Ryde Municipal Council v Macquarie University

139 CLR 633

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(Judgment by: Aicken J)

Ryde Municipal Council v Macquarie University

Court:

Judges: Gibbs ACJ
Stephen J
Jacobs J
Murphy J
Aicken J

Hearing date: 4 April 1978
Judgment date: 19 December 1978

Sydney

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Judgment by:
Aicken J

AICKIN J. The proceedings out of which this appeal arises were commenced in the Equity Division of the Supreme Court of New South Wales where the respondent Macquarie University ("the University") sought a declaration that certain land, the subject of a rate notice dated 15th February 1974 issued by the Ryde Municipal Council ("the Council"), was not ratable under the Local Government Act, 1919 (NSW), as amended ("the Act"). The University appealed against the levying of that rate to the Land and Valuation Court pursuant to s. 133 (2) of the Act. For reasons which are referred to in the judgment of Waddell J. in the Equity Division, the parties agreed that the issue should be determined by a proceeding for a declaration in the Equity Division (1976) 2 NSWLR 36 .

A further preliminary point which should be mentioned is that it is now said that the rate notice issued by the Council is invalid because the valuation on which it is based was not made in accordance with the provisions of the Valuation of Land Act, 1916 (NSW), as amended, which governs the making of valuations by the Valuer-General in relation to land in certain parts of the State, including the municipality of Ryde. Section 26 of that Act deals with circumstances in which more than one parcel of land may be included in a single valuation notice and s. 27 (1) provides that where several parcels of land owned by the same person are not of the same class of tenure or are separately let to different persons, they shall be valued separately. Section 27 (4) then provides that, "Where a part only of a parcel of land is subject to a particular rate, the value of such parcel shall be apportioned so as to show separately the value of that part which is subject to the particular rate." The land now in question forms part of the land owned by the University and is the subject of leases relating only to small portions of that land. It is said this mode of valuation was not followed, but there was obtained from the Valuer-General a valuation only of the area subject of the leases. We were informed after the conclusion of the hearing that it was common ground that the rate as levied was invalidly levied. It was said, however, that if the correct method of valuing had been adopted the issue would be the same, namely, whether the areas the subject of the leases were ratable at all. It was urged, therefore, that the issue in this proceeding was nonetheless a live issue as between the University and the Council because if the Land and Valuation Court were to take the correct step of quashing the rate or the assessment the correct valuation procedure would presumably then be adopted by the Valuer-General and a new rate notice issued in respect of which a fresh notice of appeal would then be lodged.

It can scarcely be regarded as satisfactory that these proceedings have gone through two courts and have now reached this Court without this point being drawn to the attention of the Court. However the written objection to the rate notice did not raise this ground and s. 133 (2) suggests that time has gone by for raising this objection. Accordingly, it seems to me that as the question of ratability has now been argued in full before three courts it is proper for this Court to deal with the appeal on its merits.

The facts relating to the issue are not in dispute and it is convenient to take them from the judgment of Waddell J. with such minor adaptations as reflect only the present stage of the proceedings.

The University was established and incorporated by the Macquarie University Act, 1964. Section 4 (1) provides:

"A University, consisting of a Council and Convocation and graduate and undergraduate members, shall be established at Ryde in the State of New South Wales."

Section 6 provides that the functions of the University shall include the provision of educational facilities at University standards and the establishment of such facilities as the University deems desirable for the provision of courses of study and the dissemination of knowledge and the promotion of scholarship. Section 21 (1) confers certain powers on the Council. Among these powers are that the Council:

"shall have the entire control and management of the affairs and concerns of the University and may act in all matters concerning the University in such manner as appears to it best calculated to promote its objects and interests."

The subject land is in a central position on the University campus. It has a frontage to the north-west corner of approximately 202 ft and a depth of approximately 72 ft. It is vested in the University. It has been the subject of a separate valuation by the Valuer-General purporting to act pursuant to the Valuation of Land Act 1916. There is erected on it a separate building having two levels. Portions of this building are leased for commercial purposes. The upper level includes the University Co-op Bookshop, a retail shop conducted by Grace Bros. Pty. Ltd., a chemist shop and an office leased to the Australian Union of Students for the purposes of a travel centre. The lower level includes a branch of the C.B.C. Bank and the Rural Bank, a storeroom used by Grace Bros. Pty. Ltd., a handicrafts and gift shop and an area occupied by the University Sports Association known as "The Union 'Downstairs'" which also has in it a shop known as "Dave's Place".

The University claims that the subject land is not liable for rates upon two grounds of exemption contained in s. 132 (1) of the Local Government Act 1919 being: "(d) land which belongs to . . . (a) public charity, and is used or occupied by the . . . charity . . . for the purposes thereof." and "(fiii) land which is vested in the Macquarie University, . . . and is used or occupied by the University . . . solely for the purposes thereof."

The relevant history of the subject land is as follows. Since the initial planning of the University it has always been provided that there should be a section devoted to commercial and shopping facilities enabling the University to avoid the necessity for its students and members of staff to make a special trip in order to obtain access to banking or shopping facilities not provided on the University campus. In order to achieve this object the subject land, which is described as "the market" was placed under the control of the Macquarie University Union pursuant to the terms of its constitution which designates the Council of the Macquarie University as the ultimate supervising authority of the Union's activities. The constitution of the Union, the initial construction of the Union facilities and the building on the subject land and the negotiations with various tenants with respect to the proposed occupancy of the building, which came to be known as the "Union Commercial Centre", all took place entirely under the supervision and subject to the consent of the University council.

The proprietors or managers of the various commercial activities on the subject land have each sworn an affidavit to the effect that their activities are directed to the special needs of the staff and students on the University campus and that their customers do not appear to include members of the general public. It is inherently unlikely that members of the public would patronize any of the shops or commercial premises in question because access to the University is in general restricted to persons who go there for purposes associated with its activities, and the position of the premises in the centre of the campus is, in any event, unlikely to attract members of the public.

It is formally admitted by the University - 1. The various shops on that part of the University's land the subject of the summons, whilst primarily serving the students and staff of the University, are open to the general public and operate with a view to profit. 2. Each of the banks provides a general banking service to its customers including the lending of money, inter alia, for housing.

It is said for the Council that the provision of these facilities is no more than a convenience because there are two adequate shopping centres within a reasonable distance of the campus, namely the Epping shopping centre which is by road some 3.3 kilometres away and the Eastwood shopping centre which is 3.9 kilometres away. However, in each case it would be necessary to travel by private motor vehicle or public transport and the great convenience of having commercial facilities on the campus is undeniable. Mr. Barclay, the Deputy Vice-Chancellor of the University, has given evidence that during the course of approximately twenty-six years' association with universities he has extensively visited universities both in Australia and overseas and that it is a common practice, where a university is not in close proximity to commercial and shopping facilities, for some limited shopping and commercial area to be provided for the convenience of staff and students. In this respect it is to be noted that during the academic year 1974 there were 336 students and members of staff actually resident upon the campus. The total student population was approximately 8,012 and the number of staff employed approximately 1,350. The total area of land owned by the University is some 336 acres and staff and students are about the University campus throughout the whole of the day and until late in the evening during every week day and on most weekends during term time. During vacation there are always a considerable number of staff on duty and usually students attending the University to use its facilities and especially the library.

Copies of the leases were not put in evidence, but they must be assumed to be in a form which creates a leasehold interest in the land and which entitles the tenant to exclusive possession, subject only to such restrictions as may be imposed by the terms of the lease, and subject to compliance with the terms and conditions of the lease. It appears from the affidavits that the leases purport to be granted by the Macquarie University Union, but in this respect, it must have been acting as the agent of the University itself. The Union is, so far as appears, an unincorporated association deriving its authority from the University itself and in no sense of the term having any title to the land in question.

There is no dispute about the nature of the activities of the various tenants nor as to the fact that the great bulk of the customers are students or members of the staff of the University, academic and otherwise, and other persons having some connexion with the University. There is a degree of unanimity of expression in the affidavits sworn by or on behalf of the tenants, which might otherwise have aroused suspicion, but as these points are not in dispute no problem arises.

The relevant provision of the Act is s. 132 which so far as material provides that:

"132. (1) All land in a municipality or shire (whether the property of the Crown or not) shall be ratable except -

. . .

(fii) land which is vested in the Macquarie University, or in a college thereof, and is used or occupied by the University or college, as the case may be, solely for the purposes thereof. . "

The general scheme of the Act so far as rating is concerned is that the rates fall upon the owner of land and that all land is ratable, except in so far as it falls within exemptions which are set out in a lengthy list. Paragraphs (a), (b), (c) and (e) are concerned with land owned by the Crown and the exemptions are expressed in those paragraphs by reference to its use. Paragraph (g) exempts land owned by the Crown, not being let to any person for private purposes, and not being occupied and used by the Crown for an industrial undertaking. In the light of that provision it is not easy to see the purpose of pars (a), (b), (c) and (e), but nothing turns on that. The remaining exemptions are expressed in terms of land vested in or belonging to particular bodies and in those cases the exemption depends upon the land being "used or occupied", or "used and occupied", by that owner, and in most cases with the addition of the words "solely for the purposes thereof." The principal point which was argued is whether the land fell within the exemption in par. (fii) of s. 132 (1) of the Act.

There are a great many cases in which the terms "use" and "occupy" have been discussed in relation to land and premises as used in a variety of Acts, in particular in rating Acts and land tax Acts. The context in which the words have been used has varied greatly and cases decided on one piece of legislation must be examined with great care before being applied to other legislation.

In the field of rating the general tendency has been to treat the expressions "used" and "occupied", when used together, as involving two distinct conceptions, not as synonyms or in a cumulative sens, but as each involving a separate relationship to the land, though in many cases they overlap. However the compound expression "used and occupied" is found both in statutes and in judgments, and is used in s. 132 (1) (h) and (j) of the Act. The true position seems to be that one who occupies land necessarily uses it, while one who uses may, but does not necessarily, occupy. Thus, for example, a licensee may use land without occupying.

I shall begin with the term "occupy" and note first that it is used in relation to land, and in the present case in relation to land which is let by the owner to tenants which are carrying on their own businesses on the land. That relationship is one which normally produces the consequence that the owner is not in occupation, but the tenant is. The grant of a lease involves the grant of the right of exclusive possession to the tenant. Unless a tenant has sublet or otherwise permitted some person to occupy, it is abundantly clear that, as between landlord and tenant, it is the tenant who is in occupation and in possession. It may be that questions could arise as between a landlord and a licensee, or a tenant and a licensee, as to who was in occupation, but that is not the present case. There is ordinarily implied from the relationship of landlord and tenant a covenant for "quiet enjoyment". An implied, as well as an express, covenant for quiet enjoyment secures to the tenant at least the right to exclusive possession of the land as against the landlord and those claiming under him.

The evidence makes it clear that each tenant is in occupation of the relevant part of the leased area and is using it for, and by, carrying on its business thereon, and that the tenant's occupation and possession is exclusive of the University.

I am, therefore, of opinion that the University cannot succeed in these proceedings upon the footing that it is in occupation of these premises at all.

The question is whether it can be said that the premises are "used" by the University "solely for the purposes thereof". As an ordinary matter of language I would not consider it possible to say that land which has been let by the University to a tenant who is in occupation and carrying on his business thereon, can be said to be "used" by the University "solely for the purposes thereof". There can be no doubt that land occupied by a tenant, upon which the tenant carries on its own business, is used by the tenant for its own purposes.

A question arises as to the meaning of the phrase "used" by the University "solely for the purposes thereof". It may mean first that only the University uses it and such use is solely for the purposes of the University, or second, that in so far as the University uses it, such use is solely for University purposes. If it bears the first meaning the University cannot succeed because, even if it is used in the relevant sense by the University, it is also used by the tenants for their own purposes. Thus the use of the land is not solely by the University. In my opinion, that is the correct meaning of the expression. It is, however, necessary to consider the other possible meaning. If it bears the second meaning, two overlapping questions arise, first, does the University use the land at all, and second, does it use it solely for its own purposes? One must therefore ask, what are the purposes of the University?

Sections 6 and 7 of the Macquarie University Act, 1964 provides as follows:

"6. The functions of the University shall, within the limits of its resources, include-

(a) the provision of educational facilities at University standards for persons who being eligible to enrol seek the benefits of such facilities;

(b) the establishment of such facilities as the University deems desirable for -

(i)

the provision of courses of study, whether at Ryde within the University or elsewhere, for evening students;

(ii)

giving instruction to and the examination of external students;

(iii)

providing courses of study or instruction at such levels of attainment as the Council deems appropriate to meet the special requirements of industry, commerce or any other section of the community;

(c) the dissemination of knowledge and the promotion of scholarship otherwise than as hereinbefore provided.

7. The University -

(a) shall, as soon as convenient after the commencement of this Act, proceed to provide facilities for study in the disciplines of Arts, Science and Economics; and

(b) may, for the purpose of discharging its functions provide such facilities for its undergraduates and students and other persons as it deems desirable.

For the purpose of this section the University may establish such Faculties, Schools and Departments as it sees fit."

In addition s. 21 confers certain powers on the council, including:

"21. (a) Subject to this Act and the by-laws the Council -

(a) may provide courses in Arts, Science and Economics, and such other courses as it deems fit and may confer the several degrees of Bachelor, Master and Doctor, and such other degrees and grant and issue such certificates in the nature of degrees, diplomas or otherwise as it thinks fit;

(b) may appoint and terminate the appointment of academic and other staff of the University;

(c) shall have the entire control and management of the affairs and concerns of the University and may act in all matters concerning the University in such manner as appears to it best calculated to promote its objects and interests;

. . .

(g) shall have the control and management of all real and personal property at any time vested in or acquired by the University, and may dispose of real or personal property in the name and on behalf of the University; . . ."

It is important to bear in mind the familiar distinction between objects (or purposes or functions) and powers. I would not doubt that the University has power to operate a bookshop or to provide meals for, or sell food to, its staff and students, but equally I would not doubt that those are not part of its objects, purposes or functions as a University. Again there can be no doubt that the University has no power to operate a bank. Even if the University has power to operate a chemist's shop, a travel agency, or a department store, which I would seriously doubt, I am satisfied that not one of its purposes is to do so. The argument, however, is that it is convenient to the University and to its staff and students that these banks and shops should be located in the grounds of the University, and that the same practice is followed in other universities, and those facts again are not in doubt. The question is whether they are enough. In my opinion they are not; none of these activities are purposes of the University in any sense of that term.

It is necessary to examine some of the authorities cited. It is convenient to consider first the relevant cases which have been decided on this Act and directly comparable provisions in rating and land tax Acts in the various States. I begin with Commissioners of Taxation v. Trustees of St. Mark's Glebe (1902) AC 416 , though it is by no means the earliest relevant case. It dealt with certain Glebe lands (being Crown lands vested in trustees for parochial church purposes) partly let on building leases and partly waste. The question was whether the lands let on building leases were "occupied or used exclusively for, or in connection with, . . . public charitable purposes, churches, . . ." within the meaning of s. 11 (5) of the Land and Income Tax Assessment Act 1895 (NSW). It may be noted that the exempt purposes are much less strictly confined than in the provision now in question, but the case is important because of what was said about "use". The Privy Council held that the leased land was not exempt from land tax and Lord Davey said (1902) AC 416, at pp 420-421 :

" . . . reading the whole of s. 11, subsection (5), of the taxing Act, their Lordships think that the words point rather to the use and occupation of the land itself, and do not prima facie apply to the use or purpose to which the rents and profits derived from the land may be applied. A private dwelling-house is used and occupied by the owner or lessee of it as a residence for himself and his family, and it would, in the opinion of their Lordships, be a forced construction to say that it was used by the lessors for their own purposes because they apply the rent which they receive in a particular way. If it be said that the land is used by the trustees, though not by the lessees, for the charitable purpose, the answer would seem to be that the land is, strictly speaking, not used by the trustees at all. They have parted with the use and occupation of it during the term of the lease."

In Council of the City of Newcastle v. Newcastle Hospital (1956) 96 CLR 493 it was held by a majority of this Court (and approved by the Privy Council (1959) 100 CLR 1 ; (1959) AC 248 that land was "used or occupied by the hospital . . . for the purposes thereof" within the meaning of s. 132 (1) (d) and accordingly was exempt from rating in the following circumstances. The hospital owned some three hundred and twenty-seven acres of land of which some two hundred and ninety-one acres was rough bushland, heavily timbered and in substantially its wild natural condition. On the remaining thirty-six acres the hospital buildings were erected; they and their surroundings occupied a fenced area of seventeen and a half acres and the remaining eighteen and a half acres was outside the fence, and although not physically distinguishable from the three hundred and twenty-seven acres of bushland, was not in fact rated by the Council. No physical use was made of the two hundred and ninety-one acres, but it was proved that that area ensured a clear atmosphere for the treatment of patients, provided psychological advantages for patients, and provided opportunities for future expansion. It is to be noted that there was no suggestion that anyone other than the hospital "used" the land in any way. Williams J. said that, "There can be no suggestion in the present case that the area of two hundred and ninety-one acres was acquired to be left derelict. It was purchased so that it should be occupied by the respondent to the exclusion of anyone else and it is the respondent that is in occupation" (1956) 96 CLR, at p 505 . Taylor J. said that the land was "used by the hospital" and that:

"The uses to which property of any description may be put are manifold and what will constitute 'use' will depend to a great extent upon the purpose for which it has been acquired or created . . . where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient in my opinion, if it is shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land."

(1956) 96 CLR, at p 518 . In the Privy Council Lord Denning said (1959) 100 CLR, at p 4; (1959) AC, at p 255 :

"An owner can use land by keeping it in its virgin state for his own special purposes . . . legal possession is not the same as occupation. Occupation is matter of fact and only exists where there is sufficient measure of control to prevent strangers from interfering, . . ."

In my opinion, nothing in these two cases assists the University in any way. On the contrary, what they decide about "use" is contrary to the arguments for the University and, if they do not require a decision against the application of the exemption, they point strongly against it.

In Randwick Corporation v. Rutledge (1959) 102 CLR 54 this Court decided that certain land which was reserved from sale and set apart for use as a racecourse and then granted to trustees who were permitted to use it "as a racecourse, as a racehorse training ground . . . or for any other public amusement or purpose declared by the Governor in Council" was not exempt from rating. The land was leased to the Australian Jockey Club. That Club used the land as a racecourse and admitted the public on race days on payment of reasonable charges and on special occasions permitted selected members of the public to come on the land for parties or the like. The land was also used for the training of racehorses. Members of the Club enjoyed various facilities on the land not available to the public. It was held by this Court (Dixon C.J., Fullagar, Kitto, Menzies and Windeyer JJ.) that the land was not exempt from rating as "land . . . which has been dedicated or reserved from sale by the Crown for public health, recreation, enjoyment or other public purposes of the like nature, and is used for one of those purposes" and that it was not used as a public reserve. Dixon C.J. and Kitto J. agreed with the judgment of Windeyer J. as did Fullagar J. The judgment of Windeyer J. contains a detailed account of the establishment of public reserves and the reservation, appropriation and alienation of the waste lands of the Crown in New South Wales. For present purposes interest in the judgment lies in its discussion of the expression "use" of land and of the words "exclusively" and "solely" in relation to use of land (1959) 102 CLR, at pp 88-94 . Speaking of the facts of the case itself he said (1959) 102 CLR, at p 88 :

"The only way in which the trustees use the land is by leasing it to the Club, to be used by it as a racecourse in accordance with the grant and the Australian Jockey Club Act. Indeed the land is not really used by the trustees at all, for they have parted with the use and occupation of it for the term of the lease. (Commissioners of Taxation v. Trustees of St. Mark's Glebe (1902) AC 416, at p 421 .) When the Act speaks of land used for a public reserve it is referring to the actual use to which the land is put by the persons who in law control it for the time being."

Many of the early cases are there discussed and I do not need to add to Windeyer J.'s account of them. He said (1959) 102 CLR, at pp 93-94 :

"Where an exemption from rating depends upon the use of land exclusively for a particular stated purpose, then the use must be for that purpose only (Nunawading Shire v. Adult Deaf and Dumb Society of Victoria (1921) 29 CLR 98

. . . . As Kitto J. said in Lloyd v. Federal Commissioner of Taxation (1955) 93 CLR 645 , at p 671 , such words confine the use of the property to the purpose stipulated and prevent any use of it for any purpose, however minor in importance, which is collateral or independent, as distinguished from incidental to the stipulated use. Even without such words, an exemption from rating based upon use or occupation for a particular purpose or in a particular manner can only apply when the property is so used that it can properly be described as used for that purpose or in that manner, any other user being merely incidental, or at least not inconsistent with such main user."

All these observations are in my opinion opposed to the decisions of the trial judge and the majority of the Court of Appeal in this case and to the University's argument. Even if one can say, contrary to the observations which I have quoted above, that the University is using the land subject of these leases, it cannot be said that the land is being used solely for its purposes or that the University's use by letting is solely for the purposes of the University. The land is undoubtedly being used by, and for the purposes of, the tenants, which purposes are by no means identical with those of the University. I think that "use" means physical use and that mere letting does not in this exemption constitute "use". The fact that the University finds the use to which the tenants put the land convenient to it cannot make their use that of the University. The use by the tenants for their own purposes is independent of whatever use (if any) by the University is involved in its letting of the premises; in my opinion it cannot be described as "incidental" to the University's use for its purposes.

In my opinion both the ordinary meaning of the words of the exemption in s. 132 (1) (fii) and the cases to which I have referred are fatal to the exemption claimed by the University.

The University relied on the decision of the Privy Council in Commissioner of Income Tax v. Hanover Agencies Ltd. (1967) 1 AC 681 . Under the income tax legislation of Jamaica a deduction was allowable for "a reasonable amount for exhaustion, wear and tear of any building or structure used by the owner thereof for the purpose of acquiring income". It was held that, where a building was let to tenants and rent received, it was used by the owner for the purpose of acquiring income. In its context the decision appears, with respect, to be inescapable. It is indeed difficult to find another example of how a building itself could be so used, as distinct from being used as a site for the carrying on of a business which itself earns income. I cannot, however, regard it as of any assistance in the construction and application of s. 132 (1) of the Act.

It was argued for the University that the facts showed that the provision of these premises was an integral part of the planning of the University and that the facilities were designed for the use of staff and students and to promote the more efficient use of their time. So much may be granted, but does it follow that such fact showed that there was "use" by the University? It was argued that, unless the letting of the premises denied such use, it did constitute use. It was also said that the obtaining of rent was not a primary consideration, but the fact is that the obtaining of rent was one of the purposes because it was an essential part of the financing of the building. In the present statutory context I would not regard such letting as use by the University, although the letting produced a situation in which the actual use by others was convenient for and planned by the University.

This argument comes close to, but is not the same as, the basis on which Wells J. decided Council of the South Australian Institute of Technology v. Corporation of Salisbury (1975) 10 SASR 225 . The case concerned premises leased by the Institute to persons who conducted a bookshop but which were claimed to be "used for the purposes" of the Institute within a rating exemption in s. 5 of the Local Government Act 1934-1972 (SA). It appeared that there was close collaboration between the staff of the Institute and those operating the bookshop and that the Institute exercised substantial influence over its activities. Wells J. said (1975) 10 SASR, at p 230 , "All of those facts, it seems to me, lead to the conclusion that the Book-store, having regard to its essential functions, is part and parcel of the Institute judged by the way in which it actually functions." Although Wells J. points out that the words of the exemption referred to "used for the purposes of the Institute" and not to "used by the Institute for the purposes of the Institute", he held that "the Institute of Technology has, through setting up and authorising the creation and managing of, this book-shop, used the land for the purposes of the Institute of Technology." (1975) 10 SASR, at p 235 . That conclusion goes further than was required by the words of the exemption and I am, with respect, unable to agree with it. For reasons which I have set out already I cannot regard the letting of land for use by a tenant as a bookshop or for other commercial purposes of its own (even assuming that there was a covenant requiring such use) which purposes are convenient for the University, as use by the University solely for its purposes. Whether the actual decision of Wells J. can be supported on the ground that the use was for the purposes of the Institute (though not by it or solely for its purposes) I do not need to consider.

Reliance was also placed on par. (d) of s. 132 (1) which provides exemption for "land which belongs to any public hospital, public benevolent institution, or public charity and is used or occupied by the hospital institution or charity, as the case may be for the purposes thereof". It was said that exemption applied because the University was a "public charity". Assuming that to be so it is still necessary to show use or occupation by the University. The reasons I have expressed above show that the land is neither "occupied" nor "used" by the University for its purposes, and accordingly this exemption is not available.

For those reasons I am of the opinion that the premises are not exempt from rating under the Act and that the appeal should therefore be allowed.