Centro (CPI) Limited v Chief Commissioner of State Revenue

[2012] HCATrans 56

[2012] HCATrans 056

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S365 of 2011

B e t w e e n -

CENTRO (CPL) LIMITED

Applicant

and

CHIEF COMMISSIONER OF STATE REVENUE

Respondent

Application for special leave to appeal

FRENCH CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 MARCH 2012, AT 9.35 AM

Copyright in the High Court of Australia

MR A.H. SLATER, QC:   If your Honours please, I appear with my friend, MR M.L. ROBERTSON, for the applicant.  (instructed by Freehills)

MR V.B. HUGHSTON, SC:   If your Honour pleases, I appear with my learned friends, MR I.S. YOUNG and MS E. BISHOP, for the respondent.  (instructed by Crown Solicitor (NSW))

FRENCH CJ:   Thank you.  Yes, Mr Slater.

MR SLATER:   Your Honours, the holder of a lease such as that which was granted in the present application has all the commercial advantages of ownership of the fee simple; lease was for a term of 300 years, it was not subject to forfeiture for breach, it involved no payment of rent and the lessee had the capacity to enlarge it to fee simple if it desired to do so without costs under section 134 of the Conveyancing Act.  Correspondingly, it had all of the burdens of ownership; it was responsible for the upkeep and for rates and taxes and it had to pay a premium corresponding in amount to the purchase price of the fee simple. 

FRENCH CJ: Now, we are concerned solely here with the application of section 24(2), are we not?

MR SLATER:   We are, your Honour, yes.

FRENCH CJ:   Yes.

MR SLATER:   It might reasonably be asked why would the lessee acquire the substance but not the form?  The answer to that is that as the holder of such a lease it does not suffer stamp duty at conveyancing rates on the purchase price, conveyancing rates being 5.5 per cent.  Instead, it suffers stamp duty at the rate of 0.35 per cent on the lease and, in consequence, the income from the land gets a better yield on the acquisition cost.  Your Honours, in this case the applicant did not take that course.  The applicant did not in form or substance acquire the freehold carrying with it the right to the rents and profits and the applicant did not save any duty. 

FRENCH CJ: The question is whether, as it were, splitting the parties between lease and reversion attracts the application of section 24(2).

MR SLATER:   And whether it imposes duty on the transferee of the reversion and specifically whether that duty should be relieved as falling with subsection (2).

FRENCH CJ:   Well, the statutory question is whether the interest is to be disregarded, that is the 300‑year lease interest, is that right?

MR SLATER:   Yes, your Honour.  As we have said, your Honour, duty was undoubtedly saved but the party who saved it was the trustee of an unlisted investment syndicate of which a subsidiary of the applicant was the promoter and trustee.  That was an unlisted investment fund constituted as a unit trust, the investors in which were institutions and members of the public.  The applicant had no interest in that fund.  The effect was that CPT custodian for the benefit of the investors acquired the 300‑year lease and with it all the commercial advantages of ownership, but it paid duty only at lease rates. 

Your Honours, the provision at issue in this appeal, section 24, was the first legislative attempt directed at countering such avoidance and although it is expressed more generally, it deals with the case where duty is avoided by leases at a nominal rent for a long term where the lessee later gets in the reversion.  It was aimed at transactions such as that which was the subject of Trust Company of Australia v Chief Commissioner of State Revenue where that was the transaction, that is, a long‑term lease and then acquisition of the reversion by the tenant and that ‑ ‑ ‑

GUMMOW J:   Someone since had a clever idea and the question is whether the clever idea, nevertheless, falls within 24(2), is it not?

MR SLATER:   Yes, your Honour.  The question in the application is whether the interpretation of subsection (2) adopted by the Court of Appeal is erroneous as we submit it is.  So, your Honours, could I take your Honours to section 24 which your Honours will find under tab 2 of our little bundle of materials on page 8 and although the issue concerns subsection (2), I need to take your Honours briefly first to subsection (1) which provides that:

In determining the dutiable value of dutiable property under this Part, any interest, agreement or arrangement . . . that has the effect of reducing the dutiable value is to be disregarded, subject to subsection (2). 

Now, four things I wish to draw your Honours’ attentions to about that.  The first is that section 24 operates only for the purposes of what is described as “this Part”, that is, Part 2 of Chapter 2, which is concerned with establishing dutiable value, as your Honours will see on page 7 of the folder.  Chapter 2 deals only with transfers.  The head of duty is in section 8 on page 1 of the folder, it is dutiable transactions and transfers.  It does not deal with leases.  Leases are dealt with in Chapter 5, as the Act was in 2004, they are no longer subject to duty and, as I told your Honours, the rate of duty on transfers is 5.5 per cent for large transactions – your Honours would see that, if your Honours need to, in section 32 on page 13 under tab 3 – whereas leases were taxed at 0.35 per cent. 

Your Honours, section 24 is concerned only with the dutiable value of dutiable property to which section 8 applied.  Chapter 2 imposes duty only on the transferee of the dutiable property.  That is the effect of section 13, which you Honours will find on page 4.  The property transferred to or vested in the transferee by the dutiable transaction is the subject of duty.  Nobody else is subject to duty under this chapter.  Section 24 is in aid of imposing duty on the transferee, not upon anybody else.  In particular, your Honours, section 24 does not authorise the reconstruction of the dutiable transaction.  All it does is to say that one aspect of the dutiable property is to be disregarded for valuation purposes only. 

In our submission, the reasoning of the Court of Appeal, comprised in Justice Sackville’s judgment, goes beyond disregarding and to the extent of reconstructing. Your Honours will recall that the reason why section 260 of the Income TaxAssessment Act 1936 was replaced was by Part IVA was that section 260 operated in a somewhat similar fashion, that is, it directed that things be regarded as void or disregarded. Part IVA was introduced so that the Commissioner could, to a measure, reconstruct. Section 24, sticks with the earlier approach. Now, we accept, your Honours, that section 24(1) is very widely drawn. It rests on the effect and not on the purpose of the interest agreement or arrangement which is to be disregarded.

FRENCH CJ:   Now, you are not challenging anything that the Court of Appeal said in relation to 24(1)?

MR SLATER:   No, your Honours, we are not.  We did not put that in our grounds of appeal.

FRENCH CJ:   Yes.

MR SLATER:   Subsection (1) is so broad that it goes well beyond the trust company scheme.  It catches all reversionary purposes.

GUMMOW J:   What is wrong with that? 

MR SLATER:   Sorry?

GUMMOW J:   Suppose it does?

MR SLATER:   I was about to respond to that, your Honour.  I was about to respond to it by way of example.  Your Honours may be aware that some large areas of land on the north side of Sydney Harbour were the subject of very long‑term residential leases granted early in the last century and then renewed.  The effect of those leases was to reduce the reversionary fee to a very low value and the purchase of the fee would have been affected by subsection (1).  In the Court of Appeal, the presiding judge asked my friend why section 24 would not apply to such a transaction and my friend answered, and we accept that this is a correct answer, that subsection (2) of section 24 allows those reversions to be excluded, and Justice Sackville makes that point in the judgment appealed from.  What subsection (2) provides is that what is disregarded under subsection (1):

is not to be disregarded if the Chief Commissioner is satisfied that is was not granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. 

Your Honours will find that at the top of page 8 of the book of authorities.  As a matter of ordinary meaning, the words in the last line, “the dutiable transaction”, using the definite article rather than the indefinite article, must refer back to something earlier identified as to dutiable transaction and what is earlier identified is to be found in the first line of subsection(1), that is, it is the dutiable transaction affecting the dutiable value of dutiable profit – affecting the dutiable profit of the dutiable value of which is in issue.  So that it is not concerned with some other dutiable transaction, in particular, it is not concerned with the vesting of an estate in the lessee.  It is only concerned with what passes to the transferee of the reversion. 

FRENCH CJ:   Just going back, if one identifies as the relevant interest for the purposes of subsection (2) the grant of the lease against your contention, the grant of the lease would be disregarded pursuant to (1) and applying (2) if the Chief Commissioner were not satisfied, reversing as he said there, that it was granted or made as part of a scheme with a collateral purpose of reducing a duty otherwise payable on the transfer of the acquisition of the reversion.  So you say it does not work that way, it cannot work that way where there are different parties involved?

MR SLATER:   We say that it is not directed to attacking the acquisition of the reversion by somebody who was never going to get anything more than the reversion.

FRENCH CJ:   It is the splitting of the parties that is critical, is it not?

MR SLATER:   Yes.

FRENCH CJ:   If this were just a one party ‑ ‑ ‑

MR SLATER:   If this were a trust company where the lessee acquired the reversion, then clearly subsection (2) would not aid the transferee of the reversion.

GUMMOW J:   Does it matter that the parties are related?

MR SLATER:   It would matter if they were associated parties within the meaning of the Act, but they are not.  That is common ground.  The fact that they are related in the sense that they had common directors, no, that does not matter, in our submission, because although there were common directors between the applicant and the trustee for syndicate 8, the people who benefited were the investors in syndicate 8.

FRENCH CJ:   There seems to have been some common ground or concessions, or perhaps a mix of both, reflected in the judgment of the Court of the Appeal and I am looking at pages 94 and 95 of the application book.  Paragraph 174 the proposition was unchallenged:

that if the arrangement or scheme had not been entered into, GPT’s freehold estate would have been transferred to CPT Custodian.

And, secondly, at 177:

not suggested that there was any commercial efficacy to the grant of the Long Lease other than to reduce the duty that otherwise would have been payable.  Mr Slater accepted that a purpose of the arrangement or scheme was to reduce the duty otherwise payable by CPT Custodian.

MR SLATER:   Yes, and in both cases, your Honour, the critical point is “by CPT Custodian”.

FRENCH CJ:   Yes.

MR SLATER:   Not by the applicant which is Centro CBL, which had no interest in the long‑term lease.  If the reversion had been acquired by CPT Custodian for the benefit of the syndicate investors, we would accept that we were bound by Trust Company and by the language of the Act, although it is different language from that which was considered in Trust Company, and that the relief in subsection (2) would not be available to us.  But the applicant did not acquire any interest in the lease and all that it ever acquired was the reversion.  There was no merger in contemplation and, indeed, there was an express covenant against merger.

Your Honours, in our submission, it is a transaction like that, and there are other similar transactions.  Justice Sackville referred to, for example, the case of an easement.  If there were a grant to CPT Custodian of an easement for passage over the whole of the land – in this particular case that would work very well, but if there was a grant of an easement for passage over the whole of land and then a transfer of the land subject to that easement, the grant of the easement would not attract duty.  The value of the land would be diminished by the easement.  If the land subject to the easement were acquired by the holder of the easement, then section 24 would require the easement to be disregarded.  If it was acquired by some other party, then section 24 would not strike at it, in our submission.

FRENCH CJ:   Is it right, the key passage in Justice Sackville’s reasoning is at 171:

The sub-section requires a comparison to be made between the actual dutiable transaction and a hypothetical or counter-factual dutiable transaction.

MR SLATER:   We say that what his Honour does there is to go into a degree of reconstruction or hypothesising that is beyond what is authorised by the statute.  What his Honour, in effect, is saying is that I should treat this as if the relevant duty which is avoided is the duty payable by CPT Custodian if it had acquired the reversion.  We say if CPT Custodian had acquired the reversion we would agree with his Honour.  That would be the hypothetical transaction in that case, but this is not that case.  This is a case where somebody else acquired the reversion and acquired it pursuant to the exercise by the vendor of a put option.  Undoubtedly the put option was all part of the one arrangement.

Your Honours, in our submission, what the Court of Appeal has done by the process of reconstruction that your Honour identifies in the judgment is to visit on the applicant liability for duty avoided by somebody else and in regard to that, it is our submission first that that is an egregiously wrong and unfair construction.  We submit that there should not be inflicted on one taxpayer on its actual transaction the duty avoided by a different taxpayer on a different transaction and we further submit that a strained construction of an ill-drawn Act should not be adopted to achieve that result.  In our written submissions at page 109 we have set out the passage from Wolfson’s Case which Justice Fullagher adopted in Henty House:

“It is not the function of a court of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate words”.

The appropriate course in this case would have been to do what the legislature subsequently did and that is to impose duty on the premium ‑ ‑ ‑

GUMMOW J:   What was the provision involved in Henty House?  It was not a 260 case?

MR SLATER: No, your Honour. It was section 57 of the Income Tax Assessment Act 1936, the provision which required the owner of depreciable property to include in assessable income the amount of depreciation recouped where a property was disposed of or the amount of depreciation claimed where property was disposed of otherwise in the ordinary course of business. The issue which concerned the straining construction was whether, I think, destruction by fire – I am sorry, your Honour, I am reaching slightly for the memory – amounted to a disposal. It was about the meaning of disposal. I said to your Honours section 57, section 59.

GUMMOW J:   It is a long way from this section in this sort of case.

MR SLATER:   It is a long way, your Honour, but the principle is the same.  The section in Wolfson’s Case was a long way from section 59.  So, your Honours, in our submission, one should not strain the language of the Act to remedy simply a drafting error.  Secondly, your Honours, in our submission, if section 24 were properly so construed, its operation would in the language that has been used in various places be capricious and arbitrary and I accept that that language has been used more in relation to taxes imposed by the Commonwealth than relation to taxes imposed by the State and it has a particular meaning about section 51(2), but nonetheless, it does raise the same general issue because the effect of section 24 as construed by the Court of Appeal is to impose the duty not on the party who otherwise avoids it and benefits from the avoidance, but on someone who does not benefit.  It is not a tax on the applicant’s acts but an arbitrary collection from the applicant of tax which could not be collected from syndicate 8. 

Your Honours, this Court has said that unjust and expropriator laws can be enacted by the States.  We have given in our written submissions a reference to Durham Holdings Pty Ltd v State of New South Wales 205 CLR 399. There is the passage in the joint judgment at paragraphs 8 to 14 of page 408 where, in effect, the Court rejected an argument that the expropriation legislation there should be struck down as being arbitrary, but this Court has said that where that is to be done it must be done in clear statutory language, and the best exposition of that requirement is, with respect, in your Honour the Chief Justice’s judgment in State of South Australia v Totani, the bikies’ case, and that is under tab 7.

GUMMOW J:   Is this some constitutional point?

MR SLATER:   Sorry, your Honour?

GUMMOW J:   Are you raising a constitutional point of some sort?

FRENCH CJ:   It is just a principle of legality issue.

MR SLATER:   It is the principle of legality issue rather than a constitutional point.  It might be said to raise a point under section 106 if your Honours grant special leave, although it is a slightly strange way of looking at it.  Section 106 was invoked both in Durham and in Totani as raising the issue of what was the constitutional power of the States, but neither case was decided on that point.  But I was going to take your Honours to what your Honour the Chief Justice has said ‑ ‑ ‑

FRENCH CJ:   I think I know what I said, Mr Slater, and your time is up.

GUMMOW J:   Yes, I do too.

MR SLATER:   Well, in that case, I do not need to remind your Honours of it.  The point is that it has to be said in clear and unambiguous language.  In our submission, section 24 does not in clear and unambiguous language impose on the applicant the duty which was avoided by the trustee and neither in Totani nor in Durham was the question resolved.  What the Court did in each case was to decide the matter on other grounds. 

FRENCH CJ:   I think your time is up, Mr Slater.

MR SLATER:   I am sorry, your Honour.

FRENCH CJ:   Thank you.  Yes, Mr Hughston.

MR HUGHSTON:   If your Honours please.  Your Honours, the first special leave question is whether an anti‑avoidance provision can and, if so, should be so construed that tax successfully avoided by one taxpayer should be visited upon another taxpayer who does not benefit from the avoidance.  We say that question does not arise.  The liability imposed on the applicant is not an unconstitutional act because the State of New South Wales has full plenary powers to enact an avoidance provision of this kind.

FRENCH CJ:   No one is saying it is.

MR HUGHSTON:   Pardon?

FRENCH CJ:   Nobody is saying it is.

MR HUGHSTON:   The applicant in the written submissions does, your Honour.  They say there is an unconstitutional tax.

GUMMOW J:   They have not said it this morning.

MR HUGHSTON:   The tax is neither capricious nor arbitrary, your Honours.  Liability is only imposed in circumstances where an interest agreement or arrangement has been granted or made in respect of dutiable property that has the effect of reducing the dutiable value and the Chief Commissioner or the Supreme Court on appeal is not satisfied that it was not granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable.  That is not arbitrary and that is not capricious. 

The section is not directed towards the tax liability of a particular taxpayer and it is not directed towards the intention of a particular taxpayer as to whether they always intended to acquire the property they intended to acquire.  The subsection is directed towards and focuses upon whether there is a purpose of an arrangement or scheme to reduce the dutiable value.  In this case, the Court of Appeal found that, at paragraph 179 of the judgment at about page 95 of the application book at about point 15:

The overwhelming inference from the objective circumstances, including the inter‑related character of the transactions entered into on 30 October 2002, is that a substantial, if not the predominant purpose of the scheme or arrangement identified by the Commissioner was to reduce the duty otherwise payable [that should be “on”] the dutiable transaction.

The dutiable transaction, of course, was the sale of GPT management’s fee simple interest subject to the 300‑year lease to Centro.  So there is no question that the applicant was a party to that scheme or arrangement, as his Honour Acting Justice Sackville says earlier on in that particular paragraph.  The participants in the arrangement or scheme, in fact, had that subjective purpose, his Honour says, of reducing the dutiable value, and of course it does have that purpose.  The fee simple which is transferred, because it is transferred with that 300‑year lease, is of a substantially less value.  The applicant here is a party to that arrangement or scheme.  The applicant here is also the parent company of CPT Custodian who took the leasehold interest.  CPT Custodian was, in fact, a wholly owned subsidiary.

FRENCH CJ:   Do you rest upon a broad reading of the words “arrangement or scheme” in subsection (2)?

MR HUGHSTON:   Your Honours, there was no issue.  It was accepted that there was an arrangement or scheme and that the applicant was a party to it.  The only issue was whether the purpose of that arrangement or scheme was to reduce the dutiable value of the dutiable property – sorry – the duty on the dutiable transaction.  That was the only issue.  There was no doubt it was accepted that there was an arrangement or scheme.

FRENCH CJ:   But you would say that the scheme contemplated by section 24(2) is a scheme – includes schemes in which you have, as it were, a division of parties with different interests in the same property?

MR HUGHSTON:   Yes, your Honour.  That is the natural and the ordinary meaning to be given to the words used in the text because they are not directed to a particular taxpayer.  They are directed to whether there was an arrangement or scheme which had as its purpose reducing dutiable value.  In this case, as the Court of Appeal found, of course there was an arrangement or scheme which had that as its purpose. 

GUMMOW J:   Do you get some support from the basic idea in the 1997 Act of dutiable transaction?

MR HUGHSTON:   I am sorry, your Honour, I am not familiar with the 1997 Act.

GUMMOW J:   It talks about dutiable transactions.  The statute we are construing talks about dutiable transactions.

MR HUGHSTON:   Yes, it is, your Honour.  It is the dutiable transaction – the Court of Appeal stayed focused on the dutiable transaction.  The dutiable transaction here was that sale of the fee simple interests subject to the 300‑year lease to Centro, the applicant, and that is the dutiable transaction which is referred to in subsection 24(2) and there was a scheme or arrangement which had as its purpose reducing the value of the property to be transferred pursuant to that dutiable transfer.  In this case, it was the applicant’s chief executive officer who initiated negotiations with the shopping centre proprietors to, at that stage, purchase the shopping centre outright. 

Your Honours will find that in the reasons at paragraph 41 at page 50.  At that stage there was no reference made to acquiring a lease hold.  Again there was no issue, as the Court of Appeal found, that there was no commercial efficacy at all in the grant of the 300‑year lease.  There was no commercial efficacy in the grant of the 300‑year lease and the purpose was to reduce the duty payable by CPT Custodian when it acquired virtually control and ownership of the shopping centre through the grant of the 300‑year lease.  So the purpose was there of reducing the duty. 

It is also important to realise, your Honours, as is set out in paragraphs 42 and 43 of the Court of Appeal’s reasons at page 51, that when Centro, the applicant, first approached the GPT manager with the proposition that one of its subsidiaries would only acquire a lease hold interest in GPT management’s property very long term, lease hold interest, GPT said that they were not interested.  They were only interested in divesting themselves of the fee simple.  So it was a necessary element if CPT Custodian was to acquire that 300‑year lease at a very much reduced duty.  It was necessary that the parent company, the applicant, step in and agree to take a transfer of the reversion. 

In those circumstances, the factual situation fits squarely within the wording of subsection 24(2).  There is no strained meaning being given to the words of that section by the Court of Appeal.  There is no need to resort to some expansive construction to overcome any deficiencies or any ambiguities.  The Court of Appeal does not identify any deficiencies or any ambiguities.  When it comes to making a comparator transaction, as his Honour Acting Justice Sackville did at paragraph 71, which your Honour the Chief Justice referred to – if I could just go to that paragraph.

GUMMOW J:   Page 93.

MR HUGHSTON:   Thank you, Justice Gummow.  The reason why that comparison has to be made is because subsection 24(2) refers to the duty that would otherwise be payable.  His Honour then goes on in paragraph 172 to point out that he thought that:

the better view is that the Commissioner must form a judgment as to what dutiable transaction would have occurred but for the grant of the Interest.

That is the transfer of the fee simple to CPT Custodian.  But his Honour went on to say –

The alternative is to construe s 24(2) as identifying the hypothetical dutiable transaction as the dutiable transaction that actually took place but disregarding the Interest. In the present case, this would mean that the hypothetical dutiable transaction would be a contract for the sale of GPT’s reversionary interest in the Centre –

that is, to the applicant –

subject only to the Short Leases (since the Long Lease would be disregarded).

Importantly, his Honour says –

I do not think that it is necessary finally to choose between these alternatives in the present case, since each produces the same result.

So if his Honour was in error in preferring the view that the Commissioner should compare what would have actually occurred or what was likely to have occurred, which is CPT Custodian would have acquired the fee simple, it makes no difference because, as his Honour said, you get exactly the same result if you look at the purchase of the fee simple by the applicant, no different result occurs.

FRENCH CJ:   What effect, if any, does section 24(3)(b) have in relation to the competing construction offered by Mr Slater as the associated person consideration?

MR HUGHSTON:   Well, here, your Honour, “associated person” is a defined term in the Duties Act and it is defined as a company which has a common shareholder – shareholding is in common, and that is not the case here, but what is relevant is under (d).

FRENCH CJ:   But what, if any, constructional implications does it have for 24(2)?  Mr Slater is running a line that 24(2) does not apply in a situation where you have an interest granted to one party and the dutiable property acquired by another.

MR HUGHSTON:   Well, it is one matter that the Commissioner can clearly take into account.  If they are associated persons, clearly that would assist the Commissioner to reach a particular view.  If they are not, that will not assist him to reach a particular view.

FRENCH CJ:   Yes.  The real question I was asking is, what does it tell us about the scope of subsection (2)?

MR HUGHSTON:   That if the companies were associated persons, then subsection (2) would be intended to apply, but that does not necessarily bring in ‑ ‑ ‑

FRENCH CJ:   The question is, does it mean that subsection (2) is capable of applying where you have an interest granted to one person and the dutiable property acquired by another?

MR HUGHSTON:   Yes, it does, your Honour, and can I take your Honour to subsection (d) which provides a wide discretion in the Commissioner to take into account any matter that the Commissioner considers relevant, and here, although the companies were not associated

persons within the definition as I have indicated to your Honours, CPT Custodian was a wholly owned subsidiary of the applicant and clearly that is a matter which could and should be taken into consideration.

FRENCH CJ:   Yes.  The special leave point that is being raised is a question of the construction of 24(2).  It is not so much its application in the particular case but ‑ ‑ ‑

MR HUGHSTON:   Yes, your Honour.  I cannot assist your Honour any further on that, I apologise.

GUMMOW J:   The question is whether there could be some form of linkage that does not satisfy the definition of “associated person”, which seems rather narrow, does not satisfy that, but there is some form of linkage which the Commissioner considers relevant under (d).

MR HUGHSTON:   Yes, your Honour, and again, we can see in subparagraph (c), a powerful consideration in this matter, whether there was any commercial efficacy to the transaction.

FRENCH CJ:   Mr Slater would say, as I understand his submissions, that none of that stuff in 24(3) matters because 24(2) does not reach this class of transaction.

MR HUGHSTON:   We say if one looks certainly at the wording of 24(2), then it does reach this transaction, the clear wording.  It is only directed towards catching, if you like.  It is directed towards the purpose of the scheme or arrangement.  It is not directed towards the liability of a particular taxpayer.  Section 13, although it provides that taxation duty is under Chapter 2 payable by the transferee, it also provides unless this chapter requires another person to pay the duty.  So there is some broadness there as well.  Unless there is anything further I can say to your Honours, that is about all I can say for the respondent, if your Honours please.

FRENCH CJ:   Thank you.  Yes, Mr Slater.

MR SLATER:   Your Honours, two perhaps three things.  First, my learned friend’s submission rests on the proposition that section 24 is not directed to the liability of a particular taxpayer.  We controvert that quite clearly it is.  Section 13 identifies, for the purpose of Chapter 2, who is the taxpayer.  The taxpayer is the transferee.  The duty which was avoided in this case was in the acquisition by the trustee of the long‑term lease in lieu of the acquisition of the freehold.  It was not duty which was avoided on what the applicant acquired. 

My learned friend also, in dealing with subsection (2), said that section 24(2) is concerned with the collateral purpose of reducing the duty otherwise payable and he stopped there. It is the last four words that matter. It is not just duty payable, not just any duty otherwise payable, it is the duty otherwise payable “on the dutiable transactions”, that is, the applicant’s dutiable transaction, which was simply the acquisition of the reversion.

Your Honour asked my friend about the notion of division of parties and how subsection (3)(b) bore on the matter.  In our submission, it points to the conclusion for which we contend.  If I can give your Honour an example, a very brief example.  An intending purchaser sponsors a 300‑year lease to a subsidiary at a premium and at nominal rent.  The holding company or the lessee then acquires the reversion at a nominal price and then procures the subsidiary to surrender the lease, for example, by taking a lease for a month which would cause a surrender at law. 

In that case, the intending purchaser would have acquired the fee after the expiration of the one‑month term and the fact that it was an associated party to whom the long‑term lease had been granted is a matter which the Commissioner could take into account in deciding whether he should exercise his discretion.  That is what paragraph (b) is there for.  It is not there to indicate that two unrelated parties or two parties who are in different ultimate ownership should be conflated in some fashion for the purpose of taxation. 

Your Honours, in our submission, what the Court of Appeal’s reading does is to stretch section 24 far beyond its intended scope, to strain it to give a result which would make up for poor drafting and it unfairly burdens a party who has no interest in the land which is the subject of the transaction, other than a reversion in 300 years time, and for those reasons, your Honour, in our submission, special leave should be granted.

FRENCH CJ:   Thank you, Mr Slater. 

This application for special leave concerns the construction and application of section 24(2) of the Duties Act 1997 (NSW). The applicant was assessed for stamp duty on its purchase, pursuant to a put option, of a reversionary right of the vendor to a freehold half interest in the Bankstown Shopping Centre which was subject to a 300-year lease in favour of a subsidiary of the applicant as trustee for a syndicate of investors.

The applicant contends that section 24(2) is not concerned with the dutiable value of different dutiable property (ie, the lease) acquired by a different transferee (ie, its subsidiary). The applicant contends that section 24(2) was misconstrued by the Court of Appeal as extending to an arrangement or scheme involving one taxpayer with a collateral purpose of reducing the tax payable by another taxpayer.

On the face of it, the 300‑year lease granted to the applicant’s subsidiary was granted as part of a scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction, that is to say, the acquisition of the reversion to the freehold.  The section was apt to cover the scheme which was established in this case. 

The application involves a question of statutory interpretation and the application of a statute upon which the Court of Appeal has not shown to have been in error.  Special leave will be refused with costs.

AT 10.18 AM THE MATTER WAS CONCLUDED