Commissioner of State Revenue v 1043 Melton Highway Pty Ltd
[2020] VSC 820
•9 December 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S ECI 2020 01863
| COMMISSIONER OF STATE REVENUE | Applicant |
| v | |
| 1043 MELTON HIGHWAY PTY LTD (ACN 169 964 756) | Respondent |
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JUDGE: | Kennedy J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 November 2020 |
DATE OF JUDGMENT: | 9 December 2020 |
CASE MAY BE CITED AS: | Commissioner of State Revenue v 1043 Melton Highway Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2020] VSC 820 |
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TAXATION – Stamp Duties – Determination of the consideration for a dutiable transaction under s 20(1)(a) Duties Act 2000 (Vic) - Where dutiable transaction is transfer of dutiable property – Whether consideration for transfer includes additional amount received as ‘default interest’ – Where default interest payable under varied agreement in return for agreement to transfer on a later date and to refrain from issuing default notice - Whether consideration for transfer also includes additional amount received as ‘loan advance interest’ by reason of purchaser’s failure to make advances to the vendors on dates stipulated - Whether default interest and loan advance interest are ‘distinct matters’ for the purposes of s 261 Duties Act 2000 (Vic) – Duties Act 2000 (Vic) ss 7(1)(a), 10(1)(a)(i), 11, 20(1)(a), 261 – Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, Commissioner of State Revenue v Lend Lease Development Pty Ltd (2014) 254 CLR 142 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C Horan QC with Mr D Morgan | State Revenue Office |
| For the Respondent | Mr M Flynn QC with Mr M Meng | Fisher McCrae Lawyers |
HER HONOUR:
In this proceeding both parties seek leave to appeal a decision of the Victorian Civil and Administrative Tribunal (‘the Tribunal’) on a question of law under s 148 of the Victorian Civil and Administrative Tribunal Act1998 (Vic). The decision related to a notice of reassessment by which 1043 Melton Highway Pty Ltd (‘the respondent’) was assessed to duty on a transfer of land at 1043-1067 Melton Highway, Plumpton (‘the property’).
In addition to the purchase price of $7,350,000 the respondent (nominated as a substitute purchaser) was obliged to, and did, pay certain additional amounts to the vendors (both described as ‘interest’ payments).
The critical issue raised in these proceedings is whether those interest payments form part of the consideration for the transfer of the property so as to be included in the ‘dutiable value’ of the property under s 20(1)(a) of the Duties Act 2000 (Vic) (‘Duties Act’).
The Tribunal decided that amounts received by the vendors by reason of the purchaser’s failure to make cash advances within the time stipulated (‘the loan advance interest’) did form part of the consideration for the transfer of the property. However, the Tribunal also decided that amounts received in return for the vendors’ promise to defer settlement and refrain from issue of a notice of default (‘the default interest’) was not consideration for the transfer of the property.
In circumstances where both the applicant and respondent have appealed, the two main issues arising are:
(a) Did the Tribunal err in finding that the default interest did not form part of the consideration for the transfer of the property?
(b) Did the Tribunal err in finding that the loan advance interest was part of the consideration for the transfer of the property?
An additional issue was whether the Tribunal erred in relation to the finding regarding loan advance interest by reason that it was a ‘distinct’ matter for the purposes of s 261 of the Duties Act and hence not dutiable.By notice of contention the respondent also alleged that the Tribunal’s decision in relation to default interest should be affirmed on the basis of s 261.
Background facts
The facts were not in dispute in the Tribunal. The respondent filed one witness statement of Mr Andrew Sirianni, director of Universal Brothers Developments Pty Ltd (‘Universal’), who was not cross-examined.
Original contract
On 18 November 2010, Universal, a related company of the respondent, entered into a contract of sale for the purchase of the property (‘the original contract’). The terms of the original contract were contained in the particulars of sale; the special conditions; the general conditions; and the vendors’ statement (in that order of priority).
The particulars of sale provided that payment was constituted as follows:
Price $7,350,000
Deposit $735,000 on the signing hereof by the purchaser
Balance $6,615,000 payable on settlement
The particulars also provided for settlement to be due on 18 November 2015.
Clause 4 of the special conditions made provision for certain cash advances to be provided by the purchaser to the vendors during ‘the Term’ (which was defined as the period commencing on the day of sale and terminating on the settlement date: see clause 1 of the special conditions).
The evidence of Mr Andrew Sirianni was that Universal agreed to provide the cash advances ‘because the vendors asked for it.’ Clause 4 thus relevantly provided as follows:
4 Cash Advances by the Purchaser to the Vendor
4.1The Purchaser in consideration for the mutual promises contained in this agreement, during the Term, agrees to make the following cash advances to the Vendor as follows:-
(a)The amount of $735,000.00 on the date that is 18 months from the day of sale [18 May 2012]; and
(b)The amount of $735,000.00 on the date that is 30 months from the day of sale [18 May 2013].
4.2To secure the amount of the advances, the Vendor agrees to enter into a loan agreement and grant to the Purchaser a first ranking mortgage over the property.
…
4.4 Interest will not accrue on the principal sums advanced, except in the case of default by the Vendor, namely failure to make good title or otherwise fail to settle on the Property in accordance with this contract of sale. In such a case penalty interest calculated in accordance with the Penalty Interest Rates Act 1983 will accrue from the date of the default.
4.5 In the event that the Purchaser fails to make the advances referred to in Clause 4.1 (a) and (b) within the times stipulated therein, then the Purchaser shall pay penalty interest calculated in accordance with the Penalty Interest Rates Act 1983, which will accrue from the date of the default until the date that the default is remedied.
4.6 Upon settlement of the sale, the loan indebtedness of the Vendor will be set off against the purchase price payable by the Purchaser to the Vendor.
4.7Upon settlement of the sale, the Purchaser will cause the Purchaser’s mortgage to be discharged.
…
4.9 In the event of default by the Purchaser, the cash advances paid by the Purchaser to the Vendor shall be forfeited to the Vendor, provided that the Vendor has first served written notice on the Purchaser specifying the default and providing the Purchaser with 30 days’ notice from the date of service of the notice to remedy the default.
The general conditions were standardised terms. Clauses 26-28 of the general conditions made provision for ‘default.’ Clause 26 provided that interest at a rate of 2% per annum plus the rate for the time being fixed by s 2 of the Penalty Interest Rates Act 1983 was payable on any money owing under the contract during the period of default, without affecting any other rights of the offended party.
Clause 27.1 provided that a party was not entitled to exercise any rights arising from the other party’s default, other than the right to receive interest and the right to sue for money owing, until the other party was served with, and failed to comply with, a written default notice. Clause 28 provided, inter alia, that if the contract ended by a default notice given by the vendors, then the deposit of 10% was forfeited and the vendors were entitled to possession of the property.
Payments
On 24 November 2010 Universal paid the deposit of $735,000.
Universal paid amounts comprising a first cash advance totalling $735,000 between 29 June 2012 and 30 April 2013 (having been due on 18 May 2012).
Universal paid amounts comprising a second cash advance totalling $735,000 between 30 May 2013 and 17 April 2015 (having been due on 18 May 2013).
Given Universal failed to pay the cash advances within the required times, Universal was obliged to, and did, pay loan advance interest totalling $127,744.17, in the following amounts:
(a) $3,323.53 paid on 29 June 2012;
(b) $4,441.80 paid on 30 April 2013; and
(c) $119,978.84 paid on 17 April 2015.
Variations
Given the Victorian Planning Authority had not released a precinct structure plan the bank would not lend Universal money to settle. Owing to Universal’s inability to settle the sale on the original settlement date, a deed of variation of contract was executed by the parties on 23 October 2015 (‘the first variation’). Recital C recorded that, at the request of the guarantor,[1] the vendors had agreed to refrain from issuing a notice of default, and that they would refrain from issuing a notice of default should settlement not occur on 18 November 2015 pursuant to the original contract.
[1]Andrew Sirianni and Charlie Sirianni had signed a guarantee of moneys payable under the original contract.
Clause 1 relevantly read:
1 Agreement
(a) Subject to the Purchaser meeting its obligations under clause 2, the parties agree that settlement shall take place on 18 November 2016 or earlier at the election of the Purchaser.
(b) Subject to the Purchaser meeting its obligations under clause 2, the Vendors agree to refrain from issuing a Notice of Default under the Contract before 18 November 2016.
…
Clause 2 then provided for the ‘Purchaser Obligations.’ Such obligations included the entry into a licence agreement for the vendors to remain in occupation for four years following settlement for a licence fee of $1.00 per month (cl 2(a)). Clause 2(b) then provided as follows:
2 Purchaser Obligations
(b) The Purchaser agrees to pay interest on the balance amount of $5,145,000.00 under general condition 26 of the Contract, being at a rate of 2% per annum plus the rate for the time being fixed by section 2 of the Penalty Interest Rates Act 1983, from the Contract settlement date of 18 November 2015 until payment in full (including interest and costs) is received by the Vendors.
The Purchaser agrees to pay the interest on the balance as above, in quarterly arrears on the following dates:
(i) 18 February 2016;
(ii) 18 May 2016;
(iii) 18 August 2016; and
(iv) 18 November 2016.
(c) The Purchaser agrees to continue paying the rates and taxes associated with the Property during the licence agreement.
(d) The Purchaser agrees to pay the reasonable costs and expenses (including legal costs) in relation to:
(i)the Purchaser’s failure to pay the balance due of $5,145,000.00 on the date required under the Contract; and
(ii) the preparation, negotiation and execution of this Deed.
Clause 3 provided that if the purchaser did not comply with any of its obligations or did not make the final payment of $5,145,000 by 18 November 2016, the vendors may serve a notice of default on the purchaser pursuant to the original contract.
On 20 December 2015 Universal nominated the respondent to take transfer of the property.
On 22 February 2016 the respondent paid $147,918.75 in respect of default interest pursuant to the first variation. It also paid equal amounts in May and August 2016.
The respondent was then again unable to settle on the extended settlement day of 18 November 2016 under the first variation (for the same reason). Accordingly, on 22 November 2016 the parties entered into a further deed of variation of contract (‘the second variation’) which was substantially identical to the terms of the first variation, and which extended the settlement date to 28 April 2017. Clause 2 then made provision for further instalments of interest.
The purchaser subsequently made three further payments of default interest pursuant to the second variation.
Settlement
Settlement occurred on 28 April 2017. As well as the purchase price, the vendors received a total of $857,522.98 as default interest under the first variation and the second variation.
The assessment process
By a Notice of Reassessment dated 19 September 2018, the applicant assessed the respondent to duty on the transfer of the property based on the total of the contract price and the payments of default interest. Given the respondent had already paid duty on the contract price of $7,350,000, the Notice of Reassessment charged additional duty of $47,164 (for default interest) together with penalties and interest.
The respondent objected to the reassessment and, after the objection was disallowed, the respondent applied for review by the Tribunal.
The Tribunal
At the hearing before the Tribunal, the applicant was granted leave to argue that the reassessment should be increased by including in the dutiable value the loan advance interest.[2]
[2]The applicant agreed to remit penalty and interest by letter dated 4 April 2019.
The Tribunal found that the consideration for the transfer of the property, and hence the dutiable value of the property, included the loan advance interest, but did not include the default interest.[3]
[3]1043 Melton Hwy Pty Ltd v Commissioner of State Revenue [2020] VCAT 396, [64] (‘The Tribunal reasons’).
In relation to loan advance interest, the Tribunal found that the agreement to advance the loans to the vendors was an essential element of the vendors’ agreement to sell the property. It was closely connected to the contract price as the loan was to be set off against the amount at settlement and could be forfeited in the event of purchaser default.[4]
[4]Ibid [46].
The member found that the loan advance interest was the same or similar to amounts which were held to be capital in the case of Federal Commissioner of Taxation v Broken Hill Co Pty Ltd (‘BHP’).[5] In that case the purchaser had agreed that, in addition to a fixed amount based on a valuation of the assets, it would pay amounts described as ‘interest’ calculated as a specified percentage, but not in excess of the net income generated over the relevant period. The Federal Court found that the interest payments were not deductible because they were part of the total consideration for the shares and an outgoing on capital account.
[5](2000) 179 ALR 593 (‘BHP’).
The Tribunal recorded that in rejecting the payments as deductions Hill J (in the leading judgment) found that no extended credit was being advanced; rather that the consideration for the shares comprised two components which included the so-called purchase price on the one hand, and the so-called interest payments on the other.[6]
[6]The Tribunal reasons (n 3) [49].
‘Likewise’ the Tribunal found that the loan advance interest formed part of the consideration which moved the transfer in this case so as to be included in the dutiable value.[7]
[7]Ibid [50].
By way of contrast, the position differed for default interest. The member observed that the default interest under the variation deeds was payable on a quarterly basis which, in theory, could have resulted in compound interest being payable so that it was not necessarily the same interest rate as in the original contract on an ‘effective basis’.[8] He highlighted, however, that the agreement to change the settlement date and to refrain from issuing a notice of default was expressly conditional on the obligation to pay interest. He considered that, consistent with observations of Hill J in BHP,[9] the default interest was payable ‘for the extension of credit’ and was therefore ‘interest’, although he accepted that this did not definitively resolve the dutiable issue.[10]
[8]Ibid [53].
[9]BHP (n 5) 604 [42].
[10]The Tribunal reasons (n 3) [55].
The Tribunal considered that what was necessary was to discern what the default interest, however described, ‘was really paid for’,[11] citing a passage from the decision of Pagone J in Conder Tower Pty Ltd v Commissioner of State Revenue (‘Conder Tower’).[12]
[11]Ibid [56].
[12](2012) 88 ATR 123 (‘Conder Tower’).
The Conder Tower case was, similar to the critical decision of the High Court in Commissioner of State Revenue v Lend Lease Development Pty Ltd (‘Lend Lease’),[13] concerned with the transfer of parts of the Docklands area to developers. Both matters were heard by Pagone J at first instance and, in both cases, the Court held that the additional amounts paid under the development agreement were part of the consideration for the dutiable transaction. However, only the matter concerning Lend Lease was taken on appeal.
[13](2014) 254 CLR 142 (‘Lend Lease’).
The relevant passage the Tribunal cited from Conder Tower was as follows:[14]
The need to identify that which moves that part of a composite transaction [relating to the transfer of land] will require consideration of the notions of causation and attribution and the determination of what the consideration "really paid for". The analysis called for by s 20(1) [of the Duties Act] is not satisfied merely by finding promises in one place or by finding that the promises (whether in one place or in more than one place) are interdependent. The analysis called for by s 20(1) ... requires an evaluation of the promises and of their connection with the transfer.
[14] Conder Tower (n 12) 133 [12].
The member considered that this observation was consistent with what Hill J said was required in order to determine the deductibility of the payments in BHP and the ultimate conclusion that, when properly analysed, the ‘interest’ in that case formed part of the consideration ‘for’ the shares.[15]
[15]The Tribunal reasons (n 3) [57], citing BHP (n 5) 605 [47].
The Tribunal continued:[16]
That the Vendors' agreement to the extension of the settlement date and to refrain from issuing a notice of default was expressly tied to payment of the Default Interest makes it clear that the Default Interest was consideration for those matters, rather than the transfer of land which may (or may not) occur subsequently.
[16]The Tribunal reasons (n 3) [58].
The Tribunal noted that if the Commissioner was correct it would follow that consideration ought also include the agreement to grant a licence at a nominal fee, as well as to pay the vendors’ costs associated with the variation. The Tribunal considered that the fact the Commissioner had not sought to impose duty on those amounts was consistent with recognition that not all promises under a contract form part of the relevant consideration for any dutiable transaction.[17]
[17]Ibid [60].
The member also cited Lend Lease, but, by way of contrast, did not find that the promises made under the variation deeds met the description of a ‘single, integrated and indivisible part of an overall transaction.’[18]
[18]Ibid [62].
Thus, the Tribunal found that the default interest was not part of the consideration for the transfer.
The appeal and cross-appeal
As indicated already, both parties have sought leave to appeal the orders of the Tribunal.
In its notice of appeal the applicant identifies the question of law as follows:
On the proper construction of s 20 of the Duties Act 2000 (Vic), did the amounts described by the Tribunal as “Default Interest” form part of the consideration for the transfer of the property located at 1043-1067 Melton Highway, Plumpton (the “Relevant Property”)?
The applicant’s grounds of appeal are:
1. The Tribunal misconstrued section 20 of the Duties Act 2000 (Vic).
2. The Tribunal should have found that, on the proper construction of section 20, the amounts described by the Tribunal as “Default Interest” were part of the consideration for the transfer of the Relevant Property.
In its notice of cross appeal, the respondent identifies the question of law as follows:
On the proper construction of section 20 of the Duties Act 2000 (Vic) (Duties Act), did the amounts described by the Tribunal as ‘Loan Advance Interest’ form part of the consideration for the transfer of the property located at 1043-1067 Melton Highway, Plumpton (Relevant Property)?
The respondent’s grounds of cross-appeal are:
1.The Tribunal erred at paragraph 50 of its reasons in finding that the ‘Loan Advance Interest’ formed part of the consideration which moved the transfer of the Relevant Property for the purposes of section 20 of the Duties Act.
2. The Tribunal should have found that the amounts described by the Tribunal as ‘Loan Advance Interest’ did not form part of the consideration for the transfer of the Relevant Property.
In written submissions the respondent also alleged that the Tribunal should have found that the loan advance interest did not form part of the consideration on the basis that it ought to have been excluded by reason of s 261 of the Duties Act. The respondent’s notice of contention also sought to uphold the Tribunal’s decision in relation to default interest for the additional reason that:
The Tribunal correctly found at paragraph 58 of its reasons that the amounts described by the Tribunal as ‘Default Interest’ was [sic] consideration for ‘the Vendors’ agreement to the extension of the settlement date and to refrain from issuing a notice of default’. Those matters are ‘distinct matters’ to the transfer of the dutiable property for the purposes of section 261 of the [Duties Act] and are to be ‘separately and distinctly’ assessed for duty purposes. Those matters are not dutiable transactions under section 7 of the Duties Act.
It was not disputed that the issue of construction raises a question of law. This was because each party effectively accepted that, on the facts as found, only one answer was open on a correct construction of the statute.[19]
[19]And see Marsh v Transport Accident Commission [2020] VSC 228 [23]-[26] and cases cited therein.
Legislative provisions
Pursuant to the Duties Act, duty is charged on the ‘dutiable value’ of the ‘dutiable property’ the subject of a ‘dutiable transaction.’[20]
[20]Duties Act 2000 (Vic) s 18.
A ‘dutiable transaction’ includes certain specified transactions, but also includes the ‘transfer’ of ‘dutiable property.’[21]
[21]Ibid ss 7(1)(a), 7(2).
‘Dutiable property’ includes an estate in fee simple in land in Victoria.[22]
[22]Ibid s 10(1)(a)(i).
The ‘dutiable value’ is then determined by s 20, which relevantly provides:
20 What is the dutiable value of dutiable property?
(1) The dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of –
(a)the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration); and
(b) the unencumbered value of the dutiable property.
…
This proceeding concerns only the first limb in s 20(1)(a).
Importantly also, s 11(1) provides that a liability for duty arises when the dutiable transaction occurs. Hence, in the case of a transfer the subject of this proceeding, the liability arises at the time when the transfer occurs.
Principles
The leading High Court decisions on the meaning of ‘consideration’ in s 20(1)(a) are Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (‘Dick Smith’)[23] and Lend Lease.[24] Both these cases approve[25] the interpretation of ‘consideration’ for duty purposes originally adopted by Dixon J in Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) where his Honour said:[26]
In the context I think that the word ‘consideration’ should receive the wider meaning or operation that belongs to it in conveyancing rather than the more precise meaning of the law of simple contracts. The difference is perhaps not very material because the consideration must be in money or money’s worth. But in the law of simple contracts it is involved with offer and acceptance: indeed properly understood it is perhaps merely a consequence or aspect of offer and acceptance. Under s. 66 the consideration is rather the money or value passing which moves the conveyance or transfer.
[23](2005) 221 CLR 496 (‘Dick Smith’).
[24]Lend Lease (n 13).
[25]Ibid 151 [18]; Dick Smith (n 23) 517–18 [71].
[26](1948) 77 CLR 143, 152 (emphasis added).
In Dick Smith, the vendors agreed to sell all of the shares in a company to a purchaser for a stated price of approximately $114 million minus the amount of a dividend to be declared by the company before completion of the sale. Under the agreement, the purchaser was obliged to pay the sale price and to provide finance to the company in order to enable it to pay the dividend. The company declared a dividend of approximately $25.5 million, which was payable to the vendors on completion of the sale. At completion, the purchaser paid the price of approximately $88.5 million to the vendors and loaned the company funds to enable it to pay the dividend of approximately $25.5 million to the vendors. The Commissioner then assessed the agreement to duty on the full amount of $114 million.
The High Court held (by a majority of 3:2) that the consideration was the amount of some $114,139,649 which was the total amount that the vendors had bargained to receive, and did in fact receive.[27] In so finding the majority said:[28]
The consideration which moved the transfer by the Vendors to the Purchaser of the Shares which they owned in the Company was the performance by the Purchaser of the several promises recorded in the Agreement in consequence of which the Vendors received the sum of $114,139,649. It was only in return for that total sum (paid by the various steps and in the various forms required by the Agreement) that the Vendors were willing to transfer to the Purchaser the bundle of rights which their shareholding in the Company represented.
[27]Dick Smith (n 23) 518 [73] (Gummow, Kirby and Hayne JJ).
[28]Ibid 519 [75] (Gummow, Kirby and Hayne JJ) (emphasis added).
After summarising the promises made by the vendors and the purchaser,[29] the majority concluded that what moved the transfer was the performance of all of the various stipulations in the agreement (not just the promises which the purchaser made). The vendors transferred the shares for receiving some $114 million, of which part was received from the company, because the parties had agreed that this should be so.[30]
[29]Ibid [78]: that is, the vendors’ promises to transfer the shares and to procure the company to declare a dividend, and the purchaser’s promises to pay the sale price ($114,139,649 minus the dividend amount) and to fund the company’s payment of the dividend.
[30]Ibid 519–20 [79]–[80].
In Lend Lease, the High Court was concerned with the transfer of properties in the Docklands area in Melbourne. It was agreed that the developer would buy parcels of land from the authority and that it would design, construct and sell large buildings on that land. It was further agreed that the authority and the developer would each build various forms of infrastructure for the development.
Each transfer of land was to be made pursuant to a land contract. The authority and Lend Lease had also entered into a development agreement pursuant to which Lend Lease agreed to make various payments to the authority in addition to the amounts directly referable to the transfer of land (‘the stage land payments’). Such additional amounts were by way of contribution for external infrastructure, integrated public art, the remediation of a former gasworks site, and a share of the gross proceeds received by the developer on sale. The issue was whether these additional amounts formed part of the consideration for the transfer of the land.
Duty was assessed on the transfers on the basis that the consideration was the total of the sums payable under the development agreement. Lend Lease objected to the assessments and claimed that only the payment of the stage land payments was consideration for moving the transfer of the land — which was undeveloped land. All other payments were in the nature of, and had as their purpose, payment for development work, or payment of a share of revenue from the sale of the developed land. The objection was disallowed and the taxpayer’s appeal was refused by Pagone J at first instance. However, an appeal was allowed, following which the Commissioner appealed to the High Court.
In an unanimous judgment, the High Court (French CJ, Hayne, Kiefel, Bell and Keane JJ) allowed the appeal.
In the High Court, Lend Lease emphasized that it was necessary to identify the ‘nature and purpose’ of the several payments. It highlighted that the land was undeveloped land when it was transferred, and submitted that the development agreement was not only concerned with the transfer of the land, but also with the ongoing development and realisation of the land. Thus, only the stage land payments were consideration for the transfer of the undeveloped land, with all other payments being payment for development work or payment for a share of revenue.
The Court referred to the majority’s decision in Dick Smith and highlighted that the statutory criterion of consideration ‘for’ the transaction looks to ‘what was received by the vendors so as to move the transfers to the Purchaser as stipulated in the agreement.’[31]
[31]Ibid 159 [49], 160 [51].
The Court further rejected the arguments of Lend Lease and found:[32]
In these cases, the consideration which moved the transfer by VicUrban to Lend Lease of each Stage was the performance, by Lend Lease, of the several promises recorded in the 2001 DA (or that agreement as later varied and supplemented), in consequence of which VicUrban would receive the total of the several amounts set out in the applicable agreement. It was only in return for the promised payment of that total sum, by the various steps recorded in the applicable agreement, that VicUrban was willing to transfer to Lend Lease the Land comprising the relevant Stage.
[32]Ibid 159–60 [50].
It is significant that the Court came to this view notwithstanding arguments which resemble some of the submissions raised in the current proceeding. Such arguments included a suggestion that proper characterisation was necessary. There was also criticism that the Commissioner’s approach would have the consequence that each contractual promise is collected, with no proper basis for distinguishing between payments that are consideration, and payments received at the same time and ‘but for’ which the vendor would not have made the transfer.[33]
[33]Ibid 145–7.
The Court also made various other findings:
·The Court accepted that the transactions between the authority and Lend Lease were ‘single, integrated and indivisible’.[34]
·The Court rejected the suggestion that the (undeveloped) condition, or ‘value’ of the land, could assist in deciding what was the consideration for its transfer under s 20(1)(a).[35]
·The Court also rejected the suggestion that it was appropriate to divide obligations up between those concerned with the sale and transfer of land, on the one hand, and other obligations described as the ongoing development of the land and ultimate realisation on the other.[36] First, this denied the fact that the obligations were interrelated. More fundamentally, it assumed that the other obligations formed no part of the consideration moving the transfers.[37]
·The Court also rejected the importance of proper characterisation as emphasized by Lend Lease. Thus, it was not concerned about the manner of calculation of the amounts, nor the connection between the payments and works undertaken by the authority.[38] Nor was the characterisation of payments as relating to ‘development’ obligations, or ‘revenue’ or ‘profit’ decisive.[39]
[34]Ibid 160 [53]; see further 160–1 [54]–[58].
[35]Ibid 157–8 [44]–[45].
[36]Ibid 158 [46].
[37]Ibid.
[38]Ibid 162 [61].
[39]Ibid 159 [48].
Default interest
Applicant’s submissions
The applicant submitted that the transfer of the property was ‘moved’ by the performance by the respondent of the several promises recorded in the original contract and variations in consequence of which the vendors received the purchase price, the loan advance interest, and the default interest. It was only in return for the promised payment of all of those amounts that the vendors were willing to transfer the property.
The applicant’s position was that the original contract and the variations together constituted one single, integrated, and indivisible transaction.
The applicant accepted that it may be accurate to describe the default interest as being paid in respect of the extension of the settlement date. However, as correctly observed by the Tribunal, this did not determine whether or not it formed part of the consideration for the transfer.
The applicant submitted that the Tribunal fell into error when it relied on the passage from Conder Tower.[40] Senior Counsel submitted that the Lend Lease decision had overtaken this case, and did not endorse the passage relied upon. Thus, the High Court did not make reference to concepts of causation or attribution, nor did it frame the statutory question as one of what the consideration was ‘really paid for.’ It was also unnecessary to attribute a sole or single characterisation to any particular payment. Further, insofar as the respondent alleged that the payments were somehow ‘indirect’ this was to misstate the test under Lend Lease, which was not concerned to evaluate the directness of the connection. Rather, if the promise moved the transfer then the degree of ‘directness’ is of no consequence.
[40]At the Tribunal reasons (n 3) [56].
The applicant submitted that the Tribunal was further in error in relying on BHP since in that case the Court was concerned with determining whether payments were either capital or revenue given they could not be both. This was distinguishable from the present case because the payment of interest could be one of the promises that the purchaser made to move the transfer.
The applicant emphasized that by the time the default interest payments began the parties had already amended their original bargain. The effect of the first variation was that, if certain instalments of interest were not paid, the vendors were not obliged to transfer the property. Whatever the position under the original contract the agreement to pay default interest was something the respondent agreed to do in order to obtain a transfer of title. Simply because it was calculated by reference to clause 26 did not matter.
However, the applicant’s ultimate position was that if there was a significant amount payable for default interest then this interest would also constitute consideration. Thus, default interest was properly brought to duty as part of the consideration provided it was not ‘de minimus’.
The applicant further highlighted that the ‘dutiable transaction’ was the transfer of the property (under s 7(1)(a)), not the entry into the original contract. Further, that duty is charged when the transfer occurs under s 11 (not when the contract is entered into).
The applicant accepted that the correct approach is that a taxpayer should be assessed to duty on the basis that an agreement will be performed on its terms when it is unknown whether there will be a default. However, if a default is known to have occurred, if the defaulting party made promises that came into effect on default, and if value passes as a result, then that value passing is part of the consideration. It also does not make any difference that at the time payments are made it is not yet known whether the purchase will settle. This is also the case with the payment of a deposit which is clearly part of the consideration that moves the transfer.
Respondent’s submissions
The respondent submitted that the default interest was not consideration for the transfer of the property because it did not ‘move’ the transfer of the property and became payable only when the respondent breached the original contract. Its purpose was therefore to compensate the vendors for the late payment, not as consideration for the transfer of the property. Thus, as set out in paragraph 58 of the Tribunal’s reasons, as a result of paying the default interest, the purchaser obtained an extension to the settlement date and the vendors’ agreement to refrain from issuing a notice of default, ie it obtained something apart from the property.
Senior Counsel for the respondent submitted that the real difference between the parties was the construction of the word ‘for’ in s 20(1)(a). He submitted that only payments that have a direct connection to the transfer of the property are payments for the transfer, relying on Conder Tower. Thus, there needs to be an evaluation of the degree of proximity, such that a ‘close’ connection was required. Further, a connection that is premised solely on whether it is a necessary payment to secure the transfer is insufficient.
As well as the passage cited by the Tribunal, the respondent relied on the following paragraphs from Conder Tower:[41]
The majority in Dick Smith did not conclude that any promise in a contract “connected with” or “relating to” the transfer of dutiable property would necessarily be consideration “for” the dutiable transfer.
…
A contract may contain interdependent promises, some, but not all, of which may bear the characterisation of being “consideration for” that part of the composite whole which moved the transfer…
[41]Conder Tower (n 12) 132–3 [11]–[12].
It accepted that the High Court did not specifically endorse the passages from Conder Tower. However, the High Court upheld the judge at first instance’s decision in Lend Lease and the reasoning is consistent with the passage that the Tribunal relied upon. The High Court also did not suggest that all covenants in the development agreement under which the purchaser may have to pay money in connection with the purchase transaction were consideration ‘for’ the transfer; only payments the purchaser was required to make to bring about the transfer of the land.
The respondent also advanced a ‘floodgates’ submission that an obligation to pay default interest was present in a great many purchase transactions and queried whether duty should be paid in respect of default interest under all standard contracts of sale. It also queried whether the approach would apply to other money or value passing (as observed by the Tribunal at paragraphs 59 and 60). Thus, there was no principled basis for distinguishing default interest from other forms of consideration the purchaser agreed to provide.
Further examples were advanced to demonstrate the absurdity of the applicant’s construction, and that a ‘but for’ test was inappropriate. For example, if a purchaser acquired two separate parcels of land from two different vendors but the acquisition of parcel A was made conditional on completion of the acquisition of parcel B then, in assessing the consideration for parcel A, this would be constituted by the consideration of both contracts. Senior Counsel also raised concern in relation to a sale of land and business transaction. In terms of chattels, he also observed that s 10(1)(d) of the Duties Act (which makes certain goods in Victoria dutiable property if sold as part of a transfer of land[42]) would be unnecessary if, as the applicant suggests, chattels sold with land were already included within s 10(1)(a) (as part of that which moved the transfer of the estate in fee simple).
[42]Though this does not include goods that are stock-in-trade: s 10(1)(d)(i).
The respondent submitted that the formal variations did not, in substance, change what the payment was for ie a deferred settlement. All the variation did was to provide for the amount and date. Significantly, however, Senior Counsel accepted that if the parties had agreed on a deferral of the settlement date on terms that the purchaser would pay a higher purchase price or fixed sum ‘that was somehow tied to the market value of the land’ then that would most likely be consideration. This was different to this case because the payment was for the delay in payment of the purchase price and not for the property.
The respondent distinguished Dick Smith on the basis that, in the present case, no other amount was payable for the transfer of the property. As also observed by the majority in Dick Smith the transaction was to be assessed on the footing that it was performed on its terms.[43]
[43]Dick Smith (n 23) 516 [65].
The respondent fairly accepted, contrary to the Tribunal,[44] that it was not in issue in this case that the original contract together with the variations constituted one single and indivisible transaction. However, unlike Lend Lease, the purchaser did not promise to pay the default interest in the original contract to secure the transfer of the property. Rather, the original contract expressly allocated a purchase price of $7,350,000. This is to be compared with Lend Lease where the authority would not have transferred the relevant land if Lend Lease had not undertaken to provide the additional expenditure on infrastructure and other matters. Importantly too, the High Court did not contemplate that the movement of value to the authority under the default provisions would be included in the consideration for the transfer of the land.
[44]The Tribunal reasons (n 3) [62].
In oral submission Senior Counsel also highlighted that, although the developer made contributions to art work in Lend Lease, it was not actually acquiring pieces of the art work. This meant that the only thing the developer ever acquired was the land.
Senior Counsel also relied on a number of authorities which will be dealt with further below.[45]
Analysis
[45]Commissioner of Taxation v Morgan (1961) 106 CLR 517 (‘Morgan’); Resolute Mining Limited v Commissioner of State Revenue [2020] QSC 281 (‘Resolute Mining’); Commissioner of Taxation of the Commonwealth of Australia v Scully (2000) 201 CLR 148; Western United Investment Co Ltd v Inland Revenue Commissioners [1958] 1 Ch 392 (‘Western United’).
First, insofar as the respondent cited the decisions of Western United Investment Co Ltd v Inland Revenue Commissioners (‘Western United’)[46] and Resolute Mining Limited v Commissioner of State Revenue (‘Resolute Mining’),[47] I did not find them of assistance in resolving the issue in this case.
[46]Western United (n 45).
[47]Resolute Mining (n 45).
In Western United a vendor agreed to sell shares with the consideration to be payable in 125 equal yearly instalments. There was also a clause in the agreement which provided that, if the purchaser defaulted in making any instalments, then the whole of the purchase price became immediately payable. The issue was whether stamp duty should be assessed on the basis that all the instalments might become payable within a period of 20 years.[48] The Court rejected this argument, finding that the terms of sale did not comprehend terms which come into operation only if the agreed terms of sale were broken.[49] Rather, the provisions proceeded upon the footing that the contract was going to be carried out according to the primary intention of the parties.
[48]Section 56(2) of the Stamps Act 1891 (UK) provided that “Where the consideration … consists of money payable periodically for a definite period exceeding 20 years … the conveyance is to be charged in respect of that consideration with ad valorem duty on the total amount which will or may … be payable during the period of 20 years next after the day of the date of the instrument”.
[49]Western United (n 45) 404.
The case is therefore concerned with a different provision where the Court was looking prospectively at what ‘will or may’ be payable in the future. Secondly, unlike the situation in Western United, it is unnecessary to speculate as to what would happen under the agreement in this case because the consideration is identifiable and quantifiable as a matter of fact, as considered at the very different time of transfer.
The statements made in both Dick Smith and Western United to the effect that a taxpayer should be assessed to duty on the basis that an agreement will be performed according to its terms,[50] were also made in circumstances where the original agreement was being assessed (not the subsequent transfer).
[50]Ibid; Dick Smith (n 23) 516 [65].
The case of Resolute Mining was similarly concerned with a prospective issue as to whether consideration could be ‘ascertained’ as at the date of the agreement. The Court held that the consideration could not be ascertained given it was unknown as at the date of the agreement whether the consideration might be increased, depending on whether cost overruns occurred in the future.
However, the respondent places reliance on certain statements made in relation to an argument that consideration should also take account any liquidated damages payable by the vendor in the event of delay. In rejecting this submission Bradley J stated:[51]
In my view, the Department’s obligation to pay Resolute any liquidated damages is a separate promise dealing with the loss to Resolute likely to be occasioned by such a delay. While it is consistent with the allocation of risk between the parties under the Funding Agreement, it is not an element of the consideration payable by Resolute for the Department’s agreement to transfer the land. It is analogous to a payment by a vendor to a purchaser (or a purchaser to a vendor) for an extension of the settlement date.
[51]Resolute Mining (n 45) [55].
As is apparent from the language used, the judge was directing attention to prospective matters, consistent with the terms of the legislation he was applying. The ‘analogous’ comparison to an extension of a settlement date was also unnecessary. However, to the extent that it suggests that the consideration for a transfer cannot include an additional payment consequent on the extension of a settlement date, I would respectfully disagree.
Returning to the present case, the default interest may or may not also be characterised as compensation for a late payment. However, as highlighted above, there is nothing in Lend Lease which suggests that the proper characterisation, or manner of calculation, of the additional payment is the key issue. Instead, the relevant question is whether, when considered as at the date of transfer, it was only in return for the promised additional payment that the vendors were willing to transfer the property. Whether the purpose of the payment was also the extension of the settlement date is not to the point.
The concession of the respondent also highlights the difficulties with its approach. Thus, the suggestion that a different approach may be warranted if the additional amount was tied to market value is not supported by Lend Lease. Value under s 20(1)(b) was also not the basis of the assessment in that case or this one.[52]
[52]Lend Lease (n 13) 157–8 [44].
The respondent’s approach would also lead to difficult assessments as to whether the additional amount was properly characterised as lost opportunity cost, or whether it was properly related to increased property value. More significantly, such an approach distracts from the crucial question as to what, in the result, was received so as to ‘move’ the transfer.
I am also unable to be satisfied that I should consider whether there is a ‘close’ nexus which is not ‘indirect.’ Although the High Court upheld the first instance decision in Lend Lease where there was, like Conder Tower, a focus on the ‘nexus’, the High Court did not endorse any such test of ‘nexus’ or make reference to concepts of causation or attribution as suggested in Conder Tower (and at first instance in Lend Lease[53]). It is not appropriate that this Court provide additional criteria and/or undertake a revision of the High Court’s formulation.
[53]Lend Lease Development Pty Ltd v Commissioner of State Revenue (2012) 87 ATR 504, 513 [12]–[13].
Similarly, the High Court did not suggest that the word ‘for’ should somehow be construed narrowly and/or be qualified in any way. Thus, the respondent sought support from certain remarks of a dissenting judgment of Kirby J in Commissioner of Taxation of the Commonwealth of Australia vScully[54] who suggested that, in adopting the word ‘for,’ rather than ‘in respect of,’ the legislature may be thought to require something less.[55] Scully was concerned with a different provision[56] which contained both the words ‘for’ and ‘in respect of,’ hence enabling a more direct comparison. It is of very limited utility in present circumstances.
[54](2000) 201 CLR 148.
[55]Ibid 182 [68]. Such remarks were also cited in both Conder Tower (n 12) 130 [7] and Lend Lease at first instance (n 53) 512 [12].
[56]Income Tax Assessment Act 1936 (Cth) s 27A(1) (repealed).
I accept that the applicant’s approach may widen the application of s 20(1)(a). However, this is already a consequence of the High Court’s decision in Lend Lease. As highlighted already, that decision was made after consideration of some of the same arguments that have been advanced in this Court. Although I also accept that the Court should avoid a construction that may have absurd results,[57] it is not for this Court to adopt any particular construction. For the sake of completeness, I also do not consider that the application of the High Court’s formulation leads to absurd results in this case.
[57]Dennis Pearce, Statutory Interpretation in Australia (LexisNexis Butterworths, 9th ed, 2019) 2.8.
Insofar as it is also necessary to consider some of the hypotheticals raised, care should be taken since there are various provisions of the Duties Act which may have specific application.[58] However, turning to the general principles applying to the ‘Parcel A’ and ‘Parcel B’ example, it would be necessary to consider what was received by the vendor to move the transfer as stipulated in the relevant agreement. As the applicant accepted, notwithstanding that contract A may be conditional on contract B, each vendor would only have received the amount specified in relation to their individual piece of land, ie the second payment received by the second vendor under contract B does not actually move the transfer of land under contract A. In terms of the sale of land and chattels example, it is true that s 10(1)(d) defines chattels as dutiable property in that context. However, this of itself does not resolve the question as to whether the consideration for the transfer of a piece of land would also include the price of the chattels. Rather, as with the A and B example, and subject to all relevant provisions of the Duties Act, the matter would need to be resolved in the particular context, and having regard to the principles in Lend Lease.
[58]See eg, s 24 which makes provision for aggregating duty where dutiable transactions arise from what is substantially one arrangement; see also ss 17, 25.
The Court is also not called upon in this case to determine whether other covenants are assessable and, more particularly, whether default interest is generally assessable. It is not appropriate to do so since the issues could arise in a number of ways not the subject of this appeal. However, there is no reason why something called ‘default interest’ could not be consideration provided it was received so as to move the relevant transfer.
In terms of Dick Smith, it is true that the Court was concerned with the price as only specified in the original contract. However, that is not to the point in this case where the assessment occurs as at the time of transfer. By that time, it was known that the vendors had received the additional amounts of ‘default interest’ in return for the transfer.
It is also true that Lend Lease did not consider whether payments under default provisions would be included, but this does not assist either way given the issue did not even arise. Moreover, the focus is not on what the purchaser received (contrary to one of the respondent’s submissions) but, rather, what was received by the vendors so as to effect the transfer.
I agree with the submission of the respondent that the Tribunal appears to have fallen into error by focusing on the case of BHP, rather than applying the principles from Lend Lease. As highlighted already, BHP was concerned with the very different question of deductibility of amounts paid by a purchaser for shares by way of ‘interest’ prior to the settlement. More particularly, although it was appropriate to focus on the ‘true characterisation of an outgoing’ in that context,[59] (where the amounts were either capital or revenue), there is no such ‘sole characterisation’ test here.[60]
[59]BHP (n 5) 600–1 [27].
[60]For similar reasons, the decision in Morgan (n 47) (also relied upon by the respondent) did not assist which was also concerned with whether payments made by a purchaser were deductible.
The Tribunal has also placed emphasis on the further tests proffered in Conder Tower which have not been endorsed by the High Court. Its focus on a ‘sole’ characterisation was particularly highlighted in paragraph 58 where it acknowledged that, pursuant to the provisions of the variation agreements, the payments of default interest were tied to the vendors’ agreement to extend the settlement date and to refrain from issuing a notice of default. The Tribunal then considered that this meant that the default interest was consideration for those matters ‘rather than the transfer of land which may (or may not) occur subsequently.’
The Tribunal thereby took an ‘either/or’ approach based on sole characterisation. It also focused on the time of the agreement, rather than the time of transfer. Thus, although the default interest was tied to the vendors’ agreement to extend the settlement date and refrain from issuing a notice of default, this did not mean that it was not also consideration for the ultimate transfer. In fact, as those stipulations make clear, absent the default interest payments, a default notice might have terminated the agreement altogether (in which case there would have been no transfer). By the time of the transfer it was also known that the vendors had refrained from issuing the notice of default and transferred the property in return for, inter alia, the default interest payments.
It was only, then, in return for the promised payments of additional amounts (represented by the default interest payments) that the vendors were willing to transfer the property.
I am therefore satisfied that the Tribunal misconstrued s 20(1)(a) and should have found, on a proper construction, that the amounts described as ‘default interest’ were part of the consideration for the transfer of the property.
Loan advance interest
Submissions
The applicant emphasized that the promise to pay interest on loan advances was expressly made ‘in consideration for the mutual promises contained in the [original contract].’
In oral submission Senior Counsel highlighted that the evidence of Mr Sirianni was that the purchaser agreed to provide the cash advances because the vendors asked for them, and the loan advance interest was an integral part of the promise to give the loan advances. Therefore, like Lend Lease, it was only in return for that promise that the vendors were willing to agree to transfer the property.
The respondent submitted that the loan advance interest is not consideration for the transfer of the property as it was not a payment that moved the transfer. It became payable only when the purchaser failed to pay cash advances on the due dates. It was therefore consideration for the vendors agreeing to not enforce their default rights, ie it compensated the vendors for the late payment of the cash advances.
The respondent submitted that the loan advance interest was even more divorced from the transfer than the default interest. This is because the loan advance interest was paid for the delayed transfer of loan money, rather than the delayed transfer of the property. If the later transfer of the property did not occur (for example, by agreement between the parties), the cash advances would simply be loans that needed to be repaid by the vendors.
The respondent emphasized that the vendors received the loan advance interest because they were kept out of the money they were entitled to and were compensated by the payment of the loan advance interest. The loan advance interest was therefore interest for credit provided by the vendors and the Tribunal erred in finding that ‘there was no extended credit being advanced’. Moreover, such interest did not relate to the late payment of the purchase price.
Analysis
The key question is, again, whether the receipt of loan advance interest ‘moved’ the transfer.
More specifically, it is not relevant to characterise the loan advance interest, for example, as being related to ‘credit’ or paid because of the delayed transfer of loan monies. It is also unnecessary to consider what the result would be if the transfer did not occur.
Turning then to the key issue, cl 4.1 of the special conditions in the original contract expressly provides that there was an obligation to make cash advances of particular amounts and on particular dates ‘in consideration for the mutual promises contained in this agreement.’ It may therefore be accepted that the vendors were not prepared to transfer the property absent receipt of the loan advances.
However, more importantly, it may be accepted that the agreement to transfer was also dependent on receipt of the cash advances on the days stipulated. Put differently, the vendors were only prepared to move the property if it received payments in advance of settlement described as ‘cash advances.’ Such cash advances were to be, and were, then set off against the purchase price at settlement under cl 4.6. In fact, the timing of receipt was sufficiently significant that an obligation was to be imposed on the purchaser to pay additional amounts (of specified interest) in the event that the cash advances were not made on the dates stipulated. Default in the making of such ‘interest’ payments could further result in service of a notice of default (and forfeiture of any advances paid - similar to a deposit).
In these circumstances, I am satisfied that the promised performance of the stipulation to pay interest on late advances moved the transfer in this case. Put another way, consistent with the terms of cl 4.1, the vendors were only prepared to transfer the property on the payment of the additional amounts (characterised as ‘interest’) in circumstances where the ‘loan advances’ had not been made on the dates stipulated.
The Tribunal was therefore correct in finding that the loan advance interest formed part of the consideration which moved the transfer of the property.
Section 261
Section 261 of the Duties Act is found in Ch 12, which concerns administration and enforcement. Part 1 of Ch 12 is headed ‘Stamping instruments’. Section 261 provides:
261 Instruments to be separately charged with duty in certain cases
An instrument that contains, gives effect to, or relates to, two or more distinct matters or transactions is to be separately and distinctly charged with duty in respect of each such matter or transaction, as if each matter was expressed in a separate instrument.
In written submissions the respondent submitted, first, that s 261 can apply to dutiable transactions, not just instruments, highlighting that the current form of s 261 includes reference to ‘transactions.’ Secondly, it relied on Commissioner of Stamp Duties v Pendal Nominees Pty Ltd[61] for the proposition that, even if matters are integrated and interlocked, the test for ‘distinct’ turns on whether the matters have different duty consequences. It submitted that, while the transfer of the property was a dutiable transaction, the other matters (including the payment of default interest and loan advance interest) were not dutiable transactions and were therefore ‘distinct’ and not liable to duty.
[61](1989) 167 CLR 1, 11–12.
However, in oral submission, this matter was not pursued with any force. Although there was no formal abandonment, Senior Counsel accepted that if the Court found that the payments were consideration for the transfer, then it was ‘unlikely’ that s 261 would change the outcome.
The applicant submitted that, although the High Court left open the question of whether s 261 can apply when duty is to be assessed on a dutiable transaction, the question should be answered in the negative.
In any event, the question did not need to be answered, as was the case in Lend Lease, since it begged the question about what was the duty on the dutiable transaction, being the transfer. Thus, the relevant passage cited by the applicant from Lend Lease was as follows:[62]
In these cases, however, there is little, if anything, to be gained by deciding whether there was more than one “matter” or “transaction”. A conclusion that there was more than one “matter” or “transaction” is no more than a statement, in other words, of the answer that is to be given to the statutory question identified earlier: what was the consideration “for” the transfers, in the sense of what was “the money or value passing which move[d] the conveyance or transfer”. It is not necessary to decide, therefore, whether the Court of Appeal was right to conclude, as it must be taken to have concluded, that s 261 can apply when duty is to be assessed on a dutiable transaction. Rather, chief attention must be given to Lend Lease’s submission, and the Court of Appeal’s conclusion, that the consideration for the transfers was only the Stage Land Payment.
[62]Lend Lease (n 13) 157 [43].
I have found, above, that the proper construction of s 20 means that both the default interest and the loan advance interest constituted part of the consideration for the transfer, as the one dutiable transaction. There is therefore no other ‘distinct’ or separate transaction for the purposes of s 261.
It is unnecessary in such circumstances to consider whether s 261 otherwise applies generally in respect of dutiable transactions.
It follows that the notice of contention fails.
Conclusion
The Tribunal was correct to include loan advance interest but erred in excluding default interest as part of the consideration for the transfer.
Subject to hearing from the parties, the following orders appear to be appropriate:
1 In respect of the appeal:
(a) leave to appeal is granted;
(b) the appeal is allowed;
(c) the orders of the Tribunal made on 1 April 2020 are set aside and in their place it is ordered that the reassessment made by the Commissioner of State Revenue on 19 September (as confirmed by notice of re-assessment no 17589724) is varied to:
(i) calculate duty on the basis that the dutiable value included an additional amount of $985,267.15 (as opposed to $857,523.73); and
(ii) by consent, reduce the penalty and interest to nil.
(d) the respondent is to pay the applicant’s costs of and incidental to the appeal.
2 In respect of the cross appeal:
(a) leave to appeal is granted;
(b) the appeal is dismissed;
(c) the respondent is to pay the applicant’s costs of and incidental to the cross-appeal.
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