Central Pacific Holdings Pty Ltd & Anor v State of Victoria
[2009] VSC 230
•11 June 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4956 of 2006
| CENTRAL PACIFIC HOLDINGS PTY LTD (ACN 061 811 210) and SOUTHERN CROSS PROPERTIES PTY LTD (ACN 004 449 101) | First Plaintiff Second Plaintiff |
| v | |
| STATE OF VICTORIA | Defendant |
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JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 May 2009 | |
DATE OF JUDGMENTS: | 11 June 2009 | |
CASE MAY BE CITED AS: | Central Pacific Holdings Pty Ltd & Anor v State of Victoria | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 230 | |
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CONTRACT – Contract of sale of land by the State to the first plaintiff – Contractual promise to indemnify the first plaintiff and any Related Body Corporate for land tax liability in respect of the land sold – Whether second plaintiff a Related Body Corporate of the first plaintiff – Whether grant of indemnity extended to a Related Body Corporate that was not a purchaser under the contract – Construction of indemnity – Relevance of context and factual matrix.
STATUTORY CONSTRUCTION – Broad statutory discretion in the State to contract for sale of land “for any consideration or on any other terms and conditions”– Whether contractual promise by the State to indemnify the first plaintiff and any Related Body Corporate for land tax liability in respect of the land sold was within power – Whether a specific grant of power required to confer power – ss 3, 10 and 11 Land (Revocation of Reservations) Act 1994.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr CL Pannam QC with Mr SD Hay | Jacobsons Lawyers |
| For the Defendant | Mr G Bigmore QC with Mr MNC Harvey | Victorian Government Solicitor |
HER HONOUR:
The first plaintiff (“CPH”) purchased land (“the Land”) from the defendant (“the State”) pursuant to a contract of sale dated 15 September 1994 (“the contract”) that it entered into with the then Minister for Finance (“the Minister”). CPH seeks an order that the State specifically perform a special condition in the contract under which it agreed to indemnify CPH and “any Related Body Corporate” of CPH for “liability for payment of any land tax assessed on the land by the Commissioner of State Revenue for the period prior to” 15 September 1994. CPH claims that the second plaintiff (“SCP”) was related to it when the contract was made and had an extant land tax liability as a lessee of the Land for the purposes of the Land Tax Act (Vic) 1958. In March 2007 SCP paid the Commissioner of State Revenue (“the Commissioner”) $3.275 million in settlement of its pre 15 September 1994 liability. CPH claims that the State is contractually liable to indemnify SCP for the land tax it paid.[1]
[1]At the hearing, senior counsel for the plaintiffs abandoned all other claims against the State as pleaded in the Second Further Amended Statement of Claim filed 11 September 2008, including the SCP’s claims against the State.
The State disputes CPH’s entitlement to relief on several bases. The defences raise the following issues for determination:
(a)Was SCP a “Related Body Corporate” to CPH as defined in s 9 of the Corporations Law 1994 (Cth) (“Corporations Law”) on the “Day of Sale”: viz, 15 September 1994?
(b)Does special condition 2, on its proper construction, oblige the State to indemnify SCP for the land tax it paid?
(c)Was it lawful for the State to enter into such a contractual promise?
I am satisfied on the evidence that SCP was a Related Body Corporate of CPH as at 15 September 1994. I am also of the view that it was lawful for the State to grant the indemnity on the terms contained in special condition 2. However, I have concluded that CPH is not entitled to the relief that it seeks because, in my view, special condition 2 did not, on its proper construction, extend the indemnity to SCP, although a Related Body Corporate at the relevant time. In my view, a reasonable person would have understood that special condition 2 was only intended to create a right of indemnity in favour of the purchaser of the Land, namely CPH and/or any Related Body Corporate that it nominated as purchaser. As CPH did not nominate SCP as an additional or substitute purchaser a right of indemnity did not accrue to SCP.
I turn now to the relevant facts.
CPH’s purchase of the Land
The Land is the former Southern Cross Hotel site which the Nauru Government, using CPH as the purchasing vehicle, acquired for redevelopment. Before it could be acquired, the State had to revoke a permanent reservation that applied to the Land and a crown grant registered volume 5914 folio 754 in favour of the Melbourne City Council (“MCC”). The Land (Revocation of Reservations) Act 1994 (“the Revocation Act”) was enacted in part for that purpose and reverted the Land to the State for the purposes of sale,[2] with express authority conferred on the Minister to sell “for any consideration or on any terms and conditions that may be determined by the Minister”.[3]
[2]Revocation Act ss 1(b), 3 and 10(a).
[3]Ibid ss 11(1) and (2).
A contract for the sale of the land was entered into on 15 September 1994. The parties to the contract were the Minister as vendor and CPH “and/or Nominee” as purchaser. The particulars of sale provided that the purchase price was $10 million payable by a deposit of $500,000 and the residue on 31 March 1996. March 1996 was the expected completion date of the redevelopment.
The general conditions of sale included, relevantly:
Clause 1:
These General Conditions shall be read subject to any Special Conditions forming part of this Contract and the provisions of the [Revocation] Act.
Clause 2:
The Land is sold under the [Revocation] Act.
Clause 4.4:
If the land is expressed as sold to a named purchaser “and/or nominee” (or words of like effect) then subject to obtaining the Vendor’s written consent and paying the prescribed fee required under section 96 of the Land Act 1958 the named purchaser may nominate a substitute or additional purchaser (in this contract called “the nominee”) but the named purchaser shall remain personally liable for the due performance of all his obligations under this contract. … (emphasis added)
Clause 4.5:
That from [15 September 1994] the purchaser or any [R]elated Body Corporate as defined in Section 9 of the Corporations Law, nominated by the Purchaser shall be entitled to occupy the land and shall be deemed to be the owner of the land for the purpose of any Act which imposes any obligation or liability on an owner of the Land … (emphasis added)
The special conditions included, relevantly:
Special condition 1:
The Vendor and the Purchaser acknowledge and agree that the Purchaser shall assume liability as owner of the land for payment of land tax assessed on the land by the Commissioner of State Revenue in respect of the period commencing on the Day of Sale until the settlement date and for any land tax accruing thereafter. (emphasis added)
Special condition 2:
[The State] indemnifies [CPH] and any Related Body Corporate as defined in section 9 of the Corporations Law against liability for payment of any land tax assessed on the land by the Commissioner of State Revenue for the period prior to the Day of Sale. (emphasis added)
Special condition 2 is the clause which is the subject of CPH’s claim for specific performance by the State in favour of SCP.
CPH did not exercise its contractual right in clause 4.4 to nominate SCP as a substitute or additional purchaser.
CPH’s purchase of SCP’s shares
Whilst MCC was owner, it had leased the Land under a long term lease to SCP and the Revocation Act preserved the continuity of that lease by providing that the lease had effect as a lease between the Minister and SCP, as if it had been assigned to the Minister.[4]
[4]Revocation Act s 10(2).
CPH had to acquire SCP’s lease to get unencumbered title to the Land. It needed the title to be free from the lease for the redevelopment to happen. CPH entered into a conditional agreement with SCP’s receivers[5] on 26 November 1993 to acquire SCP’s assets, including the leasehold interest, for $42 million. CPH also sought and obtained advice from Ernst and Young, accountants, about the most tax effective way of acquiring SCP’s lease. CPH was advised to acquire the shares in SCP because it had accumulated losses that CPH could use for tax purposes. CPH accepted the advice and replaced the sale agreement with a share acquisition of SCP for $43.260 million. CPH claims that it acquired all the shares in SCP on 22 July 1994, before it entered into the contract to purchase the land from the State.
[5]SCP had been placed into receivership in 1992.
MCC and SCP both liable to pay Land Tax on the Land
Land tax was payable on the Land and both MCC and SCP had outstanding liabilities for land tax when the State contracted to sell the land to CPH. MCC was liable as owner of the land and SCP was liable as the deemed owned of the Land by reason of its leasehold interest. Each had been assessed on the full unimproved value of the Land. In Commissioner of Land Tax (Vic) v City of Melbourne and Ors,[6] the Full Court, affirming the decision at first instance, held that the land tax payable on the full unimproved value of the Land was to be apportioned between them in the manner prescribed by s 42 of the Land Tax Act 1958 (Vic) so that MCC’s liability, as owner of the Land, was reduced by the tax that SCP, as lessee of the Land, was required to pay pursuant to s 42.
[6][1994] 1 VR 486.
Shortly stated, under the scheme of the Land Tax Act, as it then was, each owner of the Land was assessable each year on the total unimproved value of the Land.[7] There were certain deeming provisions, including s 42, which imposed liability on a lessee as if the owner of the Land. Section 42 provided as follows:
[7]Land Tax Act 1986 (Vic) s 8.
(1)Save as hereinafter provided any person entitled to any leasehold estate in land whether legal or equitable (other than under any lease from the Crown) shall be deemed for the purposes of this Act (though not to the exclusion of the liability of any other person) to be the owner of the fee-simple of the land, and shall be assessed and liable for land tax accordingly.
(2)Whenever any person entitled to any leasehold estate is assessed under the provisions of this section there shall be deducted from the tax payable by the owner of the freehold estate in respect of the same land the amount of tax payable by the person entitled to the leasehold estate.
(3)Nothing in this section shall operate to relieve the legal owner of the fee-simple from the payment of tax except in so far as in the opinion of the Commissioner his interest in the unimproved value of the land is lessened by the covenants of any lease thereof and in every such case the Commissioner shall determine the amount of the tax payable by the owner and by the person entitled to the leasehold estate respectively.
Section 66 provided that the tax was a first charge on the Land in respect of which it was payable and -
notwithstanding any disposition of any land it shall continue to be liable in the hands of any purchaser or holder thereof for the payment of such tax so long as the same remains unpaid but it shall not be liable in the hands of a bona fide purchaser for value for the payment of any land tax due and unpaid at the date of a certificate issued under s 97 in excess of the amount of the land tax due and unpaid on that land as certified by the Commissioner in that certificate.
In Commissioner of Land Tax v City of Melbourne & Ors, Fullagar J, with whom Brooking and McDonald JJ agreed, said as follows about the effect and operation of s 42:
What might be called the operative part of s 42 of the Act is sub-s. (3) thereof. It provides in substance that, if and in so far as the commissioner considers that the freeholder's interest in the unimproved value of land is lessened by the covenants of any lease thereof, the commissioner must apportion the land tax applicable to the leased land between the freeholder and the lessee. The commissioner will of course conclude this task by assessing the land tax of both the freeholder and the lessee. But the first step in the process of applying s. 42, after arriving at the requisite opinion that the freeholder's interest is lessened as above, is to determine the amount of land tax which in the absence of s. 42 would be payable by the freeholder in respect of the leased land. …
To make legitimate, as it were, this process of assessing to land tax a lessee, sub-s. (1) of s. 42 confers, on the lessee to whom the words of sub-ss. (2) and (3) apply, the deemed character of owner, "accordingly" putting him into a legal character or category in which he may "be assessed and liable for land tax". However his character of owner, being "not to the exclusion of the liability of any other person", such as the freeholder, is not at large and for all purposes, but is subject to the provisions which follow sub-s. (1), or is "save as hereinafter appears". Double duty is not permitted.
Thus, the lessee under s 42 had a liability, by virtue of its tenancy, separate and distinct from the liability of the owner of the Land, albeit in respect of the same piece of land.
In 2000, some seven years after the Court of Appeal decision (handed down on 11 August 1993), the Commissioner issued amended assessments for the years 1982-1994 to the MCC and SCP apportioning between them the land tax payable by MCC for each year in respect of the property. The MCC objected to these amended assessments but SCP did not. The MCC’s objections resulted in further amended assessments being issued to the MCC and the SCP on 30 November 2001. In 2004, the Commissioner commenced recovery proceedings against SCP. SCP defended the recovery action and counterclaimed, seeking an indemnity in respect of the amounts it was found liable to pay to the Commissioner in reliance on special condition 2 of the contract. The recovery proceedings were settled on 14 February 2007 and the Commissioner agreed to accept from SCP the sum of $3.3 million in full and final settlement of its liability. Those terms were amended on 23 March 2007 when the Commissioner agreed to a discount and accepted payment of $3.275 million from SCP, in respect of which CPH seeks indemnity from the State in favour of SCP.
Was SCP a “Related Body Corporate” of CPH as at 15 September 1994?
I find that SCP was a Related Body Corporate of CPH as at 15 September 1994, by reason that on and from 22 July 1994, CPH owned all the shares in SCP and thereby became, and remains, a wholly owned subsidiary of CPH.
A wholly owned subsidiary is a “Related Body Corporate” within the meaning of that expression as defined in s 9 of the Corporations Law 1994 (Cth) as it stood in September 1994, which provided:
“Related body corporate”, in relation to a body corporate, means a body corporate that is related to the first-mentioned body by virtue of s 50.
Section 50 of the Corporations Law provided:
Where a body corporate is:
(a) …
(b) a subsidiary of another body corporate; or
(c) …
the first-mentioned body and the other body are related to each other.
Section 46 of the Corporations Law provided:
A body corporate (in this section called “the first body”) is a subsidiary of another body corporate if, and only if:
(a) the other body:
(i) controls the composition of the first body’s board;
(ii)is in a position to cast, or control the casting of, more than one half of the maximum number of votes that might be cast at a general meeting of the first body; or
(iii)holds more than one half of the issued share capital of the first body (excluding any part of that issued share capital but carries no right to participate beyond a specified amount in a distribution of either profits or capital); or
(b) the first body is a subsidiary of a subsidiary of the other body.
Although CPH was not able to produce the executed Share Sale Agreement, I am satisfied on the evidence that it was executed on 22 July 1994 and that CPH became owner of all of SCP’s shares on that date. I refer to the following evidence. The minutes of the 22 July 1994 CPH directors’ meeting record a share transfer and share purchase agreement having been executed at that meeting under the heading “Operation SCRAP”. Although the minutes do not specify the subject matter or content of the share transfer and share purchase agreement and, therefore, are inconclusive on their own, the evidence of Mr Graham Sherry, the partner at Baker & McKenzie responsible for CPH’s acquisition of SCP and its assets, was that “Operation SCRAP” referred to the project to acquire the Southern Cross hotel site, including the acquisition of all the shares in SCP. Mr Sherry’s evidence was that it was his belief, based on this entry, that at that meeting the directors executed the share transfer and share purchase agreement which had been “previously provided” to the Firm and held in escrow subject to the satisfaction of two conditions: confirmation by Ernst & Young of available losses and foreign investment acquisition approval from the Treasury, each of which by that time had been satisfied. In his evidence Mr Sherry referred to correspondence between his Firm and others which pointed to the share purchase agreement executed on 22 July 1994 as having been the one which was “previously provided”. By letter dated 13 May 1994 from Mr Gillad Dalal of Baker & McKenzie to SCP, Mr Dalal indicated that a “final version” of the Share Purchase Agreement was enclosed. The subject matter of the enclosed agreement was the purchase by CPH of all of SCP’s shares. The 13 May letter also stated that the agreement was being held “in escrow conditional upon” two conditions, namely, “[CPH] receiving consent … of the Treasurer of Australia to the transfer of the shares pursuant to the Foreign Acquisition and Takeovers Act 1975” and “[CPH] obtaining an opinion in a form satisfactory to it from Ernst & Young stating that the accumulated tax losses of the Company are no less than $19,000,000”. Treasury, by letter dated 24 May 1994, had indicated its consent to the purchase by CPH of 100 per cent of the issued shares in SCP. Ernst & Young, by letter dated 14 June 1994, had indicated that the accumulated tax loss as at June 1993 was approximately $18,215 million and that there may be further losses of approximately $30 million arising from the write off of a bad debt. Subsequent to the directors’ meeting, by email dated 23 August 1994 from Mr Gillad to Mr Sherry, Mr Gillad requested confirmation of the “exact date” on which the “share transfer in Southern Cross Properties executed by CPH … was signed”. Mr Sherry replied, by email dated 1 September 1994, “JULY 22”. The evidence is also consistent with a recital in the variation agreement dated 16 September 1994, replacing the November 1993 conditional agreement, that the conditions to which the share purchase agreement had been subject had been fulfilled and that the transfer had become effective as at 22 July 1994.[8]
[8]Recital C and definition of “Share Purchase Agreement” of the Agreement dated 16 September 1994.
The State did not advance evidence that was inconsistent with these documents.
I find that the evidence establishes that the share purchase agreement and share transfer were executed on 22 July 1994, on which date CPH became the sole owner of SCP’s shares and, therefore, a “Related Body Corporate” within the definitions provided for by ss 9, 46 and 50 of the Corporations Law.
Proper construction of special condition 2
Senior counsel for the State submitted that special condition 2, properly construed, did not extend the indemnity to SCP, even if a “Related Body Corporate” of CPH at the relevant date. On the State’s construction, the condition should be read as if the phrase “Related Body Corporate” was a reference to such related body corporate as was “nominated as a purchaser under the contract of sale” pursuant to cl 4.4 of the general conditions. It was said that this was because the manifest purpose and object of the contract was to sell the Land to CPH or its nominee without burdening it[9] with outstanding land tax liabilities of the MCC, as the previous owner of the Land. It was submitted that special condition 2 must be construed in light of the contract as a whole and its purpose and object, which was concerned with the sale of the Land, but not the leasehold interest of SCP, and the assumption of liability by CPH for land tax “as owner” of the Land as and from the date of the contract. It was submitted that it is material to consider the matrix of surrounding facts to the contract, in particular the knowledge of the parties about MCC’s land tax liability “as owner”. It was further submitted that the intention of the parties by special condition 1 was that CPH would assume liability for land tax payable on the Land “as owner” of the Land as and from 15 September 1994.
[9]See Land Tax Act s 66.
Senior counsel for CPH submitted that there was no ambiguity in the words and that absent ambiguity the Court cannot have regard to the alleged factual matrix to give meaning to special condition 2. It was further submitted that the factual matrix did not, however, affect the meaning of the clause in the manner contended for by the State.
The proposition that the language must be ambiguous before taking into account the factual matrix has now been rejected in a number of cases.[10] In Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd,[11] Weinberg J said:
I am also satisfied that the controversy engendered by the passage from the judgment of Mason J in Codelfa, to which to which Finn J referred, has now been largely resolved by recent High Court cases dealing with the use of surrounding circumstances when construing contracts. I refer, in particular, to Pacific Carriers, Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) CLR 471; 211 ALR 101; [2004] HCA 55, and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; 211 ALR 342; [2004] HCA 52 (Toll). In effect the High Court has determined that, at least when construing commercial contracts, the "surrounding circumstances" or "factual matrix" may be taken into account. This is so in all cases, even if the words at issue are not ambiguous, or susceptible of more than one meaning.[12]
The meaning of text may take on a different understanding when considered in the context of the contract as a whole and its commercial purpose.
[10]Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) ALR 236, 561; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461–462 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Investors [1998] 1 WLR 896, 912–913; [1998] 1 All ER 98.
[11](2006) ALR 236.
[12]Ibid 573–574.
The approach to construction of terms in a contract is well established. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[13] the High Court stated:
The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction(21).[14]
The task is to ascertain what the parties intended the special condition to mean. That is an objective inquiry, in the sense of what a reasonable person would understand the clause to mean.[15]
[13](2004) 219 CLR 165.
[14]Ibid (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) [40].
[15]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); International Air Transport Association (IATA) v Ansett Holdings Ltd (2008) 234 CLR 151 (Gleeson CJ, Gummow, Kirby, Hayne, Heydon, Crennan and Kiefel JJ).
In my view, condition 2 is susceptible of more than one meaning. On one view, the State undertook to indemnify CPH and any body corporate related to CPH which had a land tax liability in relation to the Land. However, the indemnification of “CPH and any Related Body Corporate” is also reasonably capable of being understood as a cross reference to the named purchaser (CPH) and any Related Body Corporate that CPH nominated as purchaser of the Land pursuant to general condition 4.4 which, by special condition 4.5, would be treated as the owner of the Land from the date of contract for the purposes of obligations or liabilities arising under any Act, including land tax as “owner”.[16] The question for determination is which meaning should attach to the words.
[16]General conditions 4.4 and 4.5.
In my view, a reasonable person would not have understood the phrase “CPH and any Related Body Corporate” other than as a reference to CPH and such body corporate as nominated by CPH pursuant to cl 4.4 of the General Conditions. In my view, a consideration of the contract as a whole makes it clear that the object of the condition was to ensure that the purchaser of the Land, that is, CPH and/or its nominee, would not be at risk for the vendor’s outstanding land tax liabilities as at the date of contract.
That construction accords with the objective framework of the contract. Read as a whole, the contract was for the sale of land on terms that would give the purchaser rights of ownership from the date of entry into the contract, albeit that title would not pass until the settlement date, being 31 March 1996.[17] Consistently with that purpose, the terms of the contract made the purchaser liable as owner under any Act as and from the date of contract. Consistently also with that purpose,[18] the contract made express provision in special condition 1 for the purchaser to assume liability for land tax as and from the date of contract. Special condition 1 had the effect of bringing forward the point in time when the purchaser would be “owner” of the Land for the purposes of the Land Tax Act. The corollary is that the burden of past liabilities would be borne by the State, the vendor of the Land, by way of the grant of indemnity.
[17]Particulars of Sale.
[18]General conditions 4.4 and 4.5.
Senior counsel for CPH submitted that special condition 2 would have no work to do on the State’s construction. But the work to be done by special condition 2 is explained by s 66 of the Land Tax Act. Section 66 charged the Land with the tax payable and, notwithstanding the sale of the Land, arrears would “continue to be liable in the hands of the purchaser … for the payment of such tax so long as [the tax] remains unpaid”.[19] It was common knowledge of the parties at the time of sale that the MCC had an extant tax liability which remained to be quantified by the Commissioner according to the methodology prescribed in the Full Court decision in Commissioner of Land Tax v City of Melbourne. The meaning of special condition 2 is apparent against that background. In my view, the clear contractual arrangement of the parties, determined from a consideration of the contract as a whole and the factual matrix, was that the “purchaser”, ie CPH and/or its nominee, would be only be liable for land tax that accrued from the date of contract (expressed in special condition 1) and, in so far as the purchaser was liable by force of statute for land tax payable by the MCC for the period prior to the date of contract, the State, as vendor of the Land, would indemnify the purchaser – ie CPH and/or nominee – for such amount.
[19]Australia and New Zealand Banking Group Ltd v 112 Acland Street Pty Ltd [2000] VSC 428 (Unreported, Byrne J, 20 October 2000); Re Langford (dec’s); Equity Trustees Ltd v Langford [2005] VSC 84 (Unreported, Byrne J, 24 March 2005).
The factual matrix does reflect that the parties intended the State to assume the burden of SCP’s pre-existing liability as lessee, once quantified. It points to quite the opposite. Accordingly, I find that the indemnity does not extend to SCP.
Was it lawful for the State to contract special condition 2?
I now turn to consider whether it was lawful for the State to contract special condition 2 if, contrary to my view, the State is obliged on the proper construction of the condition to indemnify SCP as claimed.
It was not disputed by the State that its then Minister for Finance had exercised the power of sale contained in s 11 of the Revocation Act in selling the Land to CPH.[20] Section 11 relevantly provides that:
[20]And see General Condition 2 of the Contract.
(1)The Minister, on behalf of the Crown, may sell to a person or body approved by the Minister, all or part of—
(a)the land described in folio of the Register Volume 5914 Folio 754;
…
(2)A sale may be for any consideration or on any other terms and conditions that may be determined by the Minister.
(3)The Minister, on behalf of the Crown, may execute any document or do anything else necessary to give effect to a sale.
(4)The proceeds of a sale of land under this section must be paid into the Consolidated Fund.
(5) …
The State claimed that special condition 2 is void as it was not within the power of the Minister to contract and the State cannot be sued for failure to give effect to it.[21] The basis of the claim was that the power of sale contained in s 11(2), which authorised the Minister to sell the Land “for any consideration or on any other terms and conditions that may be determined by the Minister”, was not a conferral of authority to contract the promise contained in special condition 2 and, absent such legislative authority, special condition 2 was unlawful. It was argued that the Minister required specific legislative power to contract special condition 2 as the indemnity effectively exempted SCP (if the relevant “Related Body Corporate”) from its obligation to pay land tax. Senior counsel for the State relied on the decision of Mandie J in Port of Portland Pty Ltd v State of Victoria[22] (“Port of Portland”), and the line of authority which his Honour applied, in support of his contention. It was further contended that even if s 11(2) could authorise the State to indemnify a taxpayer in respect of its tax liability, such authorisation would not extend to SCP as it could only apply to a purchaser’s liability arising out of land affected by the contract of sale.
[21]Paragraph 41(e) of the Defence.
[22][2007] VSC 488 (Unreported, Mandie J, 30 November 2007). I was informed by the parties that an appeal against this decision has been heard by the Court of Appeal and that judgment is reserved.
CPH, on the other hand, contended that the Minister was given the requisite legislative authority by s 11(2) of the Revocation Act. It was further submitted that it was clearly within the Minister’s statutory power to grant the land tax indemnity to SCP (if the relevant “Related Body Corporate”) arising, as it did, in respect of the Land that he was empowered to sell.
In my view, s 11(2) of the Revocation Act gave the Minister the requisite authority to contract special condition 2. The authority, in my view, was contained in the wide language of s 11(2), which permitted on its terms a sale for any consideration and on any terms and conditions as determined by the Minister. As the Privy Council observed in Shanmugam v Commissioner for Registration of Indian and Pakistani Residents:[23]
To be “express provision” with regard to something it is not necessary that that thing should be specially mentioned; it is sufficient that it is directly covered by the language however broad the language may be which covers it so long as the applicability arises directly from the language used and not by inference therefrom.[24]
Here the authority is to be found directly in the language used.[25] There are no words of limitation in s 11(2) of the Revocation Act regarding the terms and conditions on which the Land could be sold by the Minister on behalf of the Crown. The ambit of the power is undefined, other than by the context of s 11 and the scope and object of the Revocation Act,[26] of which the sale of the Land was an express purpose.[27] The Legislature deliberately conferred power on the Minister in the broadest terms.
[23][1962] AC 515, 517.
[24]Ibid 527.
[25]Rawson v Duff & Ors [1968] Tas SR 62, 70.
[26]FCT v Linter Textiles Australia Ltd (2005) 220 CLR 592, 612; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384.
[27]Revocation Act s 1(b).
Viewed in the context of s 11 and in light of the objects of the Revocation Act, there is no warrant, in my view, for concluding that special condition 2 was beyond the legal authority of the Minister to contract. The grant of indemnity was referable to the subject-matter of the Act relating, as it did, to land tax payable in respect of and charged on the Land. It seems to me that such a condition was covered by the language of s 11(2) by which the Minister was given unrestricted power to sell the Land. I am not persuaded that the wide conferral of power should not be given its full effect. In my view, the statutory language of s 11(2) of the Revocation Act was sufficient authority for the Minister on behalf of the State to grant the indemnity in respect of accrued land tax payable, as it was, in respect of and charged on the land he was empowered to sell.[28] Accordingly, I conclude that the authorisation need not have been specifically mentioned.
[28]See eg Shrimpton v The Commonwealth (1945) 69 CLR 613; Water Conservation and Irrigation Commission (New South Wales) v Browning (1947) 74 CLR 492.
The decision in the Port of Portland does not require any different result. In the Port of Portland, the Port of Portland Authority (“the Authority”) had made a contract with the State which contained the following clause (clause 11.4):
(a)The State has agreed with the Purchaser that it will effect an amendment to statutes governing the assessment and imposition of land tax to ensure that the unimproved site value used as the basis for assessment of land tax liability for the Real Property excludes the value of buildings, breakwaters, berths, wharfs, aprons, canals or associated works relating to a port.
(b)In the event that, before or after Completion the relevant statutory amendments do not become law and, as a result of that the Purchaser is assessed to land tax on the Real Property at a rate higher than would have been the case if the relevant statutory amendments were law, the State will refund or allow to the Purchaser the difference between the two amounts.
The Authority contended that although certain legislative amendments were made, the relevant legislation was not amended in a way so as to satisfy clause 11.4 and “to ensure that the unimproved site value used as the basis for the assessment of land tax liability” excluded “the value of buildings, breakwaters, berths, wharfs, aprons, canals or associated works relating to a port” and that as a result, it had then been assessed for land tax at a rate higher than would have been the case if appropriate statutory amendments had been enacted. It claimed that the State was liable, pursuant to clause 11.4(b) of the agreement, to “refund or allow” to it “the difference between the two amounts”, alternatively that the State was liable for damages for breach of contract.
Mandie J held that the clause was void. His Honour’s conclusions appear at paragraph 75 as follows:
The State cannot validly promise to release a person from taxes imposed by Parliament without parliamentary approval. A promise by the State to return to the taxpayer tax duly payable and collected, or an equivalent sum, is equally unenforceable. What the State undertook in the present case is that it would procure certain legislative amendments having the effect of reducing the plaintiff’s land tax but that, if it failed to do so, the State would “refund or allow” a sum equivalent to the amount of land tax rendered payable as a result of the failure to obtain the specified amendments. … What the State was purporting to promise (without Parliamentary approval) was in substance to dispense, to a specified extent, with the provisions of the land tax legislation insofar as that legislation was not amended as promised by the Agreement. That the executive government cannot do. If the amendments in fact passed failed to go as far as contracted for, then that must be taken to be the intention of Parliament and in my view the State is not entitled to indemnify a taxpayer against the resulting “loss” by agreeing to “refund or allow” the “additional” amount of land tax. (underlining added)
Mandie J decided the issue on the basis that the contractual promise to “refund or allow” the additional land tax effectively was a promise to exempt the authority from land tax and thus the State, not having parliamentary authority to make that promise, could not validly contract in the terms that it did.
It is unnecessary in this case to consider whether his Honour correctly decided that the clause was unenforceable as an unlawful dispensation of the requirements of the Land Tax legislation, albeit expressed as a promise to “refund or allow” the additional land tax.[29] The case is distinguishable from the present as Mandie J was concerned with the effect of the clause in the circumstance where there was no parliamentary authority to make that promise.[30] Mandie J did not decide the issue on the point that parliamentary approval must be in the form of a specific grant of power. The judgment simply does not address that issue. There is no discussion or analysis anywhere in that judgment about whether a general power could constitute sufficient parliamentary authority for the State to contract to repay amounts of taxes paid or payable by a taxpayer. Accordingly, I reject the contention that s 11(2) of the Revocation Act did not constitute a sufficient grant of power to the State because it did not, in specific terms, authorise the State to grant the land tax indemnity.
[29]I was told that an appeal from the decision has been heard and is awaiting judgment.
[30][2007] VSC 488 (Unreported, Mandie J, 30 November 2007), [72] and [75].
I also reject the contention that s 11(2) of the Revocation Act could only have authorised the Minister to extend the indemnity to SCP, as a Related Body Corporate of CPH, if it was also nominated as a purchaser of the Land. The power in s 11(2) was conferred in the widest language, confined only by the context and scope of the Revocation Act. The condition, if it has the meaning for which CPH contended, is capable of reference to the purpose of the Act relating, as it does, to an indemnity for accrued land tax payable in respect of the Land which the Minister was selling.
Availability of Relief
It was conceded by senior counsel for the State that if the State is liable to indemnify SCP in respect of the $3.275 million payment it made to the Commissioner, that CPH is entitled to specific performance of that obligation as an award of damages would not sufficiently compensate.[31] That is because ss 13 and 14 of the Revocation Act provide that no compensation is payable by the Crown in respect of anything done under or arising out of the Revocation Act and the Supreme Court has no jurisdiction to award such compensation. However, because I have found that the State is not liable under special condition 2 to indemnify SCP, the relief is refused.
[31]Trident General Insurance Co Ltd v McNeice Bros Pty Ltd (1988) 165 CLR 107.
Accordingly I will order that the proceeding is dismissed. I will hear the parties on the question of costs.
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