The words "fee simple" merely denote the quantity of estate. I refer to what I said in the case of The Commonwealth v. New South Wales[4] as to the nature of an estate in fee simple. The references there given show there is no reason whatever for disregarding restrictions or conditions when valuing the fee simple.

My answers to the questions of law in the case stated are as follow: - (1) All the parcels are liable to taxation. (2) (a) The unexpired period of the leased land was the period extending to 4th February 1941. (2) (b) The lease is within the operation of sec. 27 of the Act. (3) The fee simple to be valued is the estate subject to conditions and restrictions in the grant. (4) This was not argued.

I have had the advantage of reading the judgment of my brother Dixon, and agree with it. I find it unnecessary to add anything save upon the question upon which there is a difference in the Court as to the basis upon which the value of the land should be assessed within the meaning of sec. 27, sub-sec. 4 (b), of the Land Tax Assessment Act. I have long been deeply imbued with the hypothetical character of the valuation required for the purposes of the taxation of unimproved land values. In Campbell v. Deputy Federal Commissioner of Land Tax (N.S.W.) I said[5]: "I think a great many difficulties would disappear from these cases if the Legislature were to amend the definition of unimproved value by putting it on a practical instead of a hypothetical basis." The attention which was given to the subject of the valuation of leasehold interests in Jowett v. Federal Commissioner of Taxation[6] and Clark Tait & Co. v. Federal Commissioner of Land Tax[7] left my mind with the impression that the entire basis of valuation of these interests was hypothetical or arbitrary.

I agree with the answers given by my brother Dixon to the questions in the case.

This case raises the question whether the Randwick and Warwick Farm Racecourses, controlled by the Australian Jockey Club, are subject to land tax under the Land Tax Acts of the Commonwealth. The Randwick Racecourse is held under a lease dated 4th February 1920 granted pursuant to the Australian Jockey Club Act of 1873, but the Warwick Farm Racecourse is owned in fee simple by or on behalf of the Club.

The Club relied upon various grounds of exemption which in my opinion cannot be sustained. Under sec. 13 of the Land Tax Assessment Act 1910-1928 the following lands are exempt from taxation: "(a) all land owned by a State or ... other public authority of a State; (g) all land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for ... (3) a building owned and occupied by a society, club or association, not carried on for pecuniary profit; (7) a ... public recreation ground." Sec. 29 provides that "the owner of a leasehold estate under the laws of a State ... relating to the alienation or occupation of Crown lands ... shall not be liable to assessment or taxation in respect of the estate." Randwick Racecourse was granted to trustees, pursuant to the Crown Lands Alienation Act of 1861, for the purposes of a race-course, training ground, &c., and for any other public amusement or purpose. It is not, therefore, "owned by a State or ... other public authority of a State," nor is it held by trustees for any State purposes, but simply for the purposes of a race-course, or other amusements. Warwick Farm Racecourse, being a freehold owned by the Club, is not, of course, owned by a State. The buildings in respect of which the exemption is claimed are all used in connection with the respective race-courses, and are within the race-course enclosures. They are not owned or occupied separately from the race-courses. And the race-courses are not used solely as a site for the buildings. Consequently, the case falls outside the exemption allowed by sec. 13 (g) (3). Randwick Racecourse does not, I think, fall within the description "public recreation ground" in sec. 13 (g) (7), and certainly Warwick Farm does not. The Randwick course is, by the Australian Jockey Club Act 1873, sec. 10, to be maintained and used as a public racecourse or for the purposes in the deed of grant mentioned, and subject to the provisions of the Act and by-laws made thereunder. And sec. 12 enables the committee of the Club to make by-laws regulating all matters concerning the land, and the admission and expulsion therefrom of members of the Club or any person, and rates or charges to be paid for admission, and the management of the race-course. By-laws have been made under these powers regulating the use of the race-course and the charges for admission, and providing various privileges for and restrictions upon members and others. A race-course so controlled is not, in my opinion, a public recreation ground. Lastly, the leasehold estate of the Australian Jockey Club in Randwick Racecourse is not held under the laws of a State relating to the alienation or occupation of Crown lands. It is held under a lease granted pursuant to the Australian Jockey Club Act of 1873, sec. 3. This brings us to the main question in the case. Under sec. 27 (1) of the Land Tax Assessment Act 1910-1928 the owner of a leasehold estate in land under a lease made after the commencement of the Act shall be deemed to be the owner of land of an unimproved value equal to the unimproved value of his estate. Sub-sec. 4 declares that for the purposes of the section "(a) the unimproved value of a leasehold estate means the present value of the annual value of the land calculated for the unexpired period of the lease at four and a half per centum ... on the prescribed tables for the calculation of values; (b) the annual value of land means four and a half per centum of the unimproved value of the land." Under sec. 3 "unimproved value," in relation to land, means the capital sum which the fee simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements (if any) thereon or appertaining thereto and made or acquired by the owner or his predecessor in title had not been made. The difficulty is in ascertaining the basis of the valuation: should the fee simple value of the land be ascertained without any regard to restrictions or conditions affecting the use of the land in the hands of the owner, that is, upon a hypothetical or conjectural basis; or should that value be ascertained having regard to all restrictions and conditions affecting its use in the hands of the owner? The Act itself does not afford much guide to the solution of the problem. Land tax is levied upon the unimproved value of all lands within the Commonwealth which are owned by taxpayers (sec. 10). And the tax is payable by the owner of land upon the taxable value of all land owned by him and not exempt, and it is charged on land as owned at midnight on 30th June preceding the financial year for which the tax is levied (secs. 11 and 12). But it is not always the owner in fee simple that is taxed, for "owner" includes, inter alia, every person who jointly or severally, whether at law or in equity, is entitled to the land for an estate of freehold in possession (sec. 3, definition ). We were referred to some cases in New South Wales and in New Zealand favouring the view that the unimproved value of the land should be ascertained without regard to any restriction or condition affecting its use in the hands of the owner. But in Toohey's Ltd. v. Valuer-General[8] the Judicial Committee said, in relation to the provisions of the Valuation of Land Act 1916 of New South Wales, which are in substantially the same words as the Federal Act: - "What the Act requires is really quite simple. Here is a plot of land; assume there is nothing on it in the way of improvement; what would it fetch in the market? ... It has again and again been pointed out what the value of land on compulsory acquisition is, and the principle here is exactly the same. ... The value to the owner consists of all the advantages which the land possesses, present or prospective." And it is equally clear on the compulsory acquisition of land that if the owner holds the property subject to restriction then it is a necessary point of inquiry how far those restrictions affect the value (Corrie v. MacDermott[9]). It would be strangely unjust if a taxpayer were required to pay a land tax on the value land would fetch in the market, with all its potentialities and free from all the restrictions, although in his hands, owing to restrictions upon its use, the land had little or no value, and might even "be struck with sterility" - to use an expressive phrase of Bowen L.J. Only the clearest words in an Act of Parliament, in my opinion, could justify a construction which would lead to such results. But then it was argued that in the cases covered by sec. 27, the Court is compelled by that section to take the hypothetical value of the fee simple without regard to any restriction upon the use of the land in the hands of the owner. I see no compelling reason for this conclusion. When sec. 27 (4) (b) provides that in calculating the unimproved value of a leasehold estate in land, the annual value of land means four and a half per cent of the unimproved value of the land, the words of the section lead us back to the same problem, and it can hardly be that in one case the hypothetical value of the land is taken, and in another the actual value of the land in the hands of the owner. It is true that in some cases land must be valued in which no fee simple has ever been granted. But that occasions no difficulty, to my mind, for if no fee simple has ever been granted, then no restriction exists upon the use of the land. The statute doubtless forces the assumption that the land has been granted in fee simple and the statutory direction is to take that piece of land as if it were held in fee simple and value it at the sum which the fee simple might be expected to realize, &c. (see sec. 3). Perhaps I should notice an argument based upon a passage in Clark Tait & Co. v. Federal Commissioner of Land Tax[10]. It was said that the lease to the Australian Jockey Club had no certain duration because of the power of resumption reserved in the Jockey Club's lease. I do not agree, and all I feel called upon to say as to Clark Tait & Co.'s Case is that it involved the construction of other documents and is, therefore, of no authority upon the construction of the lease now before us. But I must not be taken as agreeing in the exposition of that case given by my brothers Rich and Dixon.

In my opinion, the questions stated should be answered in accordance with the opinion of the Chief Justice.

This case stated raises the question whether the Australian Jockey Club is liable to be assessed for Federal land tax in respect of its race-courses at Randwick and at Warwick Farm and, if so, how the taxable value is to be ascertained. According to the agreed statement of facts the Club is carried on for the purposes of horse-racing in accordance with its Act, rules and by-laws, and is not carried on for pecuniary profit. The race-course at Warwick Farm is held by the Club for an estate in fee simple, but it has a leasehold interest in the greater part of the land which it uses at Randwick. This leasehold interest was granted to the Club at a peppercorn rent by the trustees for the time being of the land and is subject to the conditions, reservations and provisoes of the Crown grant to them. The Crown grant was made in 1863 pursuant to sec. 5 of the Crown Lands Alienation Act 1861. It contained a recital of the Governor in Council's determination that it was desirable for the public interest that the land should be dedicated for the purposes of public recreation and should be granted to certain persons upon the trusts, with the powers and subject to the conditions thereinafter mentioned. It then expressed a grant of an estate in fee simple to trustees upon trust in their discretion to permit and suffer the land to be used by such persons, clubs or associations at such times and upon such terms and conditions as the trustees should think fit for purposes which, briefly stated, are: (i.) as a race-course for horse-races run under the direction of the Club or some other Club founded for horse-racing; (ii.) as a training ground for race-horses; (iii.) as a cricket ground; (iv.) as a rifle butts; (v.) for any other public amusement or purpose which the Governor in Council might declare a public amusement or purpose for which the land might be used. A power was conferred upon the trustees to lease to the Club or any other racing club, or club formed for purposes to which the land was devoted, for any term not exceeding seven years. The grant contained a reservation for roads, stone, gravel and timber, and a reservation to the Crown of a right to resume all or any of the land for any public purpose. It also contained a condition that if the land were used for any other purposes than those mentioned, the grant should be void. In 1873 an Act of Parliament, called the Australian Jockey Club Act 1873, empowered the trustees to lease to the Club or any other racing club, or club formed for the purposes to which the land was devoted, for any term not exceeding twenty-one years. It authorized the committee of the Club to make by-laws regulating all matters concerning the lands so leased or any other lands vested in the Club, including the rates and charges for admission thereto. The Club has used the land solely as a site for a race-course and as a training ground for race-horses, and the public has been admitted on payment.

The first contention of the Club is that the race-course at Randwick is exempt from taxation by reason of sec. 13 (g) (7) of the Land Tax Assessment Act 1910-1930, which exempts "all land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for ... a ... public recreation ground." This provision looks to the actual use or occupation of the land. The Club must, therefore, maintain that the use or occupation of the land as a site for a race-course and a training ground for race-horses to which the public are admitted upon payment amounts to use or occupation as a site for a public recreation ground. It is not necessary to attempt a definition or enumeration of the characteristics of a public recreation ground. It is enough to say that, in my opinion, a course where race-meetings are conducted to which admission is obtained by payment cannot be said to be used solely as a site for a public recreation ground. The next contention of the Club was that so much of the land as was occupied by buildings and erections consisting of refreshment rooms, offices, conveniences, totalisator stands, horse stalls and so on was exempt by reason of sec. 13 (g) (3); which exempts all land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for a building owned and occupied by a society, club or association not carried on for pecuniary profit. In spite of the agreed statement that the Club is not carried on for pecuniary profit, this claim to exemption cannot succeed. It fails because the buildings do not stand on distinct parcels of land and are not separately occupied. They are built upon the land used as a race-course and form part of its equipment. Their "site" is the race-course and this is not solely used for the buildings owned and occupied by the Club. It follows that none of the land at Randwick or at Warwick Farm in the hands of the Club is exempt under sec. 13 from taxation. In assessing the taxable value of the Club's leasehold interest in the course at Randwick, the Commissioner applied the provisions of sec. 28. He did so upon the supposition that the trustees, as owners of the fee simple, were exempt under sec. 13, so that the case fell within sec. 27 (3), which requires that a lessee shall be assessed as if his lease was made before the commencement of the Act when the owner is exempt under sec. 13. In this the Commissioner was wrong. The trustees are not exempt under sec. 13. The only head under which the trustees, as distinct from the Club, might conceivably seek exemption is par. (a) of sec. 13, which exempts all land owned by a State, or by a municipal, local or other public authority of a State. But the suggestion that the public purposes which they serve as trustees of the land make them part of "the use and service of the" State, within the doctrines expounded in Mersey Docks and Harbour Board Trustees v. Cameron[11]; Coomber v. Justices of the County of Berks[12] is quite misconceived. Nor is it possible to sustain the position that the trustees are a public authority of a State. It follows that the leasehold interest should be assessed, not under sec. 28, but under sec. 27, if it be taxable. But the Club contends that sec. 29 operates to exclude it from taxation. This section provides that the owner of a leasehold estate under the laws of a State relating to the alienation or occupation of Crown lands shall not be liable to assessment or taxation in respect of the estate. The lease to the Club was granted pursuant to the power conferred upon the trustees by the provisions of the Australian Jockey Club Act 1873, and it is said, accordingly, that the trustees did not grant the lease in virtue of their estate but in the exercise of a power to grant leases given by the statute law of the State. The restrictions upon the use of the land arise from the provisions of sec. 5 of the Crown Lands Alienation Act of 1861 and the grant made thereunder. It is said, therefore, that the provisions of the Australian Jockey Club Act 1873 which relax those restrictions and give a larger power to lease come under the same head of legislation and are part of the laws of the State relating to the alienation or occupation of Crown lands. This argument is answered by the circumstance that when the Australian Jockey Club Act 1873 was passed, the land to which it related had ceased to be Crown land. The statute was a special Act relating, inter alia, to land already alienated from the Crown, dealing with the powers of the trustees in their capacity of legal owners holding upon a public trust. Sec. 27 requires that the owner of a leasehold estate in land under a lease made, as the Club's lease was made, after the commencement of the Act, should be deemed to be the owner of land of an unimproved value equal to the unimproved value of his estate, and it provides that for this purpose: - (a) the unimproved value of a leasehold estate means the present value of the annual value of the land calculated from the unexpired period of the lease at four and a half per centum according to calculations based on the prescribed tables for the calculation of values; (b) the annual value of land means four and a half per centum of the unimproved value of the land. The Club claims that its lease falls outside these provisions, because its lease has no unexpired period. It says that although the lease is expressed as a term of years, yet in fact it is subject to the conditions of the Crown grant and these include a reservation to the Crown of a right to resume for public purposes at any time so that the actual duration of the lease is uncertain. For this argument a passage in the judgment of Knox C.J., Gavan Duffy and Rich JJ. in Clark Tait & Co. v. Federal Commissioner of Land Tax[13] is relied upon. The difference between the two cases lies in the character of the interests enjoyed by the taxpayers at the relevant 30th June. In Clark Tait & Co.'s Case the duration of the term of the Crown lease was expressed to be subject to the rights, powers, privileges, terms, conditions, exceptions, restrictions, reservations and provisoes in the Land Acts of Queensland. One of these conferred upon the Crown, the lessor, a right to take a fourth of the land at regular intervals. Another provided for the assessment of rent from time to time at a rate per acre. The conclusion was not difficult that these provisions combined to create a term of uncertain, although limited, duration depending upon the will of the lessor, and not to grant a term certain defeasible upon a condition. A lease which names a period of time subject to the will of the grantor to interrupt it, may be regarded as doing no more than fixing the maximum duration of the term. But in this case the lessors demised the land for a definite term which they have no power to abridge or affect. The term may be earlier determined by the exercise of the Crown's power of resuming the lessor's estate. But this is an external event independent of the lessor's volition operating as a condition subsequent. The consequences of the contrary conclusion, namely, that the lease has no definite term, is by no means clear. The chairman of the Club is the lessee, and sec. 9 of the Australian Jockey Club Act 1873 provides that the property of the Club shall vest in and be held by the chairman and his successors as if they were a corporation sole. Sec. 42A of the Land Tax Assessment Act 1910-1930 requires that where land is occupied by a person who is not the owner and there is no lease for a definite term in respect of the occupancy, he shall be deemed to be the lessee for life and shall be assessable as provided in sec. 27. It is not easy to apply such a provision to the occupancy of a club or of a corporation whether sole or aggregate. But, as I have said, I think the lease has a definite term although liable to be defeated.

It is, therefore, assessable under sec. 27. This means that as a first step in ascertaining the unimproved value of the leasehold estate four and a half per centum must be taken of the unimproved value of the land. "Unimproved value, in relation to unimproved land, means the capital sum which the fee simple of the land might be expected to realize ... assuming that ... the improvements did not exist" (sec. 3). The Commissioner maintains that when this statement is applied to sec. 27 it means that the value must be determined upon an unimproved basis of a hypothetical estate in fee simple free from encumbrances. The Club, on the other hand, contends that the value must be found on an unimproved basis of the actual fee simple granted by the Crown subject to all the conditions and obligations imposed by the grant. It is said the actual title in fee simple must be taken and the value to the owner under such a title must be ascertained, and such cases as Hilcoat v. Archbishops of Canterbury and York[14], Sculcoates Union Case[15] and Corrie v. MacDermott[16] are relied upon. There is much to be said for the view that generally the Act means to tax the unimproved value of land ascertained upon the basis of an unencumbered estate in fee simple in possession and to levy the tax upon the owner of the first estate of freehold or other person entitled to receive the rents and profits. (See sec. 3 definition of secs. 10, 11, 25, 26, 31 and 32.) This view of similar legislation has been adopted by Pike J. in the Land and Valuation Court of New South Wales (Goulston v. Valuer-General[17]; Armidale Racecourse Trustees v. Armidale Municipal Council[18]); and in New Zealand the general references to "land" and "unimproved value" in the Government Valuation of Land Act 1896 were taken to refer, not to the actual estate of the owner, but to the full property in the land (see per Cooper J. in In re Hutt Park and Racecourse Board[19]). But the question in the present case is confined to sec. 27. That section, like sec. 28, prescribes a method of ascribing a value to the leasehold interest which is arbitrary and artificial. Both sections commence with the unimproved value of the land, i.e., of the fee simple. In the case of sec. 28, land must be valued in which no fee simple has ever been granted, and whatever the words "four and a half per centum of the unimproved value of land" mean in sec. 28 (3) (a) they must also mean in sec. 27 (4) (b). Moreover, the exclusion of Crown leases from sec. 27 was not expressed until Act No. 29 of 1914, and the exclusion supposes that without it sec. 27 might apply to Crown leases and thus, like sec. 28, require the determination of the value of an estate in fee simple in land not yet alienated from the Crown. If the provision intended the actual fee simple to be taken, it would be logically difficult to avoid the consequence that it should be valued as a reversion expectant upon the lease. For the choice appears to be between taking the actual estate in fee in its actual state of title and adopting a hypothetical estate. Yet it is evident that both sec. 27 and sec. 28 adopt four and a half per centum of the capital value as an arbitrary rent. It would be strange if the amount of the rent actually reserved in the lease might indirectly affect the amount upon which the four and a half per centum is calculated, as it would do if the lease were treated as an encumbrance. The policy suggested by these sections is to determine the value of the leasehold interest by a calculation one term of which is a percentage of the unimproved capital value of a full interest in the land. For these reasons the better view appears to be that sec. 27 (4) (b) requires the ascertainment of the unimproved value of a hypothetical fee simple absolute and not the actual fee simple subject to conditions and encumbrances.

In determining this value it was not contended on behalf of the Commissioner that the fact that the land was licensed as a racecourse under sec. 51 (1) of the Gaming and Betting Act 1912-1927 should enhance the unimproved value, and it was conceded that this licence might be considered "a similar interest" within the meaning of those words in the definition of in sec. 3 of the Land Tax Assessment Act 1910-1930.

The questions in the case stated should be answered: - (1) All of them. (2) (a) On 30th June 1927 there was an unexpired period of the lease within the meaning of sec. 27 (4) (a) consisting of the period from that date until 4th February 1941. (2) (b) Within the operation of sec. 27. (3) A fee simple unencumbered by the conditions of the Crown grant and the Australian Jockey Club Act 1873 and the lease. (4) To the first part, No; to the second, it does amount to or create "a similar interest."

Questions answered as set out at the end of the judgment of Isaacs C.J. Costs of and occasioned by case stated to be costs in appeal.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.

[1] [1929] HCA 23; (1929) 43 C.L.R. 1.

[3] [1913] HCA 27; (1914) A.C. 1056; 17 C.L.R. 223; 18 C.L.R. 511.

[4] [1923] HCA 34; (1923) 33 C.L.R. 1, at p. 42.

[5] [1915] HCA 25; (1915) 20 C.L.R. 49, at p. 53.

[6] [1926] HCA 22; (1926) 38 C.L.R. 325.

[7] [1929] HCA 23; (1929) 43 C.L.R. 1.

[8] (1925) A.C., at pp. 443-444; 25 S.R. (N.S.W.), at p. 77.

[9] [1913] HCA 27; (1914) A.C. 1056; 17 C.L.R. 223; 18 C.L.R. 511.

[10] [1929] HCA 23; (1929) 43 C.L.R. 1.

[11] [1865] EngR 610; (1864) 11 H.L.C. 443; 11 E.R. 1405.

[13] (1929) 43 C.L.R., at pp. 11-12.

[14] [1850] EngR 691; (1850) 10 C.B. 327; 138 E.R. 132.

[16] [1913] HCA 27; (1913) 17 C.L.R. 223; (1914) A.C. 1056; 18 C.L.R. 511.

[17] (1924) 7 L.G.R. 17, at p. 19.

[18] (1923) 6 L.G.R. 151, at p. 153.

[19] (1907) 27 N.Z.L.R. 246, at p. 251.