Commissioner of State Revenue v TEC Desert Pty Ltd
[2009] WASCA 128
•23 JULY 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: COMMISSIONER OF STATE REVENUE -v- TEC DESERT PTY LTD [2009] WASCA 128
CORAM: WHEELER JA
McLURE JA
NEWNES JA
HEARD: 22-23 OCTOBER 2008
DELIVERED : 23 JULY 2009
FILE NO/S: CACV 19 of 2007
BETWEEN: COMMISSIONER OF STATE REVENUE
Appellant
AND
TEC DESERT PTY LTD
First RespondentAGL POWER GENERATION (WA) PTY LTD
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :SIMMONDS J
Citation :TEC DESERT PTY LTD & ANOR -v- COMMISSIONER OF STATE REVENUE [2006] WASC 300
File No :SJA 1178 of 2001
Catchwords:
Taxation - Stamp duty - Sale, transfer or conveyance of an interest in land - "Leading and principal object" of agreement - Meaning of "sale" - Whether disposition of an interest in unsevered fixtures is a sale of an interest in land - Nature of interest that may be held in fixtures by a person who does not own land to which they are attached - Instrument liable to stamp duty - Turns on own facts
Legislation:
Land Administration Act 1997 (WA)
Mining Act 1904 (WA)
Mining Act 1978 (WA), s 91(7), s 114
Mining on Private Property Act 1898 (WA)
Revenue Laws Amendment (Assessment) Act 2000 (WA), s 12
Rules of the Supreme Court 1971 (WA), O 77 r 6(d)(iii)
Stamp Act 1921 (WA), s 16, s 19, s 31AA, s 33(4), s 63(1)(a), s 70, s 74
Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant: Mr B P King & Ms I Briggs
First Respondent : Mr J W de Wijn QC & Mr B Dharmananda
Second Respondent : Mr J W de Wijn QC & Mr B Dharmananda
Solicitors:
Appellant: State Solicitor for Western Australia
First Respondent : Mallesons Stephen Jaques
Second Respondent : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Austell Pty Ltd v Commissioner of State Taxation (1991) 4 WAR 235
Barrington's Case (1610) 8 Co Rep 136; 77 ER 681
Bestman v Mitten (1904) 29 VLR 851
Coles Myer Ltd v Commissioner of State Revenue (1998) 4 VR 728
Commissioner of Stamp Duties (NSW) v Henry (1964) 114 CLR 323
Commissioner of State Taxation v Balcatta Nominees Pty Ltd [1981] WAR 7
Commissioner of Taxes (Queensland) v Camphin (1937) 57 CLR 127
Cook v Cook (1986) 162 CLR 376
Craven v Geal [1932] VLR 172
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (New South Wales) (1982) 149 CLR 431
Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27
Emanuel (Rundle Mall) Pty Ltd v Commissioner of Stamps (1986) 41 SASR 122
Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841
Federal Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150
Fisher v Hebburn Ltd (1960) 105 CLR 188
George Wimpey & Co Ltd v Inland Revenue Commissioners [1975] 2 All ER 45
Georgeski v Owners Corporation SP49833 [2004] NSWSC 1096
Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 214 CLR 269
Hallen v Runder (1834) 1 Cr M & R 266; 149 ER 1080
Hazelwood v BP Australia Ltd [1987] Tas R (NC) N1
Horsfall v Hey (1848) 2 Exch 778
Jarvis v Jarvis (1893) 63 LJ Ch 10
Kay's Leasing Corporation v CSR Provident Fund Nominees Ltd [1962] VR 429
Lavery v Pursell (1888) 39 Ch D 508
Lee v Gaskell (1876) 1 QBD 700
Liford's Case (1615) 11 Co Rep 46; 77 ER 1206
Littlewoods Mail Order Stores Ltd v Inland Revenue Commissioners [1963] AC 135
London and Westminster Loan and Discount Co Ltd v Drake (1859) 6 CBNS 798; 141 ER 664
Maxwell v Murphy (1957) 96 CLR 261
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579
McDonald's Australia Ltd v Chief Commissioner of State Revenue (NSW) (2005) ATC 4094
McKain v RW Miller & Co (South Australia) Pty Ltd (1991) 174 CLR 1
Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454
Metal Manufactures Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375
Mt Newman Mining Co Pty Ltd v Commissioner of State Taxation (1994) 11 WAR 413
Never‑Stop Railway (Wembley) Ltd v British Empire Exhibition (1924) Inc [1926] Ch 877
North Shore Gas Co Ltd v Commissioner of Stamp Duties (New South Wales) (1940) 63 CLR 52
Poole's Case (1703) 1 Salk 368; 90 ER 934
Prime Wheat Association Ltd v Chief Commissioner of Stamp Duties (1997) 42 NSWLR 505
Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50
Re Samuel Allen & Sons Ltd [1907] 1 Ch 575
Reynolds v Ashby & Son [1904] AC 466
Rockwell Graphics Systems Ltd v Fremantle Terminals Ltd (1991) 106 FLR 294
Rodway v The Queen (1990) 169 CLR 515
Rodwell v Phillips (1842) 9 M&W 501; 152 ER 212
Ruffey v Henderson (1851) 21 LJQB 49
Saint v Pilley (1875) LR 10 Exch 137
Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 9514
Standard Portland Cement Co Pty Ltd v Good [1982] 2 NSWLR 668
Thomas v Jennings (1896) 66 QBD 5
Toll (FGCT) Pty Ltd v Alphapharm (2004) 219 CLR 165
Vesco Nominees Pty Ltd v Stefan Hair Fashions Pty Ltd [2001] QSC 169
Victrawl Pty Ltd v Telstra Corporation Ltd (1994) 183 CLR 595
Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351
Wake v Hall (1883) 8 App Cas 195
Warren v Nut Farms of Australia Pty Ltd [1981] WAR 134
Wincant Pty Ltd v South Australia (1997) 69 SASR 126
WHEELER JA:
The appeal
This is an appeal from Simmonds J, who allowed an appeal by the present respondents (jointly referred to by the shorthand "TEC", in these reasons) against a decision of the Commissioner of State Revenue (the Commissioner) to disallow an objection concerning the assessment of stamp duty on an instrument.
The background to that assessment and the appeal is as follows. In July 1998, WMC Resources Ltd (WMC) issued an information memorandum announcing its intention to sell its Western Australian power generation assets and inviting bids from prospective purchasers. Southern Cross Energy, which was a partnership between the respondents, was the successful bidder. Southern Cross Energy and WMC entered into negotiations. Ultimately, the documents executed to give effect the transaction were a sale agreement made between Southern Cross Energy, WMC, TransAlta Energy Corporation and the Australian Gaslight Company dated 27 November 1998 (the Sale Agreement) and nine licence agreements (the Licence Agreements). A "Power Purchase Agreement", and a variety of other documents were executed at about the same time.
The Sale Agreement related to a variety of items. Broadly, there were two power generation systems, each comprising two power generation stations, generators and electrical wires, and associated transmission and distribution plant and equipment which connected the power stations and generator to certain named operations. That property was situated on land which was the subject of different types of tenure (the land). Relevantly, there was one parcel of freehold land, two mineral leases, and one mining lease. For present purposes, there is no material distinction between a mineral lease under the former Mining Act 1904 (WA) and a mining lease under the current Mining Act 1978 (WA) (Mining Act) (I therefore refer to them collectively as "mineral leases"). I set out and describe the relevant provisions of the Sale Agreement and Licence Agreements shortly.
The Sale Agreement was entered into on or about 27 November 1998, and Completion under that agreement occurred on 29 January 1999. In about January 1999, WMC granted to TEC the nine licences contemplated by the Sale Agreement (the licences). The Licence Agreements were lodged for assessment in January 1999, and the Sale Agreement was lodged for assessment in February 1999. By assessment dated 24 July 2000, the appellant assessed the Sale Agreement to duty of $9,140,280.25. Following objection and the appeal to Simmonds J, the orders made by Simmonds J were that the appeal be allowed, that the objection be allowed, that the assessment by the appellant be set aside and that the duty chargeable under the Stamp Act 1921 (WA) (the Act) in relation to the Sale Agreement be assessed at nil.
Before I turn to the provisions of the Sale Agreement and the Licence Agreements, I make the following general observations. These matters appeared to be common ground.
The Act does not contain any general anti‑avoidance provision. Persons are free to structure their affairs in a way which does not attract duty under the Act, even if some alternative and simpler way of achieving their practical objectives might have been adopted and would, if adopted, have attracted duty. The question in this case, as in other cases under the Act, is the proper construction and legal effect of the documents actually executed. It is important to keep this principle steadily in mind, because portions of the appellant's submissions appear to contain argument which would be relevant only if the Act did contain anti‑avoidance provisions or, perhaps, if the appellant had attempted to contend that the agreements in question were a sham.
The appellant expressly disavowed any assertion that the agreements were a sham. It appears to be perfectly true, as the appellant's "overview" submissions assert, that the purpose of the Sale Agreement, broadly, was to transfer all of WMC's power and transmission assets to the respondents. That is, by the date of termination of the Sale Agreement and the various agreements contemplated by it, WMC would end up with a very substantial amount of consideration and the respondents would end up with all of WMC's power and transmission assets. It is also correct, in broad terms, to observe that it did not appear to matter to the parties, in practical terms, whether that end result was achieved by the mechanism of a sale, a licence, or any other form of agreement; the effect of the recalculation provisions, to which I later refer, was to ensure that whether certain assets were sold outright or were the subject of licences, the same price would be paid and the purchaser would have effectively the same rights in respect of them. The subjective intention, motive, or desire of the parties, however, is not relevant, although the practical implications of a particular construction may affect the proper construction of a document, where it is ambiguous.
Where, as here, documents form interlinked parts of one transaction, so that one document refers to or contemplates another document, it is not appropriate (nor, in some cases, possible) to construe each document in isolation "with blinkers on". Rather, it may be necessary to refer to related documents in order to properly construe and characterise a document which is in question. However, it is the individual document, not the "transaction", which is assessed for duty.
Finally, the focus of the appellant's argument was on the power stations, rather than the transmission systems. That was on the basis that if the appellant could not persuade the court that the Sale Agreement was assessable to duty so far as those power stations were concerned, it would not be able to succeed in relation to the transmission systems, while if the agreement was assessable so far as it concerned the power stations, then s 70 of the Act would operate to support the amount of duty assessed.
The Sale Agreement
The following is a broad overview of a complex set of provisions, to assist in understanding what follows. The provisions of the Sale Agreement of particular relevance to these reasons are set out in full as an appendix, with defined terms capitalised in these reasons.
The scheme of the Sale Agreement is as follows. The Power System Assets consist of what are defined as the Sale Assets (being effectively anything that is not a Fixture) and Fixtures or improvements to the land. The Purchaser is to buy on the Completion Date, all of the Sale Assets (that is, all the items which are not Fixtures). Licence Agreements deal with items acknowledged to be Fixtures. For the purpose of fixing a price, the Purchaser has classified items into the categories of "assumed Sale Assets" and Fixtures. On that basis, a Purchase Price somewhat in excess of $190,000,000 is fixed for the assumed Sale Assets, and Licence Fees in the sum of a little under $4,000,000 are fixed for each year of the Licence Term (that Licence Term being defined as 15 years from Commencement). While the total Licence Fees which would be payable if paid over the 15 years would come to approximately $58,000,000, the Vendor is able to call for prepayment at the Completion Date (the date of completion of the sale and transfer of the assets which are not Fixtures). The amount payable as a prepaid Licence Fee is, in that case, a little short of $40,000,000. The vendor did call for prepayment.
However, if a Governmental Agency (very broadly defined in a way which would include both the appellant and this court) determines that any of the assumed Sale Assets are indeed Fixtures, and that determination is accepted by the Purchaser, then the items determined to be Fixtures are deemed not to have been included, ab initio, in the Sale Assets. In that event, the Purchase Price is recalculated, the relevant amount is refunded and there is deemed to have been included ab initio in the Licence Fee an amount intended to ensure that, at the date of the reclassification of those items, the present value of the Licence Fees, added to the Purchase Price, equals the aggregate of the Purchase Price and the prepaid Licence Fee sum already described. The parties can set off the amounts to be refunded from the Purchase Price and paid by way of additional Licence Fee, so that no money actually changes hands.
Of the obligations set out in the Sale Agreement, the important ones for present purposes relate to the licences and to Permanent Tenure. On Completion, the Purchaser is to execute (unless the documents had been executed prior to that date) the licences, in the form of the draft specified in sch 8 of the Sale Agreement (unless otherwise agreed). Schedule 7 of the Sale Agreement provides that the vendor shall grant the Northern and Southern System Site Licences (that is, licences in the form specified in sch 8, unless otherwise agreed) in respect of the land described in tables in that schedule.
So far as Permanent Tenure is concerned, cl 1.5 of sch 7 provides that the Purchaser shall, as soon as practicable after completion, apply for Permanent Tenure in the form of general purpose leases under the Mining Act, or such other form of tenure as the parties may agree, in respect of the land on which the power stations are situated. It is provided that the Purchaser should not do so where such tenure cannot be granted immediately after the surrender of the Vendor's mining tenure. It is provided that the parties are to co‑operate in relation to applications for tenure.
The licences
So far as the licences are concerned, the licences executed were essentially in the form provided by sch 8. That schedule recites, inter alia, that the Licensor has agreed to licence the Licensor's Improvements (that is, all of the Power System Assets on the Licence Area which are Fixtures) and that part of the Head Lease comprised in the Licence Area to the Licensee, with immediate effect upon completion of the Sale Agreement. The Head Lease is the lease described in schedule 5 of the various Licence Agreements. In relation to the Kalgoorlie Power Station, which is freehold, the licence recites that the Licensor has agreed to License the Licensor's Improvements and that part of the land comprised in the Licence Area to the Licensee; instead of a definition of "Head Lease", there is in this licence a description of the land, by reference to a certificate of title.
The term of each licence is 15 years from the Commencement Date, defined as the date of Completion of the Sale Agreement. There are provisions relating to the classification of chattels and Fixtures which are similar to those in the Sale Agreement; that is, noting that items have been classified as either assumed chattels, or assumed Fixtures, and providing for consequences of reclassification if there is a relevant determination by a Governmental Agency, the net effect of which is that the aggregate price paid in respect of chattels and Fixtures, taken together, is the same.
The pro forma Licence Agreement provides that the licence does not confer on the Licensee an estate or interest in the land.
There are complex provisions relating to the acquisition of Permanent Tenure. Clause 5.1 of each of the Licence Agreements provides that, at any time and from time to time during the Licence Term, the Licensee "may" elect to obtain Permanent Tenure over any part of the Licence Area. The Licence Area is defined as land which is the site of a power station, and which is marked on a survey. Although the terminology of this clause is permissive, par 1.5 of sch 7 of the Sale Agreement, as already noted, provides that the Purchaser (that is, the Licensee) "shall", as soon as practicable after Completion, apply for Permanent Tenure. Permanent Tenure is defined in cl 5.3 of the Licence Agreements to mean the form of permanent land tenure contemplated by par 1.5 of sch 7 for that category. Clause 1.5 of sch 7 contemplates, generally, Permanent Tenure "in the form of general purpose leases under the Mining Act ... or such other form of tenure as the parties may agree".
In relation to the non‑freehold power station licences, cl 5.3 provides that, where the form of Permanent Tenure "prescribed" under sch 7 consists of general purpose leases or miscellaneous licences under the Mining Act, then certain provisions apply. Those provisions, broadly, are to the effect that the Licensee is entitled to apply for one or more of such leases or licences and the Licensor will consent to them being granted. However, so far as the Kalgoorlie Power Station is concerned, cl 5.3 of the licence provides that, where the Licensee elects to obtain Permanent Tenure, and "where the form of Permanent Tenure contemplated by Schedule 7 ... consists of the granting of a leasehold interest over or a transfer of freehold interest in lands held in freehold by the Licensor", then certain other provisions are to apply. Broadly, they are to the effect that the Licensor and Licensee shall enter into a lease over that part of the Permanent Tenure Area or the Licensor shall transfer it to the Licensee.
Each of the licences contains a number of provisions relating to termination of the licence. The "Termination Date" is the day before the day which is 15 years after the Commencement Date (ie, after Completion). Clause 3.3 provides that the term of the licence commences on the Commencement Date and expires on the Termination Date. In relation to those licences which do not concern freehold land, cl 3.4 provides that if the Head Lease terminates prior to the end of the term or of the option period (a further 15 years commencing on the Termination Date) and if the Licensor is unable to obtain a renewal or extension of the Head Lease, then the licence terminates on termination of the Head Lease.
The pro forma Licence Agreement contains a cl 17 (variously cl 16 or cl 17 in the Licence Agreements entered into) which provides as follows. If certain clauses of the Power Purchase Agreement are triggered, then the licence will terminate following "closing" under a Sale and Purchase Agreement, the pro forma of which is found in Attachment 3 of the Power Purchase Agreement. In broad terms, certain defaults by the joint venturers, pursuant to the Power Purchase Agreement, will entitle WMC to exercise a purchase right. That purchase right obliges the joint venturers to sell such of the assets as then constitute the relevant power station and transmission system, including the benefit of site licences, to WMC, in the manner provided for by the Sale and Purchase Agreement. "Closing" is, in effect, the finalisation of that purchase.
Clauses 17.2 and 17.3 provide that the licence is terminated if either the Head Lease is terminated for any reason, or upon the day on which the Licensee is granted Permanent Tenure of the Licence Area. Clause 17.4 provides for termination at the election of the Licensee if in certain circumstances the Licensee is satisfied that the Licence Fee will not be tax deductible for the Licensee, and provides for the consequences of that election.
Importantly, cl 17.5 provides that except in the event of a termination under cl 17.1 (default triggering WMC's purchase right) or cl 17.4 (the Licensee electing, if the Licence Fee is not tax deductible), then "on the termination of this Licence for any reason, the Licensee must acquire the Licensor's right, title and interest in the Licensor's Improvements" (the Fixtures). In that event, where the Licensee has made prepayments of the Licence Fees, the Licensor is to repay to the Licensee that part of the amount so prepaid as is attributable to the period after the date of termination, but the Licensee is to pay as consideration for the acquisition an amount equal to the amount so calculated. There is provision for set‑off so that, in practical terms, no money need change hands. Where the Licensee has not made a prepayment, the Licensee is to pay as consideration for the acquisition the present value of all Licence Fees payable in respect of the remainder of the Licence Term as at the date of termination.
Clause 10 provides that, at the expiration of the Licence Term, or on the earlier termination of the licence, the Licensee must cease using the Licence Area and rehabilitate it.
So far as dealing with the Licensor's Improvements are concerned, cl 18 provides that, subject to the Sale Agreement, the risk of all the Licensor's Improvements will pass to the Licensee upon Completion. The Sale Agreement by cl 5.3 provides that, on Completion, the risk of all Fixtures passes as between the parties to the Purchaser. Clause 18A provides that if the Licensee considers from time to time that any of the Licensor's Improvements should be sold or removed, for specified reasons, then to the extent that the Licensor may lawfully sever and remove them, the Licensee is entitled to do so. It is provided that the Licensee shall act as agent for the Licensor in the severance and sale of the relevant item and that all proceeds from the sale of the relevant item are to be paid to the Licensee by way of compensation for the early termination of the licence with regard to the relevant item, without affecting the Licensee's obligations regarding payment of Licence Fees or any present value of those fees. The Licensee is required to replace the item if it is necessary to do so to fulfil its obligations under the Power Purchase Agreement.
Appeal ground 1: Overview
Ground 1 of the appellant's grounds of appeal, somewhat confusingly, deals with three distinct issues. It is obliquely expressed, but, when read with the appellant's amended submissions, it is reasonably clear what issues the appellant intends to raise by it. It appeared, at the hearing of the appeal, that the parties understood three issues to be in contention.
The first issue is that it is asserted that the learned primary judge erred in failing to hold that the Sale Agreement, properly construed, was not an agreement for the sale only of those items which were not, in law, to be regarded as fixtures. Rather, it is contended that on a proper analysis of the Sale Agreement, it operated as a sale of all "assets". As I understood the argument, it was asserted that it was a sale of all of what had been classified as "assumed Sale Assets" (which are listed in an Asset Register, defined in cl 1.1 of the Sale Agreement). For the purposes of the trial before the primary judge, it was agreed between the parties that it could be assumed that one or more of the assumed Sale Assets were Fixtures (Statement of Agreed Facts, October 2004, par 11).
The second issue raised by ground 1 is an assertion that his Honour erred in holding that the Sale Agreement did not constitute an agreement to transfer to TEC "WMC's tenure" in relation to the mineral leases. The third issue, which concerned the Kalgoorlie Power Station and emergency supply line, which was situated on freehold land, was an assertion that his Honour erred in failing to hold that the Sale Agreement was an agreement to transfer to the respondents a portion of WMC's freehold, and was therefore a contract for the sale of an interest in land. I deal with each of these three issues in turn.
Ground 1: Sale of Fixtures?
The relevant portions of the Sale Agreement which relate to this issue are principally the definition of Fixture, of Power System Assets, of Sale Assets, and cl 2.1, cl 3.2 and cl 3.4.
There were two questions relevant to this issue which were contained in the Commissioner's statement, forwarded for the consideration of the primary judge pursuant to the former O 77 r 6(d)(iii) of the Rules of the Supreme Court1971 (WA). They were questions 19(a) and 19(e), which read as follows:
(a)Was [the Commissioner] correct in assessing the Sale Agreement as a conveyance of land or an interest in land or fixtures[?]
...
(e)What is the correct interpretation to be given to clause 3.4 of the Sale Agreement, and was [the Commissioner] bound to give effect to such provision[?]
Clause 3.4 of the Sale Agreement
The learned primary judge dealt with the last part of question 19(e) at [305] ‑ [308] of his reasons. He considered that it was, in the end, unnecessary to decide it, but expressed "considerable doubt" whether cl 3.4 would permit the Purchaser to, in effect, determine the assessability of the Sale Agreement to stamp duty at its option. As I understand it, the argument before the primary judge ran something like this. It was contended by the Commissioner that the effect of the Sale Agreement, properly understood, was to sell to TEC items which included Fixtures. That was because the list of assumed Sale Assets included items which were Fixtures. However, the effect of cl 3.4 was that, because the Commissioner was a "Governmental Agency", then if he determined that one of the assumed Sale Assets was a Fixture, upon the purchaser advising the vendor that that determination was accepted, the Fixture was deemed not to have been included, ab initio, in the Sale Assets and therefore not to have been sold. It was, in effect, deemed, ab initio, to have been dealt with pursuant to the Licence Agreements, rather than sold as a chattel. The question raised for the primary judge, as I understand it, was whether the Commissioner would then be bound to assess the Sale Agreement to duty on the basis that those Fixtures had, ab initio, not been sold to the respondents.
In my view, the tentative view expressed by the primary judge was correct. That was for the simple reason that, as I understand it, there was no evidence before him to suggest that at any time the Purchaser had advised the Vendor that the Purchaser accepted the Commissioner's determination that the assumed Sale Assets, or any of them, were Fixtures; on the contrary, question 19(d), the question which the parties had agreed should be deferred until some time after his Honour's determination of the other questions, made it clear that the Commissioner's determination in that respect was disputed by the Purchasers. Further, as his Honour observed, it was not in contest between the parties that the assessability of an instrument to duty is to be determined on its characterisation as at the date of execution. The advice contemplated by cl 3.4 which would trigger the deeming for which cl 3.4(a) provided, could logically be given only subsequent to the date of execution, and would not therefore affect assessability.
Assumed Sale Assets
There are two broad contentions which the appellant makes under this heading, which must be rejected. The first is contained in the Commissioner's written submissions at par 21, which reads as follows:
It appears that the learned appeal judge analysed clause 3.4 without regard to the underlying purpose and its intended effect. Taken with the Licence Agreement in Schedule 8 of the Sale Agreement, the fact of the pre‑payment of licence fees, and the pending termination of the Licence Agreements with attendant acquisition by the respondents of the fixtures, that clause was evidence that the parties intended that all assets, that is, chattels and fixtures, were to be sold.
This argument appears to be no more than a repetition of the earlier assertion that the motive, or desire, or intention, or scheme of the various agreements was effectively that TEC would acquire all of WMC's interests, including both chattels and Fixtures. That subjective intention is irrelevant. However, some of the matters referred to in par 21 may be relevant to a proper construction of the Sale Agreement, and I return to them shortly.
The second contention I reject is in pars 22 to 27 inclusive, where there is a submission that his Honour erred in relying upon the case of Prime Wheat Association Ltd v Chief Commissioner of Stamp Duties (1997) 42 NSWLR 505, in particular, as it concerned the notion of "economic equivalence". It is submitted that Prime Wheat is distinguishable, for a variety of reasons. However, the references to Prime Wheat of which the appellant complains appear in two places in his Honour's reasons and appear to me to be, in that context, accurate and appropriate.
The first reference is at [206] and following, as part of that portion of his Honour's reasons in which he considers the correct approach to the question of characterisation of an instrument for the purposes of the Act. No error in his Honour's recitation of the principles is identified.
The second reference appears at [234] during the course of his Honour's consideration of the question of whether the relevant provisions of the Sale Agreement provide for a transfer of WMC's tenure in its mining tenements to TEC. His Honour considered that, while the economic effect of the grant of a tenure corresponding to WMC's tenure may be equivalent to assignment of that tenure, the search for economic equivalence was not the correct approach to the characterisation of an instrument. As I understand it, his Honour made that observation because, as he perceived it, portions of the Commissioner's submissions were concerned with the practical economic equivalence of the transaction in the Sale Agreement with a direct assignment of tenure. The appellant asserts that there was in his assessment no reliance upon notions of economic equivalence.
If his Honour was wrong in perceiving that the appellant relied upon notions of economic equivalence for the purpose of characterising the Sale Agreement, then to that extent he dealt with a false issue. However, I am not convinced that he was in error in detecting some reliance, on the part of the Commissioner, on notions of economic equivalence. As I have pointed out, questions of the subjective desire, purpose and effect of the transaction intended by the Sale Agreement did appear to form part of the Commissioner's submissions to this court. An assertion that the parties could have achieved their aims by a direct sale or assignment may not have been a central plank of the Commissioner's argument, but did hover at the edges of it. It was appropriate for his Honour to deal with that issue directly, and he was correct in his understanding of the law which he considered to be applicable.
In any event, the real issue to which the "economic equivalence" observations appear to have been directed was the issue of the effect of the provisions concerning applications for Permanent Tenure of WMC's mining tenements. I deal with the effect of those provisions later in these reasons.
Notwithstanding that the majority of the submissions made by the Commissioner in relation to the proper construction of the Sale Agreement were, in my view, beside the point, the submissions did point out that the provisions which deal with the disposition of the Fixtures and of the assumed Sale Assets between WMC and TEC contain some apparent inconsistencies and ambiguities, which require resolution. In broad terms, TEC relies upon the definition of "Fixture", of "Sale Assets" and on cl 2.1 and cl 3.2(a) as demonstrating conclusively (and, it is submitted, unambiguously) that the Sale Agreement is an agreement for the sale only of those items which are not Fixtures. The Commissioner, however, relies largely upon cl 3.2(b) and (c) and cl 3.4, which sit oddly with a straightforward agreement for the sale only of items which are Fixtures.
It is accepted, as I understand it, by all parties that the definition of "Fixture" in the Sale Agreement is legally correct. There are cases which cast doubt on portions of this definition at least in some circumstances and between some parties, but I leave them aside for the present. The definition of "Sale Assets" expressly excludes assets which are Fixtures. Clause 2.1 provides that "[s]ubject to the terms and conditions of this Agreement" the Vendor will sell and the Purchaser will buy the Sale Assets for the Purchase Price. If the agreement stopped there, there would be no doubt whatever that the Sale Agreement was an agreement only for the sale of those items which were not Fixtures.
However, cl 3.2 and cl 3.4 are terms and conditions of the agreement to which cl 2.1 is subject. Clause 3.2(a) is, on its face, not an operative part of the agreement, in the sense that it creates no rights and no obligations. Rather, it appears to be a recital of a common assumption, or perhaps a common intention. It asserts that the parties "have proceeded under this Agreement and the Licence Agreements on the basis that" all of the Fixtures are not to be sold, but are to be treated as Licensor's Improvements under the Licence Agreements. Clause 3.2(b) recites that the Purchaser has classified items of Power System Assets (meaning collectively the Sale Assets and Fixtures and improvements) as comprising either personal property, which items are referred to as "assumed Sale Assets", or Fixtures.
It is here that a question might be seen to arise as to whether the Sale Assets sold by cl 2.1 are, on the proper construction of the agreement, those assets which are not Fixtures as defined in the definition section, or those assets which are not Fixtures as classified by the Purchaser. Clause 3.2(c) recites that it is on the basis of the Purchaser's classification that the parties have agreed both the Purchase Price of the assumed Sale Assets and the aggregate of the Licence Fees for those Fixtures to be dealt with under the Licence Agreements. It might be thought to be anomalous, if cl 2.1 were intended to be a sale of assets other than Fixtures as defined, that the parties have agreed, in effect, upon a list of "assumed" non‑fixtures and have calculated a price based upon this assumption, recognising that the classification or assumption, and the defined terms, could encompass different sets of items.
TEC asserts that cl 3.2 is no more than a reasonable response to the uncertainty which may exist in some cases about whether particular items are Fixtures or not. Although the parties have based their calculations upon assumptions which they acknowledge in the Sale Agreement may be incorrect, nevertheless, it is asserted that the definitions and cl 2.1 are not contradicted by the existence of cl 3.2. That might be accepted, were it not for cl 3.4.
In my view, cl 3.4 puts a different complexion on those provisions. It provides that if any Governmental Agency determines that any of the assumed Sale Assets is a Fixture, and the Purchaser advises the Vendor that the Purchaser accepts that determination, then the relevant item shall be deemed to not have been included in the Sale Assets and therefore not included in the sale and purchase, and the Purchase Price is to be recalculated ab initio. There are a number of features of that provision which are relevant. One is that it is a "deeming" provision, deeming the relevant item not to have been included ab initio in the Sale Assets and therefore not included in the sale and purchase under the agreement. Although the indication is a weak one, that does tend to indicate that the parties contemplated that, were it not for the deeming and reclassification, the relevant item would have passed pursuant to the sale and purchase clause, cl 2.1. That tends to indicate that the proper construction is that cl 2.1 is a sale of assumed Sale Assets, subject to any reclassification ab initio which may take place pursuant to cl 3.4.
Importantly, it is only if two conditions are met that the item is deemed to have been not included in the Sale Assets, and therefore not included in the purchase. Those two conditions are determination by a Governmental Agency and advice by the Purchaser to the Vendor that the determination is accepted. It would appear to follow, for example, that, even if a court declared in proceedings between the Purchaser and Vendor that one of the assumed Sale Assets was a Fixture, unless the Purchaser advised the Vendor of "acceptance" of that determination, the item would not be excluded from the sale and purchase, and there would be no recalculation of the Purchase Price. That seems to me to suggest that, notwithstanding the definitions and the words of cl 2.1, the parties' objective intention, expressed in the Sale Agreement, was that what would be sold would be the assumed Sale Assets, subject to an ability to reclassify some of those assets pursuant to the operation of cl 3.4.
Finally, it should be noted that the reclassification provision deals only with the situation where one of the assumed Sale Assets is determined to be a Fixture. There is no provision which permits the reclassification of something wrongly assumed to be a Fixture, so as to include it in the assumed Sale Assets, deem it to have been included in the sale and purchase, and increase the Purchase Price ab initio.
Taken together, it seems to me that the better view of all of the clauses to which I have referred is that the Sale Agreement is an agreement to sell, not all of the assets which are not Fixtures, but all of the assumed Sale Assets. Those assumed Sale Assets which are later, by operation of cl 3.4, accepted to have been Fixtures are to be excluded ab initio from the sale. However, items which are in law fixtures, but are not reclassified by the operation of cl 3.4 are included in the sale; conversely, any chattels which are not assumed Sale Assets are not sold.
I am fortified in the above analysis of cl 3.4 by three additional considerations. One is that TEC's counsel not only accepted, but emphasised as part of his submissions, the proposition that there could be a significant degree of uncertainty in determining what was and was not a Fixture. If that is so, a construction of the agreement which regarded it as a sale of the assumed Sale Assets, with provision for reclassification, rather than a sale of legally defined "non‑fixtures", is one which would lead to greater certainty as between the parties concerning the question of what had been sold. The second is that such a reading would avoid the rather odd consequence which might otherwise follow, that the parties had agreed to the sale of one group of items, but had calculated the Purchase Price based upon a somewhat different group of items; the reading I would prefer would align the items sold with the Purchase Price calculated in respect of them. Finally, as the learned primary judge noted at [257] of his reasons, the effect of cl 3.4 would, in some cases, appear to be to require the parties to treat an item as a Fixture, inter partes, even though the relevant item might not, on its true analysis, be a Fixture in accordance with the definition in the Sale Agreement. As I understand his Honour, he considered that this might occur where, for example, a Governmental Agency took an erroneous view of whether an item was a Fixture, but the Purchaser, notwithstanding that the determination was erroneous, decided to accept the determination and advised the Vendor to that effect.
Clause 17.5 of the Licence Agreements
It is convenient, while dealing with issues of construction, to turn to a question which forms no part of ground 1, since his Honour found, in this respect, in favour of the Commissioner. The question arises from TEC's oral submissions. His Honour considered that cl 17.5 of the Licence Agreements was to be construed as an agreement for the sale of the Licensor's Improvements (that is, the items classified as Fixtures) to the Licensee. His Honour's reasons in that respect are found at [274] and [279] ‑ [282]. His Honour went on to hold at [283] that the sale was not the "leading and principal object" of the Licence Agreements for the purposes of the assessment of those agreements to stamp duty, and that conclusion is challenged by the appellant. I will consider later the "leading and principal object" issue.
There is a respondents' notice of contention dealing with the effect of cl 17.5. It does not appear to take issue with his Honour's finding that that clause, taken together with related clauses, constitutes an agreement for the sale of the Fixtures. It reads:
If clause 17.5 ... of the licence agreements is an agreement to transfer the Fixtures that was not (and could not have been) an agreement to transfer any estate or interest in land for the purposes of section 70 of the Stamp Act 1921 (WA).
There are no particulars, and no submissions directed specifically to that notice of contention; rather, TEC relies on pars 37 ‑ 45 inclusive of the respondents' submissions in response to the appeal. The propositions contained in those submissions appear to be: firstly that an agreement to transfer a Fixture is not an agreement to transfer an estate or interest in land and further that, in the event that the Licence Agreements terminate because the respondents acquire Permanent Tenure, then, as a matter of law, the Fixtures are the property of the Crown and are not therefore separately transferable to the respondents (ie, that cl 17.5 is not an effective agreement to sell anything at all). These are issues I consider under the heading of Ground 2.
During the course of oral argument, the respondents' counsel appeared to accept that, properly characterised, cl 17.5 constituted an agreement between the respondents and WMC that the respondents would acquire the Fixtures on or before the conclusion of the Licence Agreements, either by effluxion of time or otherwise. However, when specifically asked about this question, he withdrew any concession that might have been made in relation to effluxion of time.
Assuming that it was open to TEC to raise in that way an issue otherwise not raised by the grounds of appeal or by the notice of contention, I should briefly set out my reasons for concluding that counsel's earlier concession was, in any event, correct. That is, it is my view that cl 17.5 applies not just to the early termination of the Licence Agreements for a reason other than effluxion of time, but also operates so as to require the respondents to acquire the Fixtures, if not acquired earlier, upon the expiry of the term of those agreements.
The first reasons for concluding that cl 17.5 is intended to ensure that the Licensee acquires the Fixtures upon termination of the licence by effluxion of time are simple linguistic ones. Clause 17.5 is expressed to apply "on the termination of this Licence for any reason". It could have been so expressed as to operate only if the licence terminated in certain circumstances; for example, it could have been expressed to provide that it would operate "if this licence terminates pursuant to clauses 17.2 and 17.3", or in other specified circumstances. However, the expression "for any reason" is, prima facie, wide enough to include termination by effluxion of time. In the definition section, the date on which the licence expires is the "Termination Date". In its ordinary meaning, "termination" is the cessation or conclusion of something. Other terms might be equally well adapted to describe the conclusion of the licence by reason of effluxion of time; for example, one might, in that context, refer to the "expiry" of the licence. However, it does not follow from that consideration that the word "termination" is not intended to refer to conclusion by effluxion of time, and the definition chosen by the parties for that date of expiry of the licence is the "Termination Date" and not the "expiry date" or some other term.
Practical considerations also suggest that cl 17.5 is intended to operate where the licence terminates by reason of effluxion of time. It was submitted by counsel for the respondents that the practical effect of cl 17.5 was, where prepayment had been made, to require repayment of the sum of the prepayments; the implication being that repayment would only be necessary where some of the term of the licence was still to run. However, the effect of cl 17.5(a)(i) and (b) is that, where the Licensor repays part of any prepaid amount, the Licensee is to pay as consideration for the acquisition of the Fixtures an amount equal to the amount so refunded, and the amounts may be set off against each other, so that no money actually changes hands. The "practical effect", in terms of money changing hands, would appear to be nil. There may be good reasons why parties may wish to make such adjustments, for accounting purposes, as between themselves, but none was suggested. There is therefore no practical point in reading cl 17.5 as applying only to termination other than by effluxion of time.
Further, there would be apparent practical anomalies resulting from a view that cl 17.5 was not intended to apply to termination by effluxion of time. For example, where pursuant to cl 17.5 the licence terminates on the day on which the Licensee is granted Permanent Tenure, the effect of cl 17.3 and cl 17.5 would be that the Licensor would either have already been paid the prepayment of Licence Fees, which would then be, in effect, reclassified as consideration for the Fixtures, or the Licensee would be entitled to receive the present value of the Licence Fees as consideration for the Fixtures, and in either event the Licensee would acquire the Fixtures. In blunt terms, on the grant of Permanent Tenure, the Licensor would end up with the agreed sum of money and the Licensee would end up with the Fixtures. On termination by effluxion of time, however, on the respondents' argument, the Licensor would still end up with the agreed sum of money, but the Licensee would not end up with the Fixtures. No reason was suggested why the parties might have intended these differing results.
Ground 1: Agreement for sale of mining tenements?
The relevant portions of the Sale Agreement for the purposes of this issue are cl 1.5 of sch 7, cl 5 of sch 8, and cl 5.1 of the various Licence Agreements, which reflect the terms of the schedules to the Sale Agreements. The learned primary judge dealt with these provisions at [83] ‑ [143] and [231] ‑ [232]. His Honour noted that the Licensee was required to apply for Permanent Tenure, at least in respect of land on which a power station was situated. So far as transmission systems were concerned, his Honour considered that the Purchaser was not required to apply for Permanent Tenure in respect of land on which that category of assets was situated ([118]). He noted that, for three of the four power stations, WMC's tenure was a mineral lease, with the existing underlying tenure in two of the three cases being a pastoral lease, and in the third being vacant Crown land and reserve for the substation ([125]). His Honour noted that par 1.5(c) of sch 7 of the Sale Agreement required the Vendor to provide all reasonable assistance to the Purchaser in connection with its applications, including applying for any necessary conditional partial surrenders of existing tenures and that, by cl 5.3(b) of sch 8, the Licensor was to consent to the applications being granted over the Permanent Tenure Areas and to any subsequent applications for renewal.
The conclusions which the Commissioner asserts are erroneous are essentially those found in [231] ‑ [233]. His Honour relevantly said:
I have already considered the provisions of Sale Agreement, Sch 7, subpar 1.5(a) and Sch 8, cl 5.5. I do not consider that those provisions, construed in accordance with their terms, give rise to obligations on the part of WMC to sell its tenure, in respect of any of the land on which Power System Assets in the form of Licensor's Improvements are situate.
With respect to Sch 7, subpar 1.5(a), in my view there is at most, as I previously explained, a requirement to apply for Permanent Tenure in respect of land other than land held by WMC in freehold. However, the Permanent Tenure lies in the grant of a person other than WMC. While WMC is required to surrender its existing tenure in the form of "existing mining tenures" (see Sale Agreement, Sch 7, subpar 1.5(c)) for the purposes of obtaining the grant in question, there is no requirement for it to assign that tenure to the appellants.
I appreciate that the definition of "transfer" in [the] Stamp Act, s 70(1) includes "release and renounce", as I have previously indicated. However, it was not put to me that the effect of a surrender of a mining tenure is of itself to provide the person in whose favour the tenure is surrendered with a corresponding tenure. Indeed the contrary appears to be the law: see Hunt, M W Mining Law in Western Australia, 3rd ed, Sydney, Federation Press, 2001, at [10.1].
The appellant's submissions in relation to this issue are to be found principally at pars 29 ‑ 34 of the written submissions. Briefly, it is asserted that his Honour erred in failing to take sufficient account of what the appellant contended was the substance and effect of the relevant provisions. In that context, it was asserted that "[t]he purpose of the provisions was to ensure that WMC's tenure was transferred to the respondents so as to allow the respondents to operate the power transmission assets associated with that tenure". I have noted earlier the difficulty with the assertion that the agreement should be assessed to duty on the basis of the purpose, rather than the legal effect, of the document.
The submissions further assert that the structure of the agreement was such that the respondents could only apply for relevant mining tenements immediately after WMC's surrender of its tenure, thereby ensuring that the respondents would have priority and effectively ensuring that the tenements could not be the subject of an application by anyone else. It was further asserted that the fact that an application is subject to ministerial approval does not prevent the agreement to transfer tenements from being a sale. Austell Pty Ltd v Commissioner of State Taxation (1991) 4 WAR 235 was cited in that connection.
Taking the last question first, it may be accepted that the fact that an application is subject to the approval of the minister, or other body, does not prevent an agreement to sell the item the subject of the approval from being a sale. However, the difficulty in the present case is with characterising the agreement as a sale of the relevant tenements at all.
Austell was a case in which there was an agreement to transfer a cray fishing licence from one person to another, subject to ministerial consent. It appears from the regulations, which are set out at 238 ‑ 239 of the reasons for decision, that there was a degree of confusion inherent in them about whether the licence attached to the fishing boat, or to the owner of the fishing boat, or both. However, there was a clause in the notice that "declared" the relevant limited entry fishery, which provided that:
With the written approval of the Director a licence granted under this notice may be transferred and the licence shall be endorsed accordingly.
It further appeared from the statement of facts in that case that the Fisheries Department treated the rights as attaching to a particular boat, and the practice of the Director of Fisheries was apparently not to cancel and reissue, but to "approve" the transfer of a licence, subject to certain administrative checks (241). It was against that background that Brinsden J said, at 247:
I am of the opinion that what the vendors did in this case was that, for consideration, they agreed to take all necessary steps to have transferred from them to the appellant the benefit of the authority attaching to the boat. In my view that constitutes a sale, even if the actual transfer is not effected directly by the vendor because of the intervention of a licensing authority. As it was put in Littlewoods case ... by Viscount Simonds, there must be concurrence of a number of elements inter alia "a thing the absolute or general property in which is transferred from the seller to the buyer; and a price in money paid or promised". This agreement provides for a price in money to be paid and paid only on the transfer of the licence.
In Austell, then, there was an agreement which was described by the parties as an agreement for sale of the licence, and a licensing scheme in which, rather than cancelling and reissuing the licence, there was a procedure by which the director simply approved arrangements made between the vendor and the purchaser. Whether or not a fresh piece of paper issued to the purchaser, one can see why Brinsden J characterised that transaction as one of sale.
By contrast, so far as the acquisition of Permanent Tenure is concerned, the terms of the agreement in this case contemplate:
•WMC may or may not be required to surrender some or all of its tenure (it would appear, for example, that a miscellaneous licence could be granted to the respondents without any surrender by WMC: s 91(7) Mining Act).
•The interest which the respondents obtain may well be different from the interest which WMC has.
•Although WMC will assist the respondents as required, it may not be necessary for WMC to do anything in order for the respondents to acquire Permanent Tenure.
•The grant of Permanent Tenure lies in a public body, not with WMC.
•We were not pointed to anything in the Mining Act or regulations which suggested that WMC's views would carry any particular weight in the making of the decision whether or not to grant Permanent Tenure to the respondents.
In those circumstances, in my view it was correct for his Honour to hold that the provisions dealing with the application for and obtaining of Permanent Tenure do not provide for the sale, transfer or conveyance of anything from WMC to the respondents. Indeed, during the course of oral submissions, the appellant only faintly suggested to the contrary.
Ground 1: Permanent tenure - sale of freehold land?
So far as the freehold land was concerned, the learned primary judge at [235] held that cl 5.5 of sch 8, when read with cl 5.1 of that schedule and cl 1.5 of sch 7, had the effect that a requirement for TEC to acquire Permanent Tenure could only arise after the parties had agreed on both the Permanent Tenure Area and the form of the tenure. He considered that to be, at most, an "agreement to agree". Further, he noted that, in any event, the parties could agree on the grant of a leasehold interest, which would not be an agreement for the sale of an estate or interest in land.
The appellant's written submissions in relation to this portion of his Honour's reasons are, with respect, unclear. It does not appear that the characterisation of the Sale Agreement as, at most, an "agreement to agree" is challenged. It appears to be asserted simply that it was plain that something was to be "transferred" to the respondents and that his Honour should therefore have held that the Sale Agreement was chargeable as an agreement for the sale of an interest in land. During the course of oral submissions, counsel for the appellant conceded that "the freehold is an anomaly for us". However, it was contended that if, in respect of the three mineral leases, there was an agreement to transfer an estate or interest in land, then the agreement in relation to the assets situated on the freehold land was dutiable also as part of the same agreement, pursuant to s 70 of the Act.
In the absence of any challenge to his Honour's characterisation of the agreement, in relation to Permanent Tenure of freehold land, his finding that the provisions relating to Permanent Tenure of freehold land did not constitute an agreement for the sale of an estate or interest in that land must be upheld.
Ground 1: Conclusions
In my view, ground 1 should be upheld to the extent that the Commissioner has established that the proper construction of the Sale Agreement is as an agreement for the sale of, inter alia, the assumed Sale Assets. As I have noted, the Sale Agreement is, further, an agreement for the sale of those items which are classified inter partes as Fixtures and which are dealt with pursuant to the Licence Agreements, because the effect of those agreements is to require the Purchaser to acquire the Fixtures by, at the latest, the date of termination of the licences.
Depending upon the question of whether a contract for the sale of a Fixture is to be considered, in respect of any of these transactions, as a sale of an estate or interest in land, then different consequences for the amount of duty (if any) assessable may flow from each of the above conclusions.
Ground 2: Issues
The appellant's second ground of appeal is, like the first, not easy to understand, and the written submissions which relate to it appear to canvass issues which are at some points different from the issues which one would have thought were raised directly by the ground. The notice of contention, which relates largely to this ground, is, as noted earlier, a bald assertion that if any of the relevant clauses of the Licence Agreements constituted an agreement to transfer the Fixtures "that was not (and could not have been) an agreement to transfer any estate or interest in land for the purposes of section 70 of the Stamp Act 1921".
The issues in relation to this ground, like the issues in relation to ground 1, are therefore to be distilled essentially from reading the relevant portions of his Honour's reasons, together with the issues canvassed by the appellant and the respondents during the course of the appeal. The relevant findings and contentions appear to be the following.
His Honour found that the operation of cl 17.5 of the Licence Agreements was such that it was an agreement to purchase the Fixtures, but that it did not so operate "for the purposes of stamp duty" (at [274]). That was because of the Licence Agreements were not directed to the acquisition of the Fixtures as their "leading and principal object" (at [283]). This gives rise to the first issue, which was whether his Honour erred in characterising the Sale Agreement by reference to what he considered to be the "leading and principal object" of the Licence Agreements. TEC appears to concede that that was an error, but asserts that if there is such an acquisition, it can only be an object of the Licence Agreements, and not an object of the Sale Agreement, and therefore not relevant to duty to be paid on the latter. Further, TEC maintains that any acquisition is not a leading and principal object of the Licence Agreements, if that be relevant.
His Honour held that the disposition of the Fixtures by the Licence Agreements would, in any event, not be a conveyance on sale of an interest in land, since it did not represent a sale of the whole of WMC's interest in the Fixtures, but rather was an agreement to "carve out" an interest from WMC's tenure which was less than the whole of WMC's interest in "the portion of the land concerned" (at [294] ‑ [296]). His Honour found it unnecessary to determine whether, as the respondents contended, the sale of Fixtures on land held by WMC by way of mineral leases was no more than a surrender of a right to enter and remove Fixtures, which was not an interest in land, but was an interest akin to a tenant's interest in tenant's fixtures (at [298]).
There are a number of issues arising from the findings briefly described above. In addition to the "leading and principal" object issue, there are different issues arising in relation to the freehold land and the mining tenements. As to freehold land, the relevant questions appear to be: whether it is possible to dispose of Fixtures separately from the land on which they are situated; and, if it is possible to do so, whether an agreement to do so is an agreement to "sell" the Fixtures, or is an agreement to create or carve out from the landowner's interest some lesser interest which will arise only at a moment subsequent to the sale. So far as the mining tenements are concerned, the issues appear to be whether the interest of WMC in Fixtures on that land is to be considered, so far as WMC is concerned, an interest in the land, or whether WMC has, at most, a right to sever the Fixtures and convert them to chattels (which TEC asserts is the nature of a tenant's interest in "tenant's fixtures"). A further issue may arise as to whether s 114 of the Mining Act has effected any relevant change in the common law, so far as the status of fixtures on mining tenements is concerned.
I deal with each of those issues in turn.
Ground 2: "Leading and principal object"
In relation to the leading and principal object of the Licence Agreements, his Honour relevantly concluded, at [286]:
It seems to me that the "leading or principal object" of the Licence Agreements is the provision of a right to use the Licence Area and the Licensor's Improvements. This provision is in turn for the purpose of the production (if the Licence Agreement respects a site on which a Power Station is situate) or supply (if the Licence Agreement respects a site on which part of Transmission Systems is situate) of "Energy Services" during the Term (Licence Agreements, cl 9.1 and cl 9.2). This, of course, is for the purposes of the obligations of the Licensee under the Power Sale Agreement. Unlike the position in Balcatta Nominees (supra) with respect to the substances to be extracted from the quarry, it seems to me to be an incidental feature of the Licence Agreement that property forming part of the land (the Licensor's Improvements) is to be acquired, at the end of the Licence.
As I have noted, it appears to be conceded that the question for his Honour was the leading and principal object or objects of the Sale Agreement, and not of the Licence Agreements.
Notwithstanding that his Honour appeared to regard the passing of property pursuant to the Licence Agreements as only "ancillary" to the provisions of those agreements, when the Sale Agreement is considered as a whole, the disposition of the Fixtures appears to me to be a leading and principal object of it. If, as I have concluded, the Sale Agreement is an agreement for the sale of the "assumed Sale Assets" and if those assumed Sale Assets include one or more Fixtures, then plainly the leading and principal object of the agreement is the sale of that Fixture or those Fixtures.
Alternatively, if I am wrong in that conclusion, but there is an agreement to sell Fixtures effected by cl 17.5 of the Licence Agreements, then it appears to me that the Sale Agreement should be characterised as having that sale as a part of the leading and principal object of the agreement. The Sale Agreement, in effect, provides for disposition between the parties of all of the Power System Assets, being both Sale Assets, and Fixtures and improvements. While it provides directly for the sale of the Sale Assets (on this assumption, excluding Fixtures), it describes in the definition section all of the assets to be disposed of between the parties, fixes, in cl 3.2, the consideration for that disposition, and requires the parties to enter into the Licence Agreements, which, in turn, require TEC to acquire the Fixtures. It would appear to me to be an odd construction of the Sale Agreement to assert that the sale of the assets which were not Fixtures was a leading and principal object of it, but the sale of the assets which were Fixtures was not. That is particularly so, when it is plain from the definitions that all of the Power System Assets (that is, the Sale Assets and the Fixtures) are part of a series of inter‑connected power systems, all of which would need to be operated together in order to ensure the supply of power contemplated by the Power Purchase Agreement.
My view of that leading and principal object is not affected by the circumstance that the Licence Agreements, rather than the Sale Agreement itself, provide for the ultimate disposition of the Fixtures. As I have noted, the Sale Agreement in cl 5.2 creates the obligation to enter into Licence Agreements in a form which provides for that ultimate disposition. Further, cl 5.2 of the Sale Agreement passes the risk in the Fixtures to the Purchaser upon the date of Completion, and the other principal clauses which deal with the status of the Sale Assets and the Fixtures deal with them in effectively the same way (see cl 4, which deals with obligations prior to completion and cl 8, which deals with Vendor's Warranties).
I would conclude, having regard to those matters, that the leading and principal object of the Sale Agreement may be broadly described as the disposition of all of WMC's interests in the Power System Assets to the respondents, immediately in the case of the Sale Assets and at the time provided by the Licence Agreements in the case of the Fixtures, making ancillary provision for the way in which those assets not disposed of immediately are to be dealt with during the licence period.
Ground 2: Freehold land - dealing with Fixtures
It appears that at [291] ‑ [292], the learned primary judge accepted the proposition that an owner of land may dispose of unsevered fixtures to another. However, his Honour considered that such disposition was not a conveyance on sale of an interest in land. His Honour said, at [294] ‑ [296], in relation to that issue:
It seems to me that the disposition considered in those terms is not a disposition of the fixtures for the purposes of severance, such as the minerals to be quarried in Balcatta Nominees (supra). I consider that the disposition should be seen to be of the fixtures with a right to use them in situ for the time being (which would appear to me to be a revocable arrangement), and to sever and remove them at any time. However, I do not consider the disponee of the fixtures also acquires the whole of the disponor's interest in the fixtures in situ "either in point of duration or in point of content", in the language used in Balcatta Nominees (supra), per Brinsden J, at 11". I note also the following from Metal Manufacturers (supra), per Carr J at [56]:
"[b]ut for the lease, the Bank's proprietary interest would give it the right to enter upon and sever the plant and equipment from the land."
That is, cl 17.5 of Sale Agreement, Sch 8, followed in the corresponding provisions of the Licence Agreements, is an agreement to carve out an interest from the disponor's tenure less than the whole of the disponor's interest in the portion of the land concerned.
The case before me is different from the decision of this Court cited to me by senior counsel for the respondent, Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22 ATR 601, Ipp J. That case concerned the assessability to stamp duty under the Stamp Act of a sale to Eon Metals of certain mining plant and equipment located on a mine by the company that had purchased them from the operator of the mine. The operator had previously sold to Eon Metals the operator's interest in the mining leases in respect of the site on which the mine was located. It was "common cause" in that case that the exception in Stamp Act, Third Schedule, former Item 2(7), for a conveyance or transfer of goods, wares and merchandise, would cover the plant and equipment if it was not a fixture: Eon Metals, Ipp J, at p 4843. It seems to me that in that case the sale of the plant and equipment in the context of the sale of the mining leases was a disposition of the whole of the interest of the operator of the fixtures in situ.
With respect to his Honour, it is not clear to me what his Honour meant by the right to use the Fixtures in situ being a "revocable arrangement". The authorities to which his Honour referred, which I will shortly discuss, appear to be to the effect that a sale of fixtures creates an interest in the land for the purpose of access to the fixtures. There are other authorities to similar effect, to which I refer in relation to the "tenant's fixtures" issue. Although cl 10 of the Licence Agreements requires the Purchaser to "cease using" the Licence Area on termination of the agreement, this appears to be a reference to "using" the area for the purpose of the agreement, not directed to negating any interest which may result from ownership of the Fixtures. It may be that his Honour's conclusion was related to the view that he formed that the leading and principal object of the Licence Agreements was to grant the respondents a right to use the Fixtures pursuant to the licence and that the acquisition of them at the end of the licence was "incidental" (at [286]). Alternatively, he may have considered that ownership of the Fixtures carried with it no ability to enter the land without an express licence permitting entry. The respondents' written submissions appear to understand his Honour's reasoning in this last sense. No authority is cited for the proposition.
I do not understand it to have been seriously in issue that a contract for the sale of a fixture, by the owner of the land, gives rise to an interest in the land. That proposition appears to be correct: Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 at [80].
The relevant conclusion reached by his Honour, however, appears to be that expressed in [295], that the agreement was not to sell an interest in land, but to "carve out" an interest from WMC's tenure. That was certainly the argument upon which the respondents relied in this court. The parties to the appeal accepted that the common law concept of a "sale" applied to s 74 of the Act.
The concept of sale is discussed in Littlewoods Mail Order Stores Ltd v Inland Revenue Commissioners [1963] AC 135. To summarise the effect of that case, sale, according to ordinary legal terminology, is (quoting Benjamin on Sale (8th ed, 1950), page 2), "a transfer of the absolute or general property in a thing for a price in money". It follows that, to constitute a valid sale, there must be: "(1) Parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised" (per Viscount Simonds, at 152).
It follows that, as Latham CJ said in Commissioner of Taxes (Queensland) v Camphin (1937) 57 CLR 127 (at 133) " ... it cannot properly be said that whenever a proprietary interest is created in return for a money payment the proprietary interest has been sold to the person in whom it becomes vested." For example, when an owner of land grants a lease, the lessee obtains a proprietary interest in the land, but the owner has not sold this personal property to the lessee, never having been the owner of it himself.
The respondents relied particularly upon two cases, being DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (New South Wales) (1982) 149 CLR 431 and Emanuel (Rundle Mall) Pty Ltd v Commissioner of Stamps (1986) 41 SASR 122. DKLR, a decision of the High Court, would, of course, be determinative of this point if it were directly applicable. However, although there is in that case an important discussion of principles which may be relevant, Rundle Mall is more directly on point, and I turn first to consider it and a number of other cases concerning more closely analogous facts.
In Rundle Mall, the owners of the fee simple of certain land upon which a department store was erected transferred to the appellant the whole of their estates in fee simple in the land. However, the contract of sale pursuant to which the transfers were executed purported to except from the sale of the estates in fee simple numerous specified items which were plainly fixtures, including lifts, lift‑wells, escalators, toilets and associated plumbing. Those fixtures were to be enjoyed by the vendors as their exclusive property during the term of a 15‑year lease which Rundle Mall was to grant them, and they could be removed by the vendors at the vendors' option at the termination of the lease. The Full Court of the Supreme Court of South Australia held that the Commissioner of Stamps had been correct to include in the property transferred, for the purpose of stamp duty, the fixtures purportedly excepted from sale. The case is distinguishable from the present, in that it appears that the decision would have been maintainable on the basis that what was assessed to duty was the instrument of transfer, which operated to pass the estate in fee simple in the whole of the land. It was not to the point, on that analysis, that there was another instrument, the effect of which was to except, as between the parties, certain property from the transfer. In traditional stamp duty terms, whatever the whole of the underlying "transaction" might have been, the instrument on its face effected a transfer of the whole of the fee simple. That seems to have been an alternative basis upon which Jacobs J would have upheld the assessment. By contrast, in this case, on the analysis I prefer, the Sale Agreement purports to dispose of the Fixtures, not the interests in the "remainder of the land".
However, the reasons of the court in Rundle Mall were effectively those of Bollen J, with whom Jacobs J (with the additional observations to which I have referred) and Mohr J agreed. Bollen J noted that, as between the vendors and the appellant, the vendors retained a right to the fixtures which equity would recognise (at 126). Bollen J noted, and accepted, the observations of the primary judge that prior to the transfer the vendors owned the fixtures by virtue of ownership of the legal estate in the land and had no separate legal title to, or property in, the fixtures. They could not be trustees for themselves of the fixtures, and no equitable interest in the fixtures could arise in the vendors in favour of themselves, prior to settlement. The equitable interest, which his Honour accepted the vendors would have in protection of the fixtures, could only arise subsequent to the transfer (at 128). Bollen J referred also to the case of Standard Portland Cement Co Pty Ltd v Good [1982] 2 NSWLR 668. His Honour referred to it as "an unsatisfactory case" and noted that there was apparently no argument for the respondent in that case and that "[a] nice analysis of the purchaser's rights was not necessary". His Honour further noted that it was not a stamp duty case. He therefore concluded that "I do not think that the StandardPortland case helps" (at 131). His Honour then referred to a number of observations in DKLR which he considered to be of particular relevance and accepted the primary judge's assessment of the effect of DKLR upon the Rundle Mall case. That was to the effect that there could be no transfer of a bare legal estate in fee simple, so that, although the owner, when selling the fee simple, could reserve some equitable rights and interests in the land to himself, such equitable rights and interests would only be "reserved" as they would arise by way of regrant (at 135 ‑ 136). Bollen J concluded:
The value of the fixtures here must be included in the value of the property passing under the Memoranda of Transfer. These fixtures could have been "excluded out" by severing them from the building before the time for assessing stamp duty arrived. Perhaps they could have been excluded by the use of instruments other than those used here. But the Memoranda of Transfer each transferred in estate a fee simple in the land and the relevant certificates of title.
Because it is the instrument which is to be stamped, and not the underlying transaction, the whole of the property passing on the face of the instrument, including the fixtures, was to be brought to duty (at 137 ‑ 138).
In my view, Rundle Mall does not assist the respondents, as the present case is quite different factually. It is not a case in which WMC is purporting to transfer an estate in fee simple in any of the land to the respondents (although the Licence Agreements contemplate that the parties may agree at some future time upon a transfer of some or all of WMC's interest), from which WMC purports to reserve some right to Fixtures. Rather, it is the reverse. WMC is purporting to sell all its interest, as owner, in the Fixtures. This is not a case, as was Rundle Mall, in which a party sought to persuade the Commissioner to have regard to some other documents in order to alter the apparent effect of the document presented for stamping; it is a case in which it is necessary to consider the effect which that document has on its face. Nor is it a question of "reserving" anything on a transfer of a fee simple, but a question of whether a Fixture may be sold separately without selling the whole of the fee simple.
So far as this last question is concerned, the case which is perhaps most directly on point, although still not factually identical, is Standard Portland Cement. "Unsatisfactory" (as Bollen J described it) or not, that case was a decision of the Judicial Committee of the Privy Council, on appeal from an Australian State, given at a time when the Privy Council still formed part of the judicial hierarchy of Western Australia and of South Australia. It is therefore binding on intermediate appellate courts in this State, in the absence of any conflicting decision of the High Court: Cook v Cook (1986) 162 CLR 376 at 390; Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 214 CLR 269 at [82] (Gummow and Kirby JJ); Rockwell Graphics Systems Ltd v Fremantle Terminals Ltd (1991) 106 FLR 294 at 301 (Malcolm CJ, see also Pidgeon J, Nicholson J agreeing).
The facts of Standard Portland Cement were that the vendor landowner had sold to the purchaser land on which was erected a cement mill weighing 100 tons. That mill would plainly have passed, as a fixture, with the land. The contract did not expressly exclude the mill from sale, but contained a clause allowing the vendor to remove it, provided it was removed within 12 months from the date of the contract, and correspondence during negotiations established a common intent that the mill be excluded from the sale. The vendor had not effected removal within the contractual time limit, because it had agreed to give the purchaser the opportunity to remove the mill, subject to certain conditions. However, subsequent to the sale of the land, and after what the vendor considered excessive delay by the purchaser, the vendor entered negotiations with another to sell the mill and to assign the right to enter the purchaser's land and remove it. The Privy Council determined that the vendor was entitled to do so because, on its proper construction, the contract excluded the mill from the sale of the land. The failure by the vendor to comply with the contractual obligation to remove did not mean that ownership of the mill passed to the purchaser, and that the breach would sound only in damages. The vendor had been the owner of the mill at all times, and ownership never passed to the purchaser. Standard Portland Cement is, like Rundle Mall, the reverse of the present case in that it is a reservation of fixtures from sale, rather than a sale of the fixtures and retention of the balance of the land. However, in principle it stands as authority for the proposition that it is possible to dispose of that portion of a landowner's estate which consists of fixtures, and that part which does not consist of fixtures, separately from one another. The case does not characterise the vendor's interest as merely equitable, but appears to consider it retained full legal and equitable ownership.
More directly on point factually is a decision of the Full Court of the Federal Court, Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27. In that case, which arose under the Income Tax Assessment Act 1936 (Cth), the taxpayer entered into a sale and leaseback transaction with financiers. The agreement concerned the sale by the taxpayer of plant, but not of the land to which the plant was affixed. The financiers were to lease the plant back to the taxpayer for five years, in return for rent. At the expiration of the lease, the taxpayer was to repurchase the plant at an agreed residual value. In reasons with which Sundberg J agreed, Carr J suggested, at [45]:
It may well be that the Instalment Purchase Agreement was effective at common law to pass property in the ammonia plant to the financiers, even though it was a fixture and part of the land owned by the appellant. During the course of argument I raised with counsel the possibility that there may have been town planning legislation which might have an impact on the appellant's ability to vest legal title in the financiers in part of its interest in the land (i.e. the ammonia plant). We were not taken to anything that might have presented problems from that quarter. The subject is discussed by Mr Peter Butt in a note "Conveyancing and Property" (2000) 74 Australian Law Journal 130. I do not see anything in the authorities discussed in that note which would prevent ownership of the ammonia plant passing at common law to the financiers under the Instalment Purchase Agreement. What the appellant contracted to sell, and may well have sold, to the financiers was no mere "bundle of rights" (Melluish (Inspector of Taxes) vMBI (No 3)Ltd [1996] AC 454 at 475), it was full legal and beneficial ownership.
In order to apply the principle enunciated in Metwally, it is necessary to outline, briefly, the way in which the issues in the appeal developed.
Assessment to duty, objection and appeals
On 24 July 2000, the Commissioner issued an assessment in the sum of a little over $9 million on the Sale Agreement. TEC then had a period of 42 days, pursuant to s 32 of the Act, to object to the assessment. By letter dated 31 August 2000, TEC objected to the assessment. The grounds of the objection were as follows:
1.There was not any relevant transfer of:-
a)land or any interest in land; or
b)any fixture or fixtures
from WMC Resources Ltd to the Objector.
2.In the event that there has been the transfer of a fixture or fixtures, which is not admitted, such a fixture does not constitute an interest in land.
3.The Commissioner was not entitled to treat the Agreement as an agreement for the sale of property consisting in whole or in part of land or an interest in land.
4.Further or in the alternative to paragraph 3, the Commissioner was not entitled to treat the Agreement as an agreement for the sale of property consisting in whole or in part of land or an interest in land:
(i)for a consideration of $193,363,990, $188,566,404, or any other sum; or
(ii)with an unencumbered value of $193,363,990, $188,566,404 or any other sum.
5.In determining whether or not the Agreement was an agreement for the sale of property consisting in whole or in part of land or an interest in land, the Commissioner was obliged to have regard to the provisions of clause 3.4 of the Agreement, and was not at liberty to disregard those provisions. The effect of those provisions was to make it clear that the Agreement was not an agreement for the sale of property consisting in whole or in part of land or an interest in land.
6.Section 70 of the Act does not apply to the Agreement or to the transaction evidenced [or] recorded by the Agreement.
7.Neither the Agreement nor the transactions evidenced or recorded by it are shams.
8.The Assessment is not supported by the doctrine of fiscal nullity or any other similar common law doctrine.
9.The amount of duty set out in the Assessment is incorrect and the amount should be nil or a lesser amount than the total of $9,378,356.95.
10.The amount shown under the heading "Value" in the first item of the Assessment is incorrect and should be nil or some lesser amount than $188,506,404.
11.The Assessment is incorrect.
12.The Assessment should be wholly set aside.
13.Alternatively, the Assessment should be reduced by the amount of $9,140,280.25, or some other amount.
14.The Assessment is arbitrary, capricious and of no legal effect, or is based upon a mistaken or inadequate understanding of the relevant facts or law, or takes into account matters that ought not to have been taken into account, or does not take into account matters that ought to have been taken into account.
15.Without limiting the generality of the foregoing, the Commissioner was not authorised, required or entitled by any provision(s) of the Act to issue the Assessment.
It can be seen that the first five grounds are concerned with the question of whether any provisions of the Sale Agreement transferred land or any interest in land. Item 6 specifically raised s 70 of the Act. Items 7 and 8 can now be disregarded. Items 11 through to 15 inclusive all appear to be "kitchen sink" provisions, leaving it open to TEC to raise any matter which it subsequently might consider relevant. Items 9 and 10, however, specifically raise the question of the amount of the duty and the value of the property transferred by the Sale Agreement.
In answer to that objection, and disallowing it, the Commissioner advised, by letter dated 3 November 2000, that stamp duty had been assessed on the sale of assets considered to be fixtures. Although it is not as clear as it might have been, it seems to have been accepted on both sides that, at that time, the Commissioner had assessed the Sale Agreement to duty on the basis that many of the items contained in the list of "assumed Sale Assets" were fixtures. By letter dated 5 December 2000, TEC advised that it was dissatisfied with the Commissioner's decision on the objection and asked that the objection be treated as an appeal. The Commissioner then made an amended Commissioner's statement.
The amended Commissioner's statement dated 22 February 2002 makes it clear that the Commissioner assessed the Sale Agreement to duty on the basis that it was an agreement for the sale of the assumed Sale Assets and that the assumed Sale Assets were, with the exception of items (j), (k) and (l) of the definition of "Sale Assets", fixtures. The statement also makes it clear that the Commissioner relied upon s 16(1), s 31, s 74 and item 4(1) of the second schedule of the Act and did not, at that time, contend that the Sale Agreement should be assessed on any alternative basis.
The questions which the Commissioner considered would be required to be determined on the appeal were:
(a)Was the [Commissioner] correct in assessing the Sale Agreement as a conveyance of land or an interest in land or fixtures.
(b)If no to (a) on what basis should the Sale Agreement be assessed to duty?
(c)If yes to (a) which of the Generation and Transmission Assets were conveyed by WMC to Southern Cross Energy.
(d)Which of the Generation and Transmission Assets conveyed (if any) were fixtures.
(e)What is the correct interpretation to be given to clause 3.4 of the Sale Agreement, and was the [Commissioner] bound to give effect to such a provision.
(f)How shall the costs of the appeal be borne and paid?
The term "Generation and Transmission Assets" was defined elsewhere in the Commissioner's statement as being the assets listed in pars (a) to (h) in the definition of "Sale Assets". That definition expressly excluded those items which the parties had classified by agreement as "Fixtures" (the classified Fixtures). Simmonds J noted that the trial before him did not extend to question (d) and that, for the purpose of answering the questions before him, it was accepted by the parties that the Sale Assets (and therefore the Generation and Transmission Assets) comprised one or more chattels and also comprised one or more fixtures (reasons [197] ‑ [198]).
By written submissions dated 19 October 2005 (prior to the trial before Simmonds J, which began on 21 November 2005), the Commissioner expressly sought to rely upon s 70(2) and (3) of the Act. That is, the Commissioner made it clear that he was seeking, as an alternative basis for assessment, to rely on an ability to aggregate the value of the fixtures (which he regarded as an interest in land) and chattels, so as to assess duty on the aggregate value of the land and chattels transferred by the instrument pursuant to item 4 of the second schedule of the Act. The submissions noted that, prior to execution of the Sale Agreement, TEC had prepared a schedule identifying items which they considered to be Fixtures (classified Fixtures) and items they considered to be chattels (assumed Sale Assets) and ascribing a value to each item. The Commissioner's submissions set out the total value of the classified Fixtures and of the assumed Sale Assets. Relying upon s 70, the Commissioner's submissions set out a number of alternative calculations, one of which was based on the assumption that TEC had purchased not only the assumed Sale Assets, but also the classified Fixtures. That is the amount which (leaving aside a concession made by the Commissioner in relation to motor vehicles) the Commissioner now contends should form the basis of the assessment which should be ordered by the court.
Before Simmonds J, senior counsel for TEC objected to his Honour considering an aspect of s 70, but nevertheless made submissions concerning the effect of that provision (reasons [171] ‑ [174]). His Honour dealt at some length with the effect of s 70 in his reasons, and it was plainly a live issue in this court for the purposes of the appeal. TEC must have understood it to be a live issue, since TEC's notice of contention in the appeal referred to s 70.
Against that background, I turn to the three issues which TEC submits require a further trial before final orders quantifying the assessment can be made.
Issue (1): Whether any items were fixtures
The only order relevant to this issue which TEC contends should be made is TEC's proposed order 4 on its minute dated 23 July 2009. That reads:
4.The Respondents pay the Appellant the sum of $11,159,505.00 together with the interest on the amount refunded to the Respondents in appeal SJA 1178 of 2001.
Question 19(d) appears at [12] of these reasons. As I have noted, the term "Generation and Transmission Assets" was defined so as to exclude the classified Fixtures. The matter which the parties agreed to assume, with TEC reserving the right to assert the contrary at a later stage, was whether any of these items, which were not classified Fixtures, were in fact fixtures.
A trial of the issue outlined in question 19(d) would have been necessary if this court had held that the Sale Agreement was to be assessed to duty only on the basis that it was an agreement to sell the assumed sale assets. However, it was held to be assessable also on the basis that it operated as an agreement to sell the classified Fixtures (reasons [50] ‑ [57], [74] ‑ [83], [195] ‑ [201]).
No issue was raised anywhere in the proceedings about whether those assets which the parties to the Sale Agreement had defined as "Fixtures" were in fact fixtures. It is plain from a reading of the reasons of Simmonds J that he proceeded on the basis that all parties to the appeal impliedly accepted that those items which were in the Sale Agreement classified as "Fixtures" were indeed to be regarded as fixtures at law. At [198] he noted the assumption that, for the purposes of his deliberations, the assumed Sale Assets comprised at least one or more chattels, and at least one or more fixtures. If it had not been for the latter part of that assumption, the question concerning the proper interpretation of those provisions dealing with the disposition of the assumed Sale Assets would have been hypothetical. No such assumption was recorded in relation to those items which were classified inter partes as Fixtures. His Honour considered the questions of whether the appellant had agreed to purchase the classified Fixtures by reason of a variety of provisions in the Licence Agreements, and of whether the sale of a fixture, in situ, was a disposition of an estate or interest in land. That consideration was necessary only on the assumption that these questions had some relevance to the proceedings before him - that is, on the assumption that the classified Fixtures were indeed fixtures.
On appeal to this court, TEC filed a notice of contention asserting that cl 17.5 of the Licence Agreements, providing for the transfer of the classified Fixtures, was not an agreement to transfer an estate or interest in land. It was not put in the notice of contention that any of the classified Fixtures were not to be regarded as fixtures. No such proposition found its way into the written submissions, or was hinted at in the oral submissions. Instead, it was argued that an agreement to sell unsevered fixtures is not an agreement to sell an interest in land, or, alternatively, that the classified Fixtures were attached to Crown land and were not separately transferable. Those arguments were understandable only on the basis of an assumption that the classified Fixtures were indeed to be regarded as fixtures. It is not an assumption from which TEC should, at this late stage, be permitted to resile.
In any event, I would note that, factually, the absence of any issue concerning the status of the classified Fixtures was, no doubt, because it would have been blindingly obvious that some of them at least were fixtures. They include, for example, items described as "earthworks, slab and structure" with a value of approximately $1.6 million and a power station building with a value of over $2.8 million, as well as other buildings, fencing and the like. While it is always possible to imagine cases in which even items such as significant buildings will not be fixtures, items of that kind are generally regarded as the clearest examples of items which constitute fixtures at common law.
Issues (2) and (3): are some items to be excluded for calculation purposes, and valuation issues
It is asserted by TEC that the Sale Assets include, on any view, items which are neither fixtures nor chattels and that s 70 of the Act provides for the aggregation only of the value of land and chattels. It is asserted that an agreement to sell intellectual property is exempt from duty, as property locally situated out of Western Australia, and it is noted that, pursuant to s 70, some chattels are exempt from duty. It is therefore asserted that, in order to determine the duty properly payable, it will be necessary to identify the items to be aggregated pursuant to s 70(2). It is asserted that it will then be necessary to determine an "unencumbered" value for them. TEC suggests that these questions remain live because of the Commissioner's "late reliance" on s 70.
As the above history of these proceedings demonstrates, however, the reliance upon s 70 was not "late" so far as the appeal was concerned. It was raised a month prior to trial. While some objection to that reliance on s 70 seems to have been taken before Simmonds J, his Honour went on to consider its proper construction and applicability. There was no notice of contention in the appeal suggesting that his Honour should not have done so.
Before this court, senior counsel for TEC stated that it was not until very shortly before the trial before Simmonds J that the Commissioner sought to rely upon s 70 in order to increase his original assessment, but described that as "simply a little bit of the history" (ts 6, 23 October 2008). In relation to the alternative approach to assessment based upon s 70, senior counsel for TEC told the court, "I'm not complaining - well I'm complaining about it but it's not going to do me any good, but I'm only mentioning it to explain the history of the matter" (ts 8, 23 October 2008).
The written submissions of the Commissioner in this appeal from Simmonds J, at par 70, repeated the contention which had been made before his Honour that the duty chargeable should be assessed on the value ascribed in the Sale Agreement to the classified Fixtures and the assumed Sale Assets. Those submissions were dated 20 March 2007. TEC's written submissions dated 15 May 2007 contest issues of principle, concerning the proper construction of the Sale Agreement and the legal effect of an agreement to sell an unsevered fixture, but do not take issue with the Commissioner's calculations. In particular, neither in the written nor the oral submissions was it suggested that there might be assets which were neither chattels nor fixtures, the value of which might need to be deducted from the value of the assets sold, for the purpose of assessing duty. Simmonds J appears to have been alert to this possibility, but noted that no argument was addressed to him concerning the assessability to duty of agreements to sell assets which appeared to be neither chattels nor fixtures (reasons [302] ‑ [304]). If TEC had wished to take issue with the Commissioner's assumption that duty could be assessed by having regard to the aggregate value ascribed by the parties to the Sale Agreement to assumed Sale Assets and the classified Fixtures, it should have done so at some stage during the course of these proceedings. It neither sought to take issue with that assumption, nor to reserve its position in relation to it.
So far as the "unencumbered value" issue is concerned, as I have noted, senior counsel for TEC referred to s 70 on a number of occasions during the course of oral submissions. He referred to its relationship with item 4 of the second schedule of the Act, and specifically noted that item 4 levied rates of duty on the "consideration" for a sale (ts 73 ‑ 74, 22 October 2008). However, at no point did counsel either make or foreshadow any submission that if TEC's contentions were rejected, then the Commissioner was in error in relying upon the value of the consideration agreed between the parties, for the purpose of assessing stamp duty.
Neither of the two questions which I have numbered (2) or (3) having been raised, foreshadowed or reserved at any earlier time, it seems to me that it is now too late for TEC to contend that the Commissioner would be in error if he relied upon the consideration agreed by the parties in relation to the Sale Assets and the classified Fixtures for the purpose of assessing duty payable on the Sale Agreement.
Further, so far as the "unencumbered value" issue is concerned, although s 70 does refer to that concept, in relation to both land and chattels, it does not specify a rate of duty. It is item 4 of the second schedule which specifies the rate of duty and does so, as I have noted, by reference to the "amount or value of the consideration". It is, in the ordinary case, the consideration rather than the "value" to which the Commissioner is required to have regard when calculating the duty payable. The "unencumbered value" of a chattel or land would, however, be relevant where the consideration agreed by the parties was inadequate. In those circumstances, s 75(2) would operate in effect to deem the unencumbered value to be the consideration paid. However, it is not suggested in the present case that the consideration was inadequate, or that s 75(2) is applicable. I note in this connection that all the facts and circumstances affecting not only liability of an instrument to duty, but the amount of duty with which any instrument is chargeable, are to be fully and truly set forth in the instrument (s 26). If there were any difference between the unencumbered value of the assets and the consideration paid, it would have been the duty of TEC to set out that matter in the instrument. It is not suggested that TEC has either deliberately or inadvertently failed to do so.
The only issue which was agreed before Simmonds J to be a matter which might require further classification of the assets sold, rather than a simple calculation of their value, was that relating to the question of whether the Sale Agreement includes a sale of chattels which are "exempt chattels". TEC in its written submissions concerning the appropriate orders does not descend to particularity in identifying any exempt chattels, or in ascribing a value to them. Rather, it is simply asserted that because some chattels are exempt pursuant to s 70, "it cannot be assumed that the whole of the purchase price under the Sale Agreement is the value of the property properly the subject of ad valorem conveyance on sale duty" (par 22 of the respondents' submissions dated 6 August 2009).
The Commissioner asserts in his submissions dated 3 September 2009 that the only chattels exempt from the application of s 70 would be the motor vehicles, which have a total value of $707,341 (par 46). TEC, in its submissions in reply to the Commissioner's written submissions (dated 24 September 2009) does not take issue with that assertion. Nor, apart from reiterating the submission that there should be a trial of the various issues identified by TEC, did TEC take issue with the detail of the Commissioner's calculations.
Conclusion
In my view, it is appropriate for this court to "assess the duty chargeable" pursuant to s 33(4) of the Act in the following way:
| • | Total value of assumed Sale Assets: | 190,363,990.00 |
| • | Less value of exempt chattels (motor vehicles): | 707,341.00 |
| • | Plus value of the land (fixtures): | 39,836,010.00 |
| • | Total dutiable value: | $229,492,659.00 |
The total duty payable on that amount would be $11,125,200.95, plus $5 each payable on the two duplicate agreements submitted; a total of $11,125,210.95. Pursuant to s 33(4)(b), the court should determine that the Sale Agreement has been charged with insufficient duty, and order the Commissioner to reassess it pursuant to s 31AA, consistently with these reasons.
The formal order would simply be that the court declares that the Sale Agreement has been charged with insufficient duty and directs the Commissioner to reconsider the amount of duty chargeable in accordance with these reasons.
The Commissioner also seeks an order that TEC repay the interest paid by the Commissioner to TEC, by order of Simmonds J, on the amount refunded in Appeal SJA 1178 of 2001. No issue is taken with that part of the contested order, and I would make the order accordingly.
NEWNES JA: I agree with Wheeler JA.
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