Growthpoint Properties Limited v Commissioner of State Taxation - [2013] SASC 131

SUPREME COURT OF SOUTH AUSTRALIA
(Miscellaneous Appeal)
GROWTHPOINT PROPERTIES LIMITED v COMMISSIONER OF STATE TAXATION
[2013] SASC 131
Judgment of The Honourable Justice Gray
15 August 2013
TAXES AND DUTIES - STAMP DUTIES - APPEAL, CASE STATED, ETC - SOUTH AUSTRALIA
TAXES AND DUTIES - STAMP DUTIES - TRANSACTIONS CONCERNING DUTIABLE PROPERTY - LAND RICH ENTITIES - OTHER STATES AND TERRITORIES
Appeal by taxpayer, Growthpoint Properties Limited, against decision of the Treasurer to disallow an objection against two notices of assessment of liability to duty issued by the Commissioner of State Taxation – liability to duty said to arise under the ‘Land Rich Entities’ provisions of the Stamp Duties Act 1923 (SA).
Section 95(1) of the Stamp Duties Act 1923 (SA) provided that, “A person or group that acquires a significant interest, or increases its significant interest, in a land rich entity notionally acquires an interest in the underlying local land assets of the entity and is liable to duty in respect of the notional acquisition.”
Section 95(2) of the Stamp Duties Act 1923 provided that, “The following transactions are therefore dutiable…a transaction as a result of which a person or group has a significant interest in a land rich entity…”.
As a result of a transaction, Growthpoint Properties Limited acquired a significant interest in a trust. As a result of the same transaction, the trust became a land rich entity.
Whether section 95(1) of the Stamp Duties Act can only apply to acquisitions in an entity that was a land rich entity immediately prior to the acquisition, or whether section 95(1) can also apply where the entity becomes a land rich entity as a result of the acquisition.
Held: Appeal dismissed. The relevant test under section 95 of the Stamp Duties Act is whether the transaction has resulted in the person or group having a significant interest in a land rich entity.
Stamp Duties Act 1923 (SA) s 91, s 94 and s 95, referred to.
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, considered.

GROWTHPOINT PROPERTIES LIMITED v COMMISSIONER OF STATE TAXATION
[2013] SASC 131
Civil
GRAY J.

On 6 May 2010, the Commissioner of State Taxation issued a Notice of Assessment of Liability to Duty for duty and interest in the amount of $2,991,727.90 to the taxpayer and appellant, Growthpoint Properties Limited. On 22 June 2010, a further Notice of Assessment was issued by the Commissioner, adjusting the notice of assessment for duty and interest to the amount of $2,991,272.90.
On 1 July 2010, Growthpoint Properties Limited, by its solicitor, lodged objections to both notices of assessment. The objections were disallowed by the Treasurer under a Notice of Determination of 30 January 2011. This is an appeal against the decision of the Treasurer to disallow the objections.
The Transactions
On the hearing of the appeal, the parties tendered a statement of agreed facts, together with an agreed statement of the legal issues in contention. In the summary that follows, I have drawn on the statement of agreed facts. The parties also provided two books of documents, which have been marked for identification. In the event, I am satisfied that the agreed facts are sufficient to lay a proper foundation for the resolution of the issues arising on the appeal.
Growthpoint Properties Australia Trust was established by deed executed on 25 May 2006. Units in the Trust are and were issued in accordance with the terms of the constitution. The Trust is also a managed investment scheme registered under Chapter 5C of the Corporations Act 2001 (Cth).
The Trust holds interests in land in South Australia including leasehold interests in properties owned by the Commonwealth of Australia and located within the grounds of the Adelaide Airport. The interests in the airport properties were held by the Trust prior to August 2009.
On 5 August 2009, a transaction occurred in which Growthpoint Properties Limited acquired through an upfront placement 50.1 percent of the issued units in the Trust. On 24 September 2009, Growthpoint Properties Limited participated in a rights issue whereby it increased its interest to 68.12 percent of the issued units in the Trust. On the same date, it acquired, through underwriting, further units leading to a total holding of 76.18 percent of the issued units.
As at 24 September 2009, the market value of the interests in land in South Australia was $68,300,000.00. A disclosure of the transactions and of the South Australian land assets and their property values led to the earlier referred to assessment and adjusted assessment of the Commissioner.
Before the 5 August 2009 transaction, the top 20 registered unitholders in the trust held 51.7 percent of the issued shares. It follows that before the August transaction, the top 20 registered unitholders did not hold 75 percent or more of the issued units in the trust. Immediately upon the upfront placements of units to Growthpoint Properties Limited, the top 20 unitholders held 75 percent or more of the issued units in the trust.
The Legislation
Part 4 of the Stamp Duties Act 1923 (SA), entitled “Land rich entities”, at the relevant time, was first introduced into the Stamp Duties legislation in 1990.[1] The purpose of the introduction of Part 4 was to counter schemes designed to reduce the amount of stamp duty on transactions that were effectively conveyances of real property by structuring those transactions to take advantage of the lower rate of duty charged on the transfer of company shares or units within a trust. Part 4 has undergone a number of subsequent amendments including extensive amendments in the year 2000.[2]
[1] Stamp Duties Act Amendment Act (No 3) 1990 (SA).
[2] Stamp Duties (Land Rich Entities and Redemption) Amendment Act 2000 (SA).
At times relevant to the within proceeding, Division 3 of Part 4 of the Stamp Duties Act addressed dutiable transactions and section 95, under the heading “General principle of liability to duty”, provided:
(1)A person or group that acquires a significant interest, or increases its significant interest, in a land rich entity notionally acquires an interest in the underlying local land assets of the entity and is liable to duty in respect of the notional acquisition.
(2)     The following transactions are therefore dutiable:
(a)     a transaction as a result of which a person or group has a significant interest in a land rich entity; or
(b)     a transaction as a result of which a person or group that has a significant interest in a land rich entity increases its significant interest in the entity.
(3)A transaction is dutiable under this Part even though the person or group that has a significant interest, or increases its significant interest, in the land rich entity as a result of the transaction—
(a)     is not a party to the transaction; or
(b)     has a passive role in the transaction.
(4)     For example, any of the following is capable of being a dutiable transaction:
(a)     an allotment of shares in a company or units in a unit trust scheme; or
(b)     the variation or abrogation of rights attaching to shares in a company or units in a unit trust scheme; or
(c)     the redemption, surrender or cancellation of shares in a company or units in a unit trust scheme.
(5)However, if a private entity acquires a local land asset and, as a result of the acquisition, becomes a land rich entity, and conveyance duty is paid in respect of the transaction, the transaction is not dutiable under this Part.
Division 2 of Part 4 is headed “Land rich entity” and includes subsection 94(1), which addresses the meaning of land rich entity and relevantly provides:
A private entity is a land rich entity if—
(a)the unencumbered value of the underlying local land assets of the private entity and associated private entities is $1m or more; ...
...
Division 1 of Part 4 is headed ‘Preliminary’ and contains provisions as to the interpretation of a number of words and phrases. This division relevantly provides the following:
private entity means a private company or a private unit trust scheme;
...
private unit trust scheme means—
(a) a unit trust scheme in which less than 50 persons hold units; or
(b)a unit trust scheme in which 50 or more persons hold units if 20 or fewer persons hold 75 per cent or more in number or value of the units on issue, but does not include a unit trust scheme that is an approved deposit fund or a pooled superannuation trust within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cwth);
...
significant interest in a private entity means a proportionate interest in the entity of 50 per cent or more;
...
unit trust scheme means an arrangement under which investors may acquire rights to participate, as beneficiaries under a trust, in profits, income or distribution of assets arising from the acquisition, holding, management, use or disposal of property;
It was common ground between the parties that when regard is had to the interpretation provisions in Division 1 of Part 4, as well as the agreed facts, it is clear that the Trust was a public entity prior to the upfront placement made on 5 August 2009. As a consequence of the upfront placement, it became a private entity. As a private entity it was a land rich entity within the meaning of part 4.
As a consequence, the following conclusions may be drawn:
-On 5 August 2009, Growthpoint Properties Limited acquired a significant interest in the Trust through the upfront placement;
-At the moment of this acquisition, the Trust became a private unit trust scheme and, as a consequence, became a private entity within the meaning of Part 4; and
-As a private entity, it was a land rich entity as the unencumbered value of the underlying local land assets of that private entity was $1,000,000.00 or more.
It is against this background that the issues for determination on the appeal are to be resolved. The parties agreed those issues as follows:
[1] Whether the acquisition of the 347,563,813 units in the Growthpoint Properties Australia Trust (“GPAT”) by Growthpoint Properties Ltd under the Upfront Placement gave rise to any liability to duty under section 95 of the Stamp Duties Act 1923 (as it stood at the time).
[2] In determining [1], whether section 95 can only apply to acquisitions in a “land rich entity” if, at the time of the acquisition, the entity was a “land rich entity”, or whether section 95 can also apply where, as a result of the acquisition (as occurred here), the entity becomes a “land rich entity”.
[3] If the answer to [1] is "no", what is the appropriate calculation of stamp duty on the "rights issue" and "underwriting" transactions under section 97 of the Stamp Duties Act 1923.
Taxing Statutes
The approach to the interpretation of taxing or fiscal statutory provisions has been the subject of High Court comment. In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation, Mason and Wilson JJ confirmed the approach to be taken to the interpretation of a taxing statute, observing:[3]
… The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.
The rules, as D C Pearce says in Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature.
On the other hand, when the judge labels the operation of the statute as “absurd”, “extraordinary”, “capricious”, “irrational” or “obscure” he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.
…
The fact that the Act is a taxing statute does not make it immune to the general principles governing the interpretation of statutes. The courts are as much concerned in the interpretation of revenue statutes as in the case of other statutes to ascertain the legislative intention from the terms of the instrument viewed as a whole.
[3] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, 320-321, 323; see also Pearce and Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7^th ed, 2011) [9.35]-[9.37].
More recently in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory), Hayne, Heydon, Crennan and Kiefel JJ observed:[4]
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself.[5] Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text.[6] The language which has actually been employed in the text of legislation is the surest guide to legislative intention.[7] The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision,[8] in particular the mischief[9] it is seeking to remedy.
…
Fixing upon the general legislative purpose of raising revenue carried with it the danger that the text did not receive the attention it deserves. This danger was adverted to by Gleeson CJ in Carr v Western Australia[10] when he said:
"[I]t may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling."
[4]    Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, 46-48.
[5]    Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) (2001) 207 CLR 72 at 77 [9] per Gaudron, Gummow, Hayne and Callinan JJ; at 89 [46] per Kirby J; Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at 206 [30] per Gleeson CJ, Gummow, Hayne and Heydon JJ; at 240-241 [167]-[168] per Kirby J; Carr v Western Australia (2007) 232 CLR 138 at 143 [6] per Gleeson CJ; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562 at 586 [85] per Kirby and Crennan JJ; Northern Territory v Collins (2008) 235 CLR 619 at 642 [99] per Crennan J.
[6]    Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at 538 [22] per Gleeson CJ, Gummow, Hayne and Heydon JJ; at 555-556 [82]-[84] per Kirby J. See also Combet v The Commonwealth (2005) 224 CLR 494 at 567 [135] per Gummow, Hayne, Callinan and Heydon JJ; Northern Territory v Collins (2008) 235 CLR 619 at 642 [99] per Crennan J.
[7]    Hilder v Dexter [1902] AC 474 at 477-478 per Earl of Halsbury LC.
[8]    Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ, quoted with approval in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ.
[9]    Heydon's Case (1584) 3 Co Rep 7a at 7b [76 ER 637 at 638].
[10] (2007) 232 CLR 138 at 143 [6].
These authorities guide my approach to the resolution of the issues of construction arising in these proceedings.
Construction of Part 4
As earlier noted, the purpose of the introduction of Part 4 of the Stamp Duties Act was to counter schemes designed to reduce the amount of stamp duty on transactions that were effectively conveyances of real property by structuring them to take advantage of the lower rate of duty charged on the transfer of company shares or units within a trust. The amendments made to Part 4 including, in particular, the amendments made in the year 2000, sought to address more sophisticated avoidance schemes.
Growthpoint Properties Limited submitted that subsection 95(1), as earlier extracted, is the key to the understanding of the legislation. It was contended that the land rich provisions only applied to acquisitions in an entity that was a land rich entity at the time of the acquisition. It was emphasised that the legislation did not include a provision that deemed a unit trust that was not a private unit trust prior to the acquisition, and which became a private unit trust as a result of the acquisition, to have been a private unit trust immediately prior to the acquisition. It was pointed out that the deeming technique had been used in stamp duty legislation in other jurisdictions.
Growthpoint Properties Limited then submitted that at the time of the 5 August 2009 transaction it did not acquire a significant interest in a land rich entity. Growthpoint Properties Limited did acquire a significant interest, but at the time of the acquisition, the trust was a public entity, not a private entity. In the course of submissions, considerable attention was focussed on stamp duties legislation from other jurisdictions. To my mind, such comparisons are of limited value because of the materially different terms of the legislation.
Growthpoint Properties Limited submitted that subsection 95(2) took the matter no further. It was suggested that this subsection did no more than ensure that a public entity was outside the reach of Part 4 and the land rich provisions.
The Commissioner submitted that it was not necessary that an entity be a land rich entity prior to a dutiable transaction. Reliance was placed, in particular, on the terms of subsection 95(2). It was contended that the relevant test is whether, as a result of a transaction, a person has a significant interest in a land rich entity.
The Commissioner submitted that the wording of subsection 95(1) should be read in the context of the entirety of Part 4 of the Act and, in particular, the remainder of section 95. It was suggested that to interpret subsection 95(1) in context avoids a construction that would undermine the manifest purpose of Part 4.
Attention was then drawn to subsection 95(5) and it was contended that the wording of this subsection recognised that a transaction in which an entity becomes a land rich entity may be dutiable under the Act. This was said to demonstrate that the terms of subsection 95(5) were inconsistent with the construction of subsection 95(1) advanced by Growthpoint Properties Limited.

The Commissioner’s submission placed emphasis on the terms of subsection 95(2). It was said that there was no ambiguity about this provision. The terms were explicit; “the following transactions are therefore dutiable”. Two transactions are then identified including, under subparagraph (a), a transaction as a result of which a person or group has a significant interest in a land rich entity.
As a result of the 5 August 2009 transaction, Growthpoint Properties Limited obtained a significant interest in a land rich entity. As a result of the 24 September 2009 transaction, Growthpoint Properties Limited increased its significant interest in the land rich entity. To my mind, this is the clear meaning of subsection 95(2). The transactions of 5 August and 24 September 2009 are both dutiable transactions.
The Commissioner submitted that there was no substance to the suggestion that subsection 95(2) was designed to ensure that public entities were not caught by the land rich entity provisions. The Commissioner contended that the legislation was explicit in only addressing private entities and attention was drawn to the terms of subsection 94(1), as extracted above.
In my view, section 95 is plain in its meaning. Subsection 95(1) provides that a person or group that acquires a significant interest or increases its significant interest in a land rich entity notionally acquires an interest in the underlying local land asset of the land rich entity, and is liable to duty in respect of the notional acquisition. Subsection 95(2) makes it plain that the relevant test is to look at the result of the transaction, that is to the consequence of the transaction, and to consider whether the transaction has resulted in the person or group having a significant interest in a land rich entity or, alternatively, increasing its significant interest in a land rich entity.
I do not consider that the use of the word “therefore” detracts from this construction. To the contrary, it supports the construction.
Conclusion
For these reasons the appeal is dismissed. The adjusted Notice of Assessment for duty and interest in the amount of $2,991,272.90 is confirmed. Growthpoint Properties Limited is to pay the costs of the appeal to be taxed.