In Living and Leisure Australia Ltd v Commissioner of State Revenue [2018] VSCA 237, the Full Court of the Supreme Court of Appeal had to consider whether the Taxpayer was the owner of Crown land as lessee under an alpine lease at Falls Creek. In this case, the legal characterisation of the occupancy rights would determine whether the Taxpayer should be chargeable with land tax being the lessee with exclusive possession of Crown land in accordance with sections 10 and 79 under the Land Tax Act 2005 (Vic) or alternatively, not chargeable with land tax if the lease was in fact a mere licence.

The statutory arrangement between the Taxpayer and the Crown granted the Taxpayer the right to establish and operate ski lifts and associated infrastructure to the exclusion of other parties with commercial interests and secure such rights under a 50 year term. However, the arrangement contained reservations for public access provided it did not interfere with the Taxpayer’s operations.

At first instance, the judgement in the Supreme Court by Justice Croft held that the instruments were leases of Crown land such that the lessee was chargeable with land tax. The Taxpayer submitted that the instruments were not leases as the right to exclusive possession was precluded by reservations to permit public access.

On appeal, the majority of the Full Court of Supreme Court (Chief Justice Ferguson and Justice Whelan) took the view that the arrangement constituted a leasing arrangement consistent with Radaich v Smith1 having regard to the following factors:

  • The terminology within the instruments where terms such as ‘lease’, ‘demise’, ‘rent’, ‘lessor’ and ‘lessee’ were used. Whilst the terminology is not a determinative factor, it is relevant as the clauses contained within the leasing arrangement provided effective control of the land to the lessee.
  • The Taxpayer did not need exclusive possession of all the land but of the critical parts and the business could not reasonably be carried out without exclusive possession of those critical parts and those critical parts are not fixed or delineated.
  • The public access provisions assume the existence of a right to exclude and maintained by the relationship between the operators and the land, as public access is provided to other parts of the land for non-commercial recreational use and enjoyment.
  • The Taxpayer is able to control the conduct of members of the public on the land which is consistent only with having control over the land. This is evinced by provisions preventing conduct which is riotous, disorderly, offensive or illegal.

The Court held that reservations in a lease for public access are a significant consideration but not given determinative weight when deciding whether a grant constitutes a lease or a licence. Ultimately, the terms must be considered in relation to the relevant circumstances.

In a lengthy dissent, Justice Niall took the view that the reservations in the lease were so extensive that they precluded the making of a finding that the lessee had exclusive possession of the land on the basis that the reservation in favour of all members of the public to enter and enjoy the land at any time was inconsistent with the existence of a general right to exclude. Niall J took the view that the lessee was able to limit access to its commercial operation not by having exclusive possession over the land.

In this case, it was necessary for the ski lift operators to have exclusive control over the parts of the land on which its infrastructure operates and the right for public access be restricted to recreational purposes only, with the ski lift operators having the power to exclude access on the grounds of nuisance, disorderly, offensive or illegal conduct. The Taxpayer did not need exclusive possession of all the land, rather, only needed exclusive possession of the critical parts of it which had been granted for a 50 year term.

We agree with the majority decision that the commercial imperative for the operator would have warranted that exclusive possession be conferred for use and occupation of the land the subject of the lease which should not preclude a Taxpayer from paying its share in land tax through its exclusive use and occupation of land.