07-01|Before: Kitto J

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Court

High Court of Australia

Decision date

1957-07-01

Before

Kitto J

Source

Original judgment source is linked above.

Judgment (31 paragraphs)

[1]

High Court of Australia Kitto J. Royal Sydney Golf Club v Commissioner of Taxation (Cth) [1957] HCA 31

[2]

ORDER Appeal allowed. Assessment remitted to the commissioner to be amended by altering the unimproved value of so much of the land included in the parcels numbered 1 and 2 respectively in the return as is not exempt to £192,425, and by making all consequential alterations. Order that the commissioner pay the appellant's costs of the case stated to the Full Court and one-half of its other costs of the appeal.

[3]

The proceeding before me is an appeal against an assessment of land tax under the Land Tax Assessment Act 1910-1950. On 30th June 1951 the appellant was the owner, within the meaning of that Act, of certain land at Rose Bay, comprising a little over one hundred and forty-two acres, three roods, upon parts of which it has erected a club-house and other buildings. An area of about seven acres was exempt from land tax under s. 13 (g) (3) and s. 13 (h) of the Act: Federal Commissioner of Taxation v. Royal Sydney Golf Club [1] . The remaining area of one hundred and thirty-five acres, three roods was not exempt. It had been laid out as an area for the game of golf. It comprised an eighteen-hole championship course and a nine-hole or short course, and at several places on it were small buildings of an ancillary character. The assessment was made on the footing that the unimproved value of the non-exempt land at the date mentioned was £364,176. The appellant's objection, which has now to be treated as an appeal, sets out a contention that by reason of restrictions placed on the use and enjoyment of the non-exempt land by the Local Government (Amendment) Act 1951 N.S.W. its unimproved value on 30th June 1951 was only £34,000.

[7]

The Ordinance created no general power to remove restrictions arising under its provisions. Short of a repeal of the Ordinance by Parliament or its complete rescission by the Governor under s. 342M of the Local Government Act 1919-1951 (made applicable, presumably, by s. 2 (3) of the Local Government (Amendment) Act 1951), there was only one way in which the prohibition imposed by cl. 11 (1) might be lifted. The Ordinance was enacted by s. 2 of the Local Government (Amendment) Act 1951 as the scheme required by Div. 8 of Pt. XIIA of the principal Act (the Local Government (Amendment) Act 1919 as amended) to be prepared for the County of Cumberland; and it is to be deemed an Ordinance made by the Governor prescribing the scheme under s. 342K of the principal Act (s. 2 (2)). The scheme embodied in it is a prescribed scheme to which the provisions of Pt. XIIA of the principal Act relating to prescribed schemes shall apply (s. 2 (3)). Division 7 of that Part contains a provision, in s. 342Y, that where a resolution for the preparation of a scheme varying a prescribed scheme has taken effect or the Minister has directed the preparation of such a scheme, the Minister, if after consideration of a report by the Advisory Committee it appears to him expedient so to do for securing, inter alia, that any development prohibited by the prescribed scheme may be carried out notwithstanding the provisions of that scheme, may notify the suspension of the provisions of the prescribed scheme pending the coming into operation of the varying scheme, and such provisions shall be suspended accordingly (sub-s. (1)). Any such notification may suspend the provisions of the scheme either as respects the whole of the land to which the varying scheme is to apply or as respects any specified portion of it, and either as respects all development or as respects development of any specified class (ibid.). A result is that the provisions of Div. 7 with respect to the control of interim development apply to development to which the notification relates (sub-s. (2)): and that means that interim development (including the erection of any building: s. 342T) shall not be carried out except as may be permitted either by ordinance or by the council under the authority of an ordinance (s. 342U). The Ordinance relating to this topic is the Town and Country Planning (General Interim Development) Ordinance (No. 105), gazetted on 9th November 1945 and amended by proclamations of 28th March 1947 and 16th April 1948. It seems that, having regard to cl. 6 and the definitions of Interim development authority and Area in cl. 3 of this Ordinance, and to a delegation to the county council gazetted on 31st August 1951, the county council was the body to grant or refuse permission for interim development, subject only to any intervention of the Minister under s. 342V.

[13]

The only valuer called as a witness for the commissioner, a Mr. Jackson, considered the matter on the footing that the modifications required in order to enable the land to be sold in sub-division, as building lots surrounding an internal area left available for golf or other recreational purposes, could be obtained as a matter of course, and within two or three years, or at most four, from that date. His belief that this was the situation was formed upon the erroneous supposition that the land was "built-up" land, and upon an impression that financial considerations would make it imperative for the county council to consent to the use of his hypothetical lots for residential purposes. His error as to the classification of the land was prima facie important, because if the land had been "built-up" land Div. 2 of the Ordinance would not have applied to it, and the only restriction upon its use would have been that contained in cl. 14 in Div. 3, viz. that it should not be used without the consent of the county council for any purpose other than the purpose for which it was used immediately before the appointed day. That would have meant that to enable the land to be used for residential purposes all that was required was the county council's consent. But if Mr. Jackson was right in thinking that financial considerations made it imperative for the county council that the appellant's land should be released from its restrictions to the extent necessary to allow of residential use, the mistake as to classification would not have great significance: the more elaborate and radical procedure required for "vacant" land would no doubt involve the passage of a somewhat longer period than he had allowed for, but the result would as surely be achieved. In fact, if he had been right in regarding the land as "built-up" land he would have been wrong in his impression as to the financial considerations; for they depended, as I shall show in a moment, upon the applicability of cl. 17 of the Ordinance, and in truth that clause did not apply to "built-up" land. This was so because, although Div. 4 as a whole is made applicable both to "vacant" and to "built-up" land (cl. 16), it is obvious that cl. 17 by reason of its own terms has nothing to say to "built-up" land, since that land cannot be "reserved under Division 2". But his mistake was in the nature of a compensating error: he was right in thinking that cl. 17 applied, for contrary to his belief the land was "vacant" land.

[16]

In fact, within sixteen months of the appointed day on which the County of Cumberland Planning Scheme Ordinance took effect the first part of this procedure was carried out; for on 24th October 1952 a Gazette notice was published under s. 342Y, suspending the scheme, as respects all development, in relation to forty-eight tracts of land, all being golf links, race-courses or other sporting areas, and applying to them the provisions of Div. 7 of Pt. XIIA of the Local Government Act with respect to the control of interim development. The appellant's land, under the description "the Royal Sydney Golf Links", was included in the notice. This pro tanto suspension of the scheme resulted, of course, from a ministerial decision, made after consideration of a report of the Town and Country Planning Advisory Committee; so that it was probably in train for some considerable time before the date of the Gazette notice. Mr. Davis, who not only was the solicitor to the county council but had been one of three original executive officers of that body and was closely connected with the formulation of council policy, said in evidence that one purpose of the suspension was "to show that there was no intention whatever of acquiring the land or interfering with its existing use." Certainly one result in fact was that thenceforth an application for permission to put these lands to residential development could be dealt with on its merits in the light of policy, and without the coercive influence of a fear that refusal would entail an obligation to acquire. There was always the possibility that under s. 342V (3) or (5), the Minister might take the matter out of the county council's hands, but a notional purchaser, considering the land on 30th June 1951, could not reasonably expect that there was much chance of his ever being able to get permission for the use of any substantial part of the appellant's land for residential purposes contrary to the council's policy. Now, that policy, held with a firm conviction that the public interest demanded its fulfilment, was so far as possible to keep the lands coloured dark green on the scheme map to their existing uses as open spaces for purposes of recreation, and to allow only what was called "conforming development", i.e. development conforming to the character of the land as impressed upon it by open-space zoning: Exhibit J., p. 216. The council had declared its belief, in a report made to the Minister for Local Government in 1948: "Open space is woefully deficient, even on past standards. The task is not only to regain lost ground, but to match the current trends of increasing leisure, better transport and keener appreciation of physical and aesthetic recreation" (Exhibit J., p. 148). No one, looking at the matter on 30th June 1951 and having before him the material which is before me, could have doubted that a proposal to divert to residential use any "dark green" land which was actually being used for the playing of golf would be regarded by the county council as conflicting seriously with the application in the county of principles which it had a public duty to protect by all means in its power. It considered, indeed, that the recreational areas within the confines of the scheme were insufficient, and that no less than a further four acres per thousand of the district population was required for golf courses to bring the total up to the desirable standard: Exhibit J., p. 136. In the closely-settled locality in which the appellant's land was situated, a reduction in the area available for recreation would have been considered, I think, especially obnoxious to the principles of the scheme.

[19]

Mr. Davis admitted in cross-examination that "veiled threats" which had come to his knowledge that the appellant might desire to carry out some residential subdivision of its land had been "unwelcome" to the county council "from a planning point of view" - which he agreed meant from the point of view of public policy. He suggested early in his evidence that the council's policy as it existed on 30th June 1951 was such that a person inquiring whether permission might be given for any subdivision of the appellant's land in particular would have been told there was no intention whatsoever of acquiring any of this type of land, and that any application for subdivision, "especially perimeter subdivision" would receive favourable consideration. I do not doubt that the first part of the answer would have been given if the form of the inquiry made it relevant, but I am satisfied on the evidence as a whole that a move towards turning any part of the appellant's land to residential uses would have received the county council's most unfavourable consideration, and would not have been permitted if that council had found itself able to prevent it. In particular, I find it impossible to believe that the council would have received with anything but the strongest disapproval a suggestion for selling off residential building blocks (with a depth of one hundred and fifty feet each, which is what Mr. Jackson envisaged) along the whole length of the street frontages. A comparison of exhibit 5 (Mr. Jackson's subdivision plan) with exhibit D (showing the existing lay-out of the two golf courses), especially when these plans are understood in the light of a view, is enough to dispose of the notion that Mr. Jackson's proposal is one for "perimeter subdivision" in the limited sense in which Mr. Davis used the expression. The proposal would involve a very serious subtraction from the area in fact being used for recreation, and a substantial diminution of the recreational opportunities which the land affords. It could not have been acquiesced in by the county council without a radical departure from the course which, in its considered view, the public interest demanded that it should follow. It may be a possible view - and I have not heard argument on the point - that while the appellant's land is subject to "interim development" provisions the power to grant or refuse permission for residential use belongs to the local municipal council and not to the county council. In any case, the former's consent would be required to any proposed subdivision. It is therefore material to mention that although there is no evidence before me as to the probable fate of an application for such consent, there is a factor in the situation which might fairly be expected to weigh heavily against its success. That is a factor to which Roper J. drew attention in 1938 in the case of Royal Sydney Golf Club v. Valuer-General [1] when he said that if a large part of the appellant's land had come on to the market the nature of the district would have been considerably altered. His Honour mentioned this for the purpose of pointing out that if regard were had to actual sales which had taken place in the district in estimating the prices which might be obtained on a sale of subdivided portions of the appellant's land, allowance would need to be made for the fact that the prices realised on those actual sales had reflected the benefit which the district derived from the existence of the appellant's land as an open space and as a golf course. This is a consideration which the local council might be expected to regard as important from its own point of view. In an area which is populous but large parts of which are occupied by high-class residences, it is a matter of real importance to a body concerned at once with preserving the amenities of the locality and with maintaining values for rating purposes, that if a tract of land such as the appellant's is kept under an embargo against use otherwise than as a golf course, the consequential detriment to the owner of that land must be considered in the light of the consequential advantage accruing to the owners of the lands in a large surrounding area. Reduce the one and you reduce the other. The resulting increase in the value of the appellant's land might easily be much less than the resulting decrease in the combined values of other lands. Accordingly, I think that a purchaser of the appellant's land on 30th June 1951, even if he had foreseen the proclamation of 24th October 1952 and even if the power to give permission for the erection of residences were a matter for the local council until a varying scheme should be brought into effect, would not have been justified in feeling at all optimistic about the prospects of getting such permission.

[22]

The only valuer called on behalf of the commissioner was Mr. Jackson, an officer of the Taxation Department very experienced in matters of valuation. He had participated in the making of the assessment, and he candidly described the process which led up to it as a calculation rather than a valuation. In making the calculation, Mr. Jackson took as a commencing figure a value which had been attributed by the Valuer-General in 1949 to the whole of the appellant's land, exempt and non-exempt. The figure was £271,000. He considered that values generally in the locality had risen by 75% in the interim, but he increased the value of the appellant's land by only 50%. This gave him £406,500. Of that figure he took 89.59%, a percentage which, he says, had been agreed upon in earlier proceedings as attributable to the non-exempt land. This gave him £364,176, and the assessment was based on that figure. I am not assisted by this calculation. The steps involved in it cannot be supported in principle: cf. Deputy Federal Commissioner of Taxation v. Gold Estates of Australia (1903) Ltd. [1] . In addition it fails to make any discoverable allowance for the effect of the restrictions under the County of Cumberland Planning Scheme. Mr. Jackson told me that the effect of the scheme was discussed in the department, and that it was taken into account "in a general way" and allowed for in the reduction of the 75% to 50%. The report written at the time, however, accounted for this reduction by reference only to the fact that the cost which subdivision of the appellant's land would involve rendered inappropriate the percentage which it was thought proper to adopt for the generality of lands in the locality. The report made no mention of the effect of the scheme as an obstacle to selling residential lots in subdivision. That was an effect which it could not be satisfactory to allow for in some hazy "general way". In fact it invalidated the acceptance of the commencing figure of £271,000, for that was a figure reached on a subdivisional basis.

[24]

But one aspect of Mr. Jackson's evidence does seem to me of assistance. As a step in making his valuations, he had to deal with the internal area which he envisaged as remaining for recreational purposes after the subdivided building lots had been sold. In one valuation it was an area of one hundred and eleven and three-quarter acres, in the others only fifty-one acres. These areas he valued at £1,600 per acre. (Although he reduced his over-all figure by 10% in the one case and 20% in the others by way of allowing for such difficulty as there would be in getting permission for subdivision, he realised that this did not really apply to the residual recreational lands, so he translated the percentage into 16.23% of the subdivision lands.) He adopted the value of £1,600 per acre on the basis of two pieces of information. One was that seven acres four and one-half perches of the poorest part of the appellant's land (poorest because of drainage difficulties) had been sold by the appellant to the Woollahra Council for £470 an acre in 1948 while land sales control was in force, and he thought that on the basis of local sales at later dates this was equal to about £900 an acre in 1951. This land was portion of an acre of swampy land covered by a proclamation under the Public Health Act which forbade its being built upon in its existing state. The poor quality of this swampy land and the nature of the burden placed upon it by the proclamation were such that in 1938 Roper J. had held it to be valueless except as a park: [1] . Such value as it had in 1948 must have been referable to a similarly limited use. The second piece of information (upon which I do not think that I should myself place any weight) was that the Valuer-General had valued the Kensington golf links at £1,000 per acre in 1950, before the County of Cumberland Planning Scheme took effect but during a period of interim planning. A knowledge of certain sales in the vicinity of the Kensington course led him to think that the £1,000 was not a value arrived at on the basis of the best use of which the land was capable. Mr. Jackson could find no other information to assist him, and applying his mind to the matter as best he could be fixed on his £1,600 per acre. It may be added that Mr. Litchfield mentioned (though it was for another purpose) a sale in 1951 or 1952 of a golf course at Liverpool for a price which he took to give an unimproved value of £125.6 per acre. He thought that, "leaving out the higher-class areas of Rose Bay and Bellevue Hill and taking a broad average", land values in the Rose Bay area were six times those in the Liverpool area. This would give £750 per acre, for the appellant's land; but six times seems a very conservative estimate for use in comparing the two golf courses.