WATSON v COMMISSIONER FOR ACT REVENUE [2020] ACAT 46 | Case summary

WATSON v COMMISSIONER FOR ACT REVENUE [2020] ACAT 46 | Case summary | Zoe

[96]

The applicant's primary contention was that the exemption under section 11C(1)(b) applied because the property had 'stopped being rented' so it could be occupied by the purchaser as a principal place of residence.[13] Section 11C does not refer to the 'owner' but rather to a 'person'. This suggests that a 'person' under section 11C should have a broader meaning than just the owner. If it was the intention of the legislators that the exemption under section 11C would apply only in respect of the owner of a parcel of land, then this section should refer to 'the owner' rather than 'a person'.[14] The applicant argued that in ordinary terminology, 'a person' "could include the owner, a tenant, a buyer, relatives and friends of any of the foregoing. In fact, any one at all".[15]
As stated above, the parties agreed that the word 'person' has the meaning that is defined in section 160 and the Dictionary of the Legislation Act. The implication is that the person has to be a natural person because that person must be capable of residing in the property. The parties also agreed that both the applicant and the purchaser in the present case fall within this definition.
The applicant further contended that section 11C(3) added additional requirements, so if the property is left vacant or if the 'person' does not move in within three months to make it their principal place of residence, there is no exemption. According to the applicant's argument, this interpretation then makes it a simple factual 'wait and see' test, i.e. did a 'person' occupy it as their principal place of residence within three months of the tenant vacating?[16]
The applicant contended that the delegate's decision was in error because of the following:
- person' in s 11C(l)(b) is a clear and broad term, and includes a buyer;
- that the normal broad meaning of 'person' is confirmed by neighbouring sections of section 11C(l)(b) (i.e. sections 11A-11B) which use the term 'owner' when they clearly intend to refer to 'existing owner';
- that the Explanatory Statement to the Land Tax Amendment Bill cannot override the clear normal broad meaning of 'person' in s 11C(1)(b);
- alternatively, the Explanatory Statement does not support the delegate's findings about the meaning of that term; and
- section 11C(l)(b) LTA refers to an owner-seller's 'knowledge and regard of the prospective use of the property by an intending purchaser' because it means whether in fact a person occupied the property within 3 months of the tenant vacating.[17]
The applicant's contentions squarely raised questions about the interpretation of section 11C(1)(b). This further raises the question of what material may be considered by the Tribunal when engaging in statutory construction. The applicant argued that the Tribunal should not have regard to extrinsic material because the text of section 11C(1)(b) is clear on its face. The applicant relied upon a statement by Gray J in Morro and Ahadizard v Australian Capital Territory [18] (Morro) where his Honour commented:

[98]

In this case, the respondent relied upon the Explanatory Statements for the Land Tax Amendment Bill and the Revenue Legislation Amendment Bill. The applicant relied on the Presentation Speech for the Land Tax Amendment Bill in an alternative argument to his primary argument that extrinsic material should not be used.[20]
The applicant referred to section 141(2)(a) of the Legislation Act which was argued to be a restatement of the literal rule of statutory construction[21] pointing to the obligation of the Tribunal to take into account the "desirability of being able to rely on the ordinary meaning of the Act." Therefore, the meaning of 'a person' in section 11C of the LTA must be the meaning that is used in the Legislation Act unless the LTA displaces the meaning expressly or by a manifest contrary intention. There is no provision of the LTA that expressly or by a manifest contrary intention displaces the definition of a 'person' contained in the Legislation Act. Similarly, the applicant argued that the two references to single sentences in the Explanatory Statements relied upon by the delegate did not displace, either expressly or by a manifest contrary intention, the definition contained in the Legislation Act.[22]
At the hearing of the application, the applicant argued that the Tribunal should adopt the approach to construction that was applied by the High Court in SAS Trustee Corporation v Miles (SAS Trustee Corporation).[23] In that case, the High Court referred to a comparable exercise in statutory construction as the one involved in the present case as a "constructional choice between two possibilities."[24] The respondent agreed with this approach.
In addressing the purpose of the LTA pursuant to sections 139 and 141(2) of the Legislation Act, the applicant argued in his written submissions that a major purpose of the LTA was 'to prevent residential properties being unnecessarily left vacant for periods other than a short time.'[25] Further, the applicant relied the Chief Minister's Presentation Speech for the Land Tax Amendment Bill, where the Chief Minister stated that the broadening the base of land tax is one of the initiatives contained in the Bill "to improve housing affordability".[26] At the hearing, the representative of the applicant conceded that the major purpose of the LTA was to raise revenue but considered this purpose was modified by the legislative intention that revenue be raised and/or land tax imposed unless an exemption applied,[27] which supported the literal interpretation of the exemption in section 11C(1)(b).
As regards the delegate's conclusion that the applicant's interpretation of 'person' in section 11C could not apply because the vendor would need to have knowledge of the prospective use of a property by an intending purchaser, at the hearing the applicant relied upon the adjustments that are made in conveyancing practice between vendor and purchaser for, inter alia, land tax, and the fact that the buyer makes a BVD which is lodged via a portal at the Land Titles Office. In evidence filed after the hearing[28] the Tribunal noted this practice and the comment made by the applicant in his submissions that the BVD may contain information about the buyer's intentions regarding his/her principal place of residence.[29]
Regarding the subsequent amendment of section 11C(1)(b) in the Revenue Legislation Amendment Act and the statement in the Explanatory Statement to the Revenue Legislation Amendment Bill that the amendment 'clarif[ied]' the operation of that provision, the applicants challenged the respondent's argument (set out below) that the new provisions were legislated to correct an error. The applicant said that it would have been relatively straightforward exercise to amend the error by replacing the words 'a person' with 'the existing owner'.[30] Instead, the legislature "came up with two completely new sections."[31] This indicates that a change of policy had occurred rather than a revision of legislation so it better expresses an existing policy.[32]

[107]

The respondent agreed with the applicant's analysis of the meaning of the word 'person' and conceded that applicant's position is arguable if the Tribunal was to take a literal approach to the use of the word 'person' in section 11C(l)(b), that is, the principal place of residence exemption would apply where the property stopped being rented so that any person could occupy it as their principal place of residence. However, this approach ignores the purposive approach to statutory interpretation.[40]
The respondent contended that the purpose of the LTA is stated in Explanatory Statement to the Land Tax Amendment Bill, which is to impose land tax on properties that are not being occupied by an owner as their principal place of residence.[41] Only land which is the owner's principal .place of residence is exempt from land tax. The purpose of the Act encourages an interpretation of the word 'person' in section 11C(l)(b) as referring to an 'owner'.[42] The Explanatory Statement makes it clear that the legislature intended for the exception in section 11C to apply only to owners moving in and out of a principal place of residence, not to any and all people.[43]
The respondent argued that its position is further enhanced by the subsequent amendment of the provision in 2019. The legislature acknowledged the possibility that section 11C had the potential to be unclear and the section was amended by the Revenue Legislation Amendment Act. The respondent relied on the Explanatory Statement of the Revenue Legislation Amendment Bill, in particular the extract quoted above - the 'Move in exemption'[44] - to assert that the amendment served to clarify the original intention of the legislature not alter it.[45] The respondent submitted that the amended section 11C applies to exempt a new owner from paying land tax where they occupy a property as their principal place of residence, and the new section 11CA applies to an owner who stops renting a property so that they may then occupy it as their principal place of residence. Section 11CA replaces section 11C(l)(b).[46]
The respondent further contended that the Tribunal can take into account the consequences of giving a particular meaning to an Act.[47] While the use of a literal approach would not render the legislation 'absurd',[48] the literal reading does not conform to the legislative intent. Should the applicant's interpretation of the provision be favoured, the consequences would be that he would be exempt from land tax for the first quarter of 2019 in relation to the property. This outcome is contrary to the legislature's stated policy intention that all properties not being used for an owner's principal place of residence are subject to land tax. This submission was extended in the hearing where the respondent pointed out that no one would be liable for land tax for that quarter - the seller would not be liable as at 1 January 2019 and the buyer would also not be subject to land tax either. Therefore, if applicant's interpretation was accepted, there would be an entire quarter that the property would not be subject to land tax.[49]

[108]

In SAS Trustee Corporation, the High Court referred to 'the constructional choice' that one must undertake when engaging in statutory interpretation.[50] In this case, the constructional choice consists of a choice between two possibilities when interpreting section 11C(1)(b) of the LTA as it was drafted at the relevant period. The section provided an exemption from the payment of land tax in particular circumstances. The section states that it applies if "a parcel of land stops being rented so it can be occupied as a principal place of residence by a person". As stated above, the applicant argues that 'a person' means any person. Therefore, the exemption to land tax applies to both the applicant and the purchaser because the parcel of land stopped being rented so that it could be occupied as a principal place of residence by the purchaser in due course.
By contrast, the respondent argues that the reference to 'a person' means owner. The exemption does not apply because although the parcel of land had stopped being rented, it was not anticipated on the first day of the quarter that it was to be occupied as a principal place of residence by the owner. 'Owner' is a defined term in the Dictionary of the LTA and the only relevant part of the definition is the registered proprietor of an interest in the parcel. The only person that fell within that definition on the relevant date (being 1 January 2019 - the first day of the land tax quarter) was the applicant. The purchaser did not acquire an interest as owner until 25 January 2019 at the earliest, which was when contract for sale for the property was executed.
The Tribunal has concluded that the constructional choice favours the respondent's interpretation, which is that 'a person' means owner. In coming to this conclusion, the Tribunal has considered the literal meaning of the words and found them to be ambiguous. The context and purpose of the legislation favours this interpretation and it is supported by the extrinsic materials. The consequence of this construction is that the applicant as owner is liable for land tax at the appropriate rate for the relevant quarter while this provision was operative. Therefore, the decision under review is confirmed.

[112]

In seeking to work out the meaning of this legislation the Tribunal must consider the relevant steps in the Legislation Act. First, section 139 of the Legislation Act states that when the Tribunal is working out the meaning of an Act, it must prefer an interpretation that would best achieve the purpose of the Act to any other interpretation. The exercise that is involved in 'working out the meaning of an Act' is articulated in section 138 of the Legislation Act. That provision tells us that this phrase includes resolving an ambiguous or obscure provision of the Act.
The Tribunal considers that the meaning of the phrase 'a person' in the section 11C(1)(b) is ambiguous. The respondent conceded that the provision was ambiguous[52] and also conceded that applicant's position is arguable if the Tribunal was to take a literal approach to the use of the word 'person' in section 11C(l)(b). However, this approach ignores the purposive approach to statutory interpretation. The Tribunal considers that on a literal reading, both interpretations put forward by the parties are plausible and neither interpretation is superior.
The Tribunal notes the obligation under section 140 and at general law[53] to consider the context of the legislation. On this aspect, the applicant pointed to multiple references in the LTA where the legislation uses the word 'owner', suggesting that the use of the term 'a person' in section 11C(1)(b) is the exception and therefore should bear a different meaning. This argument is persuasive however the context of the LTA includes many references to principal place of residence which are linked to ownership.[54] Therefore the context of the LTA provides some assistance but does not resolve the meaning of the phrase 'a person' if the Tribunal were to rely upon the literal meaning of the phrase itself in the absence of legislative purpose.
Pursuant to section 141 of the Legislation Act, the Tribunal may consider material not forming part of the Act. However, in deciding what weight to give to the material the Tribunal must take the following into account, as stated in section 141(2):

[116]

Subsections 141(2)(b) - (c) are not relevant to the present proceedings and section 141(2)(a) restates the literal rule argued by the applicant together with the purposive and contextual approaches which have received judicial approval in, inter alia, SAS Trustee Corporation. Section 141(2)(a) of the Legislation Act is a composite obligation which obliges the Tribunal in working out the meaning of an Act and the weight to be given to particular material to take into account (as stated above) the desirability of being able to rely on the ordinary meaning of the Act_, having regard to the purpose of the Act and the provisions of the Act read in the context of the Act as a whole_. Section 142 of the Legislation Act sets out the material that may be considered in the table that is reproduced above. The Explanatory Statements for the Land Tax Amendment Bill and the Revenue Legislation Amendment Bill is the material that respondent submitted that the Tribunal may rely upon. The applicant argued that it was not permissible for the Tribunal to rely upon this material because the material did not manifest a contrary intention to displace the normal broad meaning of 'person'. However, the Tribunal considers that this is a stricter standard than is applied in the general law and sections 141 - 142 of the Legislation Act. The Tribunal notes Gray J's words of warning about the use of this material in Morro but in this case, the use of these materials is not determinative or a substitute for the text of the legislation, rather they assist the interpretation of an ambiguous provision. This is the approach adopted by the High Court in SAS Trustee Corporation.[55]
Section 141 of the Legislation Act makes it clear that once the Tribunal has engaged in determining the weight of the material under section 141(2) then the provision does not limit the matters that may be taken into account. Section 142 expressly nominates that an Explanatory Statement for the Bill that became an Act may be considered. In that respect, the Tribunal notes that, strictly speaking, only the Explanatory Statement for the Land Tax Amendment Bill may be considered because one must consider the Explanatory Statement or any other relevant document that was presented to the Legislative Assembly for the Act that was passed. The Tribunal nevertheless considers that the Explanatory Statement for the Revenue Legislation Amendment Bill (which was after Republication 25) is relevant to the construction of section 11C(1)(b) of the LTA. However, the Tribunal will consider this material on a different basis - by looking at the legislative history as part of the context of section 11C(1)(b), thus addressing section 141(2)(a) of the Legislation Act and the general law. In relation to the latter, the Tribunal notes the comments of the plurality of the High Court in SZTAL v Minister for Immigration and Border Protection:

[127]

As stated above, the Tribunal does not rely upon this evidence due to the operation of section 142 of the Legislation Act (particularly Table 142 item 4) but rather by considering it as part of the legislative history of the provision, which broadly comes under the rubric of context.[61] The Tribunal must consider the weight to be given to this material under section 141(2) of the Legislation Act, although section 141(2) does not limit the matters that may be taken into account (section 141(3) of the Legislation Act). In this case, the Tribunal considers the material has significant weight. It also fulfils the Tribunal's obligation under section 139 of the Legislation Act to prefer an interpretation that would best achieve the purpose of the Act. This extract is a clear statement of the legislative intention regarding section 11C(1)(b) of the LTA.
The applicant argued that the Revenue Legislation Amendment Act represented a change of policy rather than amending existing legislation. Certainly, the Land Tax Amendment Act had brought about a significant change in policy as regards the circumstances in which land tax would be imposed. The applicant did not provide evidence in support of the alleged change of policy for the Revenue Legislation Amendment Act but invited the Tribunal to draw an inference that policy had been altered because of the elaborate legislative amendments to section 11C that were promulgated in that Act. As stated above, the applicant argued that the amendments could have been readily made by substitution of 'owner' for 'person' in section 11C(1)(b). In the Tribunal's view, the relevant provisions needed more tidying up to resolve the ambiguity than is suggested by this submission. In the absence of any evidence to the contrary, the Tribunal concludes that the Explanatory Statement to the Revenue Legislation Amendment Bill supports the interpretation that the original legislative intention was to focus upon an owner's principal place of residence rather than principal place of residence of persons at large.
Given that the purpose of the legislation is to raise revenue, one of the consequences of the applicant's argument about the literal meaning of the term 'a person' is that neither the seller nor the buyer would be liable for land tax in the relevant quarter. This seems to be an unlikely consequence for a revenue-raising statute.
It is important to note that the drafting of section 11 C(1)(b) caused confusion and had a potentially deleterious effect upon the adjustments that occur between buyer and seller for conveyances of property that occurred while it was operative. The Tribunal allowed the parties to provide evidence after the hearing about conveyancing practice in the ACT and in particular the adjustments that occur between seller and buyer and the operation of the BVD. As stated above, the applicant argued that it was easy to discern the buyer's intentions and that the respondent had notice of this via the BVD. The additional evidence did not prove that the respondent or the seller had clear knowledge of the intention of the buyer at any given time. This type of reporting is also inconsistent with the broad operation of the LTA, which is focussed on self-assessment. Conveyancing practices also cannot be determinative of legislative intention even if they are relevant to the broad context within which land tax is imposed.
The issues discussed in the last two paragraphs are relevant to the Tribunal's constructional choice, as characterised by Gageler J in SZTAL v Minister for Immigration and Border Protection:

WATSON v COMMISSIONER FOR ACT REVENUE

At a glance

Court

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Judgment (188 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (11)

WATSON v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2020] ACAT 46 (26 June 2020)