Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue

[2025] NSWCA 20

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCA 20

Hearing dates:

27 November 2024

Date of orders:

27 February 2025

Decision date:

27 February 2025

Before:

Ward P at [1];
Payne JA at [2];
Stern JA at [168];
McHugh JA at [169];
Basten AJA at [170]

Decision:

(1)   Appeal dismissed.

(2)   Appellant pay the respondent’s costs of the appeal.

Catchwords:

TAXES AND DUTIES — Dutiable transactions — Dutiable value — Land — landholder duty — whether interest in pipeline is “land holdings” or “goods” — meaning of “land holdings” in s 155 of the Duties Act1997 (NSW) — meaning of “goods” in s 155 of the Duties Act — nature of interest conferred by the Water Industry Competition Act 2006 (NSW)

TAXES AND DUTIES — Dutiable transactions — dutiable value — whether interest in pipeline is indeterminate thus non-dutiable

Legislation Cited:

Bunbury Pipeline Act 1997 (WA), s 40

Duties Act 1997 (NSW), Ch 2, ss 8, 11, Ch 4, ss 146, 147, 147A, 148, 150, 155, 163H, 163K, Dictionary

Interpretation Act1987 (NSW), ss 6, 21, 33

Payroll Tax Act 2007 (NSW), s 32

Petroleum Pipelines Act 1969 (WA), s 57

Real Property Act 1900 (NSW), s 42

Stamp Act 1921 (WA), ss 76, 76AP

Stamp Duties Act 1920 (NSW), s 3

Taxation Administration Act 1996 (NSW), s 97

Water Industry Competition Act 2006 (NSW), Pt 2, Div 6, ss 63, 64, Pt 6, Div 2

Cases Cited:

Asciano Services Pty Ltd v Chief Commissioner of State Revenue (2008) 235 CLR 602; [2008] HCA 46

Ashgrove Pty Ltd v Commissioner of Taxation (1994) 53 FCR 452; [1994] FCA 598

Attorney-General (Cth) v R T Co Pty Ltd (No 2) (1957) 97 CLR 146; [1957] HCA 29

Australian Provincial Assurance v Coroneo (1938) 38 SR (NSW) 700

Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49

Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43

Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; [1971] HCA 9

Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325

Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd [2023] NSWCA 113

Clos Farming Estates P/L (rec and mgrappntd) v Easton and Anor [2001] NSWSC 525

Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118; [1967] HCA 41

Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; [2004] VSCA 82

Eastern Nitrogen v Commissioner of Taxation (2001) 108 FCR 27; [2001] FCA 366

Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228

Glentham v City of Perth [1986] WAR 205

Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472; [2004] HCA 59

Holland v Hodgson (1872) LR 7 CP 328

Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26

Mabo v Queensland [No 2] (1992) 175 CLR 1; [1992] HCA 23

Metal Manufacturers v Commissioner of Taxation [1999] FCA 1712

Metropolitan Railway Co v Fowler [1893] AC 416

Mills v Stokman (1967) 116 CLR 61; [1967] HCA 15

Minister of State for the Army v Dalziel (1944) 68 CLR 261; [1944] HCA 4

Newcastle-Under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92

North Shore Gas Co Ltd v Commissioner of Stamp Duties (1940) 63 CLR 52; [1940] HCA 7

Northern Territory v Collins (2008) 235 CLR 619; [2008] HCA 49

Re Lehrer and the Real Property Act 1900-1956 (1960) 61 SR (NSW) 365

Resumed Properties Department v Sydney Municipal Council (1937) LGR (NSW) 170

Risk v Northern Territory (2002) 210 CLR 392; [2002] HCA 23

Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470

SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 395

Stamford Property Services Pty Lts v Mulpha Australia Ltd (2019) 99 NSWLR 730; [2019] NSWCA 141

Stephenson v Thompson [1924] 2 KB 240

SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34

TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49

Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232; [2000] FCA 665

Corporation of the City of Toronto v Consumers’ Gas Co (1916) 2 AC 618

Trust Company Limited v Chief Commissioner of State Revenue [2007] NSWCA 255

Union Trustee Co v Federal Commissioner of Land Tax (1915) 20 CLR 526; [1915] HCA 68

Valuer-General v AWF Prop Co 2 Pty Ltd (2021) 65 VR 327; [2021] NSCA 274

Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10

Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd [2009] FCA 742

Wik Peoples v Queensland (1996) 187 CLR 1; [1996] HCA 40

Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53

Texts Cited:

Brendan Edgeworth, Butt’s Land Law (7th ed, Lawbook Co, 2017)

Janice Gray et al, Property Law in New South Wales, (5th ed, LexisNexis, 2022)

K Gray and SF Gray, Elements of Land Law (5th ed, OUP, 2009)

P Herzfeld and T Prince, Interpretation (3rd ed, Lawbook Co, 2024)

S Ball, “The Jural Nature of Land” (1928) 23 Illinois L Rev 45

Samantha Hepburn and Steve Jaynes, “The Nature and Scope of Rights of Removal” (2013) 2 Property Law Review 123

Category:

Principal judgment

Parties:

Conexa Sydney Holdings Pty Ltd (Appellant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel:
Philip Solomon and P G Turner (Appellant)
Stefan Balafoutis and Tamara Phillips (Respondent)

Solicitors:
Piper Alderman (Appellant)
Crown Solicitor for NSW (Respondent)

File Number(s):

2024/206555

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity

Citation:

[2024] NSWSC 628

Date of Decision:

24 May 2024

Before:

Richmond J

File Number(s):

2023/151288

HEADNOTE

[This headnote is not to be read as part of the judgment]

In September 2019, Conexa Sydney Holdings Pty Ltd (the appellant) acquired all the shares in SGSP Rosehill Network Pty Ltd (“Rosehill”) for $74,700,000 with provision for adjustments. Rosehill was the owner of a water carrying pipeline which connects a recycled water plant to large industrial sites. A report from KPMG commissioned by the appellant, which was provided to the Chief Commissioner (the respondent), valued Rosehill’s unencumbered land holdings and goods at $60,749,000, including $4,110,000 for a freehold property, $46,390,000 for the pipeline, and $10,249,000 for other plant and equipment related to the operation of the pipeline.

The Water Industry Competition Act 2006 (NSW) (“WIC Act”) provides for ownership of water industry infrastructure and gave Rosehill its “interest” in the pipeline. The issue on appeal was whether the appellant’s interest in the pipeline and related infrastructure which it acquired was, as the Commissioner claimed, an interest in land or goods for the purposes of ss 147 and 155 of the Duties Act 1997 (NSW) (“Duties Act”), or whether it was, as the appellant asserted, an indeterminate (and non-dutiable) interest that could not be characterised for Duties Act purposes as either an interest in land or goods. The primary judge, Richmond J, found that the appellant’s interest in the pipeline and related infrastructure was an interest in “goods” for the purposes of s 155 of the Duties Act and affirmed KPMG’s assessment.

The Court held, dismissing the appeal, that the appellant’s interest in the pipeline was an interest in land for the purposes of the Duties Act; alternatively, its interest in the pipeline was an interest in goods and not a “novel property right” which was neither an interest in land nor goods.

1. The meaning of “land” depends on the context and purpose of the legislation in which it appears. An “interest in land” within the meaning of s 155 of the Duties Act is not the same as an interest in land at common law: Payne JA, with Ward P, Stern JA and McHugh JA agreeing at [55]-[65].

   Risk v Northern Territory (2002) 210 CLR 392; Stamford Property Services Pty Lts v Mulpha Australia Ltd (2019) 99 NSWLR 730; [2019] NSWCA 141 applied. TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49 considered.

2. The pipeline and associated infrastructure were affixed to the land and would, ordinarily, be regarded as a fixture and form part of the land. The character of the pipeline as part of the land is not affected by the fact that the pipeline is owned by an entity other than the proprietor of the surrounding land. A statutory right to exclusive possession of a stratum of land occupied by a pipeline may create an interest in that stratum of the land for the purposes of the Duties Act: Payne JA, with Ward P, Stern JA and McHugh JA agreeing at [66]-[84]; Basten AJA at [185]-[190].

   Holland v Hodgson (1872) LR 7 CP 328, Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325, Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 applied. Metropolitan Railway Co v Fowler [1893] AC 416; Clos Farming Estates P/L (rec and mgr appntd) v Easton and Anor [2001] NSWSC 525 considered.

3. Rights with respect to “property” may take different forms depending on the type of property as recognised in the relevant statute. Text, context and purpose of the WIC Act support the conclusion that the interest of the owner of the pipeline conferred by s 64 of the WIC Act is an interest in the stratum of land occupied by the pipeline: Payne JA, with Ward P, Stern JA and McHugh JA agreeing at [85]-[140].

   Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53; Union Trustee Co v Federal Commissioner of Land Tax (1915) 20 CLR 526 applied. North Shore Gas Co Ltd v Commissioner of Stamp Duties (1940) 63 CLR 52, Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 1220 CLR 118, Asciano Services Pty Ltd v Chief Commissioner of State Revenue (2008) 235 CLR 602; [2008] HCA 46 and Northern Territory v Collins (2008) 235 CLR 619; [2008] HCA 49, Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472; [2004] HCA 59, Epic Energy, Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10, Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; [2004] VSCA 82; Valuer-General v AWF Prop Co 2 Pty Ltd (2021) 65 VR 327; [2021] NSCA 274; Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd [2023] NSWCA 113 considered.

4. Alternatively, the pipeline and associated infrastructure were an interest in goods. The word “goods” in ss 163K and 155 of the Duties Act extends to any such interests of the kind at issue in that case. The text, context and purpose of the Duties Act suggest that the interest conferred by the WIC Act is not a “novel property right” which exists outside the reach of s 155 of the Duties Act: Payne JA, with Ward P, Stern JA and McHugh JA agreeing at [141]-[167].

   Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd [2023] NSWCA 113 applied. Australian Provincial Assurance v Coroneo (1938) 38 SR (NSW) 700 at 712, North Shore Gas Co Ltd v Commissioner of Stamp Duties (1940) 63 CLR 52, Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10; Attorney-General (Cth) v R T Co Pty Ltd (No 2) (1957) 97 CLR 146, Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; [2004] VSCA 82, Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 considered.

Per Basten AJA, Payne JA agreeing at [138]

1. The appellant’s purchase of the shares in Rosehill was a “relevant acquisition”, and therefore a dutiable transaction, if Rosehill was a “landholder”. Rosehill was a landholder if it had a “land holding”, being an “interest in land”. Land, in legal terms, is a three-dimensional space on, above or under the physical surface of the Earth. Unless otherwise provided by statute, it includes fixtures. The pipeline is a fixture. The space it occupies is land. The owner of that space has an interest in land: [171]-[174], [178].

   Water Industry Competition Act 2006 (NSW), ss 6, 146-148; Interpretation Act 1987 (NSW), s 21

2. Ownership of land describes a jural relationship between a legal person and the physical entity. The owner of a fixture is usually the owner of the land in or on which the fixture stands. The ownership of the pipeline, being “water industry infrastructure”, was vested by statute in the constructor, and is therefore owned separately from the land in which it was placed. The appellant subsequently acquired title by a relevant acquisition, which is therefore dutiable: [185]-[189].

   Water Industry Competition Act 2006 (NSW), s 64

   Toronto Corporation v Consumers’ Gas Co (1916) 2 AC 618; North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7.

JUDGMENT

1. WARD P: I agree with Payne JA.

2. PAYNE JA: In September 2019, Conexa Sydney Holdings Pty Ltd (the appellant) acquired all the shares in SGSP Rosehill Network Pty Ltd (“Rosehill”) for $74,700,000 with provision for adjustments. Rosehill was the owner of a water carrying pipeline which connects a recycled water plant to large industrial sites. The pipeline is buried in the ground for its entire length. Much of the pipeline (approximately 95%) is buried under Crown land. A report from KPMG commissioned by the appellant, which was provided to the Chief Commissioner (the respondent), valued Rosehill’s unencumbered land holdings and goods at $60,749,000, including $4,110,000 for a freehold property, $46,390,000 for the pipeline, and $10,249,000 for another plant and equipment related to the operation of the pipeline.

3. The issue in the case was whether the appellant’s interest in the pipeline and related infrastructure which it acquired was, as the Commissioner claimed, an interest in land or goods for the purposes of ss 147 and 155 of the Duties Act 1997 (NSW) (“Duties Act”), or whether it was, as the appellant asserted, an indeterminate (and non-dutiable) interest that could not be characterised for Duties Act purposes as either an interest in land or goods.

4. The primary judge, Richmond J, found that the appellant’s interest in the pipeline and related infrastructure was an interest in “goods” for the purposes of s 155 of the Duties Act and affirmed the assessment.

5. For the reasons which follow, I have concluded that the appellant’s interest in the pipeline and related infrastructure which it acquired from Rosehill was an interest in land and the appeal should be dismissed.

Relevant Facts

6. In 2009, the NSW government established the Rosehill Water Recycling Scheme with approval under the Environmental Planning and Assessment Act 1979 (NSW). The Recycling Scheme was a public-private partnership under the NSW Government’s Metropolitan Water Plan and aimed to deliver recycled water to southwest Sydney.

7. Pursuant to agreements executed in August 2008, AcquaNet Sydney Pty Ltd and Rosehill, both subsidiaries of Jemena Ltd, were the entities designated to construct and execute the pipeline project. Rosehill was the asset-holding entity and owned the pipeline.

8. The pipeline requires two reservoirs to operate, one in Rosehill on land leased by Rosehill from Shell Company of Australia Ltd and the other in Woodville located on land leased by Rosehill from Parramatta City Council.

9. Much of the pipeline (estimated at 95.37 percent) travels under Crown land. The remainder of the pipeline travels underneath privately owned land. The only land owned by Rosehill that the pipeline traverses is a Fairfield property where the pipeline originates.

10. As at the acquisition date, aside from that ownership interest, Rosehill’s rights in respect of the lands where the pipeline lay were various. For part, Rosehill held certain registered leases, and a registered sub-lease, over privately-owned land where other portions of the pipeline were located. Over other private lands containing the pipeline, Rosehill held registered easements, access rights agreements and/or licences.

11. The characterisation of Rosehill’s rights in the case of the Crown lands through which the vast bulk of the pipeline travels is at the heart of this case.

12. The parties agreed on the following characteristics of the pipeline:

1. The pipeline is approximately 19 kilometres in length and is buried in the ground.

2. The pipeline is designed to provide a permanent means of water carriage.

3. There are three reservoirs and two pumping stations along the pipeline.

4. Rosehill constructed the pipeline and in order to do so either laid it in an open trench, over which the displaced soil was replaced, or used directional boring through abandoned gas mains pipes.

5. Where road surfaces or footpaths were disturbed in the process of laying the pipeline, they were restored and returned to use as roads and footpaths once the pipeline was installed.

6. The pipeline was connected to a recycled water plant in Fairfield which was developed and operated by Veolia Water Australia Pty Ltd under a plant agreement. The Fairfield plant is located at 2 East Parade, Fairfield. The pipeline runs to the boundary between Yennora and Old Guildford, it then divides into two branches which comprise the remainder of the pipeline.

7. The shorter of these branches travels west-north-west to the suburb of Smithfield and connects to the Marubeni power station. The longer branch travels through Old Guildford, Granville, Rosehill and Camellia where it eventually connects to Boral and CSR plants.

The share sale agreement

13. On 30 September 2019, the appellant (known at the time as WUA Sydney Holdings Pty Ltd) acquired the entirety of the issued share capital of AcquaNet and Rosehill pursuant to a share sale agreement exchanged on 25 June 2019. The vendors were Jemena Limited and SGSP (Australia) Assets Pty Ltd.

14. Clause 4 of the share sale agreement provided that the purchase price was $74,700,000 with provision for adjustments. The conditions for completion required that AcquaNet enter into a termination deed with Veolia in respect of the plant operation agreement. Pursuant to the termination deed, AcquaNet paid Veolia approximately $57 million. Upon payment, the plant agreement, under which the pipeline was connected to the Fairfield plant developed and operated by Veolia, was terminated and all of Veolia’s rights, title and interest in the Fairfield plant assets were transferred to AcquaNet.

The litigation

15. On 20 December 2019, the appellant’s representatives made a submission to the Commissioner regarding the assessment of duty on the transaction the subject of the share sale agreement. An estimated duty liability of $1,275,160 was paid to the Commissioner, consisting of $233,957 (described as being in respect of the surrender by Veolia to AcquaNet of the Fairfield Sub-Lease) and landholder duty of $1,041,203. The submission also noted that the appellant had commissioned KPMG to undertake an independent valuation of the land holdings and other assets of Rosehill, and that the appellant was not in a position to provide a finalised statement.

16. On 22 June 2020, the appellant provided a valuation report (“KPMG Report”) to the Commissioner along with a landholder acquisition statement. The KPMG Report identified the purchase consideration for both AcquaNet and Rosehill as $70.4 million, with approximately $60.8 million attributed to the market value of the shares in Rosehill. The KPMG Report stated that the fair value of the Fairfield property was $4,110,000, and the fair value of Rosehill’s plant and equipment was $56,639,000 consisting of $46,390,000 for “piping” and $10,249,000 attributed to the remainder.

17. On 21 March 2022, the respondent issued a Duties Notice of Assessment which assessed the appellant as liable for landholder duty in the sum of $3,326,497. This assessment was based on the KPMG Report.

18. On 20 May 2022, the appellant objected to the assessment with reasons provided on 31 August 2022. On 23 March 2023, the respondent disallowed this objection, after which the appellant brought proceedings before the Supreme Court for review pursuant to s 97(1)(a) of the Taxation Administration Act 1996 (NSW).

15. The primary judge affirmed the assessment and dismissed the Amended Summons: Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 628.

Primary judgment

20. The primary judge concluded that Rosehill’s interest in the pipeline was not an interest in land but comprised goods for the purpose of s 155(1) of the Duties Act, and the appellant failed to discharge its onus of proof that the unencumbered value of the pipeline at the time of the acquisition was less than the amount on which the assessment was based, being $46,390,000.

21. At the outset, the primary judge observed that the word “interest” in s 147 of the Duties Act is capable of many meanings depending on the context in which it is used. When the term “interest” is used in the phrase “interest in land”, it is regarded as referring to a proprietary right in the land and not a mere personal right.

22. The primary judge found that the answer to the question of whether the pipeline is an interest in land lies in the effect of s 64 of the Water Industry Competition Act 2006 (NSW) (“WIC Act”). The primary judge held that the words in s 64 are designed to negate the position which would arise under common law, which is that where chattels are affixed to the land so as to become fixtures they form part of “the land” and are owned by the owner of “the land”. Section 64 vests ownership of the thing or things comprising the water industry infrastructure in the person identified irrespective of whether that person owns the land in, on, under or over which the thing or things are situated. The primary judge found that s 64 also “treats the thing or things which comprise water industry infrastructure as items of property separate from the land in, on, under, or over which they are situated”: at [70].

23. In addition to the language of s 64, the primary judge gave three other reasons why on its proper construction s 64 has the effect of causing the things comprising the water industry infrastructure to retain their character as chattels despite their affixation to the land.

24. First, there is a general principle that a statutory provision which vests in a person ownership of items that would otherwise be fixtures does not merely by virtue of conferring that right of ownership in the item confer an interest in “the land” itself: referring to Newcastle-Under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 at 103; Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118 at 127 and 133–4 (“North Shore Gas (No 2)”); Asciano Services Pty Ltd v Chief Commissioner of State Revenue (2008) 235 CLR 602; [2008] HCA 46 at [27]–[31]; Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 at [75] and [163].

25. Secondly, there are a number of decisions about statutory “severance” provisions of a similar kind to s 64 of the WIC Act where the relevant items have been treated as retaining their character as chattels. These cases included Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10, Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; [2004] VSCA 82 and Epic Energy. All these cases held that such statutory severance provisions reformulated the principles relating to property in tenant’s fixtures. The primary judge concluded that the legislature was addressing the same concerns in s 64 of the WIC Act; namely, to protect the licensee’s interests against competing claims from the landowner. The primary judge found that the legislature chose to address this concern through the same mechanism, which is to confer ownership of the pipeline on the licensee, and this approach had the same effect which is to prevent the pipelines from becoming part of the land.

26. Thirdly, the Court of Appeal’s decision in Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd [2023] NSWCA 113 was analogous to the present case as it concerned vesting orders made under statute which had the effect of legally severing the assets concerned from the land on which they were situated. There, the taxpayer had acquired interests in power plants that were affixed to land. On the Commissioner’s appeal, the Court of Appeal found that the effect of the vesting orders was legally to sever former chattels, which had become fixtures, from the land. This had the effect that the pipeline infrastructure should be characterised as goods for the purposes of the Duties Act.

27. The primary judge found that he was bound by the reasoning in Shell Energy (No 1) to conclude that the pipeline infrastructure should be characterised as goods. In that case, Kirk JA (with whom Adamson JA and Griffiths AJA agreed) concluded that the items constituting the power stations were “goods” for the purposes of s 155(1) of the Duties Act. Kirk JA reasoned that the statutory usage of “goods” in s 155(1) encompasses the ordinary understanding of that notion at general law which includes former chattels which have been legally severed from the land. This understanding of goods includes items that are difficult but not impossible to move. Kirk JA further distinguished s 155(1) from the context in which the word “goods” was used in the legislation considered in North Shore Gas Co Ltd v Commissioner of Stamp Duties (1940) 63 CLR 52 (“North Shore Gas (No 1)”).

28. The primary judge made three additional points in relation to the finding that Rosehill’s interest in the pipeline was an interest in goods. The first was about the legislative history of the Duties Act. His Honour observed that in the Second Reading Speech for the State Revenue Legislation Further Amendment Bill 2009 (NSW), which introduced the landholder provisions including s 155(1), Mr Aqualina on behalf of the Minister for Finance stated that the goal was to align the tax treatment of transactions involving land with those involving goods, thereby applying landholder duty to acquisitions of both land and goods.

29. Historically, the Stamp Duties Act 1920 (NSW) used the term “goods, wares and merchandise”. Dixon J interpreted this phrase in North Shore Gas (No 1) and found that it includes all tangible movable items, excluding intangible rights (choses in action). Starke J similarly observed that “goods, wares and merchandise” covered all movable property, excluding fixtures.

30. The second point was in relation to the general meaning of “goods”. In Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470 which concerned the interpretation of the term “goods” in s 32(2)(d) of the Payroll Tax Act 2007 (NSW), Gleeson JA held that “goods” should be understood within its specific context. In the Duties Act, the term “goods” is used but, according to Kirk JA in Shell Energy (No 1), this should not be limited by prior interpretations of expressions used in older statutes. Kirk JA explained that “goods” in s 155(1) aligns with its general meaning, which includes chattels (personal, movable property).

31. The third point was in relation to severance. The primary judge held that a chattel that is attached to land in such a way that removing it would cause damage, ceases to be “goods” and is only considered a chattel if it is removed from the land, referring to Mills v Stokman (1967) 116 CLR 61 at 71; [1967] HCA 15; Ashgrove Pty Ltd v Commissioner of Taxation (1994) 53 FCR 452; [1994] FCA 598; and Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232; [2000] FCA 665 at [9]–[18]. Shell Energy (No 1) held that severance can include a legal severance. Here the legal severance was effected by s 64 of the WIC Act which allowed the attached items to retain their status as chattels under the law.

Conclusion of the primary judge

32. The KPMG Report (which it will be recalled was provided by the appellant to the Commissioner) stated the fair value of the pipeline to be $46.39 million based on its current use within an ongoing water treatment business. The appellant agreed that if the pipeline’s value was to be assessed as part of a going concern, its value would match the KPMG report’s figure. A separate expert report from a Mr Collins assessed the value of Rosehill’s right to remove and sell the pipeline as “nil”. That report was excluded from evidence and there was no appeal brought on this topic. In the absence of evidence challenging the KPMG Report's valuation, the primary judge upheld the valuation of $46.39 million. Accordingly, the primary judge affirmed the assessment and dismissed the appellant’s Amended Summons.

Grounds of appeal

33. By Notice of Appeal filed 19 August 2024, the appellant raised six grounds of appeal:

1.   The trial judge erred in concluding that his Honour was bound by the reasoning in Chief Commissioner of State Revenue v Shell Energy Operations No. 2 Pty Ltd (2023) 116 ATR 337; [2023] NSWCA 113 at [120]-[126] to conclude that the water-carrying pipeline in which the appellant acquired an interest on the acquisition date (the Pipeline) was “goods” for the purposes of section 155(1) of the Duties Act 1997 (NSW) (the Duties Act).

2. The trial judge erred in concluding that “goods” in section 155(1) of the Duties Act has a meaning wider than tangible moveables, or chattels personal other than choses in action. The trial judge should have concluded that (subject to the express exclusions in section 163K of the Duties Act) “goods” in section 155(1) means tangible moveables, or chattels personal other than choses in action.

3.   The trial judge erred in concluding that statutory severance of “ownership” of tangible items affixed to land alters the status of such items from “land” to “chattels” and “goods”. The trial judge should have concluded that such statutory severance merely identifies who in law stands in an ownership relation to the tangible items.

4.   The trial judge erred in concluding that a “legal severance” of tangible items from land to which they were earlier affixed has the same effect, of causing the tangible items to become “goods”, as a physical severance of tangible items from land to which they were earlier affixed. The trial judge should have held that the effect of a “legal severance” is a matter of statutory construction to be determined in accordance with the principles in Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 1220 CLR 118 and Asciano Services Pty Ltd v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46.

5. The trial judge erred in concluding that the Pipeline in which the appellant acquired an interest on the acquisition date gained the status of a “chattel” and “goods” by the operation of section 64 of the Water Industry Competition Act 2006 (NSW) (the WIC Act). The trial judge should have followed North Shore Gas Co Ltd v Commissioner of Stamp Duties (1940) 63 CLR 52 to conclude that, notwithstanding the operation of section 64 of the WIC Act, the Pipeline lacked the status of a “chattel” or “goods” as of the acquisition date.

6. The trial judge erred in concluding that, in acquiring an interest in the Pipeline on the acquisition date, the appellant acquired an interest in “goods” for the purposes of section 155(1) of the Duties Act.

Notice of contention

34. On 16 September 2024, the respondent filed a Notice of Contention contending that:

1.   The trial judge:

(a) should have found that the Pipeline was a "land holding" of Rosehill for the purposes of ss 147 and 155(1) of the Duties Act 1997 (NSW) (the Duties Act); or, alternatively

(b) should have found that the parts of the Pipeline that were buried in the land which Rosehill owned or leased were a "land holding" of Rosehill for the purposes of ss 147 and 155(1) of the Duties Act, and the parts of the Pipeline that were not a "land holding" were "goods" for the purposes of s 155(1) of the Duties Act;

or, alternatively

(c) was correct to find that the Pipeline was "goods" for the purposes of s 155(1) of the Duties Act.

Consideration

35. The principal question raised in this case is whether, when the appellant acquired the share capital in Rosehill on 30 September 2019, it thereby acquired “land holdings” within the meaning of s 155 of the Duties Act, as the Commissioner submitted, or whether the interest in the pipeline was a “novel property right” which was not subject to duty under the Duties Act, as the appellant claimed. I will first address the dispositive issue of whether the appellant acquired an interest in land for the purposes of ss 147 and 155(1) of the Duties Act.

Submissions

36. The appellant submitted that s 64 of the WIC Act does not “support a conclusion that the pipeline is ‘land’ within the meaning of the Duties Act”. It was submitted that s 64(3), which was only added in 2009 to s 64, does not reflect an intention of the Parliament that ownership of water industry infrastructure under s 64(1) constituted an interest in land. Such an inference, the appellant argued, finds no footing in the terms or the legislative history of s 64.

37. As to the legislative purpose of s 64 of the WIC Act, the appellant submitted that it was to protect the investment outlay made by a private sector entity which installed water industry infrastructure on, in or under another’s land. Section 64 operates as a legal device of “constituting novel property rights to confer legal protection of an economic interest” against the owner of such land. In other words, s 64 prevents landowners from being entitled to the advantage of the water industry infrastructure and guards against the investor losing its economic investment in the infrastructure asset.

38. The appellant submitted that to protect that investment it was unnecessary for Parliament to deem the investor’s statutory ownership of the water industry infrastructure to be an interest in “land” – and nothing in the terms of the WIC Act as originally enacted, or as amended in 2009 or 2011, indicates otherwise.

39. The appellant submitted that the respondent had failed to show how “[a]n underground pipeline is a ‘tenement’ or ‘hereditament’” and that, as a matter of law, the pipeline is thus a land holding of the landholder. It was submitted that to say that a pipeline can be the subject of an estate or interest, and can be inherited, says nothing about whether this pipeline is a “land holding” in New South Wales. It was submitted that the principles established by North Shore Gas (No 2), Asciano and Northern Territory v Collins (2008) 235 CLR 619; [2008] HCA 49 demonstrate that Rosehill's ownership of the pipeline was not intended to create an interest in land. Such reasoning, it was submitted, is “fallacious” and has been consistently rejected by the High Court: per Windeyer J in North Shore Gas (No 2).

40. The respondent submitted that the WIC Act provides for ownership of water industry infrastructure and it is common ground that it gave Rosehill its “interest” in the pipeline. To establish that ownership of the pipeline is an interest in “land” within the meaning of the Duties Act, the respondent relied on three propositions.

41. First, a permanent underground pipeline falls within the general law meaning of “land”. The respondent argued that this general law meaning is broad and inclusive: it is a three-dimensional concept encompassing not only the earth’s surface but also the space above and below it. Fixed contents within that space, such as the pipeline in this case, are part of the land. The respondent relied on passages in Brendan Edgeworth, Butt’s Land Law (7^th ed, Lawbook Co, 2017), Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 at [73]-[74], the Dictionary to the Duties Act which states that “land” includes a “stratum”, as well as Trust Company Limited v Chief Commissioner of State Revenue [2007] NSWCA 255 at [49]. The respondent submitted that s 21 of the Interpretation Act1987 (NSW) which defines “estate” and “land” reinforces this broad interpretation:

estate includes interest, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity.

land includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein.

42. The Duties Act’s broader context was also said to favour a wider definition of “interest in land”. Section 163H of the Duties Act gives the Chief Commissioner discretion to grant exemptions or concessions where imposing liability would be unjust. This provision implies that a broad construction of “land” is consistent with the statutory scheme which seeks to ensure equitable application of the Act.

43. Secondly, the pipeline is “land” under the Duties Act regardless of the fact that it is separately owned from the surrounding land. The concept of “land” under the Duties Act includes the notion that land is divisible into separate parts which may be owned by different individuals or entities. This interpretation aligns with general law principles and the statutory inclusion of “stratum” within the definition of “land”. As articulated in Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325, land can be divided both vertically and horizontally, allowing structures or strata to exist independently of the land above, below, or beside them. Ownership is not a determinant of whether something constitutes land under this framework.

44. The respondent observed that cases have consistently upheld this principle. For example, in Resumed Properties Department v Sydney Municipal Council (1937) LGR (NSW) 170 at 172 (Roper J) and Glentham v City of Perth [1986] WAR 205 at 206-207 (Burt CJ) and 211 (Wallace J), it was held that a single floor of a building was considered “land” under general law and the Interpretation Act. Similarly, in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 at 91; [1971] HCA 9 (Windeyer J, Barwick CJ agreeing), the High Court found that a landowner could retain ownership of the underlying land while transferring ownership of a building, effectively creating separate ownership of a stratum. This principle of divisible ownership applies broadly to other cases including where fixtures or improvements occupy a defined space below the surface.

45. In taxation and duty cases, the respondent observed that courts have also reinforced this understanding. If a landowner transfers fixtures without physically severing them, those fixtures remain classified as land. The transferee acquires at least an equitable interest, if not a legal one, in the land. Decisions in cases such as Metal Manufacturers v Commissioner of Taxation [1999] FCA 1712 and Eastern Nitrogen v Commissioner of Taxation (2001) 108 FCR 27; [2001] FCA 366 demonstrate that fixtures, as part of the land, retain their legal characterisation even when subject to separate ownership. Applying these principles to the present pipeline, the respondent submitted that the pipeline here constitutes land even when its ownership is distinct from the surrounding land. This interpretation coheres with the statutory and common law understanding of land as encompassing three-dimensional divisions.

46. Thirdly, s 64(1) of the WIC Act explicitly acknowledges the alienability of water infrastructure and allows for the acquisition of “title” to such infrastructure although the surrounding land may be owned by another party. This aligns with the characterisation of the pipeline as land. The fact that water infrastructure may be owned by a party other than the freehold owner of the surrounding land does not undermine this conclusion. Section 64(3) of the WIC Act was said to support this conclusion. This provision was introduced as part of the Real Property and Conveyancing Legislation Amendment Act 2009 (NSW), a legislative reform aimed at addressing the relationship between the ownership rights conferred, inter alia, by s 64(1) of the WIC and the principle of indefeasibility of title under s 42 of the Real Property Act 1900 (NSW). The inclusion of s 64(3) in the WIC Act ensured that the ownership of water industry infrastructure specified in s 64(1) prevailed over title established by s 42 of the Real Property Act.

42. The question whether the Duties Act’s conception of an “interest in land” extends to this pipeline is further supported by the meaning of “interest” in land under the Duties Act. The respondent submitted that “interest” is broadly defined in the Act’s Dictionary to include “an estate or proprietary right”. While the term “estate” is broadly interpreted in the Interpretation Act to encompass various rights and claims, its application in the Duties Act has been held to imply proprietary rights in land. Clause 4 of the Dictionary to the Duties Act elaborates that certain statutory rights, such as mining leases under the Mining Act 1992 (NSW), can give rise to an “interest in land”, including fixtures affixed under the authority of such leases. However, specific statutory rights, such as exploration licenses or carbon sequestration rights, are explicitly excluded from the definition.

43. The respondent also relied on the legislative history, including amendments introduced by the State Revenue Legislation Further Amendment Act 2012 (NSW), which clarifies that statutory rights can qualify as “interests in land” for duties purposes, even if they may not be recognised as such under general property law. It was submitted that the characterisation of an interest in land under the Duties Act is not strictly dictated by how it is classified under other statutes. For instance, a petroleum title, described as personal property under the Petroleum (Onshore) Act 1991 (NSW), is excluded, and forestry rights, deemed an “interest in land” under the Conveyancing Act 1919 (NSW), are similarly excluded for duties purposes. This demonstrates that the classification under non-duties legislation does not necessarily determine whether an asset qualifies as an interest in land for duties purposes. Additionally, cl 4(1A) of the Dictionary to the Duties Act allows for items physically affixed to land by a person with another recognised interest in land to qualify as an “interest in land”, independent of the general law of fixtures. This expands the scope of what may constitute an interest in land under the Duties Act.

44. The respondent submitted that the primary judge and the appellant did not address these implications or analyse the impact of cl 4 of the Dictionary to the Duties Act, which distinguishes this case from earlier cases involving different statutes such as North Shore Gas (No 1), North Shore Gas (No 2), and Asciano.

45. The respondent submitted that the question of whether rights under s 64 of the WIC Act constitute an “interest” in land under the Duties Act does not require a broad determination of the full scope of “interest” in land. An “interest” typically includes estates or proprietary rights and may extend to certain statutory rights concerning land. The respondent submitted that when a statute explicitly provides for ownership of infrastructure travelling over land owned by another entity, it confers a proprietary interest in that land. As such, s 64(1) did not establish a novel legal category. Instead, it vested ownership of the water infrastructure to the designated persons, aligning with established principles of property law. Thus, it was submitted that the rights granted under s 64(1) constitute a proprietary interest in land within the framework of the Duties Act.

Construction of the Duties Act and the WIC Act

51. Whether the appellant’s interest in the pipeline and associated infrastructure at the acquisition date is an “interest in land” or “goods” or an indeterminate (and non-dutiable) interest depends on the construction of the Duties Act and the WIC Act.

52. The critical question here of whether Rosehill’s ownership of the pipeline is an interest in land for the purposes of the Duties Act involves answering the following questions:

1. What is an interest in land within the meaning of the Duties Act?

2. What is the nature of the appellant’s interest in the pipeline recognised or conferred by the WIC Act?

3. Is the interest identified in answer to question (2) an interest in land within the meaning of the Duties Act?

53. There was no dispute about the relevant principles of statutory construction which involves consideration of text, context and purpose. In SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34, Kiefel CJ, Nettle and Gordon JJ said:

[14]   The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. (footnotes omitted)

Duties Act

54. Chapter 4 of the Duties Act imposes landholder duty on the acquisition of an interest in a private landholder. Section 155(1) of the Duties Act charges duty on the “unencumbered value of all land holdings and goods of the landholder in New South Wales”. Section 155 provides:

155 How duty is charged on relevant acquisitions—private landholders

(1)   If an acquisition statement that discloses a relevant acquisition in a private landholder does not disclose any other acquisitions during the statement period, duty is chargeable, at the general rate, on the amount calculated by multiplying the unencumbered value of all land holdings and goods of the landholder in New South Wales (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.

(2)   If a relevant acquisition results from the aggregation of the interests of associated persons, the reference in subsection (1) to the interest acquired includes a reference to any interests acquired by associated persons on the same date.

(3)   If an acquisition statement disclosing a relevant acquisition in a private landholder also discloses one or more other acquisitions during the statement period, duty is chargeable, at the general rate, on the aggregate of amounts severally calculated, in the manner provided by subsection (1), in respect of each interest required to be disclosed in the statement.

(4)   Duty payable under this section is to be reduced by the sum of the duty paid or payable under this Act in respect of an acquisition, during the statement period, by the person or any associated person of an interest in the same landholder, but only in proportion to the extent to which the duty paid or payable is attributable to the amount of the duty payable under this section.

(5)   Duty payable under this section is to be reduced by the sum of the amounts severally calculated, in accordance with the following formula, in respect of each acquisition of an interest in the landholder made by the person, or an associated person, during the statement period—

where—

A is the unencumbered value of the land holdings and goods in New South Wales of the landholder at the time the acquisition was made, and

B is the unencumbered value of all property of the landholder at that time, and

C is the sum of—

(a)   the duty under this Act paid or payable in respect of—

(i)   a dutiable transaction in relation to the units or shares acquired, or

(ii)   a capital reduction or a rights alteration under Part 3 of Chapter 3 by which an interest in the landholder was acquired, or

(iii)   an allotment of shares under Part 5 of Chapter 3 by which an interest in the landholder was acquired, and

(b)   any duty of a like nature so paid or payable under a law of another Australian jurisdiction.

(6)   If a relevant acquisition is made owing to the aggregation of the interests of associated persons, but the Chief Commissioner is satisfied that the associated persons acquired their respective interests independently, the Chief Commissioner may assess and charge duty on each separate acquisition without aggregating the interests of the person who made it with the interests of associated persons.

(7)   Duty is not chargeable under this section on the acquisition of an interest in a landholder that is required to be disclosed in an acquisition statement if the acquisition is an exempt acquisition.

(8)   This section is subject to Part 3.

55. Sections 148 and 149 identify the circumstances in which liability for duty arises and define what constitutes a “relevant acquisition”:

148 When does a liability for duty arise?

A liability for duty charged by this Part arises when a relevant acquisition is made.

149 What is a “relevant acquisition”?

(1)   For the purposes of this Chapter, a person makes a relevant acquisition if the person—

(a)   acquires an interest in a landholder that is of itself a significant interest in the landholder, or

(b)   acquires an interest in a landholder that (when aggregated with other interests in the landholder held by the person or an associated person) results in an aggregation that amounts to a significant interest in the landholder, or

(c)   already having a significant interest, or an interest described in paragraph (b), in a landholder, acquires a further interest in the landholder.

[…]

56. Section 150 identifies the meaning of a person having an “interest” or “significant interest” in landholders:

150    What are “interests” and “significant interests” in landholders?

(1)    For the purposes of this Chapter, a person has an interest in a landholder if the person, in the event of a distribution of all the property of the landholder, would be entitled (without regard to any liabilities of the landholder) to any of the property distributed.

(1A)    However, an entitlement that arises merely because a person has a debt interest in a landholder, is not an interest in a landholder.

(2)    A person who has an interest in a landholder has a significant interest in the landholder if the person, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, would be entitled (without regard to any liabilities of the landholder) to—

(a)    for a private landholder that is a private unit trust scheme—20% or more of the property distributed, or

(b)    otherwise for a private landholder—50% or more of the property distributed, or

(c)    for a public landholder—90% or more of the property distributed.

(3)    An interest in a landholder that was acquired at a time when the landholder did not hold land in New South Wales is not counted during the period of 12 months after the landholder first holds land in New South Wales.

(4)    In determining whether a person has a significant interest in a landholder, a distribution of property to any person in the person’s capacity as the holder of a debt interest is to be disregarded.

(5)    In this section—

debt interest has the same meaning as it has in Division 974 of the Income Tax Assessment Act 1997 of the Commonwealth.

person includes a landholder.

private unit trust scheme has the same meaning as in Division 2.

57. It is common ground that when the appellant acquired the share capital in Rosehill on 30 September 2019, the appellant made a “relevant acquisition” in a “private landholder” for the purpose of Chapter 4 of the Duties Act. A landholder includes a private company that has land holdings in New South Wales with a threshold value of $2,000,000 or more: s 146(1). A landholder is a private landholder if it is a private company: s 146(2). There is no dispute that, at the time of the acquisition effected by the share sale agreement, Rosehill was a private landholder (having landholdings with a threshold value of $2 million) and the appellant acquired a significant interest in Rosehill within the meaning of s 150 of the Duties Act, being 100% of the interest.

An interest in land within the meaning of the Duties Act

58. The question is whether and, if so, how the pipeline held by Rosehill is encompassed in the phrase “all land holdings and goods” of Rosehill, being the landholder. The meaning of this phrase must be ascertained from the text, context and purpose of the Duties Act. The extent to which general law principles are applied to ascertain this meaning must also be informed by the statutory context of s 155(1) of the Duties Act.

59. In Risk v Northern Territory (2002) 210 CLR 392; [2002] HCA 23 at [26]-[36], Gleeson CJ, Gaudron, Kirby and Hayne JJ explained, as with the meaning of any word, the meaning of “land” depends on the context and purpose of the legislation in which it appears. Gummow J also observed at [83] that the question of whether the seabed and waters above the ground are “land” in the context of particular legislation must be resolved by “regard to the text of the statute as a whole, and the subject, scope and purpose of the statute and against the legislative history and antecedent circumstances”.

60. As Leeming JA explained in Stamford Property Services Pty Lts v Mulpha Australia Ltd (2019) 99 NSWLR 730; [2019] NSWCA 141:

[26]   … “Land” is a term which is familiar in ordinary language, and which bears a number of quite distinct legal meanings. In Scully v Leichhardt Council (1994) 85 LGERA 109 at 110 Pearlman CJ noted that:

“The word ‘land’ is a word of general meaning. It does not of itself suggest any specific limitation of size or measurement or any specifically identifiable area, such as is suggested by the word ‘allotment’. It is necessary, then, to consider the context in which the word appears, and the scope and purpose of the relevant statutory provisions, in order to determine how the word ‘land’ is to be construed.”

The primary judge cited that passage with approval. I respectfully agree with its aptness.

61. The concepts of an “interest” in land, “land holdings” and “land” are non-exhaustively defined in the Duties Act. As to the term “land holdings”, s 147(1) of the Duties Act provides:

147   What are the “land holdings” of a landholder?

(1)    For the purposes of this Chapter, a land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor, subject to this section.

(2)    An interest in land is a land holding of a unit trust scheme only to the extent that the interest is held by the trustee of the unit trust scheme in its capacity as trustee of the scheme, by a custodian of the trustee of the unit trust scheme in its capacity as custodian or by a sub-custodian of the custodian of the trustee of the unit trust scheme in its capacity as sub-custodian.

(3)    An interest in land is not a land holding of a company if the company holds the land on trust, but only if the company is not a beneficiary of the trust.

(4)    This section is in aid of, but does not limit, the operation of any provision of this Chapter providing for constructive ownership of interests.

Note.

In relation to interests in land, see also clause 4 of the Dictionary.

62. An “interest” is defined non-exclusively in the Dictionary:

interest includes an estate or proprietary right.

63. Clause 4 of the Dictionary to the Duties Act makes it clear that an “interest in land” within the meaning of s 155 of the Duties Act is not the same as an interest in land at common law:

4    Interests in land

(1)    For the purposes of this Act, a mining lease or mineral claim granted under the Mining Act 1992 is taken to give the holder an interest in the land to which it relates.

(1A)   To avoid doubt, the land includes anything that, under the authority of the mining lease or mineral claim (whether direct or indirect), is fixed to the land the subject of the lease or claim and that would be a part of the land (as a fixture) if the lease or claim were an estate in fee simple in the land.

(2)   For the purposes of this Act, the following do not give rise to an interest in land—

(a)    an assessment lease, exploration licence or opal prospecting licence under the Mining Act 1992,

(b) a carbon sequestration right within the meaning of Division 4 of Part 6 of the Conveyancing Act 1919,

(c)    a petroleum title within the meaning of the Petroleum (Onshore) Act 1991,

(d)    a licence, permit, lease, access authority or special prospecting authority under the Petroleum (Offshore) Act 1982.

64. In TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49, the High Court explained that mining tenements and fixtures thereon were not interests in land at common law or under the then Mining Act 1904 (WA). Clause 4 of the Dictionary to the Duties Act, including the exclusions in cl 4(2), were introduced in 2012 as a legislative response to TEC Desert.

65. The word “land” is defined non-exclusively in the Dictionary as:

land includes a stratum.

66. In its predecessor, the Stamp Duties Act 1920 (NSW), a definition of “stratum” was included in the definition of “Land” in s 3:

[B]eing a part of land consisting of a space or layer below, on, or above the surface of the land, or partly below and partly above the surface of the land, defined or definable by reference to improvements or otherwise, whether some of the dimensions of the space or layer are unlimited or whether all the dimensions are limited.

67. Sections 147 and 155 were inserted by the State Revenue Legislation Further Amendment Bill 2009 (NSW). In the Second Reading Speech by John Aqualina (on behalf of the Minister for Finance), it was said that the amendments were introduced in order to “provide consistency with the tax treatment of direct transactions, landholder duty will apply to the acquisition of land and goods”. Further, “[t]he bill introduces a general anti-avoidance provision for duties”. Plainly, ss 147 and 155 were part of an attempt to broaden the Duties Act base and to provide consistency with the tax treatment of direct transactions. The sections underline the fundamental nature of the change from taxing instruments (as was generally the case under the Stamp Duties Act) to taxing transactions effected by the Duties Act.

68. Section 147A of the Duties Act was introduced with effect from 24 June 2020, after the relevant acquisition in this case. It is accepted that this section does not apply to the questions of construction in this case.

69. There is no dispute that the pipeline with associated infrastructure was affixed to the land and would, ordinarily, be regarded as a fixture and form part of the land. The law recognises that something “annexed to the land becomes part of the land”: e.g., Holland v Hodgson (1872) LR 7 CP 328 at 334. The pipeline and associated infrastructure are buried in the ground. They are intended to provide a permanent means of water carriage and remain in the ground indefinitely.

70. The character of the pipeline as part of the land is not affected by the fact that the pipeline is owned by an entity other than the proprietor of the surrounding land. It is possible for a landowner to own one part of land whilst a third party owns a separate stratum of the land. Land can be divided, and land divided up may consist partly of bare land, partly of tunnels, partly of other structures. As Basten JA said in Pacific National, in a passage not doubted by the High Court on appeal:

[76]   … However, it is trite to say that land may be divided both vertically and horizontally. There is no reason why a structure cannot be separated from the land above, below or beside it. In the general meaning of “land” the identity of the owner is rarely if ever a relevant criterion for determining whether or not the thing owned is land or not.

71. In Butt’s Land Law (7^th ed, 2017), the author observed at [2.10]:

[…]

In its common law meaning, “land” is never simply two-dimensional, as the term “surface” implies, but is any area of three-dimensional space, with its position identified by natural or imaginary points located by reference to the earth's surface. This three-dimensional space may include the earth's surface, but it is not restricted to it. It may be wholly above the surface or wholly below it. The space may have physical contents or it may be a void. Thus, any three-dimensional quantum of the space - even airspace - can be “land”. If the three-dimensional space has contents that are fixed in position, those fixed contents are part of the “land”.

[…]

(footnotes omitted)

72. In Bursill, the High Court determined a dispute about who owned a building located on Bursill’s land. Under the usual principles, Bursill would own a building erected on its own land, but Berger, who was Bursill’s neighbour, claimed that Berger owned the building on Bursill’s land. The Court found that the building had been transferred by Bursill’s predecessor to Berger’s predecessor and that the transfer was not defeated by the indefeasibility provisions of s 42 of the Real Property Act.

73. It is common ground that the definitions in the Interpretation Act apply in construing “land holdings” under the Duties Act.

74. The Interpretation Act defines the terms “estate” and “land”, as appearing in other NSW Acts (subject to any contrary intention in the Act concerned), as follows:

estate includes interest, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity.

….

land includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein.

75. “Land” is thus broadly defined to include tenements and hereditaments. The meaning of those terms was considered by Jacobs J in Re Lehrer and the Real Property Act 1900-1956 (1960) 61 SR (NSW) 365 where his Honour explained that “tenement” refers to anything holdable of a permanent nature connected with land, while “hereditament” encompasses all interests in real property capable of inheritance.

76. In the present case, for nearly the whole of its length, the pipeline occupies a stratum beneath the surface of the land under which it travels. As I will explain, by reference to rights granted by s 64 of the WIC, the pipeline is a permanent feature of the land. It is, by its nature, connected with land. An owner of the pipeline is capable of transferring that ownership interest, including by inheritance.

77. In Metropolitan Railway Co v Fowler [1893] AC 416, the House of Lords held that a tunnel fell within the meaning of hereditament and tenement. The issue in that case was whether the company’s rights under the Metropolitan and District Railways (City Lines and Extensions) Act 1879 (UK) with respect to a tunnel constituted an easement or a hereditament. If it was a hereditament or a tenement, then it was an interest in land and subject to land tax. Each of the members of the House of Lords came to the conclusion that the tunnel was a hereditament or a tenement. Lord Watson said at page 427 that the tunnel would be land whether or not it is “severed in title”:

Is then the interest of the company, being an interest in land, within any of the classes of heritable right, corporeal or incorporeal, which are made liable to the incidence of the land tax by the Act of 38 Geo. 3? The answer to be given to that question does not appear to me to be attended with doubt. I think the tunnel is as much “land” as the highway itself, or any other part of the soil beneath it. I also think that it is a “tenement” within the meaning of the Act. And, if I were wrong in both these conclusions, I should still be of opinion that it fell within the category of “all hereditaments of what nature or kind soever they be.”

It was argued that the Act of 1797 applies only to the surface of land and to buildings erected upon it, and that, whenever the surface is taxed, or is exempted, as in this case, by reason of the use to which it is put, no tax is exigible in respect of buildings below the surface. I can find no solid foundation for that argument, either in principle or in the language of the Act. A construction in or below the land is as much a part of it as an erection on its surface. A cellar below a public footway is as much a tenement as the dwelling-house to which it is appurtenant; and I can see no reason for holding that, should they be severed in title, the one would not be as much a hereditament as the other. If the tax were redeemed by the owner of the land, at a time when there were no buildings upon it, I think that buildings subsequently constructed, whether above or below the surface, would be enfranchised.

78. In Clos Farming Estates P/L (rec and mgr appntd) v Easton and Anor [2001] NSWSC 525 Bryson J addressed Metropolitan Railway in the following passage (emphasis added):

[44]   … The Metropolitan Railway case turned on statutory construction and on whether the rights conferred on the railway company in respect of a tunnel under a highway in the City of London made the tunnel a hereditament for the purpose of a statute imposing land tax. The actual holding of the House of Lords is not of wide import, although in an oblique way it supports the view that a statutory right to exclusive possession of land including a stratum of land creates a freehold interest in the land. At 428 Lord Ashbourne said:

I concur with Cave J. and the three judges of the Court of Appeal that the railway company took more than an easement; they took an interest in land - taking a practically perpetual right of exclusive possession in the tunnel. The case of Reilly v. Booth 44 Ch. D.26 supports this view - the words of Lopes L.J. there are in point: “The exclusive or unrestricted use of a piece of land,” “beyond all question passes the property or ownership in that land, and there is no easement known to law which gives exclusive and unrestricted use of a piece of land.”

79. A statutory right to exclusive possession of a stratum of land occupied by a pipeline may create an interest in that stratum of the land for the purposes of the Duties Act.

80. Turning then to the specific interest created under the WIC Act. The high-water mark for the appellant’s submission about the interest here engaged being an indeterminate (and non-dutiable) statutory interest is the dicta of Windeyer J in North Shore Gas (No 2) at page 131:

It seems to me futile really to try to classify and describe the respondent's rights in respect of mains and pipes under streets and roads according to the traditional categories and terminology of the law of real property.

[…]

The question must be judged having regard to rights and interests created by the law of today, without, it seems to me, trying to fit them into the law of feudal tenures and estates.

[…]

81. His Honour’s conclusion, however, must be seen in the context of the statutes the subject of North Shore Gas (No 2). As Windeyer J explained at page 131:

The question for us is very different. It is not what description should be given to the mains and pipes in the ground, but what was the character or nature of the right of the respondent to place them there and have them remain there.

82. Paraphrasing Windeyer J, the critical tasks here are:

1. Identifying the character (or nature) of the statutory right(s) of Rosehill to:

1. place the pipeline under the public lands where the pipeline travels;

2. enjoy the statutory right of ownership of the pipeline despite it being affixed to public lands; and

3. have the pipeline remain in the position it has been placed.

2. Having identified the character or nature of Rosehill’s statutory right(s) determining if those rights amount to an interest in land within the meaning of the Duties Act.

83. As to the approach to be adopted in addressing these questions, I agree with Basten JA in Pacific National that any answer to the present questions cannot be gleaned from analysing the two North Shore Gas Co cases:

[68]   To derive any answer to the present question from the two North Shore Gas Co cases would be to overlook the basic principle for which they stand. The correct approach is to identify the nature of any power or interest conferred on a statutory authority pursuant to its constituting regime, or any other Act relevant to it, and to identify such consequences as may flow from that scheme without assuming that the legal consequences will be those which would flow from an analogous general law categorisation of the power or interest.

84. Before assessing the specific interest in the pipelines under the WIC Act, it is important to note that the concept of “property” is a legal one and is “ultimately validated by some social or collective judgement about the legitimacy of the claim involved”: Janice Gray et al, Property Law in New South Wales, (5^th ed, 2022 LexisNexis) at [5.10]; see also Minister of State for the Army v Dalziel (1944) 68 CLR 261 at 276-7 (Latham CJ).

85. In Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53, Gummow J explained the distinctions between property rights, possession and ownership:

[85]   Property is used in the law in various senses to describe a range of legal and equitable estates and interests, corporeal and incorporeal. Distinct corporeal and incorporeal property rights in relation to the one object may exist concurrently and be held by different parties. Ownership may be divorced from possession. At common law, wrongful possession of land might give rise to an estate in fee simple with the rightful owner having but a right of re-entry. Property need not necessarily be susceptible of transfer. A common law debt, albeit not assignable, was nonetheless property. Equity brings particular sophistications to the subject. The degree of protection afforded by equity to confidential information makes it appropriate to describe it as having a proprietary character, but that is not because property is the basis upon which protection is given; rather this is because of the effect of that protection. Hohfeld identified the term ‘property’ as a striking example of the inherent ambiguity and looseness in legal terminology. (footnotes omitted)

86. The joint judgment in Yanner v Eaton (Gleeson CJ, Gaudron, Kirby and Hayne JJ) explained that the word “property” refers to a description of a legal relationship with a thing and there can be many kinds of such a legal relationship:

[17]   The word “property” is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, “property” does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of “property” may be elusive. Usually it is treated as a “bundle of rights”. But even this may have its limits as an analytical tool or accurate description, and it may be, as Professor Gray has said, that “the ultimate fact about property is that it does not really exist: it is mere illusion”. Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by “property” in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of “property” as an analytical tool. No doubt the examples could be multiplied.

…

[19]   “Property” is a term that can be, and is, applied to many different kinds of relationship with a subject matter. It is not “a monolithic notion of standard content and invariable intensity”. That is why, in the context of a testator's will, “property” has been said to be “the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have”. (footnotes omitted)

87. Rights with respect to a “property” may take different forms depending on the type of property as recognised in the relevant statute. Different statutes may establish different types of proprietary rights in distinct ways. There is no single, uniform rule that universally defines what constitutes a proprietary right. The question to be asked is what the particular statute creating or conferring the interest or right sought to create or confer.

Water Industry Competition Act 2006 (NSW)

88. In 1994, the Council of Australian Governments (“COAG”) endorsed a framework of initiatives for the water industry to run over a seven-year period. In 2003, COAG agreed to refresh its 1994 water reform agenda by developing a new National Water Initiative (“NWI”). The NWI was agreed as the national blueprint for water reform to provide greater certainty for the water industry and provide long-term benefits for the environment.

89. In NSW, in 2006, the Water Industry Competition Bill 2006 (NSW) was introduced. The Minister explained in the second reading speech:

… the Water Industry Competition Bill and the Central Coast Water Corporation Bill, that together initiate reform of the water and wastewater industries in New South Wales for the benefit of consumers, the economy and the environment. The improvement of the governance of water systems is the aim of both bills which, once enacted, provide for the improved running of water systems, more straight forward decision making and access arrangements. Ultimately, these will enable more recycling and improved water security, which are imperative during drought.

90. At the heart of the case are sections 63 and 64 of the WIC Act which originally provided:

63    Charges for placement of water industry infrastructure

No annual or other periodic or special charge is payable by a licensed network operator to a local council or roads authority in respect of any water industry infrastructure located in a public reserve or public road or in respect of the space in a public reserve or public road that is occupied by any such infrastructure.

64    Ownership of water industry infrastructure

(1)   A licensed network operator is the owner of its water industry infrastructure, whether or not the land in, on or over which it is situated is owned by the network operator.

(2)    A licensed network operator’s water industry infrastructure is not to be taken in execution of any judgment against a person other than the network operator under any process of a court.

91. The Explanatory Note to the Water Industry Competition Bill 2006 explained:

Clause 63 prevents local councils and roads authorities from imposing charges on a licensed network operator in relation to water industry infrastructure that is located in a public road or public reserve.

Clause 64 provides that a licensed network operator retains ownership of its water industry infrastructure that is located in or under land that it does not own.

92. Section 63 of the Act assumes that the interest created by the WIC Act may otherwise have attracted an annual or other periodic or special charge levied by a local council or roads authority. Section 63 is only necessary on the assumption that some water industry infrastructure is land and is thereby otherwise chargeable with rates by local councils or a road authority.

93. From the beginning, s 64(1) of the WIC Act declared full ownership of the pipeline in Rosehill. As recognised in Union Trustee Co v Federal Commissioner of Land Tax (1915) 20 CLR 526 at 530; [1915] HCA 68, ownership entails a proprietary interest in the subject property. The right granted by s 64 is a proprietary right, permitting the owner of the pipeline to sell or mortgage the pipeline, regardless of the ownership of the land over which the pipeline travels and regardless of whether, on general law principles, the pipeline was a fixture, the ownership of which would pass to the owner of the land. The new owner (or mortgagee) of the pipeline enjoys the same rights of ownership of the pipeline travelling in the stratum of land where the pipeline has been laid. It is a right which is transferable without restriction, including by inheritance. It is a right over that stratum of land where the pipeline travels, which right is given priority over all other estates and interests in the land, including the land in, on under or over the pipeline. Section 64 confers an exclusive use of a piece of land, being the stratum of land occupied by the pipeline. The appellant, by the WIC Act, has the right to exclude all others from that stratum of land, giving the right to control and exploit the stratum. The appellant is granted the right to use or enjoy the pipeline in the stratum of land in which it is fixed, by conveying recycled water, for reward, using that pipeline. The appellant acquired the right to alienate the pipeline, which right of alienation necessarily includes the pipeline in the existing stratum of land it occupies.

94. In 2009, s 42(3) of the Real Property Act was introduced by the Real Property and Conveyancing Legislation Amendment Act 2009 (NSW):

42      Estate of registered proprietor paramount

(1)   Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except—

(a)   the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land,

(a1)   in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act,

(b)   in the case of the omission or misdescription of any profit à prendre created in or existing upon any land,

(c)   as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and

(d)   a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected—

Provided that—

(i)   The term for which the tenancy was created does not exceed three years, and

(ii)   in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years.

(iii)   (Repealed)

(2)   In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio.

(3)   This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

95. In the Second Reading Speech to the Real Property and Conveyancing Legislation Amendment Bill 2009 (NSW), Mr Collier, Parliamentary Secretary said:

The Real Property Act, like any other Act, is subject to partial or total repeal by later legislation. Such legislation, often quite unconnected to the Real Property Act, can impose statutory exceptions onto a registered proprietor's otherwise indefeasible title. As a result the register can be misleading, for although the Real Property Act purports to make the register conclusive, the registered title may in fact be subject to interests that are not required to be disclosed on the register. In some instances this is inevitable. A person's interest in land is, after all, a private right that must defer to the public interest. There are occasions when certain statutory interests must take priority over private interests recorded on the register. An example is land tax. Section 47 of the Land Tax Management Act 1956 imposes a statutory first charge on the land that has priority over all other encumbrances until the land tax is paid.

150. The term “legal severance” is one which must be approached with some caution. However, for present purposes, it suffices to conclude that the effect of the alternative construction of s 64 of the WIC Act I am addressing is that the items resume their previous legal character, as chattels or goods. As Kirk JA explained in Shell Energy (No 1), the word “chattels” is often used in contrast with “fixtures”. As Jordan CJ said in Australian Provincial Assurance v Coroneo (1938) 38 SR (NSW) 700 at 712, “[a] fixture is a thing once a chattel which has become in law land through having been fixed to land”. Conversely, if and when a fixture is removed it becomes a chattel again. The point is illustrated by Dixon J’s explanation of tenant’s fixtures in North Shore Gas (No 1) at 68:

…Though removable tenants’ fixtures may during the term be detached and become chattels belonging to the tenant, yet the better opinion appears to be that unless and until the tenant exercises his right of removal they form part of the realty … and for this reason, subject to the exercise of the tenant’s right to convert them again into chattels, pass with the land…

152. Ormiston JA in Vopak discussed the possibility of taking legal steps to sever fixtures so as to “convert them again to chattels”: at [46]-[49]. Infrastructure items may return to their status as chattels despite the absence of physical steps to separate the fixtures form the land. The issue is addressed in Samantha Hepburn and Steve Jaynes, “The Nature and Scope of Rights of Removal” (2013) 2 Property Law Review 123.

153. Whether or not something is a fixture turns in particular on the degree to which the thing is affixed to the land, and “whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period … or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose”: Coroneo at 712; see further TEC Desert at [24]. Thus, a chattel might be physically affixed to the land but not be regarded as a fixture because there is not the requisite intention. In such a case the thing does not become part of the land for legal purposes. The same result can come about by statutory provision: see Vopak at [38]-[42]. Such a thing would in general retain its legal character as a chattel: Vopak at [42].

154. Goods affixed to land physically but not legally could be the subject of a separate sale. If the suggestion is that very large, practically immovable things cannot be “goods”, then that is inconsistent with the fact that such things can be goods if they do not satisfy the tests for being fixtures. For example, in Attorney-General (Cth) v R T Co Pty Ltd (No 2) (1957) 97 CLR 146 Fullager J held that a printing press weighing 45 tons was not a fixture.

155. Analysing the text, context and purpose of the Duties Act leads me to conclude that Kirk JA in Shell Energy (No 1) was correct, at [126], to conclude that in the case of large industrial structures fixed to land, nothing in the vesting orders his Honour was considering had the effect of changing the legal character of the items such as to become “innominate sui generis property interests”.

156. Critically, his Honour concluded that even if they had done so, such a property interest would still fall within the reach of the concept of goods as employed in Ch 4 of the Duties Act. I respectfully agree.

157. Statutory construction requires a purposive approach: Interpretation Act s 33. The outcome urged by the appellant suggests that Parliament should be understood to have intended to recognise a third, distinct, category being neither an interest in land or goods, the engagement of which would turn on an almost arbitrary element of timing. The items in question once were goods but became part of the land when affixed as part of the pipeline construction. If the pipeline was disassembled and the items sold, then they would indisputably be goods. The object of s 155 is to tax both interests in land and goods. The appellant’s construction is an unlikely one. I am unable to agree with the appellant’s construction. First, as Kirk JA in Shell Energy (No 1) pointed out, the term “goods” is context-dependent and broadly encompasses tangible property. The Duties Act explicitly excludes certain categories, like stock-in-trade, but does not exclude fixtures or infrastructure legally severed from realty from its reach. This is inconsistent with the appellant’s submission that goods are limited to “tangible items of personal property physically moveable in their present condition”. Section 163K(2) clarifies that “goods” include items in which the landholder holds an interest (excluding interests as a mortgagee or secured creditor), also indicating a broad meaning of the term “goods”. The statutory design includes discretionary relief under s 163H, suggesting that Parliament envisioned a wide meaning of the term “goods”. In Shell Energy (No 1), the court reasoned that legally severed infrastructure should be classified as goods for Duties Act purposes. Kirk JA observed that excluding such items from both “land” and “goods” would create an unreasonable gap in the duty scheme. This conclusion aligns with the Duties Act’s purpose of taxing both land and goods.

158. Secondly, courts have consistently treated the term “goods” as including, but not limited to, tangible property, often synonymous with chattels: see Shell Energy (No 1); Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43 at [6] and Stephenson v Thompson [1924] 2 KB 240 at 249. The appellant’s assertion that the meaning of “goods” in Ch 4 of the Duties Act is confined to “tangible items of personal property physically moveable in their present condition” is unsupported by the cases the appellant called in aid:

1. AGL Victoria Pty v Lockwood [2003] VSC 453; (2003) 10 VR 596 does not identify an “accepted legal usage” of the term “goods” that is restricted to personal property physically moveable in its present condition. To the contrary, Byrne J at [69] referred to the term being one of indefinite import that is dependent on the context in which it is found. The discussion of “goods” in Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232; [2000] FCA 665 at [17] rested on a particular statutory definition in a trade practices context;

2. North Shore Gas (No 1) and (No 2) have been addressed above and do not assist the appellant.

159. Thirdly, the cases cited by the primary judge in the present case to support an identification of the pipeline as “goods” support this conclusion. Vopak, AWF, and Uniqema demonstrate instances where statutory provisions affected the ownership of items affixed to land. In each case items that, under the general law, would have been considered as fixtures belonging to the freehold owner, were treated as “chattels”. As I explained in SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 395, physical things affixed by a tenant may be reclaimable by the tenant: see eg Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd [2009] FCA 742 at [67]. Tenant’s fixtures remain part of the land and are thus at general law owned by the landlord. While the tenant has a right to remove the fixtures, if the tenant fails to do so at the end of the tenancy the tenant loses that right and the fixtures become the absolute property of the landlord: see further North Shore Gas (No 1) at 67-68 per Dixon J; TEC Desert at [25]-[26].

160. There are exceptions to these general law rules effected by legislation. I have addressed Vopak. Uniqema dealt with the question of whether the Commissioner was entitled to include in the value of the land the whole of the value of the goodwill, as designated in a Business Acquisition Agreement, whereby Unilever sold to Uniqema a manufacturing business. Part of the land transferred, however, had been leased since about 23 December 1992 by a company named Co-Generation Australia Ltd (“Co-Gen”). A relevant issue concerned the value of the land itself arising out of the construction by Co-Gen as lessee of the steam and electricity generating plant. That plant was not the subject of the contract but the appellant asserted that the plant and equipment were fixtures which formed part of the real property at the time of the sale and thus had to be taken into account in valuing the whole of the land sold by Unilever.

161. Ormiston JA (with whom Phillips and Callaway JJA agreed) held that s 28(2) of the Landlord and Tenant Act 1958 had the effect of rendering the plant chattels when they would ordinarily be fixtures. In Uniqema, his Honour described the decision in Vopak thus:

[50] …In essence it was held there that, notwithstanding the common law rules as to fixtures, the Parliament of this State had by s 28(2) reformulated the principles relating to property in tenant’s fixtures by explicitly providing that, whenever fixtures are erected or put in by the tenant, “property” shall ordinarily remain in the tenant, until he or she gives up possession. In other words, contrary to the appellant’s submission, tenant’s fixtures (of the widest description, whether trade, ornamental or whatever) do not become property of the landlord and thus part of the realty, but remain chattels capable of removal at any time by the tenant and incapable of being dealt with by the landlord as part of the land, until the tenant has departed…

162. It is true that Uniqema was an unusual case. The point for present purposes, however, is that Vopak and Uniqema are clear examples of cases where, by reason of the correct construction of a statute, large items that would ordinarily be fixtures were treated as chattels or goods. At least in that statutory context, chattels and goods were properly understood as not being limited to “tangible items of personal property physically moveable in their present condition”.

163. Fourthly, the fact that the pipeline was embedded in the land does not mean that the pipeline was “not moveable as of the acquisition date”. The primary judge correctly concluded that “goods” within the meaning of the Duties Act included items that are difficult but not impossible to move. Perhaps ironically, the “break-up” value of the pipeline was the basis upon which the appellant’s expert sought to value the appellant’s interest in the pipeline before the primary judge. This valuation was predicated on this pipeline being difficult but not impossible to move.

164. Fifthly, while there is room for debate about whether ownership of the pipeline should be properly characterised as an interest in land or goods, it makes little sense to say it is neither. To conclude that the statutory right granted by s 64 of the WIC Act was neither an interest in land nor goods subverts the clear statutory purpose of the s 155 of the Duties Act. As Kirk JA explained in Shell Energy (No 1), s 155 of the Duties Act does not concern an exemption from duty nor is it concerned with protecting bona fide mercantile transactions. Its purpose is to determine how duty is charged on the acquisition of an interest in a landholder.

165. There is nothing in the text, context or purpose of the Duties Act indicating that permanent infrastructure of the present kind was intended to be excluded from the duties base. To the contrary, a provision that is intended to tax companies with large land assets the threshold being $2 million, was intended to tax permanent infrastructure belonging to such landholders.

166. I agree with Kirk JA in Shell Energy (No 1) that it is unlikely that in relation to large infrastructure assets the legislature has created innominate sui generis property interests, outside the reach of the Duties Act. If it were necessary to decide this ground, Kirk JA was correct in Shell Energy (No 1) that the word “goods” in ss 163K and 155 extends to any such interests of the kind at issue in that case.

Conclusion and proposed orders

167. For the foregoing reasons I have concluded that the following orders should be made:

1. Appeal dismissed.

2. Appellant pay the respondent’s costs of the appeal.

168. STERN JA: I agree with Payne JA.

169. McHUGH JA: I agree with Payne JA.

170. BASTEN AJA: The straightforward question raised by this appeal is whether the appellant is liable for duty on a transaction which involved the purchase of shares in the owner of water industry infrastructure, including a 19-kilometre pipeline in Sydney. Pursuant to Ch 4 of the Duties Act 1997 (NSW) the transaction was dutiable if the appellant acquired an interest in a “landholder”. ^[1]

     1. Duties Act, ss 148, 149(1)(a).

171. Chapter 2 of the Duties Act provides for duty to be payable on “a transfer of dutiable property”: s 8(1)(a). Dutiable property includes “land in New South Wales”: s 11(1)(a). This case did not deal with a transfer of dutiable property or other transaction within Ch 2; rather, it fell within Ch 4, headed “Acquisition of interests in landholders”, and imposing duty on “the acquisition by a person of a significant interest in a landholder”. ^[2] Acquiring a significant interest in a landholder is a “relevant acquisition” for the purposes of s 148. The appellant’s purchase of the share capital of the vendor was a relevant acquisition: the only issue was whether the acquisition was of shares in a “landholder”.

     2. See Note to s 145.

172. The term “landholder” is defined, relevantly, as a company that has “land holdings” in NSW with a minimum threshold value: s 146(1). The question was whether the vendor had “land holdings”. Relevantly, a landholding is “an interest in land” other than a security interest: s 147(1). Each of the terms “interest” and “land” is defined in the Dictionary to the Duties Act, definitions which operate for the purposes of the whole Act, pursuant to s 6. Those definitions are:

interest includes an estate or proprietary right.

land includes a stratum.

173. Neither definition is exhaustive, but it is uncertain whether each is intended to be expansive, or merely to “make it clear that certain potentially arguable matters are within it.” ^[3] The term “stratum” is not defined, but “strata lot” is, being defined to mean a lot within the meaning of the Strata Schemes Development Act 2015 (NSW). The term stratum is not so constrained: it refers to divisions of space, usually in a horizontal plane. It addresses one characterisation of land, not as a physical entity, but as a jural concept.

     3. P Herzfeld and T Prince, Interpretation (3rd ed, Lawbook Co, 2024) at [3.70]; Corporate Affairs Commission (South Australia) v Australian Central Credit Union (1985) 157 CLR 201, 206-207 (Mason ACJ, Wilson, Deane, Dawson JJ); [1985] HCA 64.

174. It was common ground that the definition of “land” in the Interpretation Act 1987 (NSW), s 21(1), was engaged. That definition can be excluded by express or implied statutory intention, as recognised by s 6 of that Act, but it was not contended that the text, context or subject matter of the Duties Act had that effect. Land is defined in s 21(1) of the Interpretation Act in terms common to many such statutory definitions in the common law world:

land includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein.

175. This definition also is inclusive, not exhaustive, and in broad terms. Three aspects are of present significance. First, the definition encompasses both physical entities and jural concepts. The words “messuages” and “tenements” refer to buildings and other structures. They are understood to be part of the land on or within which they stand because they are fixtures. However, as noted by Gray and Gray, in relation to a similar definition of land in the Law of Property Act 1925 (UK): ^[4]

“This collocation of the tangible and the intangible highlights a central tension in English land law: there remains a deep indeterminacy as to whether property in land is essentially a matter of physical fact or of abstract right. Together, however, corporeal and incorporeal hereditaments are known as ‘realty’ – in order to distinguish them from ‘personalty’ (ie personal or moveable property).”

4. K Gray and SF Gray, Elements of Land Law (5th ed, OUP, 2009) at [1.2.10] (emphasis in original).

176. To similar effect, Giles JA observed, in relation to the definition in the Interpretation Act, that, “in legal usage ‘land’ is not confined to the physical thing, and can mean one of many legal constructs involving an estate in the land or an interest in the land”. ^[5] Indeed, the concluding words of the definition (“whatever may be the estate or interest therein”) suggests that in law, ownership of “land” is a jural construct, and not a physical thing. That is consistent with feudal theory that the ultimate or radical title to all land is vested in the sovereign, so that legal ownership is always an intangible interest or estate rather than a tangible thing. ^[6]

     5. Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255 at [49].

     6. Gray and Gray at [1.3.3].

177. Secondly, the definition says nothing about ownership (that is the relationship of legal persons to land), beyond the inclusion of hereditaments, a legal capacity to transfer ownership. At least to an extent, the law requires that proprietary interests be alienable, both inter vivos and by will, ^[7] though that does not apply to native title. ^[8] The interests in question in this case were alienable; it was the transfer which founded the liability to duty.

     7. B Edgeworth, Butt’s Land Law (7th ed, Lawbook Co, 2017) at [5.20]; Hall v Busst (1960) 104 CLR 206 at 218 (Dixon CJ); [1960] HCA 84.

     8. Mabo v Queensland [No 2] (1992) 175 CLR 1 at 51 (Brennan J); 88-89 (Deane and Gaudron JJ); 194 (Toohey J); [1992] HCA 23 (“Mabo [No 2]”.

178. Thirdly, the archaic reference to structures (messuages and tenements) reflects the principle that fixtures are part of the land on or in which they stand. As explained below, there is no doubt that the appellant is the owner of the pipeline and associated infrastructure, but the pipeline is undoubtedly a fixture. Accordingly, for the definition in the Interpretation Act to be engaged, the appellant must own the space occupied by the structure, so that structure is part of the “land”. That conclusion is apt.

179. There is a similar definition of “land” in the Real Property Act 1900 (NSW), which provides in s 42 for the indefeasibility of the registered title of “any estate or interest in land”. It includes the defined term “land”, perhaps intended in the physical sense, and continues to include, “messuages, tenements, and hereditaments corporeal and incorporeal of every kind and description or any estate or interest therein …”. This definition is not inconsistent with the breadth of the definition in the Interpretation Act, but is expansive in that it both incorporates concepts from the general law and permits interests (“of every kind and description”) which must include those created by statute.

180. The law does not treat land only by way of intangible estates or interest; there are two relevant categories of laws. The first, including planning laws, prohibit, permit or regulate use of a physical space by reference to geographically defined boundaries; similarly the registration of title is effected by use of such boundaries. However, laws which address the property rights and interests of individuals or groups of individuals inter se adopt a jural relationship. “Property” has been described as a “bundle of rights” and as a “socially constituted fact”. ^[9] Individuals enjoy estates or interests in a physically defined area.

     9. Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53, 69 at [38] (Gleeson CJ, Gaudron, Kirby and Hayne JJ); [85]-[86] (Gummow J).

181. As to the physical entity, Butt’s Land Law identifies land as “any area of three-dimensional space, with its position identified by natural or imaginary points located by reference to the earth’s surface.” ^[10] The description continues by way of explanation:

“It may be wholly above the surface or wholly below it. The space may have physical contents, or it may be a void. … If the three-dimensional space has contents that are fixed in position, those fixed contents are part of the ‘land’. But the ‘land’ is more than those fixed contents, because if the contents of the space are physically severed, destroyed or consumed, the space itself – and so the ‘land’ remains. In this sense, ‘land’ is indestructible.”

10. Butt’s Land Law, p 42, referring to S Ball, “The Jural Nature of Land” (1928) 23 Illinois L Rev 45.

182. The reference to interests in land is a reference to the relationship between the defined space and a legal person. Such interests may generically be described as property interests or proprietary interests. As explained by Latham CJ in Minister of State for the Army v Dalziel: ^[11]

“It has often been explained by writers upon jurisprudence that the term ‘property’ is ambiguous. As applied to land it may mean the land itself in relation to which rights of ownership exist, or it may refer to the rights of ownership which exist in relation to the land. … In the former sense a man may say that his property consists of land. In the latter sense a man’s property would consist not of land, but of rights in respect of land which were rights of ownership.”

11. (1944) 68 CLR 261, 276; [1944] HCA 4.

183. The archaic language of the statutory definitions derives from the feudal system of tenure inherited from England. The absence of an allodial system of land ownership was identified by Brennan J in Mabo [No 2]: ^[12]

“The Crown was treated as having the radical title to all the land in the territory over which the Crown acquired sovereignty. The radical title is a postulate of the doctrine of tenure and a concomitant of sovereignty. As a sovereign enjoys supreme legal authority in and over a territory, the sovereign has power to prescribe what parcels of land and what interests in those parcels should be enjoyed by others and what parcels of land should be kept as the sovereign's beneficial demesne.”

12. (1992) 175 CLR at 48.

184. Mabo [No 2] held that the acquisition of radical title did not involve “absolute beneficial ownership of that land to the exclusion of the [I]ndigenous inhabitants”. ^[13] Otherwise, it has long been understood that in Australia the creation, alienation and transfer of interests in land are controlled by the provisions of the Crown Lands Acts. ^[14] No doubt the Parliament could, by statute, vary the concept of land, but that is not what has happened in the present case. What has happened is entirely referable to existing concepts.

     13. Ibid.

     14. Wik Peoples v Queensland (1996) 187 CLR 1 at 77 (Brennan CJ); [1996] HCA 40.

185. According to established principles, a structure which could properly be described as a fixture became part of the land on which it was constructed and was therefore owned by the owner of the land; a pipeline laid in land would become part of the land. As a practical matter, the suggestion that the person responsible for constructing the pipeline intended by so doing to lose control of it is implausible. That result will be avoided in practice, either because the construction takes place by consent of the owner of that part of the land and the result is governed by contract, or pursuant to a statutory provision which prevents that outcome. The present case involves such a statutory provision.

186. There was no dispute that the appellant’s pipeline and associated infrastructure constituted “water industry infrastructure” for the purposes of the Water Industry Competition Act 2006 (NSW). Part 2, Div 3 of that Act deals with approvals for a scheme and for operation of the scheme. Part 6 includes provisions dealing with the construction, maintenance and removal of water industry infrastructure that forms part of a scheme: s 58A. Importantly for present purposes, ownership of water industry infrastructure is dealt with in the following provision:

64    Ownership of water industry infrastructure

(1)    Except where another Act expressly provides otherwise, water industry infrastructure is owned by the person that constructs or installs it, or on whose behalf it is constructed or installed, or any person that subsequently acquires title to it, whether or not the land in, on, under or over which it is situated is owned by that person.

Note—

Examples of provisions of other Acts that expressly provide for the ownership of water industry infrastructure by certain public water utilities include the following—

(a) section 19 of the Hunter Water Act 1991,

(b) section 37 of the Sydney Water Act 1994,

(c) section 29 of the Water NSW Act 2014.

(3) The provisions of this section have effect despite anything contained in section 42 of the Real Property Act 1900.

187. The effect of this provision is not to deem the pipeline or other water industry infrastructure to be other than a fixture, but rather to reverse the general law presumption as to the ownership of the infrastructure. However, as the disengagement of s 42 of the Real Property Act demonstrates, there will be a limitation on the title of the owner of the surrounding land. Although not the subject of a registered title, the consequence of vesting in the constructor or acquirer rights of ownership in the pipeline (and other infrastructure) which is “in, on, under or over” land owned by another person, is that the three-dimensional space occupied by the pipeline (and other infrastructure) is within the exclusive possession of the appellant. Pursuant to general law principles, a fixed, permanent, immoveable structure will constitute land. A person with exclusive possession will have ownership rights of that land.

188. This conclusion is consistent with the reasoning of the Privy Council in Corporation of the City of Toronto v Consumers’ Gas Co, ^[15] where Lord Shaw of Dunfermline stated:

“The reasons have already been assigned for holding that the space occupied by the gas mains and the gas mains themselves of the respondents are of the nature of land in its ordinary sense. It must, however, be added that in any view the definition of ‘land’ in the Municipal Act unquestionably includes them. For it can hardly be denied that the words ‘a right or interest in, and an easement over, land’ would embrace the right of the gas company to have their pipes remain, and to have the interest and use of them and the space occupied by them undisturbed; nor can it be doubted that the company falls within the definition of owner as just cited.”

15. (1916) 2 AC 618 at 624 (Toronto Corporation).

189. In North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW),^[16] Dixon J stated, after referring to Toronto Corporation:

“The mains and service pipes are embedded in the soil of the streets as a permanent means of providing the gas supply of the frontagers …. There is therefore no doubt about the purpose, the degree nor the enduring nature of fixation of the pipes or their identification with the soil. So much of the earth as the pipes displace formed a space in the occupation of the company and that space constitutes land. The company’s occupation of the space is as of right and is exclusive.”

16. (1940) 63 CLR 52 at 69-70; [1940] HCA 7.

190. Although this reasoning in North Shore Gas went beyond the specific question of whether the pipes were “goods, wares and merchandise” (which the Court unanimously held they were not), it is consistent with the principles and the statutory scheme discussed above. Whether it applies in relation to other statutory schemes, such as the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), need not be addressed. ^[17]

     17. See Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118; [1967] HCA 41, dealing with a similar issue under the Public Works Act 1912 (NSW).

191. It follows that the space occupied by the pipeline (and associated infrastructure) and the pipeline itself, constitutes “land” for the purposes of the Duties Act. It also follows that the appellant purchased a relevant interest in a land holding company when it (indirectly) acquired the water industry infrastructure. Accordingly, although on a different basis from that adopted below, the primary judge was correct and the appeal should be dismissed with costs. I agree with the orders proposed by Payne JA.

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Endnotes

Decision last updated: 27 February 2025