BPG Caulfield Village Pty Ltd v Commissioner of State Revenue

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TAXATION LIST

S CI 2015 02095

BPG CAULFIELD VILLAGE PTY LTD (ACN 143 652 493)	Appellant
v
COMMISSIONER OF STATE REVENUE	Respondent

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 April 2016
DATE OF JUDGMENT:	22 April 2016
CASE MAY BE CITED AS:	BPG Caulfield Village Pty Ltd v Commissioner of State Revenue
MEDIUM NEUTRAL CITATION:	[2016] VSC 172

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TAXATION – Acquisition of interests in certain land holders – Duties Act 2000 Ch 3, Pt 1 and 2, particularly ss 77-86 – Whether “economic entitlement” was acquired – Whether “economic entitlement” amounted to an interest of less than 50 per cent in a “private landholder”.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr S.P. Steward QC with Mr D.C. Morgan	Norton Rose Fulbright Australia
For the Respondent	Mr P. Solomon QC with Mr C. Horan QC	Solicitor for the Commissioner of State Revenue

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Separate Questions............................................................................................................................ 1

Agreed facts......................................................................................................................................... 1

Overview of contentions.................................................................................................................. 3

Legislation........................................................................................................................................... 6

Legislative history—land rich provisions................................................................................... 12

Legislative history—landholder duty provisions...................................................................... 16

Proper construction of s 81............................................................................................................. 18

An interest of 50 per cent in a private landholder..................................................................... 37

Conclusion......................................................................................................................................... 44

HIS HONOUR:

Introduction

This proceeding arises from an objection to an assessment for duty under the Duties Act 2000 (“the Duties Act”) in respect of an acquisition made by BPG Caulfield Village Pty Ltd (“BPG”) in relation to the development and sale of certain land adjacent to the Caulfield Racecourse from Victorian Amateur Turf Club (incorporating the Melbourne Racing Club) trading as the Melbourne Racing Club (“MRC”), which is to be called Caulfield Village (“the CV Land”). The controversy with respect to the assessment as between BPG and the Commissioner of State Revenue (“the Commissioner”) is founded upon differing contentions as to the proper interpretation of s 81 of the Duties Act. The parties have agreed that the efficient determination of the objection to the assessment would be facilitated by the determination of two agreed questions with respect to the interpretation of these provisions.

Separate Questions

Pursuant to orders made on 14 August 2015 and 11 December 2015, two questions have been set down for separate determination as follows:

·First Question: On the facts set out in the Annexure which are agreed between the parties, did BPG Caulfield Village Pty Ltd acquire an economic entitlement within the meaning of s 81(2)(d) of the Duties Act?

· Second Question: On the facts set out in the Annexure which are agreed between the parties, if BPG Caulfield Village Pty Ltd acquired an economic entitlement within the meaning of s 81(2)(d) of the Duties Act, did the economic entitlement amount to an interest of less than 50 per cent in a private land holder within the meaning of s 81(5) of the Duties Act?

Agreed facts

The Annexure to which reference is made in both the First Question and the Second Question is as follows:

STATEMENT OF AGREED FACTS
1.Victorian Amateur Turf Club (incorporating the Melbourne Racing Club) trading as the Melbourne Racing Club (MRC) is constituted as a body corporate under s 3 of the Victorian Amateur Turf Club (incorporating the Melbourne Racing Club) Act 1963 (Vic), and is a “private company” within the meaning of ss 3 and 71 of the Duties Act 2000 (Vic) as in force on 1 July 2012 (the Duties Act).
2.At all relevant times, MRC has had land holdings in Victoria with a total unencumbered value of more than $1,000,000.
3.On 17 August 2012, MRC and BPG Caulfield Village Pty Ltd (BPG) entered into a Development Agreement in relation to the development and sale of certain land adjacent to the Caulfield Racecourse which is to be called “Caulfield Village” (the CV Land).
4.The Development Agreement was in writing. The first page of the said Development Agreement is attached and marked “Annexure A” (for identification). The whole of the Development Agreement will be produced at the hearing of the preliminary issue.
5.The CV Land comprised:
(a)lands owned by MRC (the Subject Land); and
(b)lands owned by the Crown or by third parties in respect of which MRC had contractual rights.

6.As at 17 August 2012, MRC held an estate in fee simple in:
(a)the Subject Land; and
(b)other lands in the State of Victoria.

7.As at 17 August 2012, the unencumbered value of the Subject Land was $32,550,000.
8.The parties agree that, at all relevant times, the unencumbered value of the Subject Land has been less than 50 per cent of the unencumbered value of all land holdings of MRC in Victoria, and BPG contends that, at all relevant times, the Subject Land has represented [less than 12per cent] of the value of MRC’s land holdings in Victoria.
9.Pursuant to the Development Agreement:
(a)BPG is appointed to carry out the development of the CV Land;
(b)the CV Land is to be sold to third parties as it is developed; and
(c)BPG is entitled to participate in the proceeds of sale of the CV Land. The extent of that participation is to be calculated in accordance with the terms of the Development Agreement.

10.By a notice of assessment dated 29 August 2013 (the Assessment), the Respondent (the Commissioner) assessed BPG to duty on the acquisition of an economic entitlement under s 81 of the Duties Act.
11.By a notice of objection dated 24 October 2013, BPG objected to the Assessment.
12.By a notice of determination dated 3 September 2014, the Commissioner partially allowed the objection by reducing the percentage interest acquired under the economic entitlement from 83 per cent to 82.9 per cent. By a notice of reassessment dated 3 September 2014, the Commissioner assessed BPG to duty on the acquisition of the economic entitlement of $1,484,209 plus interest of $18,716.06.
13.By letter dated 22 October 2014, BPG requested that the Commissioner treat the objection as an appeal and cause it to be set down for hearing at the next sittings of the Supreme Court of Victoria pursuant to s 106 of the Taxation Administration Act 1997 (Vic).

The Second Question was added by agreement of the parties as indicated in the Orders of 11 December 2015. The parties agreed, in a Joint Memorandum dated 10 December 2015, that the Second Question would also be answered on the basis of the contents of the Annexure, being the Statement of Agreed Facts which had originally been formulated for the purposes of the First Question. The basis for this view is set out in the Joint Memorandum, as follows:[1]
4.The issue sought to be raised by this question is whether any economic entitlement acquired by BPG within the meaning of s 81(2)(d) is capable of amounting to an interest of 50 per cent or more in a private landholder within the meaning of s 81(5), in circumstances where the unencumbered value of the Subject Land was less than 50 per cent of the unencumbered value of all land holdings of MRC in Victoria.
5.The parties submit that this raises a pure question of law involving the construction of s 81(5) of the Duties Act, and that it is just and convenient for the efficient disposition of the proceeding that this question be heard and determined together with the preliminary question currently set down for hearing. The proposed additional question can be answered on the agreed facts and, if decided in favour of BPG, would bring the proceedings to an end.
[1]Joint Memorandum (10 December 2015) [4]–[5].

Overview of contentions

It is agreed that the Subject Land had an unencumbered value of $32,550,000 as at 17 August 2012 and that this value has, at all relevant times, been less than 50 per cent of the unencumbered value of all land holdings of MRC in Victoria.[2] The Development Agreement between BPG and MRC was executed on 17 August 2012.
[2]Statement of Agreed Facts (11 December 2015) [3], [8].

Pursuant to the Development Agreement, BPG acquired an entitlement to participate in the proceeds of the sale of the CV Land, which included lands owned by MRC (“the Subject Land”).[3]
[3]Statement of Agreed Facts (11 December 2015) [9(c)].

With respect to the First Question, the Commissioner contends that a person acquires an economic entitlement within the meaning of s 81 of the Duties Act when that person acquires shares or units or enters an arrangement under which the person is entitled to an economic benefit or benefits in relation to a particular land holding, or several particular land holdings, of a private landholder, even if that land holding or those land holdings are not all of the land holdings of the private landholder in Victoria. By acquiring an entitlement to participate in the proceeds of the sale of the Subject Land, BPG acquired an economic entitlement within the meaning of s 81(2)(d) of the Duties Act. The First Question for separate determination should, the Commissioner contends, therefore be answered “Yes”.

As to the Second Question, the Commissioner contends that the word “interest” should be construed as having a consistent meaning within sub-ss 81(3), (4) and (5), and refers to the proportionate interest acquired under an economic entitlement as calculated in accordance with s 81(3) or (4). This interest is equated to “an interest … in a private landholder” for the purposes of s 81(5). Thus, the Commissioner contends that by virtue of the agreed facts, the Second Question for determination should therefore be answered “No”. In other words, the agreed fact that, “at all relevant times, the unencumbered value of the Subject Land has been less than 50 per cent of the unencumbered value of all land holdings of MRC in Victoria” does not mean (as the taxpayer contends, and the Commissioner disputes) that the economic entitlement acquired by BPG amounted to an interest of less than 50 per cent in a private landholder for the purposes of s 81(5) of the Duties Act. The actual calculation of the interest acquired under the economic entitlement for the purposes of s 81 is addressed by other grounds of objection; and is not encompassed by the separate questions of law set down under rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2005.

BPG contends that the Commissioner has assessed it on the basis that it acquired an economic entitlement under s 81(2)(d) of the Duties Act—a provision described as being anti-avoidance in nature[4]—which provides that:

For the purposes of this section, a person acquires an economic entitlement if the person acquires shares or units in a private landholder or enters an arrangement in relation to a private landholder under which the person is entitled to all or any of the following—
…
(d) to participate in the proceeds of sale of the land holdings of the private landholder;
…

The Commissioner has further determined under s 81(5) that the economic entitlement amounted to an interest of 50 per cent or more in MRC.

[4]Explanatory Memorandum, Duties Amendment (Landholder) Bill 2012, 15.

BPG contends that the Commissioner’s assessment, by way of Notice of Reassessment dated 3 September 2014, is flawed because BPG did not acquire a right to participate in the proceeds of sale of the land holdings of MRC. Rather, BPG submits that it only acquired a right to participate in the proceeds of sale of some of the land holdings of MRC. The unencumbered value of the land owned by MRC and subject to the Development Agreement constitutes less than half of the unencumbered value of all the landholdings of MRC.[5] BPG says that the Commissioner thus reads into s 81(2)(d) words that are not there and are not necessary for its operation. To the extent that there is any ambiguity in the provision, the Commissioner’s construction should, BPG contends, be rejected on the basis that it is inconsistent with the legislative purpose of the provision and would, in effect, result in a wholly new head of landholder duty, in the absence of any indication that this was the intention of the legislature.[6]
[5]Statement of Agreed Facts (11 December 2015) [8].
[6]Cf Commissioner of State Revenue v EHL Burgess Properties Pty Ltd [2015] VSCA 269, [115].

BPG contends that a further flaw in the Commissioner’s assessment is that even if BPG did acquire an economic entitlement, it could not amount to an interest of 50 per cent or more in MRC. This is, it is said, because it is agreed that the land the subject of the (assumed) economic entitlement is less than 50 per cent by value of all the land of MRC. In that respect, the Commissioner has not considered the full value of MRC in making his determination that BPG acquired an economic entitlement of 50 per cent or more in BPG, as the latter contends. The Commissioner has, BPG submits, instead wrongly construed the words “an interest of 50 per cent or more in a private landholder” in s 81(5) as “an interest of 50 per cent or more in the relevant lands of a private landholder”.

In relation to the Statement of Agreed Facts, BPG relies in particular on the fact that, “The parties agree, at all relevant times, the unencumbered value of the Subject Land has been less than 50 per cent of the unencumbered value of all land holdings of MRC in Victoria”.[7]
[7]Statement of Agreed Facts (11 December 2015) [8].

On the basis of its contentions, BPG submits that the First Question should be answered, “No”, and the Second Question should be answered, “Not necessary to answer”. On the other hand BPG contends that if the First Question is answered, “Yes”, then the Second Question should also be answered, “Yes”.

Legislation

The critical provisions of ss 78, 79, 81, 83 and 86 of the Duties Act as applicable at the relevant time are contained in Chapter 3 of that Act, which is entitled, “Certain Transactions Treated as Transfers”.

Part 1 of Chapter 3 of the Duties Act contains one section, namely, s 70 which, in this Part, entitled, “Introduction and Overview”, provides just that. Section 70 provides[8]:
[8](emphasis added).

70 Imposition of duty
This Chapter charges duty at the same rate as for a transfer of dutiable property under Chapter 2 on certain acquisitions of interests in landholders.

Consistently with the broad introduction and overview provided by s 70, Part 2 of Chapter 3 is entitled, “Acquisition of Interests in Certain Landholders”. Again, the title of this part, which contains the presently critical provisions of the Duties Act, is cast with reference to “in…landholders” and not something in the nature of interests taken from, interests of landholders or the like. Although these headings are necessarily brief, they are, in my view, for the reasons which follow, indicative of the proper interpretation and operation of the critical provisions of the Duties Act, particularly as they are reflected in a variety of the provisions to be found in Part 2, including in the headings to ss 79 and 86 where the expression “in landholders” and “in private landholders” is used in these section headings, respectively.[9]
[9]See Dennis Pearce and Robert S Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 8^th ed, 2014) 197–9 [4.52]–[4.53]. See also Interpretation of Legislation Act 1984, s 36.

Section 71 of Part 2 of Chapter 3 of the Duties Act relevantly provides that:

71 Meaning of landholder
(1)For the purposes of this Part, a landholder is any of the following that has land holdings in Victoria with a total unencumbered value of $1 000 000 or more—
(a)a private unit trust scheme;
(b)a private company;
(c)a wholesale unit trust scheme;
(d)a listed company;
(e)a public unit trust scheme.

…
(3)A private landholder is a landholder that is a private unit trust scheme, private company or wholesale unit trust scheme.
(4)A public landholder is a landholder that is a listed company or a public unit trust scheme.

Sections 72 and 73 of Part 2 contain detailed provisions which give the expression “landholding” a very broad meaning, particularly the provisions of s 73, which include anything fixed to the land, whether or not a fixture as a matter of law, but with some specific exceptions. Section 72 casts its net in terms of “… an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor or a profit à prendre”. The broad net is, however, confined in a number of respects not presently relevant.[10]
[10]See ss 72(2) and (3) of the Duties Act 2000.

The critical provisions are contained in Division 2 of Part 2 of Chapter 3 of the Duties Act. They are set out now together and in full to facilitate an overview of the structure and content of these provisions—and in some respects repeated in the reasons which follow to give clear context to those parts of the reasons to which they particularly relate.

Division 2—Charging of duty
77 When does a liability for duty arise?
A liability for duty charged by this Part arises when a relevant acquisition is made.

78 What is a relevant acquisition?
(1)For the purposes of this Part, a person makes a relevant acquisition if—
(a)the person acquires an interest in a landholder—
(i)that is of itself a significant interest in the landholder; or
(ii)that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by all or any of the following—
(A)the person; or
(B)an associated person; or
(C)any other person in an associated transaction; or

(b)after an interest referred to in paragraph (a) was acquired, the person, an associated person or any other person whose interest was aggregated with the interest under paragraph (a)(ii), acquires a further interest in the landholder.

(2)For the purposes of subsection (1)(a)(ii) or (b), a person is not an associated person of another person if the Commissioner is satisfied that the interests of the persons—
(a)were acquired, and will be used, independently; and
(b)were not acquired, and will not be used, for a common purpose.

(3)Subsection (2) does not apply if the persons are associated persons because they are related bodies corporate.
(4)For the purposes of this Part, persons in their capacity as qualified investors of a wholesale unit trust scheme are taken not to be associated persons of other qualified investors in relation to acquisitions of interests in the scheme .
(5)An interest in a landholder is not counted for the purposes of this section if—

(a)the interest was acquired before 15 November 1987; or
(b)the interest was acquired at a time when the landholder did not hold land in Victoria.

79What are interests and significant interests in landholders?
(1)A person has an interest in a landholder if the person has an entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder.
(2)A person who, by virtue of subsection (1), has an interest in a landholder has a significant interest in the landholder if the person, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, would be entitled to—
(a)in the case of a landholder that is a private unit trust scheme—20% or more of the property distributed; or
(b)in the case of a landholder that is a private company or wholesale unit trust scheme—50% or more of the property distributed; or
(c)in the case of a landholder that is a listed company or public unit trust scheme—90% or more of the property distributed.

(3)In this section—
person includes a landholder;
winding up of a landholder that is a unit trust scheme means the vesting of the trust property in the beneficiaries.

80 How may an interest be acquired?
(1)A person acquires an interest in a landholder if the person obtains an interest beneficially, including if the person's interest increases, in the landholder, regardless of how it is obtained or increased.

…
81Acquisition of economic entitlement
(1)Despite anything to the contrary in this Part, this section applies if a person acquires, either alone or together with an associated person, directly or indirectly, an economic entitlement, other than by a relevant acquisition dutiable under this Part.
(2)For the purposes of this section, a person acquires an economic entitlement if the person acquires shares or units in a private landholder or enters an arrangement in relation to a private landholder under which the person is entitled to all or any of the following—
(a)to participate in the dividends or income of the private landholder;
(b)to participate in the income, rents or profits derived from the land holdings of the private landholder;
(c)to participate in the capital growth of the land holdings of the private landholder;
(d)to participate in the proceeds of sale of the land holdings of the private landholder;
(e)to receive any amount determined by reference to paragraph (a), (b), (c) or (d);
(f)to acquire any entitlement described in paragraph (a), (b), (c), (d) or (e).

(3)The interest acquired under an economic entitlement is the proportion of the economic benefit referred to in subsection (2)(a), (b), (c), (d), (e) or (f) that the person is entitled to receive or acquire under the economic entitlement.
(4)The interest acquired under an economic entitlement that relates to 2 or more of the economic benefits referred to in subsection (2)(a), (b), (c), (d), (e) and (f) is the proportion of the total of those economic benefits that the person is entitled to receive or acquire under the economic entitlement.
(5)If—
(a)an economic entitlement acquired by the person, either alone or together with an associated person; or
(b)the total economic entitlements acquired by the person, either alone or together with an associated person, within a 3 year period—

amounts or amount to an interest of 50% or more in a private landholder, the person is taken, for the purposes of this Part, to have made a relevant acquisition of—
(c)that percentage interest in the landholder; or
(d)a lesser percentage interest in the landholder determined by the Commissioner to be appropriate in the circumstances.

(6)The duty chargeable on the relevant acquisition is calculated in accordance with section 86(1), as if—
(a)in the case of subsection (5)(b), all acquisitions of economic entitlements by the person or an associated person (or both) within the 3 year period were a single acquisition; and
(b)a reference to all land holdings of the landholder in Victoria were a reference to the land holdings of the private landholder to which the economic entitlement relates.

(7)For the avoidance of doubt, a person may acquire an economic entitlement by any means, including, but not limited to, the creation of the economic entitlement or the transfer of the economic entitlement to the person.
(8)This section applies regardless of interests held by any other person in the private landholder.
…

83 Acquisition statements
(1)If a relevant acquisition is made, either or both the person who made the acquisition and the landholder (or, if the landholder is a unit trust scheme, the trustee of the landholder) must prepare a statement (an acquisition statement) and lodge it with the Commissioner within 30 days after the date of the relevant acquisition.
(2)The acquisition statement is to be prepared in an approved form and must contain the following information—
(a)the name and address of the person who has acquired the interest;
…
(e)particulars of the total interest acquired in the landholder by the person, any associated person or any other person in an associated transaction, as at the date of the relevant acquisition;
(f)the unencumbered value of all land holdings in Victoria of the landholder as at the date of the relevant acquisition;
(g)any other information the Commissioner may require.

…
86How duty is charged on relevant acquisitions in private landholders
(1)Duty on a relevant acquisition in a private landholder is chargeable, at the rate specified under this Act for a transfer of dutiable property, on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in Victoria (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.
…

Legislative history—land rich provisions

A primary function of stamp duty legislation has long been the imposition of duty on sales of land. Previously, this was done by way of the charging of duty on instruments by which land was transferred—and some will remember seeing some exotic adhesive stamps on deeds, in some cases enhanced by a square of silver which was also impressed into the instrument with the stamp. The Act now, however, operates less aesthetically and has moved away from instruments-based duty and now imposes duty on transfers.[11] Consequently, s 7(1)(a) of the Duties Act brings to duty a transfer of dutiable property, which, by virtue of s 10(1)(a)(i), includes an estate in fee-simple in Victoria. It is charged on the dutiable value of the dutiable property[12] which is the greater of the consideration for the transfer and the unencumbered value of the dutiable property.[13] In this way, and subject to exceptions, the sale of land in Victoria is brought to duty; and having regard to the constitutional limitations with respect to the land elsewhere.[14]
[11]Cf Commissioner of State Revenue (NSW) vDick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496; Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd (2014) 254 CLR 142 at [41].
[12]Duties Act 2000, s 18.
[13]Duties Act 2000, s 20.
[14]As to the constitutional limitations on a State purporting to legislate with respect to land outside its territory: see Broken Hill South Limited v Commissioner of Taxation (NSW) (1937) 56 CLR 337.

As stamp duty was, historically, imposed on instruments transferring land, no duty was payable where a taxpayer purchased the owner of the land, but not the land itself. The obvious way of achieving this was the acquisition of shares or units in a private company or unit trust that itself owned the land. Clearly, the possibility of acquisition of the land owner itself had the potential for significant erosion of the stamp duty revenue base. Consequently, in order to bring such transactions to duty, Victoria enacted land rich duty provisions in 1987.[15] The effect of these provisions was to impose duty on certain acquisitions of interests in a company 80 per cent or more of the value of which consisted of real property. In 2000, the land rich provisions became Division 1 of Part 2 of Chapter 3 of the Duties Act. They were, however, repealed in 2012 when the present landholder provisions, including the economic entitlement provisions, were enacted by the Duties Amendment (Landholder) Act 2012 (“the Amendment Act”).
[15]Taxation Acts Amendment Act 1987, inserting ss 75-75O into the Stamps Act 1958.

For the reasons which follow, it is clear that the history of the development of these provisions is relevant to an understanding of the present provisions to the extent that there is ambiguity in those provisions and resort might otherwise properly be made to extrinsic material. Moreover, to appreciate the extrinsic material insofar as it is relevant, such as Second Reading Speeches and Explanatory Memoranda, some appreciation of the legislative history is important.

Prior to the Amendment Act, the land rich provisions operated as follows:

(a)duty was chargeable on a ‘relevant acquisition’;[16]
(b)a ‘relevant acquisition’ was the acquisition of a ‘significant interest’ in a ‘land rich’ landholder;[17]
(c)a ’significant interest’ in a landholder was an entitlement (otherwise than as a creditor or other person to whom the landholder was liable) to a distribution of 50% or more of the property from the landholder on its winding up, except in the case of a landholder that was a private unit trust scheme, in which case an entitlement to 20% or more of the property of the landholder on a winding up constituted a significant interest;[18]
(d)‘landholder’ was defined to include private unit trust schemes and private companies;[19] and
(e)a landholder was ‘land rich’ if it had land in Victoria with an unencumbered value of $1,000,000 or more and its land holdings in all places comprised 60% or more of the unencumbered value of all its property.[20]

[16]Duties Act 2000, s 78 as amended by Duties Amendment (Landholder) Act 2012

[17]Duties Act 2000, s 79(1)(a)(i) as amended by Duties Amendment (Landholder) Act 2012.

[18]Duties Act 2000, s 76(1)–(2) as amended by Duties Amendment (Landholder) Act 2012.

[19]Duties Act 2000, s 71(1) as amended by Duties Amendment (Landholder) Act 2012.

[20]Duties Act 2000, s 71(2) as amended by Duties Amendment (Landholder) Act 2012.

Two cumulative criteria were, broadly, created by these provisions for the imposition of duty. First, the taxpayer had to acquire an interest of at least 50 per cent—or 20 per cent in the case of a private unit trust scheme—in another entity. Secondly, that other entity had to be a land rich entity. Moreover, the purpose of these land rich provisions was clear enough, as observed by the Court of Appeal in Commissioner of State Revenue v Landrow Properties Pty Ltd:[21]

The explanatory memoranda and Second Reading Speeches accompanying each iteration of the legislation make it clear that the “mischief” to which the land rich provisions are directed is the avoidance of duty on land transfers through the use of shares and units in private unit trusts.

Similarly, as the Minister observed in the Second Reading Speech introducing the Amendment Act:[22]
The current land-rich model was introduced in 1987 to deal with the avoidance of land transfer duty through the acquisition of shares in entities that owned land. At the time, these provisions were largely seen as anti-avoidance in nature.

[21](2010) 79 ATR 800 at [48].

[22]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2023 (Kim Wells, Treasurer).

Staying with the former land rich provisions for a moment, it is instructive to observe that if BPG had entered into the Development Agreement under this regime, it would not have attracted a liability to duty because, even if the second criterion identified above had been satisfied, the first was not. BPG would not have acquired a significant interest in MRC because—on any view—it’s economic interest in the landholdings of MRC is less than 50 per cent,[23] and thus does not qualify as significant.
[23]Statement of Agreed Facts (11 December 2015) [8].

The Amendment Act abolished the former land-rich model and replaced it with a landholder regime that imposed duty on three classes of “relevant acquisition”:

(a)sections 78 to 80 provide that one class of “relevant acquisition” is, in brief, a right to participate in 50% or more of the proceeds of a landholder company on its winding up;
(b)section 81 provides that a second class of “relevant acquisition” is the acquisition of an economic entitlement of 50% or more in a landholder company. An economic entitlement includes a right to participate in the dividends or income of a landholder, or a right to participate in the income, rent, profits or proceeds of sale of the land of a landholder; and
(c)section 82 provides that a person makes a relevant acquisition if they acquire control over a private landholder. This class of relevant acquisition is of no relevance to the present dispute and can be put to one side.

For the reasons which follow, I accept the submission or approach by BPG in describing the first two classes of transaction as being the acquisition of a “direct interest” (ss 78 to 80) and of a “synthetic interest” (s 81).

Two reasons were identified by the Minister in his Second Reading Speech for the replacement of the land-rich provisions with the present landholder regime. The first was that the land-rich provisions were “complex and require[d] taxpayers to engage in complicated valuations and calculations to establish the proportion of their assets represented by land”.[24] The second is that the “land ratio test” could “provide an incentive for some taxpayers to structure their transactions to avoid” it.[25] The objectives of the new provisions were, therefore, said to be “increasing equity and efficiency in the Victorian tax system”.[26]
[24]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2023 (Kim Wells, Treasurer).
[25]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2023-2024 (Kim Wells, Treasurer).
[26]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2024 (Kim Wells, Treasurer).

As a result of these concerns, the “land ratio test”—that is, the calculus by which it was determined if 60 per cent or more of the value of a landholder’s property was land—was abolished. It was replaced by the current system, which looks to whether the taxpayer acquired a significant interest or economic entitlement in a landholder, regardless of whether or not that landholder would previously have been classified a “land-rich landholder”. The apparent intention—and ultimate effect—of maintaining the existing minimum land value and acquisition thresholds was that of the two criteria previously identified, only the second was abolished, the first remained—the first being that the taxpayer had to acquire an interest of at least 50 per cent—or 20 per cent in the case of a private unit trust scheme—in another entity.

Significantly, and particularly significant in the present context, the Amendment Act did not seek to create a new tax or significantly amend the existing one. On the contrary, as the Minister made clear in his Second Reading Speech, “we have maintained the minimum land value and acquisition thresholds that currently exist under the land-rich system”.[27] Moreover, he said that the amendments would safeguard—not augment—revenues.[28] Further, and also of particular significance, there is no suggestion that the amendments would increase revenues by creating new heads of liability. In this respect, it is important to note that in the Explanatory Memorandum to the new legislation, s 81 is described as being anti-avoidance in nature so as to operate to:[29]

… impose duty on transactions where the economic benefit of the ownership of land is acquired, whether directly or indirectly, other than by means of a relevant acquisition of an interest dutiable under Chapter 3.
[27]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2024 (Kim Wells, Treasurer).
[28]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2024 (Kim Wells, Treasurer).
[29]Explanatory Memorandum, Duties Amendment (Landholder) Bill 2012, 15 (emphasis added).

In my view, this passage in the Explanatory Memorandum confirms that the intention[30] of the legislature was to render dutiable both “direct interests”—such as shareholdings—and “synthetic interests”—such as rights to participate in the proceeds of sale—in landowners, but not so as to distinguish between the two. In other words, the intention was to extend the reach of the provisions to entitlements which, whilst falling short of an interest in a landholder for the purposes of s 78, nonetheless amounted to an equivalent interest in economic terms. Moreover, for the reasons which follow, I am of the view that this intention is also manifest in the words of the statute itself and not a matter to be divined solely from the extrinsic materials, such as the Explanatory Memorandum.
[30]And as to the nature of a shareholder’s interest in the property of a company, see Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143.
Legislative history—landholder duty provisions

As indicated previously, the legislative context of s 81 of the Duties Act is Chapter 3 and, particularly, Part 2—Acquisition of Interests in certain landholders. Much of this legislation is based on provisions found in other States and Territories, other than Tasmania.[31] Those interstate provisions are often referred to as imposing “landholder duty”. The first State to adopt a landholder duty model was Western Australia, where the relevant provisions were enacted in response to the recommendations of the State Tax Review—Final Report in 2007.[32] This Report noted that the landholder model was “a reform measure, rather than a revenue raising measure”.[33] Although the tax base was to be broadened—because non land-rich companies would now be included—this was to be offset by reduced rates of duty. The primary aims of the provisions were “to improve the equity and efficiency of the State’s taxation regime, while at the same time reducing compliance and administration costs”.[34] The Explanatory Memorandum for the Western Australian Duties Bill 2006 referred to the new Chapter 3 (Landholder duty) as implementing an “incidence shift”.[35] Importantly, the Western Australian provisions only brought to duty the acquisition of a direct interest in a landholder, being an interest in the property of that landholder on a winding-up.[36] The provisions did not render dutiable the acquisition of an indirect “economic entitlement”. As the various States and Territories moved to the landholder duty model, each continued to apply to direct acquisition only, until the Victorian provisions in Chapter 3 of the Duties Act came into effect in 2012.
[31]Duties Act 1999 (ACT) Ch 3; Duties Act 1997 (NSW) Ch 4; Stamp Duty Act 1978 (NT) Div 8A; Duties Act 2001 (Qld) Ch 3 Pt 1; Stamp Duties Act 1923 (SA) Pt 4; Duties Act 2000 (WA) Ch 3.
[32]State Tax Review—Final Report (Department of Treasury and Finance—Government of Western Australia, May 2007).
[33]State Tax Review—Final Report (Department of Treasury and Finance—Government of Western Australia, May 2007), 27.
[34]State Tax Review—Final Report (Department of Treasury and Finance—Government of Western Australia, May 2007), 30.
[35]Explanatory Memorandum, Duties Bill 2007 (WA) 100, 101.
[36]Duties Act 2008 (WA) ss 151, 153, 161 and 163.

The Victorian provisions thus apply to the acquisition of two classes of interest. First, duty is payable where a person acquires an actual interest in a landholder, described in Chapter 3 as a “relevant acquisition” of a “significant interest”.[37] A significant interest—in relation to a private company—is an interest of 50 per cent or more in the property of a private landholder in a distribution of property on a winding up.[38] This class of interest includes the acquisition of a shareholding in a company and, as I accept, it is convenient to refer to it as a “direct interest”. Secondly, and unique to Victoria, duty is charged on the acquisition of an “economic entitlement”.[39] An “economic entitlement” is defined to include a right to participate in the dividends or income of a private landholder; and a right to participate in the income, rent, profits or proceeds of sale of land holdings of a private landholder.[40]
[37]See Duties Act 2000, ss 77 and 79.
[38]Duties Act 2000, s 79(2)(b); and in the case of a public company, a significant interest is 90 per cent or more; in the case of a private unit trust scheme, a significant interest is 20 per cent or more: see Duties Act 2000 s 79(2)(a) and (c).
[39]Duties Act 2000, s 81.
[40]Duties Act 2000, s 81(2).

Proper construction of s 81

It is common ground between the parties that central to the resolution of the present questions is the operation of s 81 of the Duties Act. It is clear that the provision is not an easy one to continue.

As the Commissioner submits, the proper approach to statutory construction was summarised by the High Court in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue:[41]

This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.

[41](2009) 239 CLR 27 at 46–7 [47]). See also Certain Lloyd’s Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378 at 388-90 [23]–[26]; Thiess v Collector of Customs (2014) 250 CLR 664 at 671 [22], referring with approval to Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; Treasurer of Victoria v Tabcorp Holdings Ltd [2014] VSCA 143 [99]–[102]; Commissioner of State Revenue v EHL Burgess Properties Pty Ltd [2015] VSCA 269, [56]–[63] (citations omitted).

It follows that the interpretation of s 81 of the Duties Act must be anchored in the statutory language, taking into account both its immediate context and the broader context of the landholder duty provisions contained in Parts 1 and 2 of Chapter 3 of that Act. As the legislature requires, where more than one construction is available, a construction that would promote the purpose or object underlying s 81 is to be preferred.[42]
[42]See Interpretation of Legislation Act 1984, s 35(a).

The Commissioner makes the point that neither the Second Reading Speech nor the Explanatory Memorandum to the Duties Amendment (Landholder) Bill directly addressed the question whether or not an “economic entitlement” for the purposes of s 81(2)(d) is limited to an entitlement to participate in the proceeds of sale of all of the land holdings of the private landholder. The Commissioner also says that a similar question arises in the context of s 81(2)(b) and (c), which concern entitlements “to participate in the income, rents or profits derived from the landholdings of the private landholder” and entitlements ”to participate in the capital growth of the landholdings of the private landholder”. The Commissioner does, however, accept that the interpretation of s 81 of the Duties Act must be anchored in the statutory language, taking into account both its immediate context and the broader context of the landholder duty provisions contained in Parts 1 and 2 of Chapter 3 of that Act. As indicated previously, I accept that this approach is consistent with the proper approach to statutory construction as stated by the High Court on many occasions and, consequently, it is no answer to say, simply, that the Second Reading Speech does not specifically address the provision relating to economic entitlements. Rather, the Second Reading Speech must be looked at from a broader, contextual, perspective with respect to the legislation. Thus, it is instructive to have regard to the following parts of the Second Reading Speech where Mr Wells, the then Treasurer, said:[43]

Having carefully considered these issues [arising under the then current land-rich legislative model], the government now believes Victoria would be better served by adopting a land-holder model. The new model will remove the land ratio test so that duty applies simply where a person makes a relevant acquisition in an entity that holds land in Victoria with an unencumbered value of $1 million or more. It will also extend the categories of taxable entity to include an acquisition of 90 per cent or more in listed companies and listed unit trusts. However, these acquisitions will be subject to duty at a concessional rate (that is, 10 per cent of the land transfer rate).
With the exception of Tasmania, all other states and territories have already adopted the land-holder duty model. The basic elements of the land-holder duty system are broadly consistent across all jurisdictions, including the removal of the land ratio test and, with the exception of the Australian Capital Territory, levy duty on acquisitions in listed companies and trusts. However, like all states and territories, the government has designed a land-holder model which reflects Victoria’s own unique market, economic and geographic conditions. Accordingly, we have maintained the minimum land value and acquisition thresholds that currently exist under the land-rich duty system. This will ensure that the land-holder duty model delivers on its objectives by increasing equity and efficiency in the Victorian tax system and safeguards anticipated revenue of $125 million to $150 million per annum.

Thus, the then Treasurer explained, in broad terms, the basis of Part 2 of Chapter 3 of the Duties Act, which includes ss 78, 79 and 81.

[43]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2024 (Kim Wells, Treasurer).

The fact that the then Treasurer did not specifically address the provision relating to economic entitlements is, in my view, at least consistent with the position advanced by BPG that s 81 is not intended to create a new head of liability, but, rather, to operate consistently with the structure provided for in the Amendment Act, particularly with reference to ss 78 and 79 of the Duties Act. In my view, this position is actually supported by the Commissioner’s submission with respect to the Explanatory Memorandum to the Amendment Act. In that submission, it is said that the Explanatory Memorandum relevantly stated that s 81 “is a method by which a relevant acquisition can be made and is anti-avoidance in nature”, and that the section “operates to impose duty on transactions where the economic benefit of the ownership of land is acquired, whether directly or indirectly, other than by means of a relevant acquisition of an interest dutiable under Chapter 3”. In other words, s 81 enables the Commissioner to approach the substance of transactions involving “certain landholders” for the purpose of Part 2 of Chapter 3 of the Duties Act in terms of the actual benefit flowing from the transaction, whether the benefit is provided by the direct acquisition of an interest in the landholder or is provided by, what is described by BPG, as a “synthetic interest”. And in this context, it is apposite to recall the speech of Lord Wilberforce in the House of Lords in Ben-Odeco Limited v Powlson where his Lordship said:[44]

An important principle of the laws of taxation is that in the absence of clear contrary direction tax payers in, objectively, similar situations should receive similar tax treatment.

Clearly, without provisions dealing with, so-called, “synthetic interests”, there would be a significant gap in the machinery provided for in ss 78 and 79 of the Duties Act. For the reasons which follow, I am of the view, however, that s 81 fills this gap by enabling a broader perspective which enables the actual benefit of a transaction to be taken into account, rather than the process constrained by viewing only the means by which that benefit was obtained, and then only to a limited extent in terms of the provisions of ss 78 and 79. However, the important point is that the gap is only filled by s 81, and its provisions do not build any new machinery, they merely make the provisions of ss 78 and 79 work more broadly in the manner I have described generally.

[44][1978] 1 WLR 1093 at 1098; an approach applied by the Full Federal Court in Robe River Mining Co Pty Ltd v Federal Commissioner of Taxation (1989) 21 FCR 1.

In some respects, the Commissioner’s submissions approach the relationship between these provisions in the same way. Thus, the Commissioner submits:[45]

15.Subsection 81(1) provides that the section applies if a person acquires an economic entitlement other than by a relevant acquisition dutiable under Part 2. On its terms, this indicates that s 81 is intended to supplement the other provisions of Part 2, by bringing to duty transactions that would not otherwise be dutiable as a ‘relevant acquisition’ within the meaning of s 78. In other words, s 81 provides an additional means by which a ‘relevant acquisition’ is taken to have been made (see subs 81(5)), and this deemed relevant acquisition is then charged with duty by ss 77 and 86 of the Duties Act.[46]

The position of the parties does, however, diverge as a result of the emphasis and interpretation the Commissioner places on the operation of specific provisions of s 81 which, in my view, have the effect of turning the provisions of that section into a provision establishing a new head of liability, rather than operating as an “anti-avoidance” provision or a provision filling “gaps” in the operation of ss 78 and 79, in the manner I have already indicated. For the reasons which follow, I do not accept the Commissioner’s interpretation of s 81 to this effect. I turn now to focus on specific provisions, but in context in conformity with the task of statutory construction as stated by the High Court.

[45]Respondent’s Outline of Submissions (18 December 2015) [15] (emphasis in original).

[46]Compare s 82 of the Duties Act, which deals with the acquisition of control over a private landholder other than by a relevant acquisition dutiable under Part 2.

Section 77 is the operative provision of Part 2 of Chapter 3 of the Duties Act and creates a liability for duty when “a relevant acquisition is made”. Its operation depends upon the provisions of this Part, particularly ss 78, 79 and 81, and operates, as indicated previously, with respect to two classes of relevant acquisition, namely, one “direct” and one “synthetic”.

The first class of acquisition—the “direct” or base case—is the acquisition of an interest in a landholder, simpliciter, within the terms of s 78. It is not sufficient under these provisions to acquire any interest, rather, the interest must be a “significant interest”. The question, what are “interests” and “significant interests” in landholders is answered by the provisions of s 79 of the Duties Act. Under the provisions of that section, a “significant interest” is, in the case of a private company, an entitlement on a winding up (other than as a creditor) to a distribution of 50 per cent or more, “of all the property of the landholder”[47]. Ordinarily, this will mean a shareholding of 50 per cent or more. For the preceding reasons and those which follow, this feature of the statutory scheme is directly relevant to the correct interpretation of s 81.
[47](emphasis added).

I turn now to s 81 itself and, in so doing, adopt the description of “synthetic” acquisition, as indicated earlier in these reasons. Applying this nomenclature, a “synthetic” acquisition is a right less than a shareholding in a landholder company, but which right, nonetheless, gives the acquirer rights to participate in the dividends, income, rent, profits, capital growth or proceeds of sale of the property; as follows from the provisions of s 81(2) of the Duties Act.[48] It is not surprising that, for reasons of parity, such a “synthetic” acquisition is not dutiable unless it amounts to an interest of 50 per cent or more in the landholder; as follows from the provisions of s 81(5). However, on the Commissioner’s case, s 81 could apply—and in the present case would apply—to an economic interest which is much less than 50 per cent. Section 81(2) also applies to shares, but, importantly, not shares qua ownership of a company, but rather, as the source of an economic entitlement. Thus, the acquisition of only 1 per cent of the shares in a company will attract duty under s 81(2) if that shareholding gives the acquirer the right to participate in the proceeds of sale of the property of the company, for example, if the company has shares of different classes. Indeed, provisions such as this serve to emphasise, in my view, the anti-avoidance nature of the provisions of s 81 and, perhaps less pejoratively, its role as “gap” filling in the machinery of ss 78 and 79 so that the “machine” operates in a wide variety of circumstances and not where a relevant interest is acquired in the landholder company in, what might be described, “as not only in a direct sense but also in a proprietary or structural sense”. As discussed previously, s 81 focuses on real, tangible “economic” benefit, not merely on proprietary interests and structures, the means of obtaining such a benefit. Consequently, the provisions of s 81(2) are very broad and, for example, encompass contractual rights and even non-contractual arrangements which confer “entitlements”.[49]
[48]Section 81(2) also applies to shares but, importantly, not shares qua ownership of a company, but rather as the source of an economic entitlement. Thus the acquisition of only 1 per cent of the shares in a company will attract duty under s 81(2) if that shareholding gives the acquirer the right to participate in the proceeds of sale of the property of the company, for example if the company has shares of different classes.
[49]Respondent’s Outline of Submissions (18 December 2015) [18]–[19] (emphasis added).

Returning to the operation of the provisions of s 81, if a relevant acquisition occurs, duty is calculated in accordance with s 86(1). At the risk of repetition, it is helpful, in the course of this discussion, to repeat the provisions of that sub-section:

Duty on a relevant acquisition in a private landholder is chargeable, at the rate specified under the Act for a transfer of dutiable property, on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in Victoria (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.

As discussed, sub-s 81(2) of the Duties Act is the key provision in the present context. Again, in the course of the present discussion, it is helpful to set out those provisions again in full:

For the purposes of this section, a person acquires an economic entitlement if the person acquires shares or units in a private landholder or enters an arrangement in relation to a private landholder under which the person is entitled to all or any of the following—
(a)to participate in the dividends or income of the private landholder;
(b)to participate in the income, rents or profits derived from the land holdings of the private landholder;
(c)to participate in the capital growth of the land holdings of the private landholder;
(d)to participate in the proceeds of sale of the land holdings of the private landholder;
(e)to receive any amount determined by reference to paragraph (a), (b), (c) or (d);
(f)to acquire any entitlement described in (a), (b), (c), (d) or (e).

The provisions of sub-s 81(2) are clearly cast in broad terms but, for the reasons which follow, the breadth of these provisions is, effectively, constrained by the context of the other provisions of s 81, particularly those which follow. Moreover, the structure and content of the division of the Duties Act in which these provisions are to be found, together with the constitutional limitations to which reference has been made indicate that their reach should be read as limited to economic entitlements with respect to land in Victoria.

Applying the approach to statutory instruction as stated by the High Court, it follows that the language chosen by the legislature in paragraphs (a) to (f) of s 81(2) must be construed as a whole, and that it would be mistaken to construe one or some of these paragraphs in isolation from the whole. Thus, although the parties agree that none of paragraphs (a) to (c) and (e) to (f) apply in the present circumstances, the language of those paragraphs is nonetheless relevant to the construction of the section as a whole. As submitted by BPG, the first thing to note in the language of these paragraphs is that the words “to participate in the” are common to the first four paragraphs and, as there is no indication to the contrary in the “whole”, these words should bear the same meaning. Thus, in Registrar of Titles (WA) v Franzon, Mason J said:[50]

It is a sound rule of construction to give the same meaning to the same words appearing in different parts of a statute unless there is reason to do otherwise.

Here, the same words are used in the same section of a statute, rather than in different parts of a statute more removed. Thus, the inference that the phraseology employed in each of these paragraphs is to be construed in the same way as part of a coherent scheme in this sub-section is, in my view, very strong indeed. Moreover, to borrow from the judgment of Mason J to which reference has been made, “Here, no such reason appears”.[51]

[50](1975) 132 CLR 611 at 618 (emphasis added).

[51](1975) 132 CLR 611 at 618 (ie the sentence which follows the quoted passage).

Similarly, in paragraphs (b) to (d), the word “the” before “land holdings” should bear the same meaning as the first “the” in subparagraph (a). Again, there appears no reason why this approach to construction should not be applied in this respect also. On this basis, the construction of these provisions as contended for by the Commissioner must be considered. Thus, if the word “the” is to be qualified so that it can mean, as the Commissioner contends, “some of the” or “any or all of the” land holdings for the purposes of paragraph (d), then it must be so qualified in each of the four paragraphs. The difficulties with such a construction are apparent. For example, what does it mean to say that a person is entitled to participate in some of the dividends of a company? Either a share has an attached right to dividends or it does not. The same observation may be made about participating in “the” income of the landholder. These considerations do, in my view, indicate simply on the language and having regard to the concepts to which the language is directed indicate real difficulties with the construction contended for by the Commissioner. Moreover, as the consideration of the interpretation and operation of the provisions of s 81(5) in the reasons which follow indicate, it is an intended feature of the legislative scheme that an entitlement to economic benefits arising from any, or some only, of land held by a landholder is insufficient. The entitlement must be in relation to economic benefits in relation to all of the land held by a landholder. Moreover, a consideration of the proper interpretation and operation of s 81(5), together with s 81(3) and s 81(4), indicates, in my view, a coherent scheme and s 81 providing machinery for, in effect, determining the effect in terms of dutiable consequences of the quantum of the “economic entitlement” of the types provided for or described in s 81(2).

Section 81(3) provides that the interest acquired is the proportion of the economic benefit that the person is entitled to receive. Thus, as observed by BPG, if a taxpayer acquires a right to receive 60 per cent of the dividends of a company, their interest is 60 per cent of the value of the dividends. Sub-section 81(4) provides for the situation of aggregation of interests in different classes as provided for and described in paragraphs 81(2)(a) to (f). Section 81(5) provides for the consequences in terms of the application of the determination of species and quantum under s 81(2) and (3) or (4) for the purposes of liability to duty under the Duties Act. This is an important provision, and it is helpful to set its provisions out in the context of this discussion, as follows:

If—
(a)an economic entitlement acquired by the person, either alone or together with an associated person; or
(b)the total economic entitlements acquired by the person, either alone or together with an associated person, within a 3 year period –

amounts or amount to an interest of 50% or more in a private landholder, the person is taken, for the purposes of this Part, to have made a relevant acquisition of—
(c)that percentage interest in the landholder; or
(d)a lesser percentage interest in the landholder determined by the Commissioner to be appropriate in the circumstances.

The Commissioner sought to argue against this interpretation and operation of sub-ss 81(3), (4) and (5) on the basis that the word “interest” should be taken to bear the same meaning throughout these provisions. Superficially, this argument may seem attractive, on the basis of the approach to construction referred to by Mason J in Registrar of Titles (WA) v Franzon.[52] However, the rule only applies, as Mason J indicated, “unless there is reason to do otherwise”. In my view, there is here, clear reason to do otherwise, both for the preceding reasons with respect to the intended operation of s 81 and the language used by the legislature in this Division of Part 2 of Chapter 3 of the Duties Act because this approach, as advocated by the Commissioner, would have the effect of raising a fresh head, or heads, of liability to duty.
[52](1975) 132 CLR 611 at 618 (as set out above, [42]).

More specifically, the Commissioner’s submissions in this vein are as follows:[53]
[53]Respondent’s Outline of Submissions (18 December 2015) [30]–[31].

30.Subsections 81(3) and (4) each refer to an ‘interest acquired under an economic entitlement’, whereas s 81(5) (in its pre-amendment form) refers to ‘an interest … in a private landholder’. However, the word ‘interest’ should be construed as having a consistent meaning throughout s 81 so that, rather than differentiating between these ‘interests’, the proportionate interest calculated under s 81(3) or (4) is equated to an interest in a private landholder for the purposes of s 81(5). Such a construction is supported by the following considerations.
(a)It is highly unlikely that, having already calculated the interest under the economic entitlement (on occasions, with some complexity), the Parliament would have intended or contemplated a second-stage calculation would be required in order to convert this proportionate interest into a percentage interest in the landholder. Neither s 81(5) nor any other provision in s 81 provides any guidance on how any such conversion would be carried out. If, for example, the exercise were to require a consideration of the relative value of the land holdings the subject of the economic entitlement compared to the value of all of the land holdings of the landholder, this could involve unduly complicated valuations and calculations which the landholder provisions were intended to avoid.[54]
(b)More importantly, such a second-stage conversion would be entirely unnecessary in the light of s 81(6)(b), which operates to ensure that the deemed relevant acquisition in the landholder does not trigger a liability to duty on land holdings beyond those that are the subject of the economic entitlement.

31.Accordingly, s 81(5) takes the percentage interest ascertained under s 81(3) or (4), and treats it as an interest in the private landholder. In order to give rise to a deemed relevant acquisition under s 81(5), that interest must be ‘50 per cent or more’, being 50 per cent or more of the economic benefit or benefits referred to in s 81(2)(a) to (f). If there is a deemed relevant acquisition under subs 81(5), the Commissioner has discretion under s 81(5)(d) to determine that the relevant acquisition is of a ‘lesser percentage interest in the landholder’.[55]

[54]Cf Second Reading Speech to the Duties Amendment (Landholder) Bill 2012, which criticised the land ratio test under the previous land-rich regime: “The current land rich provisions are complex and require taxpayers to engage in complicated valuations and calculations to establish the proportions of their assets represented by land”.

[55]The exercise of this discretion might be appropriate, for example, in circumstances where the cumulative effect of an economic entitlement that relates to multiple overlapping economic benefits leads to an anomalous outcome by unduly inflating the interest acquired. In this regard, s 89E (which provides a concession in relation to an “anomalous duty outcome” resulting from the application of Part 2) is specifically excluded in relation to acquisitions of economic entitlements under s 81: see s 89E(3).

In my view, the matters identified by the Commissioner in these submissions do not take matters further in support of his contentions. First, they do not address the language, structure or operation of those provisions of s 81, nor of the relevant division of the Act. Secondly, the argument that the provisions of s 81 are complex and that calculations and “conversions” are difficult, complex and there is an absence of guidance as to the process in the legislation—therefore there should be an equating of interests and a second stage calculation avoided—takes matters no further, in my view. It is a very weak and unmeritorious argument in the face of the language and structure of the legislation, as discussed in these reasons. Thirdly, the argument with respect to sub-s 81(6) does not assist, as it is based on an interpretation of those provisions which I do not accept.

It will be noticed that both the provisions of s 81(2) and s 81(5) use the expression, “in a private landholder”. In regard to the structure of s 81, these words must refer to the interests provided for described in paragraphs 81(2)(a) to (f). Moreover, having regard to the structure of Part 2 of Chapter 3 of the Duties Act, as has been discussed, and the proper approach to statutory construction as stated and elaborated upon in the High Court authorities to which reference has been made, it does, in my view, follow that the meaning of these words is informed by the use of these words in s 79 of the Duties Act. Section 3(1) of the Act provides, as a definition provision, that: “interest in a landholder has the meaning given by s 79(1)”. Section 79(1) relevantly provides:

A person has an interest in a landholder if the person has an entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or through another person, to a distribution of property from the landholder on a winding-up of the landholder.

Also, in s 79(2), reference is made to various types of “landholder”: “a landholder that is a private unit trust scheme; a landholder that is a private company or wholesale unit trust scheme, or a landholder that is a listed company or public unit trust scheme”. Thus, the provisions of s 79 distinguish between private and public landholders. Consequently, the provisions of s 81(2) and (5), which use the cognate expression, “a private landholder”, must be seen as simply reflecting the meaning given to these words by s 79.

For these reasons, it follows, in my view, that the intention of s 81(5) of the Duties Act is thus apparent. It is, and is intended to be, the corresponding application to “synthetic interests” of the rule in s 79(2)(b) that an interest in a private company must amount to a 50 per cent entitlement to “all the property of the landholder” for it to be a “significant interest”, and thus dutiable. It also follows that for a liability to arise, the economic entitlement identified in s 81(2) must “amount to”, or be “equivalent to”, an entitlement to 50 per cent of all of the property of a landholder. These provisions therefore operate to deem that a majority interest in, for example, the capital growth of the lands of a company, is a majority interest in the proprietary company itself.

It also follows, in my view, that the existence of this rule explains why the drafter of these provisions chose to define an economic entitlement in s 81(2) by reference to “the” income, dividends et cetera of a landholder, and by reference to economic benefits arising from “the land holdings of the land holder”, rather than by reference to benefits arising from “a” landholding. Thus, in my view, it is clear, that the word “the” was used to denote all of the land held by an entity precisely because the provision turns, not upon having a significant indirect economic stake in land as such, but rather, by having a significant indirect stake in a “landholder” as defined by s 71 of the Duties Act.

Thus far, the construction and operation of these provisions is, in my view, coherent and clear from the language utilised and is an interpretation which is consistent with, and supported by, the legislative history and extrinsic materials to which reference has been made. The remaining issue, however, in relation to this legislative machinery is the effect of s 81(6), which relevantly provides:

The duty chargeable on the relevant acquisition is calculated in accordance with section 86(1), as if –
…
(b)a reference to all land holdings of the landholder in Victoria were a reference to the land holdings of the private landholder to which the economic entitlement relates.

The Commissioner puts considerable weight on the effect of the provisions of s 81(6)(b) in support of his contention that s 81 can relate to some, but not all, of the landholdings of the private landholder. Thus, the Commissioner submits:[56]
[56]Respondent’s Outline of Submissions (18 December 2015) [22], [23].

22.First, and centrally, it is necessary to give some operation to s 81(6)(b), which proceeds on the basis that the duty on the acquisition of an economic entitlement is calculated by reference to those land holdings of the private landholder to which the economic entitlement relates, and not by reference to all land holdings of the private landholder in Victoria.
(a)Section 81(6)(b) is based on an underlying assumption that an economic entitlement for the purposes of s 81 can relate to some but not all of the land holdings of the private landholder. If s 81(2)(d) were to be confined to an entitlement that relates to all of the land holdings of the private landholder, thereby giving rise to a deemed relevant acquisition in the landholder, s 86(1) could be applied to the calculation of duty chargeable on that relevant acquisition without any need for the modification effected by s 81(6)(b).
(b)Further, the wording of s 81(6)(b) provides a strong textual indication that, for the purposes of Part 2 of Chapter 3, the land holdings of the private landholder to which the economic entitlement relates’ means something different to ‘all land holdings of the landholder in Victoria’.

23.Secondly, this construction best promotes the purpose or object of s 81. To construe s 81(2)(d) as requiring that an entitlement must relate to “all” land holdings of the private landholder would limit the operation of the provision in a manner which would potentially defeat its intended purpose. Most starkly of all, a person would be able to avoid the operation of s 81 simply by ensuring that some land holdings of the private landholder were not the subject of the economic entitlement. In fact, on the taxpayer’s proposed construction, s 81(2)(d) would not operate even where a person acquired an entitlement in relation to 99 per cent of the land holdings of the private landholder, or otherwise where one minor land holding was excluded from the scope of the arrangement.

Reference has already been made to the provisions of s 86(1) of the Duties Act, which provides for the duty on a relevant acquisition and a private landholder being chargeable: “… on the amount calculated by multiplying the unencumbered value of all landholdings of the landholder in Victoria (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired and the relevant acquisition”. Thus, the thread of “all landholdings” and the analogy with the position under ss 78 and 79 of the Duties Act is preserved in relation to the acquisition of “synthetic interests”. It is, as contended by BPG, admittedly difficult to see how s 81(6) has any independent work to do. On one view, these provisions are predicated on the assumption that the landholdings of the private landholder referred to in s 81(2)(b) to (d) may be only a subset of all the landholdings of the landholder. This is, in other words, the position being contended for by the Commissioner. However, if that view is correct, this would be inconsistent with the machinery provided for in what, in my view, is the correct interpretation of ss 81(2) to (5), particularly the provisions of the latter sub-section. This view, the view advanced by the Commissioner, would, in effect, dismantle this machinery and render dutiable a range of transactions much broader than would otherwise be rendered dutiable had they been transactions acquiring an interest or interests of the type provided for under ss 78 and 79 of the Duties Act. This would, as contended by BPG, turn s 81 into a set of provisions imposing a new head of liability to duty, rather than a set of provisions designed to fill a “gap” in the machinery provided for by ss 78 and 79 with respect to “direct interests” as that machinery is sought to be applied to “indirect interests” or “synthetic interests”. Consequently, the better view is, applying the approach to statutory construction as stated by the High Court and, particularly, construing provisions in context and coherently, that s 81(6) does not make the assumption contended for by the Commissioner, but is, rather, in the nature of a “for the avoidance of doubt” provision.[57] Moreover, I do not accept the Commissioner’s contention that the interpretation advocated in the submissions set out in the preceding paragraph best promote the purpose or subject of s 81. For the reasons set out, I do not accept the Commissioner’s submissions in this respect and neither do I accept the contention that provisions would be rendered inoperative in the circumstances the Commissioner indicates. On the basis of the correct interpretation of these provisions, as set out in these reasons, I do not accept that any provisions will be rendered inoperative as suggested.
[57]See FCT v Greenhatch (2012) 203 FCR 134 at 144 [40].

The answer to the s 81(6)(b) conundrum is, however, in my view, to be answered having regard to the provisions of s 86(1) — which lies in the same division of the Duties Act — in the context of the constitutional constraints on the legislature in legislating with respect to land outside Victoria.[58] Applying this perspective, the provisions of sub-ss 86(1) and 81(6)(b) should, read together as contended by BPG, be taken to mean:[59]

Duty on a relevant acquisition in a private landholder is chargeable, at the rate specified under this Act for a transfer of dutiable property, on the amount calculated by multiplying the unencumbered value of the land holdings of the private landholder to which the economic entitlement relates in Victoria (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.

This reading has the virtue of giving work to both sets of provisions, particularly sub-s 81(6)(b), which is both consistent with each other and which does not, as the Commissioner’s interpretation would have it, effectively dismantle the carefully constructed machinery of Division 2 of Chapter 3 of the Duties Act, as discussed in these reasons by what is, effectively, a side wind—the provisions of sub-s 81(6)(b).

[58]As to the provisions of sub-s 86(1), see [18] above; and as to constitutional limitations, see the reference at [19] above.

[59]Appellant’s Outline of Submissions (18 December 2015) (emphasis in original).

In this respect, the Commissioner also relied, in his notice of determination, on the presumption in s 37 of the Interpretation of Legislation Act 1984, that the singular includes the plural and vice versa. Thus, the Commissioner says that “the land holdings” expression as used in s 81(2)(d) of the Duties Act encompasses “any one of the land holdings”. I do, however, accept BPG’s contention that this is not the effect of s 37 of the Interpretation of Legislation Act 1984. The presumption there provided for allows the expression, “the land holdings” to be read as “the land holding”, so that if MRC only held one piece of land, a taxpayer could not avoid duty by arguing that s 81(2)(d) could not be engaged because of an absence of “landholdings”. It is clear, in my view, that the application of the presumption has nothing to say in the case where the issue is whether “the” means ”all of the”. Moreover, the interpretation which the Commissioner seeks to place on these provisions is clearly at odds with the requirements of s 83 of the Duties Act, which requires the taxpayer to lodge with the Commissioner an acquisition statement providing information which includes (under s 83(2)(f)) “the unencumbered value of all landholdings in Victoria of the landholder as at the date of the relevant acquisition”.[60] Clearly, such information would be potentially largely irrelevant if the legislation were, as the Commissioner would have it, directed to more limited landholdings.
[60](emphasis added).

For these reasons, I do conclude that the relevant provisions of Chapter 3 of the Duties Act are clear and that an economic entitlement will not be acquired in circumstances where the taxpayer only acquires a right to participate in the proceeds of sale of some of the land holdings of a private landholder.

BPG also submits that if the Court were to conclude that the provisions of s 81 are ambiguous, the same result with respect to its interpretation would follow for a variety of reasons which it sets out in detail.[61] As the issues raised in the submissions have, to a significant extent, already been discussed in the preceding reasons, it is convenient to set these submissions out in full, together with some comments on specific matters not already so comprehensively considered. The BPG submissions in this respect are as follows:[62]
[61]Appellant’s Outline of Submissions (18 December 2015) [47].
[62]Appellant’s Outline of Submissions (18 December 2015) [47].

47.If, however, the Court were to conclude that the provisions are ambiguous, it should still reach the same conclusion on the proper construction of s 81, for the following reasons:
(a)the legislative history of the taxing of sales of land shows that there has been a gradual evolution of the relevant provisions in order to bring to duty transactions structured to avoid duty:
(i)initially, only the sale of land itself was dutiable;

(ii)at that time, where a sale of land was effected by way of a sale of the majority ownership of the land-holding entity there was no duty payable. That problem was addressed by the land-rich provisions; and
(iii)even with the land-rich provisions, there was still a loophole: where a person acquired neither the land nor its owner, but through some other arrangement became entitled to the economic value of the land, they could avoid paying duty. This loophole was closed (albeit for now only in Victoria – and only in relation to land held by private companies and private unit trusts) by taxing economic entitlements.

This analysis is consistent with the economic entitlement provisions being described in the Explanatory Memorandum as anti-avoidance in nature.[63]
[63]Explanatory Memorandum, Duties Amendment (Landholder) Bill 2012, 15.
If the words “the land holdings of the private landholder” in s 81(2)(d) can mean “some of the land holdings of the private landholder” then they would do more than close the loophole. They would bring into the duty net transactions that would not be caught even if they were structured as a direct acquisition of the landowner;
(b)the structure of div 2 of ch 3 of the Act does not suggest any distinction should be drawn between direct interests and synthetic interests (or control interests). This is apparent when one notices the following features of the division:
(i)it begins with the general charging provision, s 77, which renders dutiable any “relevant acquisition”;
(ii)it then goes on to, seriatim, define the three classes of relevant acquisition: direct interests in ss 78-80, synthetic interests in s 81 and control interests in s 82; and
(iii)it then goes on to deal with matters relevant to all classes of interest – such as acquisition statements, calculation of duty, identity of the liable party etc – in the balance of the chapter.

It follows that there is no warrant for treating a synthetic interest as being more readily dutiable than a direct interest. In each case, in the case of a private company, a 50 per cent or greater interest in the whole of the landowner (not that part of it that is the subject of a particular transaction) is needed;
(c)on the Commissioner’s argument, the acquisition of a synthetic interest will frequently be dutiable in circumstances where acquisition of that same interest directly would not be. Take for example a company which has two classes of shares. The 49 A-class shares carry with them the right to the rent from one property, worth 49 per cent of the company’s property holdings. The 51 B-class shares carry with them the right to the rent from another property, worth 51 per cent of the company’s property holdings. A person who directly acquires all the A class shares will not acquire a relevant interest under ss 78–80 because the 50 per cent minimum is not reached. However, if the same person acquires not the shares themselves, but the right to the rent attaching to those shares, it will have acquired an economic entitlement (and thus a relevant interest) under s 81, because it will have acquired a right to the rent from 100 per cent of the first property. It is most unlikely that Parliament intended to create such an anomalous outcome. One would expect that, if anything, a direct interest would more readily be taxed than a synthetic interest. That is the case under every other Australian Duties Act, where synthetic interests are not taxed at all. The Court should avoid a construction of the land rich provisions which lead to irrational or anomalous outcomes: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297;
(d)the example given in the previous paragraph illustrates that the Commissioner’s construction would have capricious results that would also depend entirely on the form of a transaction. To continue with that example, if the taxpayer acquires a right to 100 per cent of the rent from the first property, they have acquired a relevant interest, but if the transaction is restructured so that they acquire a right to the rent from both properties but only as to 49 per cent of that rent, they will not have acquired a relevant interest. This is so even though under both transactions, the taxpayer has acquired the right to 49 per cent of the rent of the company; and
(e)the effect of accepting the Commissioner’s argument is that an entirely new head of duty would be created. Transactions that would never previously have been dutiable – regardless of whether they were structured as an acquisition of a direct or a synthetic interest – would become dutiable. There is no indication in the Minister’s Second Reading Speech or the Explanatory Memorandum that the legislature intended to create a new head of duty. To the contrary, in his Second Reading Speech, the Minister said that the amendments would safeguard – not augment – revenues.[64]

[64]Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2024 (Kim Wells, Treasurer).

Turning to some particular matters in these submissions, I note that the legislative history and the anti-avoidance nature of the provisions of s 81 has already been discussed in the preceding reasons and, as I have indicated, I am of the view that s 81 is a provision which is anti-avoidance in nature and intended to fill a “gap” in the machinery of ss 78 and 79 of the Duties Act otherwise applicable to “direct interests”. This is also, in my view, confirmed by the structure of Division 2 of Chapter 3 of the Duties Act, as previously discussed and also as summarised in these BPG submissions. For these reasons, I accept that it follows that there is no warrant for treating a “synthetic interest” as being more readily dutiable than a “direct interest”. It is the position that in each case, in the case of a private company, a 50 per cent or greater interest in the whole of the landholder and not that part of, if it is subject to a particular transaction is required.

A further consideration, highlighted in the BPG submissions, is the potential for anomalous outcomes in the application of the legislation as the Commissioner would have it and a position which is clearly undesirable as a matter of general policy, namely, that the duty consequences would depend not on the substance of a particular transaction, but in the form of the transaction. Thus, there is a potential, a real potential, if the Commissioner’s interpretation were to be applied, for different outcomes to occur as between a “direct interest” transaction and a “synthetic interest” transaction which, in an economic sense, are the same in substance. It might be said that general policy considerations of this nature may not generally be relevant to interpretation, but the position is, in my view, different having regard to the provisions of Part 2 of Chapter 3 of the Duties Act. As discussed in detail in the preceding reasons, the structure of this part is directed to substance with respect to transactions, as is evident by the very provisions of s 81, which focus on economic outcomes, rather than the nature of transactions or the structures of the entities to which they relate. Finally, it is clear, in my view, for the preceding reasons, that the legislature did not intend to create a new head of liability to duty in the enactment of s 81.

Moreover, to the extent that the Commissioner would seek to justify s 81 opening up new heads of liability to duty as an “anti-avoidance” measure—beyond operating as such in the more narrow sense of filling in the “gaps” in the s 78 and s 79 machinery, as discussed—it must be observed that this is at odds with the broad anti-avoidance measures contained in the Duties Act. Section 89L of the division containing these provisions provides that: “This division imposes duty on an acquisition in respect of which duty would have been chargeable but for a tax avoidance scheme”. Section 89M contains provisions for the purpose of identifying such a scheme—provisions which, in essence, adopt the same approach as s 177A of the Income Tax Assessment Act 1936 (Cth). Thus, there is no imperative to construe s 81 as a broad anti-avoidance measure. Rather, it has a much more limited anti-avoidance purpose, limited by the context of the suite of particular provisions within which it is to be found. This is consistent with the accepted position that taxation legislation should not be construed in a manner which, in effect, conflates the interpretation of “operative” provisions—such as s 81 of the Duties Act—with broad anti-avoidance provisions.[65]
[65]See Service v Commissioner of Taxation (2000) 97 FCR 265.

An interest of 50 per cent in a private landholder

I turn now to matters which go to the Second Question. In this context, BPG submits that if the Court is of the view that BPG acquired an economic entitlement, the Assessment is still excessive because there was no relevant acquisition for the purposes of the charging provision, s 77.

Section 81(5) of the Duties Act provides that there is a relevant acquisition where an economic entitlement acquired by a person “amounts … to an interest of 50 per cent or more in a private landholder”. Moreover, as adverted to previously, the effect of the provisions of s 79 is to define an interest in a private landholder to be an entitlement (other than as a creditor) to a distribution of property from the landholder on a winding up of the landholder.

If these provisions of s 81(5) and s 79 were taken literally—and without regard to the context of Part 2 of Chapter 3 of the Duties Act—they would appear to be satisfied only where the economic entitlement includes a right to a distribution of property of the landholder on a winding up of the landholder. Such a construction would give the economic entitlement provisions of s 81 very little work to do, because it would be rare for one of the classes of economic entitlement referred to in s 81(2) to also carry with it a right to a distribution on a winding up. That is a right that normally belongs to shareholders and would be unusual indeed to see it given to a person who has, for example, merely acquired the right to participate in the proceeds of the sale of the land of the landholder. In the present case, there is no suggestion that BPG obtained a right to a distribution of the property of MRC on the latter’s winding up and accordingly if the literal construction of s 81(5) were preferred, the Assessment would have to be set aside.

Consequently, these considerations must inform the proper interpretation of s 81(5) as the usual canons of statutory construction would not support a construction such as this which would produce a result which, if not absurd, can readily be accepted as a result unlikely to have been intended by the legislature. What, then, is “an interest of 50 per cent or more in a private landholder”? Curiously, the words “in a private landholder” have since been removed from sub-s 81(5) of the Act[66] because now “[t]he benefit obtained must relate to a private landholder but does not have to be in a private landholder”.[67] However, for the reasons which follow, this amendment sheds no light on the meaning of “an interest of 50 per cent or more in a private landholder”, as provided in the legislation at all relevant times.
[66]State Tax Laws Amendment (Budget and Other Measures) Act 2013 s 22. Section 22 provides, simply, that: “In section 81(5) of the Duties Act 2000 omit “in a private landholder”.
[67]Explanatory Memorandum, State Tax Laws Amendment (Budget and Other Measures) Bill 2012 (Vic) 9.

The Commissioner also relies upon this amendment of sub-s 81(5) in support of his contentions as to its proper interpretation on the basis that the amendment was made to remove any doubt as to the correctness of his construction. More particularly, the Commissioner says that the subsequent amendments to remove the words “in a private landholder” in sub-s 81(5) served to clarify or remove any doubt as to the legislative intention, but did not alter the meaning or substantive operation to treat the proportionate interest under the economic entitlement as a reference point for the deeming provision in sub-s 81(5).[68]
[68]See Allina Pty Ltd v Commissioner of Taxation (1991) 28 FCR 203 at 212; Interlego AG v Croner Trading Pty Ltd (1992) 39 FCR 348 at 382; Doughty v Martino Developments Pty Ltd (2010) 27 VR 499 at 511 [33]. Subsection 81(5) was amended by s 22 of the State Tax Laws Amendment (Budget and Other Measures) Act 2013. The Explanatory Memorandum in relation to the amendment relevantly stated:
Clause 22 amends section 81(5) of the Duties Act 2000. Section 81 deals with acquisitions of economic entitlements as part of the landholder duty scheme. Duty is imposed if a person acquires an interest under an economic entitlement (which is a measure of the economic benefit obtained by the person) of 50% or more. The benefit obtained must relate to a private landholder but does not have to be in a private landholder for duty to be imposed. The amendment ensures that position by omitting “in a private landholder” from section 81(5).
And, as to proportionate interest issues, see [45] above.

This argument by the Commissioner is predicated on the proposition that there was some purpose in the amendment. Thus, the general rule is that a subsequent amendment may be taken into account for the purpose of determining the scope of prior legislation at least to avoid a result that would render the amendment unnecessary, futile or deficient.[69] Thus, in Commissioner of State Revenue v Landrow Properties Pty Ltd, the Court of Appeal said:[70]
[69]Dennis Pearce and Robert S Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 8^th ed, 2014) 124-7 [3.33]-[3.35].
[70](2010) 79 ATR 800 at 814–5. See also Preble v Commissioner of Taxation (2003) 131 FLR 130 at 142 [52].

54.Our second reason for rejecting the Commissioner’s submissions is that their acceptance would deprive the amendments made to ss 76 and 77(1) of the Duties Act 2000 (Vic) by the State Taxation Acts (Tax Reform) Act 2004 (Vic) of any meaning.
55.Counsel for the Commissioner submitted that the amendments were intended to clarify, rather than alter, the operation of the legislation. According to that analysis neither the amendments made to the Duties Act 2000 (Vic) in 2004, nor the later amendments made in 2007, achieved any change in the operation of the legislation.
56.The amendments made in 2004 included the insertion of the word “beneficial” before “entitlement” in s 76(1) and the addition of a new s 77(1) which provided that:
A person acquires an interest in a land rich landholder if the person obtains an interest beneficially, including if the person’s interest increases, in the landholder regardless of however it is obtained or increased. [Emphasis added.]

The earlier version of s 77 provided that an interest in a land rich private corporation could be acquired in a number of different ways, and was virtually identical to the current provision in s 77(2). The addition of s 77(1) by the amendments made in 2004 therefore goes well beyond clarifying the effect of the previous provision.
57.We cannot accept counsel for the Commissioner’s submission that these words are otiose and were not intended to change the meaning of the provisions. It may be argued that the new s 77(1) was simply intended to pick up the reference to a “beneficial entitlement … to the distribution of a property from the landholder on a winding up of the landholder or otherwise” in s 76(1). However, as the trial judge said, this argument gives no meaning to the word “beneficial” in s 76(1) and does not account for its addition to s 76(1) in the 2004 amendment.
58.Thirdly, whilst the words “beneficial entitlement” in s 76(1) refer to an entitlement to “a distribution of property from the landholder, on the winding up of the landholder or otherwise”, there is nothing in this section or in other sections in Chapter 3 to suggest that the “beneficial entitlement” to a distribution means something different from the normal meaning of a beneficial entitlement to such a distribution.

In the case of the present amending legislation, the Explanatory Memorandum to Clause 22 of the 2012 Bill which became the 2013 Amending Act stated:

Clause 22amends section 81(5) of the Duties Act 2000. Section 81 deals with acquisitions of economic entitlements as part of the landholder duty scheme. Duty is imposed if a person acquires an interest under an economic entitlement (which is a measure of the economic benefit obtained by the person) of 50% or more. The benefit obtained must relate to a private landholder but does not have to be in a private landholder for duty to be imposed.
This amendment ensures that position by omitting “in a private landholder” from section 81(5).

As, for these reasons, this statement did not reflect the position under the provisions of the Duties Act prior to amendment, it follows, on the basis of the authorities to which reference has been made, that the amendment does not inform the present process of statutory construction and must be regarded as an amending provision which effected a change in the law, prospectively.[71] Consequently, the amendment does not assist the Commissioner’s position.

[71]See Dennis Pearce and Robert S Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 8^th ed, 2014) 127 [3.35].

It is trite that in order to calculate a percentage, it is necessary to know three things: the nature or quality of the whole; the quality of the part that is the percentage of the whole; and the time at which to determine these attributes. In the case of s 81, the part is clearly enough the economic features of the economic entitlement. The whole is the total aggregate economic attribute of the private landholder; this follows from the words “in a private landholder”.

This construction is, in my view, supported by the language of ss 78 and 79, and the structure of Part 2 of Chapter 3 of the Duties Act. A person is not there exigible on an acquisition of a relevant interest he or she or it acquires unless, relevantly, that interest carries with it a right to 50 per cent or more of the property of the land rich company on a winding up. Critically, that is 50 per cent or more of “all property of the landholder”[72] and not just a 50 per cent interest in particular land, or, for that matter, in all lands. It must be a 50 per cent interest in all property, whether real, personal, corporeal or incorporeal. Section 81 operates in a similar manner by requiring the presence of an entitlement that amounts to an interest of 50 per cent or more in the totality of the landholder. Any other construction would give s 81 a much broader field of operation than ss 78 and 79, a result unlikely to have been intended by the legislature for the reasons already discussed. Additionally, such a broad reading of s 81 would render the need for s 78 and 79, addressing as they do the acquisition of “direct interests”, wholly otiose. Again, that is unlikely to be what the legislation intended.[73]
[72](emphasis added).
[73]Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 [71].

Additionally, it is clear as a matter of language that the word “amount” is not used here in its numeric sense. Rather, when juxtaposed against the word “to” the phrase “amounts to” means “the equivalent of”.[74] The “entitlement” must thus be the equivalent of a 50 per cent or more “interest” in the landholder. This construction is consistent with the provision being a “synthetic” version of ss 78 and 79. One is thus looking to determine, in economic terms, whether there is sufficient equivalence between a 50 per cent or more interest in the company, that is an interest carrying a right or rights to “all of the property” of the landholder on a winding up, and the entitlement arising under s 81(2). Whilst the provision does not say so expressly, equivalence in value may be sufficient for s 81(5) to be satisfied, although equivalence might exist for other reasons. Again, this is consistent with the provisions of s 81 filling a “gap” in the s 78 and s 79 machinery to accommodate “synthetic interests” into the structure and operation of that machinery, as discussed previously. Turning to an example to illustrate this position: a right to 51 per cent of the dividends declared by a company might satisfy the provision, even though the company might be in losses, or have only low retained earnings. Equivalence would exist by reason of the legal rights held. Much would depend upon the nature of the entitlement in question to determine whether it is sufficiently equivalent.
[74]Concise Oxford Dictionary, 10^th Edition.

Here, although it does not say expressly, I accept that it must follow that the Assessment relies on reading the words “an interest of 50 per cent or more in a private landholder” as “an interest of 50 per cent or more in the relevant lands of a private landholder”.[75] There is no warrant for this. Moreover, the assessment proceeded by determining whether BPG had an interest of more than 50 per cent in the estimated proceeds of the sale of the Subject Land. Because the lands have not been sold, and their proceeds of sale are entirely unknown, the Commissioner made a purported estimate of the future proceeds under s 11(2) of the Taxation Administration Act 1997 which provides:

If the Commissioner has insufficient information to make an exact assessment of a tax liability, the Commissioner may make an assessment by way of estimate.

[75](emphasis added).

Leaving aside whether this provision applied here, as well as whether the Commissioner’s calculation was an “estimate” for the purposes of it, the final issue to consider is one of timing. Having regard to the context and structure of Part 2 of Chapter 3 of the Duties Act, I am of the view that the time to test whether an entitlement amounts to a 50 per cent or more interest in a landholder is when that entitlement is first acquired. This also follows from the language of s 77: “[a] liability for duty charged by this Part arises when a relevant acquisition is made”.

Thus, for the purposes of s 78 and 79, the time for testing whether a person has a 50 per cent right to all property on a winding up is “when” the acquisition is made.[76] This testing is then to be carried out, if necessary, having regard to the rules in s 89H regarding the maximisation of entitlements. No different time arises under s 81, even though it creates a statutory fiction. Again, there liability arises upon the acquisition of an entitlement.[77] That requires determination of the quality of the entitlement at that time, to assess whether it is equivalent to a 50 per cent or more interest as discussed above.
[76]Duties Act 2000, s 77.
[77]Duties Act 2000, sub-ss 81(1) and (2).

In the case of an entitlement being a right to income, or a right to rent, where the entitlement is fixed by amount and duration, equivalence might be tested by determining the value, as at the date of acquisition, of such rights. In the case of a right to dividend, assessing its economic attributes by reference to value might well be difficult, given that ordinarily dividends are discretionary returns, which depend not only upon the future performance of a company but also on the decision of a board. Nonetheless, a legal right to 51 per cent of all dividends might nonetheless amount to a 50 per cent or more interest in a private landholder because such rights are equivalent to rights on a winding up.

Where the entitlement is a right to participate in the proceeds of sale of the land holdings of the private landholder, the focus is on the economic role that land has within a private landholder. Unlike a right to a dividend or to capital, this type of entitlement has little legal equivalence to the rights identified in s 79. Equivalence, here, is thus more likely to emerge from assessments of economic value. Accordingly, if the land was, at the time of acquisition of the entitlement, of insignificant value, holding a right to, say 80 per cent of the proceeds of that land, would be very unlikely to amount to a 50 per cent or more interest in the landholder. In contrast, if the land was of very great value, when compared to the other assets of the landholder, holding this 80 per cent right might very likely be equivalent to a 50 per cent or more interest. In each case, the economic value of the right to proceeds would be tested by reference to the value of the relevant land at the time of acquisition of the right. At that time, the Commissioner would usually have all of the information needed to assess the value of that land and the resultant value of the right to proceeds. There would be no need to make estimates.

In that respect, it would be wrong to determine the economic attributes of a right to the proceeds of a sale of land by reference to predictions about the value of those rights at some indeterminate time in the future. That is because the time for determining whether s 81(5) is satisfied is at the time of acquisition of the entitlement, and not some other time in the future. Moreover, picking a future time for determining economic value is fraught with unresolvable uncertainty, and for that reason is very unlikely to be what the legislature intended. That is because in such a case both predicting the future proceeds of sale and the future overall value of the landholder are unknowable. Both values depend on guessing at when the lands would be sold, and their value at that time, and the overall value of the landholder at that same time. Because the time of sale is uncontrolled, this is not a matter for estimation arising from insufficient information.

Once it is accepted that the relevant question for s 81(5) is whether the economic entitlement amounts to an interest of 50 per cent or more in the value of the private landholder, it is apparent that the Commissioner faces an insurmountable hurdle. It is an agreed fact that the Subject Land is less than 50 per cent of the value of all of the land of MRC. An economic entitlement to the Subject Land, no matter how great, could never amount to an entitlement of 50 per cent or more in MRC. The Commissioner did not consider the value of all of MRC, but if he had, the answer must inevitably have been that the economic entitlement acquired by BPG was less than 50 per cent of all of the value of MRC.

Conclusion

The Commissioner has assessed BPG as if the economic entitlement provisions in Chapter 3 of the Act operated in respect of particular parcels of land, rather than in respect of all of the land of a particular private landholder. Thus, the Commissioner has ignored all of the MRC land other than the land the subject of the Development Agreement. The Assessment has been made on the basis that BPG acquired an economic entitlement in the Subject Land (rather than in MRC) and that the extent of that interest is the extent of BPG’s interest in the Subject Land (rather than in MRC). There is no basis for the Commissioner’s position.

On its proper construction, s 81(2)(d) of the Act cannot apply where a person acquires a right to participate in the proceeds of sale of some but not all of the land holdings of a private landholder. In this case, BPG acquired a right to participate in the proceeds of sale of the Subject Land,[78] but the Subject Land was far from the only land owned by MRC in Victoria.[79] Indeed, the Subject Land comprised less than 50 per cent by value of all the land holdings of MRC in Victoria.[80] Therefore, s 81(2)(d) cannot apply to BPG’s acquisition of a right to participate in the proceeds of sale of the Subject Land.
[78]Statement of Agreed Facts (11 December 2015) [5], [9].
[79]Statement of Agreed Facts (11 December 2015) [6].
[80]Statement of Agreed Facts (11 December 2015) [8].

For the preceding reasons, the First Question must be answered, “No” and the Second Question must be answered “Not necessary to answer”.

Regardless of the answer to the First Question, s 81(5) of the Act is not satisfied by BPG obtaining rights over land of MRC that is agreed to be worth less than 50 per cent of all of MRC’s land. If BPG obtained an economic entitlement at all, it was not “50 per cent or more in” MRC, since it obtained no right to the majority by value of MRC’s land. It thus follows, for the preceding reasons, that if the First Question had been answered, “Yes”, then the Second Question would have been answered “No”.

The parties are to bring in orders, to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further on this issue.

[2016] VSC 172

22 April 2016