Commissioner State Revenue v Pioneer Concrete (Vic) PL

[2002] HCATrans 283

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M13 of 2002

B e t w e e n -

COMMISSIONER OF STATE REVENUE

Appellant

and

PIONEER CONCRETE (VIC) PTY LTD

Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 7 AUGUST 2002, AT 10.17 AM

Copyright in the High Court of Australia

MR C.M. MAXWELL, QC:   May it please the Court, I appear with my learned friend, MR R.R. BOADEN, for the appellant.  (instructed by the Solicitor for the Commissioner of State Revenue)

MR H.M. WRIGHT, QC:   If the Court pleases, I appear with my learned friend, MR S.G.E. McLEISH, for the respondent.  (instructed by Cornwall Stodart)

GLEESON CJ:   Yes, Mr Maxwell.

MR MAXWELL:   If the Court pleases.  The Court was notified yesterday, your Honours, of an abandonment of a ground of appeal.  If the Court would permit me, I will defer dealing with that specific matter until a little later in the submissions.  It was ground (a) on appeal book 354.

GLEESON CJ:   Yes.

MR MAXWELL:   Your Honours, the issue in this appeal is whether, in determining the unencumbered value of land for stamp duty purposes, my client, the Commissioner, should or should not take into account in that valuation the effect on value of contractual promises in personam which affects the use of the land after the sale but do not affect the nature or extent of the estate conveyed.

KIRBY J:   It is an odd result you argue for as was pointed out in the Court of Appeal.  Out is in and in is out.  The extraction is in, the tip is out.  But anyway, you develop it and no doubt you will show that that is not really an inconsistency, it is based on a firm principle.

MR MAXWELL:   We respectfully submit it is but even if the Commissioner were wrong in the concession he made on the sand extraction it was a concession in favour on the taxpayer but with your Honour’s leave I will deal with that later.  The issue in the appeal as your Honours know is the view of the Commissioner, supported by her Honour Justice Balmford, that the tipping rights should be left out of account in the valuation of the property.  The Full Court held as your Honours have seen, unanimously, that that was wrong, that the retention by the vendor of the right to use the land for tipping was, as his Honour Justice Tadgell described it, an ineluctable fact which the hypothetical purchaser had to confront.

There is a notice of contention filed by the respondent – and your Honours will find it at 359 – which is to reargue a submission argued and rejected by the Court of Appeal that the tipping rights not being an encumbrance, as properly so‑called, must be taken into account in the reckoning of the market value.  No doubt our learned friends will develop how it is said that description of the approach to construction affects the matter.  It is plain that the Court of Appeal thought that this factor should be taken into account and it is not, as we would read their Honours’ judgments, characterised as a discretion but, rather, as a principle of law.

GLEESON CJ:   Could you just briefly explain what tipping rights are and why they are so valuable?

MR MAXWELL:   Yes, your Honour.  Tipping rights are – and there are definitions in the material that I will take your Honour to – the right to bring on to the land what I think is described as putrescible waste.  There is a scarcity, so the expert evidence asserts, of land fit for that purpose and the difference between green acres, on the one hand, and a quarry which needs to be filled is evident, that instead of poisoning good land, the dumping of refuse into an old quarry restores to the possibility of productive use land which, if it remained as it was, is unproductive.

GLEESON CJ:   Brown acres.

MR MAXWELL:   Brown acres.

KIRBY J:   Black acres maybe.  Can I ask, there was the reservation for a company associated with the vendor, was there not?  It is not suggested in any way that that was a tax avoidance mechanism?

MR MAXWELL:   It is not suggested.

KIRBY J:   So that we start with the proposition that that which was sold was minus the tipping right which was itself a valuable commodity to sell.  If you could sell it separately, it is filling in the void.

MR MAXWELL:   Yes, your Honour.

GLEESON CJ:   That which was sold was subject to the tipping right.

MR MAXWELL:   That is so.

GUMMOW J:   Well, that is the basic question, is it not?

MR MAXWELL:   That is the basic question.

GUMMOW J:   It is all about exceptions and reservations as to property and the creation of a contractual right which does not burden the land.  This does not burden the land, does it?  It is not attached to the land.

MR MAXWELL:   It does not.  It is not attached to the land.

GUMMOW J:   It is just a purely contractual right, as you said.  It is not an exception out of the subject of what was sold at all.

MR MAXWELL:   Exactly so.

GLEESON CJ:   Your argument is it did not affect the value of what was conveyed.

MR MAXWELL:   That is so.  It did affect the price which was paid.

GLEESON CJ:   Exactly.  It affected the consideration.

MR MAXWELL:   Yes, indeed, and hence the question under the relevant provision arises because the market value of the unencumbered property on the open market exceeds what it was sold for.

KIRBY J:   But ultimately the question is construing a statute of the Victorian Parliament.

MR MAXWELL:   Exactly so.

KIRBY J:   But against the background of principles of property law.

MR MAXWELL:   Indeed so, your Honour, and there are judgments of this Court and the Full Court of South Australia which point up precisely the distinction his Honour Justice Gummow was pointing to between an interest which burdens the land, including by subtracting from the interest which is conveyed ‑ ‑ ‑

GUMMOW J:   Yes, a profit a prendre of some sort in ‑ ‑ ‑

MR MAXWELL:   Indeed.  Exactly so, and another example is Buckle’s Case where the question was, how was the trustee’s right of indemnity out of the trust assets to be regarded?  This Court held that the property, the subject of the conveyance, was diminished to the extent of the trustee’s rights.  In other words, this was not an encumbrance on the property conveyed, but the property conveyed was what was left after treatment of the prior right of the trustee.  That is not this case at all.  Here, as her Honour Justice Balmford found in what we respectfully submit are short, lucid and compelling reasons, what was transferred was the full estate in fee simple in the land.  That is what the transfer says.  There has never been argument, as I understand it, by the taxpayer or by Pioneer that these rights constitute an interest in land and the Court of Appeal quickly confirmed that it was not such an interest.

KIRBY J:   But because we have to construe the statute, you are going to have to really start your argument by taking us to the statute.

MR MAXWELL:   Yes, your Honour.

KIRBY J:   My recollection is that the statute talks of the encumbrance of paragraph (a)….., which is and has been held and you contend, I think, it means something which burdens ‑ ‑ ‑

MR MAXWELL:   The land.

KIRBY J:   ‑ ‑ ‑ the land and the title.

MR MAXWELL:   Yes, your Honour

KIRBY J:   Then it goes in (b) to talk of the value of the land and (b) may be a horse of an absolutely different colour.  It is not talking of legal theory.  It is talking of something really hard-nosed and practical out there in the marketplace.

MR MAXWELL:   Well, in a hypothetical marketplace and that is ‑ I mean, there is no contest but that this is a statutory fiction.  This is a supposition in which all the integers are hypothetical, other than the subject matter of the hypothetical transaction, namely, the land.  It is a hypothetical vendor selling to a hypothetical purchaser, the land free of incumbrances in the open market.

GLEESON CJ:   I am still not sure I understand what tipping rights are.

MR MAXWELL:   Your Honour, might I take you to the evidence of Mr Torr.  My learned friend, Mr Wright, makes a much more sensible suggestion.  I will deal first with the definition of the “tipping rights” and then with what Mr Torr says about why they are valuable.

GLEESON CJ:   Thank you.

MR MAXWELL:   Your Honours will have seen that the contract of sale is at appeal book 90.  The vendor was Amatek, the purchaser was Pioneer Concrete, the respondent, and if your Honours would go to 92, the particulars of sale, what is sold is there described at point 6 of page 92 as being “the whole of the land comprised in” the relevant certificates of title.  If your Honours would turn at the same time to appeal book 140 in the second volume, where the transfer of land is copied ‑ ‑ ‑

KIRBY J:   Just pausing there, the whole of the land would ordinarily, according to ordinary concepts, include rights of tipping or using it as the purchaser wished, ordinarily.

MR MAXWELL:   Ordinarily, a full owner will be entitled to ‑ ‑ ‑

KIRBY J:   They can do what they want, subject to other statutory and other town planning laws.

MR MAXWELL:   Yes, that is so.  At 140 the transfer of land, being the instrument on which duty is chargeable, says at point 4 of the page that the estate and interest transferred is, the words used are, “all its estate in fee simple”.

KIRBY J:   What page was that?

MR MAXWELL:   Page 140.  Before coming back to the tipping rights, it is the Commissioner’s case, as it has been throughout, that the question formulated by his Honour Justice Mason in DKLR, which is referred to at first instance and in the Court of Appeal, namely, what was the property conveyed by the transfer?  The answer to that question is, as her Honour held at 316 – and I will take your Honours to that later – all the vendors estate in fee simple in the land.

KIRBY J:   That question by Justice Mason must be read in the context in which the question was asked. 

MR MAXWELL:   That is so. 

KIRBY J:   Our ultimate duty is to the statute of the Victorian Parliament. 

MR MAXWELL:   That is so.  We accept that, but, in our respectful submission, the question aptly applies to this stamp duty context, as to the New South Wales context in which it arose, and that it states what has been the touchstone of valuation of real property for stamp duty purposes for so long as those laws have been, generally speaking, in the terms in which they now are:  what was the property conveyed by the transfer?  As his Honour says, it is not for the court to substitute for that which was conveyed something else. 

GLEESON CJ:   Well, it is a tax on an instrument.  What is the dutiable instrument? 

MR MAXWELL:   In this case the dutiable instrument is the transfer by which ‑ ‑ ‑

GLEESON CJ:   The one we are looking at now? 

MR MAXWELL:   Yes, your Honour. 

GUMMOW J:   Not the anterior agreement? 

MR MAXWELL:   No, the transfer.  Now, if I might ‑ ‑ ‑

HAYNE J:   The anterior agreement – there is no disconformity, is there, between the transfer and the anterior agreement?  I wonder whether we may not need to take rather more steps than you have taken in understanding this agreement that gives rise to the transfer.  At the risk of undue delay, can I take you first to page 90, where you have to begin with “The Vendor sells and the Purchaser buys” at lines 8 and 9.  What is sold and bought is both the property and the chattel.  You then have to go via the definition of “property” at page 92, which is: 

The Land together with any Improvements (as defined in Special Condition 1 of this Contract) –

see page 96, which means “buildings and roads”.  From the definition of “property” at page 92, we have to go back to the land, which is “the whole of the land comprised in” the identified certificates, so that what is sold and what is bought is the land thus identified, together with any improvements, and it is just that transaction which is given effect to by the instrument of transfer.  Now, we have to take all of those steps along the way, have we not? 

MR MAXWELL:   With respect, yes. 

GLEESON CJ:   And on page 93 under the heading “SCHEDULE, ITEM (1)” there is a subparagraph (2), do you see that?  Are they the rights we are concerned with?

MR MAXWELL:   Yes, your Honour, and I am about to take the Court to special condition 5.  If your Honours would turn to page 95 which is the beginning of the special conditions and 1.1 contains definitions.  There is a reference in the middle of page 96 to the “Grant Agreement” which involves a grant of tipping rights by Amatek to a different Pioneer company.  The Court need not be concerned with that for now.  The Grant Agreement itself appears at appeal book page 19.  Then at the top of page 98 there is a definition of “Tipping Operations” which in turn gives content to the definition of “Tipping Rights”:

the bringing on to the Land of waste, tipping and disposing of, treating compacting and covering the same, in conformity with the EPA Works Approval and . . . Licence.

GLEESON CJ:   Just before you go any further down that track, Pioneer referred to in the grant agreement is Pioneer Australia Waste Management?

MR MAXWELL:   Exactly so, your Honour, as defined on page 97.

GLEESON CJ:   There may be no evidence about this, it may be irrelevant, but we have been assured this has nothing to do with tax avoidance.  Why did Amatek grant the tipping rights to Pioneer Australia Waste Management and not Pioneer Concrete grant the tipping rights to Pioneer Australia Waste Management?

MR MAXWELL:   I think your Honour is right, there is no evidence about that.  I will leave it to my learned friend to deal with that but, conceptually, it is not easy to see why that would not have been an equally effective way of achieving the result, though what I am not ‑ ‑ ‑

GUMMOW J:   The grantee is not the purchaser?

MR MAXWELL:   No, that is so.  It is a related company which, judging by its name carries on a waste management business and is interested in the tipping rights which the vendor retained.  What I am not in a position to say conclusively, your Honour, is whether the subletting of the tipping rights to Pioneer Waste Management was coextensive with the rights which Amatek retained itself, and it may be that they were going to each have some tipping rights.  The grant agreement sets out areas and periods for which Pioneer Waste Management will be able to use those areas for that purposes.

My learned friend, Mr Boaden, draws attention, your Honours, to appeal book 250, the affidavit of Mr Pringle on behalf of Pioneer, the appellant, but he is Divisional Manager of Pioneer Australia Waste Management.  He explains the background, beginning of paragraph 4:

The Appellant, Pioneer Concrete (Vic) Pty Ltd (“Pioneer”), operates the concrete and quarry business of the Pioneer Group -

Pioneer Waste, referred to in paragraphs 6 and 7:

operates as a business unit separately from Pioneer . . . It operates exclusively in Pioneer’s comparatively new business of waste disposal . . . it does not own or acquire freehold land.

GLEESON CJ:   Anyway, Pioneer Concrete digs the holes and Pioneer Waste fills them in.  There is a definition of “waste operations” - I am sorry “tipping operations” and “tipping” also on page 98.

MR MAXWELL:   Yes, your Honour.  So the tipping rights, which are referred to in those terms in the judgments and in the submissions are the rights which, as the Court will see in a minute, are expressly reserved or retained by special condition 5, which is to be found on page 101.  Now, your Honours will see special condition 5.1:

The Vendor retains to itself as trustee for Thomas the right to possess, use and occupy (excluding Tipping Rights) -

certain areas of the land for certain periods.  And 5.2:

retains to itself . . . Tipping Rights -

specified areas for specified periods.  5.3:

Without limiting the generality of sub‑clause 5.1 of this Special Condition 5, the retention . . .  of the right to possess use and occupy a Land Area excludes Tipping Rights but includes . . . the retention of the following specific rights during the relevant period of possession use and occupation by the Vendor:

(a)  the right to occupy and possess the relevant Land Area to the exclusion of third parties -

so it is a right of exclusive occupation -

(b)  the right to use, sell or otherwise supply Cover Material and tailings -

that does not concern the Court, and:

(c)  the right to use the relevant Land Area for any purpose whatsoever including but not limited to quarrying operations.

That is the retention of the sand quarrying rights.  If I might, for completeness on that point, refer the Court to condition 8.1(a) on 105, where:

The Purchaser acknowledges . . . that:

(a)  the Vendor shall retain all rights, entitlements and benefits attaching to the Extractive Industry Licences -

being the licences pursuant to which the sand is extracted.

KIRBY J:   Now, these provisions mean that the land is less valuable than it would be if the land were conveyed without the inhibitions?

MR MAXWELL:   That is so.

KIRBY J:   Now, that may not be legally relevant except, perhaps, on (b), but the fact is if the purpose of the stamp duty is, generally speaking, to affix to the title, then it does not matter.  If it is to affix to the value of the land, it does matter.  Is not that correct, because, what is conveyed is a less valuable thing?

MR MAXWELL:   That is so.

HAYNE J:   Less valuable to whom, Mr Maxwell?  You agreed with his Honour, but what does your agreement encompass?  Less valuable to whom?

MR MAXWELL:   The conveyance of the property subject to the contractual terms rendered it less valuable to the actual purchaser than it would have been to that purchaser had those contractual conditions not existed.  That is accepted.  This is a contractual restriction which denies to the purchaser, in its own right, the ability which it would otherwise have, but for those restrictions, to do the things encompassed within the restrictions.  The question, however, is, as a matter of the proper construction of the relevant provision, is that economic effect of those restrictions to be taken into account?

GLEESON CJ:   But looking at clause 5 on page 101 of the appeal book, is it your contention that some of the provisions of clause 5.1 reduced the liability to duty and some did not?

MR MAXWELL:   Exactly so, your Honour, yes.

GLEESON CJ:   Now, is it your contention that 5.1 reduced the value for duty and 5.2 did not?

MR MAXWELL:   In essence, yes, in so far as 5.1 is, as 5.3 spells out, the basis of the retained right to extract the sand.

GLEESON CJ:   So 5.2 deals with the tipping rights and 5.1 deals with the extraction rights?

MR MAXWELL:   That is so.

GLEESON CJ:   Thank you.

KIRBY J:   The reason I asked at the outset the tax avoidance question was that if, in fact, it was suggested that this is simply an inter partes contractual arrangement for the purpose of tax avoidance, one would not be so enthusiastic and, indeed, there is now legislation in Victoria that addresses that question which we have to think about, but on the face of things it really gets back to the essential purpose of the statute and we will not answer that unless we get our hands on the statute.  I cannot wait to have a look at the statute.

MR MAXWELL:   No, your Honour, as soon as I have dealt with the tipping rights question, I will take your Honour to the relevant provision.

KIRBY J:   My enthusiasm is unbounded.

GLEESON CJ:   Is the reason why you distinguish between clause 5.1 and 5.2 that clause 5.1 is a retention of a right to possess, use and occupy, whereas 5.2 is not?

MR MAXWELL:   No, your Honour.  The critical distinction for the purposes of the Commissioner’s approach to valuation is this.  The effect of 5.1 read with 5.3(c) is that the land is being sold without the sand, that there is a subtraction from the property – no question of encumbrance.  As his Honour Justice Tadgell said, this is, in a sense, by the way but I want to develop that submission by reference to both how the respondent argued the position in its notice of objection, that is to say, that is precisely how Pioneer put it to the Commissioner, “We did not buy the sand”.

GUMMOW J:   What they have a conveyance of was an estate in fee simple.

MR MAXWELL:   Indeed.

GUMMOW J:   There is a disconformity involving some cute conveyancing, perhaps, between the contract and the actual conveyance.  If you sell someone an estate in fee simple, unless you have an exceptional reservation in the necessary terms, you have sold them the sand, and when they said they were obtaining the sand, they were talking nonsense in so far as they were involving any proprietary extraction at all.  There was some contractual provision that was attached to all of this which has been dressed up in the contract as some retention, but it all comes home to roost when you get the actual conveyance.

MR MAXWELL:   Yes.  With respect, your Honour, I entirely see the force of what your Honour is putting and it is fundamentally the Commissioner’s case that what was transferred was the entire estate.  Your Honour points to an apparent contradiction in saying, “But we accepted for the purpose of valuation that although the transfer purported to give the fee simple including the sand, we accepted the argument put against the decision that they did not buy the sand.”

GLEESON CJ:   If the concession that you made about the extraction rights is embarrassing, you say that we should politely avert our gaze?

MR MAXWELL:   Exactly.

KIRBY J:   That is one way.  The other way is to say your client is extremely experienced in this field, your client is not noted for its generosity of spirit and throwing away public money and, therefore, we have to look for some other explanation which may just lie in the construction of the statute of the Victorian Parliament. 

MR MAXWELL:   Well, your Honour, I have instructing me today a very experienced solicitor from the Office of the Commissioner for State Revenue and she, I think, would give evidence to a rather different effect about the Commissioner’s ‑ ‑ ‑

KIRBY J:   We cannot take evidence, Eastman, Mickelberg.  No way we can ‑ ‑ ‑

MR MAXWELL:   Precisely so, but your Honour should make no assumptions about lack of generosity or otherwise.  The fact is this was a beneficial concession.  It may have been wrong.  Much has been made by the respondent of the apparent inconsistency, save to say that both the respondent itself and our expert were content to say the sand was not sold and should be ‑ ‑ ‑

HAYNE J:   This is not a matter for expert evidence, is it, Mr Maxwell?  Really, we are dancing around the point.  The case as conducted below has a singular awkwardness for you.  Why not face up to it and abandon it?  Say that the result is that you have valued a fee simple regardless.

MR MAXWELL:   Yes, your Honour, I will seek those instructions but I respectfully acknowledge, as I did to Justice Gummow, that the very submission we have in our written submissions is the one your Honours have put to me.  What is to be valued is the whole of the estate in fee simple, see the transfer. 

KIRBY J:   This is a change of direction, not in midstream, not in early stream, but in the very last moment, because both at first instance and in the Court of Appeal you persisted with the theory of the interpretation of the Act which you are now being invited to withdraw from.

MR MAXWELL:   Indeed, so.

HAYNE J:   And it may not be to the detriment of the taxpayer because I assume, given the course of events that have occurred, that the Commissioner now would run out of power to amend to increase.  So we are not talking about seeing the taxpayer saddled with a greater assessment than has already been made, are we?

MR MAXWELL:   No, your Honour, and the relative proportion of value attributable to the sand and the tipping is such that the sand is a very small proportion of the total assessed value, something like 570,000, compared to 7.1 million.

KIRBY J:   Yes.

GUMMOW J:   In New South Wales, there is a providential provision for the revenue in section 71 of the Stamp Duties Act, considered a long time ago in Commissioner of Stamp Duties v Yeend (1929) 43 CLR 235, which is a provision which, on one view, is designed to catch these, as it were, little side arrangements between contracts and conveyances. Do not answer me now, but do you have a provision like section 71 in Victoria? Just see if you can get some instructions about that.

MR MAXWELL:   I will, your Honour.  We have furnished to the Court ‑ ‑ ‑

GUMMOW J:   Yeend’s Case is well‑known amongst stamp duty obsessives. 

MR MAXWELL:   Yes, your Honour, it is mentioned in at least one of the authorities on which we are relying ‑ ‑ ‑

GUMMOW J:   There is a later case in this Court called Henry’s Case I think, which deals with it further. 

MR MAXWELL:   If I might just diverge momentarily to ask if your Honours have the folder of annexures to our submission, which contains three annexures.  The first is a series of reprints of the Victorian Stamps Act, which I will come back to in a moment.  The second is a selection of extracts from the Victorian Act and the legislation of other States.

KIRBY J:   This was put forward by Mr Nettle, lest it be said that this was overtaken by the amendment of the Act.  I think, on the special leave, it was said that the question was still alive. 

MR MAXWELL:   And was one of general importance.  Then annexure 3 is extracts from what I am instructed was intended to be model uniform legislation under the title Duties Act, though ‑ ‑ ‑

GUMMOW J:   It is a model that is slow in reaching adoption, is it not? 

MR MAXWELL:   And, as I understand it, your Honour, it is rather tending away from uniformity to disuniformity, already.  In all events, that is there.  If I might, while that folder was open, take your Honours ‑ ‑ ‑

KIRBY J:   It was enacted, was it, in all States, or ‑ ‑ ‑

GUMMOW J:   No.  That is the problem. 

MR MAXWELL:   There is an index to annexure 3, just before tab 1, and your Honours will see there is a Victorian Act, a New South Wales Act, Tasmania and Queensland and the ACT.  As I understand it, that is as far as it has gone. 

KIRBY J:   Well, that is a long way, in Australian terms. 

MR MAXWELL:   Indeed, it is.  If I might then take your Honours to the relevant provision while your Honours have that folder to hand.  Tab 1 under annexure 1 relevantly contains, starting at the second page of the photocopy, section 63.  Subsection (1) includes definitions of “conveyance” and “real property”: 

“real property” includes any estate or interest in real property ‑

and then the relevant provision is on the right hand, page 89 – right‑hand side of the third physical page in the photocopy.  Your Honours will see section 63(3)(b), about point 2 of the page: 

a reference in this subdivision or in the provisions of the Third Schedule under Heading VI to the value of real property or property is a reference –

(i)  in relation to a conveyance on sale –

which is this –

of the real property or property –

(A)  to the sum of the consideration for the sale and the consideration for the transfer of chattels included in the real property or property by reason of paragraph (a); or

(B) –

with which the Court is concerned –

to the sum of the amount for which the real property or property and the amount for which such chattels might reasonably have been sold if they had been sold, free from encumbrances, in the open market on the date of the sale –

whichever is the greater. 

GLEESON CJ:   So if there is a sale of an undervalue, duty is assessed at market value?

MR MAXWELL:   Yes, your Honour.  By reference to a hypothetical sale of the unencumbered land to a hypothetical purchaser in the open market.

KIRBY J:   Now, I notice “real property” is defined to “include any estate or interest”, so presumably that is not all that is referred to.

MR MAXWELL:   No, we would accept that does not purport to be an exhaustive definition.

GUMMOW J:   Well, wait a minute, it has to be an estate or interest in real property; it might not be a fee simple.

MR MAXWELL:   That is so, provided it is a proprietary interest.

GUMMOW J:   Yes.  The whole of this debate seems to have some strange obscuring of distinctions between property and contract, which I just do not understand.

MR MAXWELL:   With respect, your Honour, nor do we.

GUMMOW J:   I feel as if I am back conducting some tutorial as a student.

MR MAXWELL:   Yes, your Honour.  The submission made at special leave by my learned friend, Mr Nettle, as he then was, was that point precisely.  That what the section says is you disregard encumbrances, a fortiori, lesser interests which do not burden the property in a proprietary sense, for example, these contractual rights.  What this is about is treating the property as if it was not encumbered by some third party proprietary interest, ie an encumbrance; less still by a non-proprietary interest, the subject of a contractual provision.

KIRBY J:   I take the force of that but you have to be just a little careful with the words, because it says “in relation to a conveyance on sale”, so that is, as it were, or at least arguably, the factual element that activates the section.  So the question is whether in (B) the words “real property or property” bring in the conveyancing or the conveyance or whether it is directing your attention to the actual value of the land, which is the subject of the conveyance.  That is the question.

MR MAXWELL:   Yes, your Honour.

KIRBY J:   I do not want to strain against what is an orthodox rule of stamp duty law, but ultimately we have to construe the section.

MR MAXWELL:   That is so.

GLEESON CJ:   Under a mortgage of old system land in Victoria, does the mortgagee have a right of possession?

MR MAXWELL:   Yes, I believe that to be the case, your Honour, but let ‑ ‑ ‑

GLEESON CJ:   The reason I ask the question is that if the form of encumbrance referred to in this provision includes a mortgage of old system land and if a mortgagee of old system land has a right of possession, then ‑ ‑ ‑

MR MAXWELL:   That would be disregarded.

GLEESON CJ:   That would be disregarded.

MR MAXWELL:   Exactly so and a conveyance by a mortgagor of his land, where there was a mortgagee in possession, the duty would be calculated by reference to the value of the land disregarding that encumbrance and, in our respectful submission, that is a powerful rejoinder to the whole of the respondent’s case, which says, “This is not fair, we are not getting full value.”  Well plainly the purchaser from a mortgagee or from a mortgagor with a mortgagee in possession, with a tenant paying rent, for example, would say the same, but Parliament has, in our respectful submission, said with unambiguous clarity that for the purposes of duty those matters are to be disregarded.

KIRBY J:   Your case, do I understand it, is that you are within (b)(i) and not (b)(ii) – I am sorry?

MR MAXWELL:   We are within (b)(i)(B).

KIRBY J:   Yes, and (b)(ii) is not activated because you say this is a case where there is a conveyance on sale?

MR MAXWELL:   Exactly so.

KIRBY J:   Therefore, you do not get into the alternative hypothesis, it may have been a mistake of the way the solicitors went about it, but that is what they have sold and, therefore, it activates (b)(i) and that is the end of it.

MR MAXWELL:   That is so.  The “in relation to”, as we would read it, with respect, is to ‑ ‑ ‑

KIRBY J:   Contrast.

MR MAXWELL:   Trigger a category of reference which is “conveyance on sale of the real property”.  This transaction or this conveyance is in that category so what follows applies.  On any view this is a conveyance on sale of real property.

GUMMOW J:   Would we not have to look at the charging section, the actual charging provision?

HAYNE J:   I think you will find it is section 18, will you not, which we do not have?

GUMMOW J:   Which will refer us to a schedule, I guess.

MR MAXWELL:   Yes, your Honour, we will ‑ ‑ ‑

HAYNE J:   I think the scheme is, is it not, section 18 charges the duties.  The duties are those identified in the third schedule.  We get to the third schedule.  Is that right?

MR MAXWELL:   Yes, your Honour, that is correct.  If your Honours will go to 295 in the appeal book, it is set out ‑ ‑ ‑

HAYNE J:   I am sorry, that is 17(1).

MR MAXWELL:   Section 17(1).  It is set out in the judgment of her Honour and it would be convenient to go to that.  This is her Honour’s first of two judgments and it is of assistance in relation to the question your Honour Justice Kirby was asking me.  If I might by way of introduction to this judgment take your Honours to 289 where her Honour directed that there be a “trial” of a:

preliminary question to determine all issues other than the assignment (if necessary) of a value to the amount referred to under –

the relevant provision, as we have called it –

section 63(3)(b)(i)(B) –

GUMMOW J:   They are not really the relevant provisions.  The relevant provision is the actual schedule, is it not?  I may be wrong about it.

HAYNE J:   It may be pedantic, Mr Maxwell, but do we not have to trace this accurately?  We go, do we not, section 17(1), duties are charged.  What do they charge and how are they charged ‑ section 17(1) says the third schedule.  We go to the third schedule.  We find in item VI, which you have reproduced at tab 1 of part 1 of your annexures, “VI - Conveyance of Real Property and Land Transfer” introduced by a provision which seems largely, if not entirely, to reproduce bits of section 63.

We come under item VI to item (A), not presently relevant, namely, “CONVEYANCE OF REAL PROPERTY”. Rather, we are in item (B), “LAND TRANSFER (under the Transfer of Land Act”, and, in particular, we are, are we not, under subparagraph (d) of item (B), being, “every transfer of land”, and we then have these opaque provisions about how you actually compute the money.

MR MAXWELL:   Yes, your Honour, I accept, with respect, that that legislative chain ought to have been tracked through.

HAYNE J:   Then, through either or both of, what might be called the covering clause of item VI of the third schedule, and/or section 63, then we get into valuation because item (B) of item VI is turning around the fulcrum of the value of the property –

If the value of the property is not less than –

et cetera –

the duty payable on . . . 

(d) every transfer of land –

is the amount determined –

by the table, and the table itself turns on the value of the property.  Now is that the statutory change?

MR MAXWELL:   It is, your Honour, and I am indebted to your Honour for that reference.

KIRBY J:   Can I just ask on that question, why is it not consistent with your answer to me earlier, an (A) case, namely a conveyance of real property case as distinct from some other value or land transfer?  The little VI seems to reflect the pattern of the statute itself in section 63.  I feel a bit lost here.

MR MAXWELL: As I understand it, your Honour, (B) is the applicable provision because this is Transfer of Land Act land, whereas (A) is old system land.

GUMMOW J:   Now, this transfer was dated in November 1995.  At some stage we need to know which is the correct reprint number.

MR MAXWELL:   Yes, your Honour.

GUMMOW J:   I have 16 in my hand, but I think that is too late.

MR MAXWELL:   Your Honour, we have included ‑ ‑ ‑

GUMMOW J:   I am not interested in bits and pieces.  I want to look at the whole statute.  What we need to know is the number of the reprint in its relevant form.

MR MAXWELL:   With respect, I endorse the comment.  It is difficult to make sense of extracts, and we should have furnished a full copy.

GUMMOW J:   Justice Hayne suggests reprint 12.

HAYNE J:   That is print up to 31 August 1995.

MR MAXWELL:   Reprint 13, which is under tab 2, is up to July 1996, and your Honours will ‑ ‑ ‑

GUMMOW J:   It should be possible to work out which is the right reprint.

MR MAXWELL:   Yes, your Honour.

GLEESON CJ:   Mr Maxwell, before you pass from this Act, and I am looking at reprint 16 which is obviously the wrong one, but not materially I hope.

MR MAXWELL:   That is so.

GLEESON CJ:   And I am looking at page 353 of that reprint.  Subparagraph (ii) in the covering clause to item VI.  It is subparagraph (ii) that we are concerned with, is it not?

MR MAXWELL:   Your Honour, I do not have that in my extract of reprint 16, I am afraid.

GLEESON CJ:   Well, at the top of 353:

the amount for which the real property or property might reasonably have been sold if it had been sold, free from encumbrances, in the open market -

that is what you are concerned with, is it not?

MR MAXWELL:   Yes, your Honour, that is so.

GLEESON CJ:   Now, the question I wanted to ask you is this.  Are the terms and conditions of sale relevant?

MR MAXWELL:   In our respectful submission, no.

GLEESON CJ:   That is the point of departure in this case.

MR MAXWELL:   Absolutely.

KIRBY J:   That is not really consistent with your concession about the sand.

MR MAXWELL:   That is so.

KIRBY J:   And you have now acknowledged that you want to change your horses.  I suppose if you won on the point that you did not argue in the Court of Appeal, you would have to offer the costs to the respondent.  The Court of Appeal commented on this inconsistency.

MR MAXWELL:   Indeed, unfavourably but, Your Honour, our essential argument has never changed.  We have sought to ‑ ‑ ‑

KIRBY J:   Not really, because Justice Gummow and Justice Hayne have been at pains to point out to certain fundamental land law principles, and you were not embracing those.  You were trying to have some sort of halfway house.

MR MAXWELL:   With respect, no.  We accept and assert the fundamental principle that what is transferred and, therefore, that which is the reference point for valuation, is the whole estate in fee simple.  What, on the basis of the concession I am in the process of making to this Court is being said is it was a mistake to regard the whole of the estate as describing something which did not include the sand.  That is how - it was sought to reconcile the decision about the sand with the fundamental proposition which is it is the whole of the estate in fee simple, that does not include the sand.

KIRBY J:   Well, as I think was pointed out in the Court of Appeal, it is pretty hard to say how something that is tangible and in the land itself is not part ‑ ‑ ‑

MR MAXWELL:   Yes, your Honour.

KIRBY J:   ‑ ‑ ‑ but the whole, which is not land itself, is.  I mean, the whole thing is inconsistent.

MR MAXWELL:   But the point is that the Commissioner’s essential proposition has never changed, that is to say, the decision of Justice Balmford was correct.  What is transferred is the whole of the estate in fee simple, so her Honour found.  The contractual retention of tipping rights has no effect on the proprietary interest transferred, nor would any variation by contract of the tipping rights, so they are to be disregarded for the purpose of valuation.  That is the decision we have sought to uphold in the Court of Appeal and here, and we say the decision is right.

GLEESON CJ:   Leaving to one side whatever embarrassment you might have about that concession, the issue that we have to resolve comes down, does it not, to whether or not, when you give effect to the statutory provisions referring to the amount for which the real property might reasonably have been sold on the open market free from encumbrances, you postulate an open contract of sale or a sale subject to special terms and conditions?

MR MAXWELL:   That is so, and your Honour ‑ ‑ ‑

GUMMOW J:   Well, what is the answer?

MR MAXWELL:   The answer is that you postulate an unrestricted transfer ‑ ‑ ‑

GUMMOW J:   An open contract.

MR MAXWELL:   An open contract of the land.

GUMMOW J:   That is a fiction.

KIRBY J:   That is a fiction.

MR MAXWELL:   It is a fiction.

KIRBY J:   The statute uses the definite article, “the land”.

MR MAXWELL:   That is so.

KIRBY J:   And, therefore, at least arguably one would say it was this particular land subject to ‑ ‑ ‑

MR MAXWELL:   The language of the section is emphatic that this is a fiction.

GLEESON CJ:   Well, the language is hypothetical, is it not?  It uses the word “might”.

MR MAXWELL:   Yes, indeed, plainly departing from what has, in fact, occurred, and what their Honours in the Full Court, in our respectful submission, erroneously have done is to say, “We will partly ignore the realities and partly not, the actualities”, and your Honour the Chief Justice in the special leave application drew attention, in our respectful submission, correctly, to an apparent contradiction or inconsistency between the notion of open market free from encumbrances, as the section says, and what his Honour Mr Justice Tadgell said at 345 about the terms on which the vendor did actually sell it, and as your Honour says, that is the point of departure.

Our submission is that the terms on which the vendor did actually sell it are irrelevant to the hypothetical transaction which is the reference point for valuation and it is nothing to the point, given what the mandate of the section is, that the actual purchaser of this land from this vendor was faced with the “ineluctable fact” that the vendor wanted to retain that right.

GLEESON CJ:   What is the force, if any, of that word “reasonably”?

MR MAXWELL:   Only, in my submission, that where the question of valuation arises, the court would need to be satisfied, or the valuer, the Commissioner, that the ‑ ‑ ‑

HAYNE J:   It would be a very odd section if it had said “might have been sold”, might it not?  You would be looking for the extreme case of the desperate purchaser.  Does not “reasonably” simply take you off to Spencer’s Case?

GLEESON CJ:   Willing but not anxious.

MR MAXWELL:   Exactly so.  Willing but not anxious.  That you would ignore anomalous sales evidence for land of that kind in that area, for example, so that it is to say ‑ ‑ ‑

GUMMOW J:   There are no special deals about tipping rights, though.

MR MAXWELL:   Absolutely not.

GUMMOW J:   That is what you say ‑ ‑ ‑

KIRBY J:   Your anchor is in the statute.  It talks of conveyance and talks of real estate.  The result is not a particularly attractive one because in a transaction which you accept was not tax avoidance, the stamp duty is assessed on much more valuable land than was the land that was conveyed.

HAYNE J:   But there lies the field for debate, does it not, Mr Maxwell?  What is the subject matter of the sale?  Once identified, the result is less odd than might otherwise be thought.

MR MAXWELL:   With respect, we agree with that.  The subject matter of the sale is the estate in fee simple in the land.

HAYNE J:   If that is the true identification of that which is sold then the value of that which is sold is brought to duty regardless of what special arrangements parties may have made by contract and if dealing at arm’s length may therefore have reflected in their price either by inflating or deflating the price according to the balance struck contractually between them.

MR MAXWELL:   Exactly so.  With respect, that is the Commissioner’s case.

KIRBY J:   It is a little theoretical, though, is it not?  I mean, fee simple is the greatest estate known to the English law yet here we know that that which was conveyed was called a fee simple but was not in truth, at least so far as the actuality and the user was concerned, an unencumbered – using that word loosely ‑ fee simple.

MR MAXWELL:   With respect, we do not accept that.  What was conveyed was the estate in fee simple.  The purchaser became the owner of that estate.  There was no proprietary burden on that interest.  There was nothing less than the entire absolute fee simple transferred.  The purchaser, for commercial reasons, decided to have contractual arrangements with the vendor which, as it happens, enabled its sister company ‑ ‑ ‑

KIRBY J:   Now, now, you have conceded it is not tax avoidance.

MR MAXWELL:   But the fact is that the grant agreement has the effect that another Pioneer company is able to do tipping on this land so there is good commercial reason from Pioneer’s point of view to agree to the retention so there is a commercial value by virtue of the retention by the vendor and then the grant off to Pioneer Waste but the Court need not be concerned with that or how the parties might have valued it or the terms in which it was done.  It might have been done as a sale and leased back, for example.

GLEESON CJ:   Not all conveyances of land are between people who are commercial at arm’s length and the fact that they are not at arm’s length does not mean it is a tax avoidance arrangement.  There might be any number of good reasons why a purchaser of an estate in fee simple in land is not paying the market value of an estate in fee simple and land.  It might be because the purchaser is a relative of the vendor.

MR MAXWELL:   Indeed.

GLEESON CJ:   But the scheme of the statute is that if, for whatever reason, good, bad or indifferent, the purchaser is not paying the full market value of the estate in fee simple, the instrument of transfer is dutied on the market value and not on the consideration.

MR MAXWELL:   Exactly so.  In our respectful submission, that is unmistakeably the legislative intent.

CALLINAN J:   Mr Maxwell, in other jurisdictions it is permitted under the Torrens System to convey or lease land to a certain depth.  One can obtain a fee simple in land to a depth of 50 feet or 20 feet or something of that kind.

MR MAXWELL:   That is so in Victoria.  The depth is prescribed by regulation.

CALLINAN J:   That might have been one way, had the parties wished to do it, that sand rights might have been retained; rights for the extraction of sand might have been retained.  The fee simple in actual land could have been retained.

MR MAXWELL:   Yes, your Honour.

CALLINAN J:   But there is no attempt to do that.

MR MAXWELL:   No attempt to do that.  I mean, the concession on the sand rights proceeded as if some such carve out had occurred but I am conceding that ‑ ‑ ‑

CALLINAN J:   That emphasises that it was purely contractual and did not involve proprietary interests in land.

MR MAXWELL:   Exactly so.  The argument for the respondent would have the effect that something in the nature of a profit a prendre, as Justice Gummow mentioned, for example, a right to come on to the land to quarry or take timber, would be disregarded as an encumbrance as an interest in land but a mere licence to have a bushwalking expedition across the land once a year, which might be very annoying to the prospective purchaser, would be taken into account.

GLEESON CJ:   Am I right in thinking that consistently with the reasoning of the Full Court any special condition attaching to a contract for the sale of land which might materially affect the price that a purchaser would pay will have to be taken into account?

MR MAXWELL:   Unless it were an encumbrance within what Mr Justice ‑ ‑ ‑

GLEESON CJ:   In which case it does not have to be taken into account.

MR MAXWELL:   Exactly.  That is exactly what the notice of contention says, it must be taken into account if it is not an encumbrance properly so‑called.  We say that is an absurd result which Parliament cannot be thought to have intended.

That is exactly the corollary; there is nothing to distinguish this from any other contractual or other restriction, but it is sufficient to think of the multiplicity of possibilities by way of contract which could affect the price.

GLEESON CJ:   Well suppose, for example, that the vendor of land is the owner of the adjoining land and whilst not taking on easement - and there is apparently some argument whether an easement is an encumbrance and would just want to avoid that – takes some contractual stipulation limiting the use that the purchaser can make of the land in the interests of the amenity of the neighbouring land, which has been retained by the vendor.

MR MAXWELL:   Yes, your Honour.

GLEESON CJ:   On the reasoning of the Full Court, that would diminish the value of the land for duty purposes.

MR MAXWELL:   The dutiable value, it would.  That is exactly and fairly what flows from the Full Court decision.  It involves saying, if any restriction, materially affecting the value of the land, is identified then it is necessary to ask, is it a “encumbrance” or not  and if it is not, then you must take it into account in valuing the land for dutiable purposes.

GLEESON CJ:   Now, is a Taulk v Moxy covenant an encumbrance?

MR MAXWELL:   I do not know, your Honour.

GUMMOW J:   It would be, surely.

HAYNE J:   It would be registered.

GUMMOW J:   It would have to be registered.

MR MAXWELL:   But your Honour has already made the point which we wish to make which is that nothing turns on the precise ambit of the word “encumbrance”.  What his Honour Mr Justice O’Bryan did in Bradney was exactly the fallacy that your Honour is just pointing to:  is a lease an encumbrance?  No it is not.  Accordingly, it is taken into account and the value of the land is reduced by 10 or 100‑fold.  We concede that these contractual rights are not encumbrances, at least in the technical sense in which that word is used in property law, they are not an interest in land, and that is the abandonment of ground of appeal 2(a).  That concession was made before Justice Balmford and again in the Court of Appeal, but we say that is neither here nor there, because that is only relevant if everything which is not an encumbrance is otherwise to be taken into account, and, in our respectful submission, for the reasons your Honours have been discussing, that could not be what Parliament intended.

GUMMOW J:   But where do you say Justice Tadgell ‑ has not been a considerable figure in these matters?  Where do you say the learned judge ‑ ‑ ‑

MR MAXWELL:   Erred?

GUMMOW J:   Yes.  Where is the particular passage which ‑ ‑ ‑

MR MAXWELL:   There are two passages in particular, your Honours.

CALLINAN J:   Paragraph 12 on page 338?

MR MAXWELL:   The first is at 338 paragraph 12, I am indebted to your Honour, and the second is at 345, which we will come to it.

GUMMOW J:   Whereabouts in 12?

MR MAXWELL:   In paragraph 12, his Honour says, at line 18:

The question that mattered was the value of that estate in real property to a reasonable hypothetical purchaser in the open market on the day.  The position was that although, on the day, the vendor was agreeable to sell its estate in fee, it would do so only if there were to be reserved to it by contract over a specified protracted period the right to exploit or to allow the exploitation of the tipping capacity of the land.  That was an ineluctable fact with which, on the day, the reasonable hypothetical purchaser was faced.

In other words, his Honour is saying, the reasonable hypothetical purchaser is not faced with a reasonable hypothetical vendor, but this actual vendor, and that is an error, in our respectful submission.

GUMMOW J:   Yes, that is what the Chief Justice was putting to you, yes.

HAYNE J:   And, at the top of 339 at lines 5 and following:

The reservation of the tipping rights to the vendor was therefore a relevant fact –

MR MAXWELL:   Exactly so, even though ‑ ‑ ‑

HAYNE J:   Let me finish:

unless paragraph (B) required it to be ignored.

What that passage seems to me to reveal is this, that his Honour considers, on the true construction of the relevant provisions, duty is to be imposed on the value struck by the parties, in every case in which the parties are dealing at arm’s length, regardless of what the open-market value may be.  That is to say, it seems to me that the consequence of his Honour’s decision is that, pointing to what he describes as the “ineluctable fact” of the vendor’s settled intention, is that it suffices to conclude that the price struck was struck between arm’s length parties to require, as he says, the ignoring of paragraph (B).  That may be a construction of the Act that is open; it may not be, but that is the way his Honour approaches it.

MR MAXWELL:   Might I respectfully suggest a slightly different way of reading that last sentence.

HAYNE J:   Yes.

MR MAXWELL:   As I understand what his Honour is saying there, starting at the top of the page:

No facts of this kind –

tipping rights and so on –

could affect the nature of the vendor’s estate in the land –

so much we agree with –

and yet each of them would or could influence the price that it would fetch in the open market –

meaning if sold by that particular vendor –

The reservation of the tipping rights to the vendor was therefore a relevant fact that fell to be considered in the valuation exercise required by s.63(3)(b)(i) unless paragraph (B) required it to be ignored.

As I understand it, his Honour is saying unless it falls within the category which Parliament says we must disregard, it will otherwise be regarded, it must be taken into account.

HAYNE J:   Yes, you may be right.

MR MAXWELL:   So it is really saying there is a defined category of things which are to be treated as out of account, otherwise, as your Honour was putting, everything which in fact affected price in this transaction is relevant.  We submit that is simply flying in the face of open market unencumbered land which is what Parliament said.  The respondent says if Parliament had meant to exclude from account lesser interests than encumbrances, it would have said so.  Having not done so, there is an implied obligation – see the notice of contention – on the valuer to take into account non-encumbrance restrictions of which this is an example, the tipping rights, a non-encumbrance restriction. 

In our respectful submission, that is contrary to authority but contrary to the plain intent of the section, which is to treat this land as if it were not encumbered, as if what you were selling was by open contract the fee simple in the land – what would it fetch on the open market?  If you disregard interests in land being encumbrances, a fortiori, lesser rights, mere licences, contractual issues of the infinite variety of kinds that could be imagined.

GLEESON CJ:   What would be the policy reason for excluding encumbrances but not excluding contractual provisions that affect the price a purchaser will pay?

MR MAXWELL:   I am unable to suggest one because, in our respectful submission, the policy is that you hypothesise a transaction of the land free of things which, in fact, if it is an encumbrance, may materially affect the value in a very significant way because, as your Honour was saying, it has been Parliament’s intent since long ago that that is the touchstone of valuation.  It is to look at the real property and to ignore third party rights or non‑owner rights, in the case of encumbrances, in order to say, “Well, putting that aside, what was this worth on the open market?”  It would seem illogical, in our submission, to say, “But ignoring interests in land, proprietary interests which burden the property, being encumbrances, you nevertheless, not only may, but must take into account lesser interests of whatever kind.”

GLEESON CJ:   Is it your submission that the reason the provision excludes encumbrances but does not exclude special contractual conditions is that there was no need to exclude special conditions?

MR MAXWELL:   Exactly so.

GUMMOW J:   They would never be part of a property conveyed.

MR MAXWELL:   Precisely so and they would not affect the – so as to derogate from the proprietary interests being transferred, ex hypothesi they are not interests in land, just as his Honour said to me, that on that view which I would respectfully adopt, it is not a question which arises because, as his Honour said, a contractual right has no implications for the title.  The only things which might have are encumbrances and you disregard them.

GUMMOW J:   Now, Justice Batt, at paragraph 23 – he agreed with…..what had been said.  He referred to Promenade Investments 26 NSWLR 203. Does that bear on the matter?

MR MAXWELL:   Your Honour, I cannot answer that question.  I have not, in preparation, looked at Promenade.  I will remedy that over lunchtime.  Your Honour will have seen that the key passage is the sentence which precedes that reference: 

To determine the hypothetical selling price in the open market of the real property subject of the transfer on the date of actual sale in the abstract, that is, without reference to the restrictions which the actual vendor was able to impose, is, I have come to think, mechanistic and artificial. 

Well, so it is artificial.  Whether it is mechanistic is, with respect to his Honour, neither here nor there.  It is what the statute commands, in our submission.  The other passage which shows Mr Justice Tadgell’s error is the one I referred to a moment ago at 345.

GUMMOW J:   Paragraph? 

MR MAXWELL:   Paragraph 17.  Really, we rely on the whole of the paragraph, which sets out submissions made by my learned junior, Mr Boaden, in the appeal.  Your Honours will see, at about line 13, Mr Boaden submitted: 

that the relevant hypothesis is the “open market”, with the land being offered for sale unencumbered.  One cannot disagree with that; but the submission went on to say that if the subject land here were offered for sale on the open market the evidence is that a purchaser, being able to put it to its highest and best use, would pay $7,140,000 for it.  This points up the intrinsic difference between the parties’ opposing approaches.  The evidence indicates that the land was not in fact available in the open market for purchase on the footing that the purchaser could use it for its highest and best use. 

It is that fact which his Honour, in our respectful submission, should have ignored.  His Honour goes on: 

There is nothing in paragraph (B) to require that the concept of a hypothetical sale in the “open market” should disregard the basis on which the vendor successfully offers to sell, save that any encumbrance is in any event to be disregarded. 

In our submission, that statement at line 18 and following is wrong.  It is precisely what the paragraph is about, that the basis on which the vendor successfully offers to sell should be disregarded, that encumbrances are disregarded expressly.  Anything less than a proprietary interest affecting the land could not be taken into account.  His Honour concludes: 

It follows, in my opinion, that the relevant supposititious amount contemplated in paragraph (B) is the price that might reasonably have been obtained for the real property had it been sold (a) free from encumbrances (b) in the open market (c) on the day of the date of the actual sale but (d) otherwise on the terms on which the vendor did actually sell it, save for the price. 

That was, as I said, the point your Honour the Chief Justice raised on special leave, that that seemed to point up an apparent inconsistency with the terms of the section.  We respectfully submit that it does, and that it would subvert the plain intent of the section.  Leave aside the valuation difficulties which it would create ‑ ‑ ‑

GLEESON CJ:   Well, from one point of view, the problem is encapsulated by comparing the second last and last sentences in the judgment of Justice Batt on page 348, where he says the reason you disregard encumbrances is that:

they do not affect the inherent value of the real property.  Restrictions of the kind here in question, on the other hand, do that very thing.

A possible point of view is that the opposite is the case ‑ ‑ ‑

MR MAXWELL:   With respect, yes. 

GLEESON CJ:   ‑ ‑ ‑ that these restrictions do not affect the inherent value of the real property. 

MR MAXWELL:   Whereas a proprietary interest in the nature of an encumbrance is likely to, because it is a burden on the title ‑ ‑ ‑

GLEESON CJ:   Well, it might be thought that a special condition, which is a condition that the vendor insists on, is not something that affects the inherent value of the real property.  It would not, for example, affect the value that the property would be shown at in the books of account of the vendor.  People who were auditing the accounts of Amatek the day before this contract of sale, who were inquiring as to the inherent value of this property, would not have cut the value down by reference to these tipping rights, would they? 

GUMMOW J:   Of the Stamps Act?

MR MAXWELL:   Yes.  Two more points, your Honours, and then I will conclude.  Our learned friend appeared to adopt what his Honour Justice Batt said about the encumbrances not affecting value and contractual rights of this kind affecting value.  In our respectful submission ‑ ‑ ‑

GLEESON CJ:   What he called “inherent value”, I think.

MR MAXWELL:   Inherent value.  And your Honour put to me before lunch that the converse was true.  It may not be necessary to go quite so far but, in our respectful submission, it is plainly wrong to say that encumbrances do not affect inherent value, whatever that means, and the charge example is a good one.  If the land is subject to an encumbrance of that kind, then the economic value to a purchaser will be reduced and he or she will pay less for it, but the inherent value of the land as fee simple between hypothetical parties is unaffected, so that we simply want to reinforce the point made earlier, that that antinomy, the suggestion that these are two opposites is not correct, and that it is as true of encumbrances as it is of rights of this kind, that they may affect the price which someone will pay.  Neither of them, we submit, affects the inherent value, or of the two, the encumbrance is the more likely to, because it is an interest directly impinging or diminishing, to use your Honour’s words, the proprietary interest of the owner.

GUMMOW J:   Now, Mr Maxwell, Justice Hayne who is much more suspicious than me, and rightly so ‑ ‑ ‑

HAYNE J:   That is a very large statement.

GUMMOW J:   ‑ ‑ ‑ points out that section 24AA was only inserted by Act 47 in May 1999.

MR MAXWELL:   I was hoping your Honour would pick that up.

GUMMOW J:   If there is some earlier provision, you had better tell us at some later date.

MR MAXWELL:   I will, your Honour.  My learned junior seems to be indicating there was not.

GUMMOW J:   It is that electronic machine that causes the problem.

MR MAXWELL:   Yes.  We will confirm that when we supply the Court with the notice of appeal from the Administrative Appeals Tribunal in Justice O’Bryan’s decision.

If I might finally say that we respectfully submit that there is no basis for the application for the foreshadowed order for costs.  It is correct, as your Honour Justice Kirby said that in certain revenue matters where there is a question of importance the relevant taxing authority is sometimes required to undertake to bear the costs in any event.  This is not such a case.  Justice Balmford was right.  This party took it to the Court of Appeal and the Court of Appeal got it wrong, in our submission.  This Court, if it accepts my client’s submissions, will restore Justice Balmford’s judgment and Pioneer takes the risk of any other litigant in pursuing appeals and, in our respectful submission, if the Court upholds the Commissioner’s submissions on the appeal, costs should follow the event.  May it please the Court.

Your Honours, in the Act at the time there was section 33A(4).  I see your Honour is putting a question mark in brackets after that but I am instructed it said:

The Comptroller shall not make a decision upon any objection concerning the value of any land without consulting the Valuer‑General.

Your Honours would read that as implying a power to do so.  May it please the Court.

GLEESON CJ:   Yes.  Thank you.  We will reserve our decision in this matter.

AT 4.19 PM THE MATTER WAS ADJOURNED