Lend Lease Development Pty Ltd v Commissioner of State Revenue , , Lend Lease Real Estate Investments Ltd , Commissioner of State Revenue , , Lend Lease IMT 2(HP) Pty Ltd and Commissioner of State Revenue

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0054, 0056, 0058, 0059, 0060, 0061

LEND LEASE DEVELOPMENT PTY LTD	Appellant
v
COMMISSIONER OF STATE REVENUE	Respondent
COMMISSIONER OF STATE REVENUE	S APCI 2012 0055
LEND LEASE REAL ESTATE INVESTMENTS LTD	Appellant
v
COMMISSIONER OF STATE REVENUE	Respondent
S APCI 2012 0057
LEND LEASE IMT 2(HP) PTY LTD	Appellant
v
COMMISSIONER OF STATE REVENUE	Respondent

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JUDGES	WARREN CJ, TATE JA and KYROU AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	27 February 2013
DATE OF JUDGMENT	15 August 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 207
JUDGMENT APPEALED FROM	Lend Lease Development Pty Ltd v Commissioner of State Revenue; Lend Lease Real Estate Investments Ltd v Commissioner of State Revenue; Lend Lease IMT 2 Pty Ltd v Commissioner of State Revenue [2012] VSC 108

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STAMP DUTY – Assessment – Dutiable value of dutiable property – Consideration for the dutiable transaction – Transfer of seven parcels of land – Nexus required between consideration and the dutiable transaction – Money or value passing which ‘moves the transfer’– Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 – Assessment calculated on the basis that consideration included contribution payments, under a development agreement, for external infrastructure, integrated public art, Grand Plaza and other matters not on land transferred – Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties (1963) 63 SR (NSW) 522, Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496 – Duties Act2000 (Vic), s 11, 20(1), s 21(1), 25(1) – Appeals allowed.

STAMP DUTY – Application to expand case beyond grounds of disallowance – Taxation Administration Act 1997 (Vic), s 109 – ‘Encumbrance’ – Duties Act2000 (Vic), s 21(1).

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Appearances:	Counsel	Solicitors
For the Appellants	Mr N J Young QC with Mr C J Horan	Herbert Smith Freehills
For the Respondent	Mr S H Steward SC with Mr D C Morgan	Solicitor for the Commissioner of State Revenue

WARREN CJ:

I have had the benefit of reading in draft form the reasons for judgment of Tate JA. I agree with her Honour, for the reasons that she gives, that the appeals should be allowed.

Tate JA:

TABLE OF CONTENTS

Introduction….................................................................................................................................... 2

The Development Agreement............................................................................................................5
(1)Objectives.............................................................................................................................6
(2)The Stages.............................................................................................................................9

(3)LLD’s Key Obligations - Land Sale Contracts & additional payments….............. 10
Clause 4.1 - Obligation to enter into Land Sale Contracts....................................... 11
Land Sale Contract………………………………………………………..… 13
Stage Release Date…………………………………………………………...14
Stage Land Payment…………………………………………………………15

Clause 4.7 - Obligation to make Payments to the Authority……………………… 16
Minimum External Infrastructure Contribution…………………………... 18
Minimum Gasworks Site Remediation Contribution……………………… 20
Stage Integrated Public Art Contribution………………………………….. 23
Schedule C - Table of Base Amounts of Payments…...…...…...…...…...…... 24

Payments for the Grand Plaza….....…...…..…...…...…......…...…...…...…...…..... 28
  Specific Stages & Specific Payments…...….........….….........…...….........…........... 30
  Dock 5 & the Final Land Payment…...….........…...….........…...….............. 30
  Mosaic…...….........…...….........…...….........…...….........…...….................. 32
C3/C4 Stage, Additional Land Payment, Additional Authority
Payment & Estimated amounts…...….........…...….........…...….........….…. 32
C10 (Montage) Stage, Estimated amounts & Non-monetary consideration..34
C9 (Myer) Stage, Additional Authority Payment, Estimated amounts
& Non-monetary consideration….................................................................. 35
V4 (MKWH)…............................................................................................... 37
V5 (Convesso)…............................................................................................. 37

The Disputed Assessments of Dutiable Value…......................................................................... 38

Dock 5…...................................................................................................................... 38
Mosaic......................................................................................................................... 39
C3/C4.......................................................................................................................... 39
C10(Montage)............................................................................................................. 40
C9 (Myer)................................................................................................................... 41
V4 (MKWH) .............................................................................................................. 42
V5 (Convesso)............................................................................................................. 42

The Statutory Scheme & applicable principles........................................................................... 46

The judge’s reasons.......................................................................................................................... 60

Grounds of appeal............................................................................................................................ 67

LLD’s submissions........................................................................................................................... 71

The Commissioner’s submissions.................................................................................................. 80

Did the judge fall into error?.......................................................................................................... 91

(1) Nature of the dutiable property.................................................................................... 92
(2) Interdependence of the obligations............................................................................ 100
(3) Causation and attribution...........................................................................................104
(4) Timing............................................................................................................................. 107
(5) Profit sharing................................................................................................................. 109
(6) Specific payments.......................................................................................................... 114
(i) The Final Land Payment.................................................................................... 114
(ii) The Grand Plaza Payments............................................................................... 114
(iii) The Additional Authority Payment................................................................... 115
(iv) Non-monetary consideration.............................................................................. 116
(v) Estimated amounts.............................................................................................. 116

Conclusion on the appeals............................................................................................................. 116

The Notices of Contention............................................................................................................. 118

(1) Ground 1 – Application to expand case..................................................................... 120
(2) Ground 2 – Encumbrances............................................................................................ 122

Appendix............................................................................................................................................A

Introduction

These eight appeals arise from objections to assessments issued under the Duties Act 2000 (Vic) (‘the Act’) by the respondent, the Commissioner of State Revenue (‘the Commissioner’), in respect of duty charged on the transfer of seven parcels of land around Victoria Harbour in the Docklands area of Melbourne. The land was transferred to the appellants, Lend Lease Development Pty Ltd, Lend Lease Real Estate Investments Ltd, or Lend Lease IMT 2 (HP) Pty Ltd (collectively ‘LLD’), by the Victorian Urban Development Authority (‘VicUrban’) in various Stages, between October 2006 and June 2010. The transfer of land for each Stage was effected by a separate Land Sale Contract, largely reflecting the terms of a generic Land Sale Contract annexed to a Development Agreement between VicUrban and LLD.[1] Each of the appeals related to a different Stage and the transfer of a different parcel of land with the exception of one Stage that had given rise to two assessments (Dock 5), the earlier assessment not being completely subsumed by a later assessment.[2]
[1]LLD and VicUrban entered into a Development Agreement in 2001. This was later varied in 2006 and 2008. See [11]-[12] below.
[2]The Appeal Proceedings are S APCI 2012/0054 and 0056 with respect to Dock 5 (earlier proceedings in the Trial Division: No 2663 of 2011 and No 2667 of 2011); 0055 (Stage C9 (Myer)) (earlier proceeding: No 2665 of 2011); 0057 (Stage V5 (Convesso)) (earlier proceeding: 2707 of 2011); 0058 (Mosaic) (earlier proceeding: 2661 of 2011); 0059 (Stage C10 (Montage)) (earlier proceeding: 2676 of 2011); 0060 (V4 (MKWH)) (earlier proceeding: 2678 of 2011); 0061 (Stage C3/C4) (earlier proceeding: 2677 of 2011). The Stages are explained below.

The Development Agreement provided not only for the sale of land in Stages but also for the undertaking of various development works in the wider Docklands area. It obliged LLD to make various contribution payments in respect of those development works, including a contribution to infrastructure in the area that was external to the Stages, the remediation of an old disused gasworks site that was largely outside the boundaries of the Stages, and a contribution to public art that was integrated throughout the Docklands area and not installed on any of the land transferred. These obligations were additional to those undertaken by LLD to develop and sell the land it acquired.

The assessments issued by the Commissioner were calculated on the basis that the consideration for the transfer of the land included LLD’s obligation to make payments towards infrastructure and construction works pursuant to the Development Agreement, as well as the agreed purchase price for the land. As a result of the assessments, LLD paid an additional $2,460,182.70 in duty, penalty and interest in relation to the additional payments.[3]
[3]The additional payments are later defined as ‘contribution payments’. See [28] below.

The grounds of objection to the assessments were primarily directed to the manner in which the Commissioner had calculated the ‘dutiable value’ of the land. The Commissioner disallowed the objections. Each objection was treated as an appeal by LLD from the Commissioner,[4] and a judge of the Trial Division of the Supreme Court heard each of the appeals from the Commissioner and dismissed them.[5] He held that the Commissioner had properly assessed the dutiable value payable on the land for each Stage as including the payments made in respect of infrastructure and construction works pursuant to the Development Agreement. In these appeals from the judge, LLD challenged that manner of calculation.
[4]LLD asked the Commissioner to treat each objection as an appeal and to set it down for hearing at the next sittings of the Supreme Court, pursuant to s 106 of the Taxation Administration Act 1997 (Vic).
[5]Lend Lease Development Pty Ltd v Commissioner of State Revenue; Lend Lease Real Estate Investments Ltd v Commissioner of State Revenue; Lend Lease IMT 2 Pty Ltd v Commissioner of State Revenue [2012] VSC 108 (‘Reasons’).

Section 20(1) of the Act relevantly provides that ‘the dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of (a) the consideration (if any) for the dutiable transaction … and (b) the unencumbered value of the dutiable property’.[6] In this context the meaning of ‘consideration’ is not confined to that applicable under contract law but has the wider meaning belonging

to conveyancing.[7] It was common ground between LLD and the Commissioner that the question of what is the dutiable value of land is to be answered by reference to the ‘money or value passing which moves the conveyance or transfer’.[8] The contest on the appeals lay in the question of whether certain amounts paid by LLD to VicUrban in respect of infrastructure and construction works pursuant to the contractual arrangements made under the Development Agreement formed part of the consideration for the transfer of the land, under s 20(1) of the Act.

[6]Section 20(1) is set out in full, [127] below.

[7]Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 (‘Archibald Howie’), 152 (Dixon J), although the consideration must be in money or money’s worth.

[8]Ibid 152 (Dixon J).

The Commissioner sought to raise a secondary issue, by means of a Notice of Contention in each appeal, namely, that the amounts LLD was obliged to pay in respect of infrastructure and construction works, if not otherwise included in the ‘dutiable value’ of the land under s 20(1) of the Act, are included in that ‘dutiable value’ because they are ‘encumbrances’ within the meaning of s 21(1) of the Act.[9] The judge did not deal with this secondary issue.
[9]Section 21(1) of the Act provides: ‘The consideration for the transfer of dutiable property is taken to include the amount or value of all encumbrances, whether certain or contingent, subject to which the dutiable property is transferred’.

I would allow the appeals. I have concluded that the judge shifted his focus from the statutory question he was obliged to ask under s 20(1) of the Act, and the evaluation of the transaction of the transfer of the land, and came to treat the relevant transfer, for the purpose of assessing duty, as the transfer of the land in the condition it would be in once it had been developed. That is, he shifted his focus from the nature of the dutiable property transferred to the land as developed.

I would dismiss the Notices of Contention.

I set out my reasons.

The Development Agreement

On 18 May 2001 VicUrban and LLD entered into a Development Agreement (‘the 2001 Development Agreement’) under which VicUrban agreed to sell land in the Victoria Harbour Precinct (‘the Precinct’)[10] to LLD, and VicUrban and LLD agreed to the terms and conditions that would regulate the use and development of the land. VicUrban was then known as the Docklands Authority (‘the Authority’).[11] The 2001 Development Agreement had as its primary aim the development of Victoria Harbour for the benefit of the public, including commercial offices, restaurants and cafes, community facilities, water-front and other spaces. At the relevant time Victoria Harbour was a 28.56 hectare holding that was the centrepiece of the Docklands.
[10]Clause 1.1 of the Development Agreement defined a ‘Precinct’ as a ‘part of the Dockland Area identified by the Authority as a precinct’. The definition of the ‘Land’ under the Development Agreement identified the land the subject of the agreement as the land known as the ‘Victoria Harbour Precinct’.
[11]The Authority was established by the Docklands Authority Act 1991 (Vic) for the purpose of facilitating development of the Docklands Area. VicUrban was established by the Victorian Urban Development Authority Act 2003 ‘to develop the docklands area’. The Docklands Authority Act was renamed the Docklands Act 1991 by Act No 59 of 2003, s 91.

The 2001 Development Agreement was varied on 22 June 2006, when VicUrban and LLD entered into a Deed of Amendment and Restatement (‘the 2006 Development Agreement’). This was further varied on 27 November 2008, when VicUrban and LLD entered into a Variation Deed that annexed an Amended and Restated Development Agreement (‘the 2008 Development Agreement’).

It is convenient to refer compendiously to the 2001, 2006 and 2008 Development Agreement as ‘the Development Agreement’ unless specific reference is required to a particular version.

The Development Agreement, while it did not itself effect a dutiable sale or transfer of land, constituted a detailed and multi-faceted contractual framework for the sale of land in the Precinct in conjunction with its development. It contained multiple and inter-connecting obligations between LLD and VicUrban. Under its terms, LLD was defined as ‘the Developer’ that had submitted a successful bid proposal for the development of the land. The intention of the Development Agreement was to facilitate the ‘Developer’s Project’; that is, ‘the planning, design, development, construction and commissioning of all Stages and the Works and all off-site facilities as described in the Bid Proposal and the Approved Design Documentation (other than the External Infrastructure)’. The primary obligation assumed by LLD was to construct and develop the Developer’s Project.[12] The Project was to be undertaken against a series of ‘Milestone Events’.[13] VicUrban was obliged to provide the external infrastructure and LLD made a contribution to its costs. The Development Agreement had the effect that on the sale of the developed land to third parties, LLD and VicUrban would share in the proceeds from the sales. The creation of a new residential waterfront area in Melbourne from undeveloped land, where people could live and work in a pleasing and vibrant environment, enabled VicUrban to discharge its statutory functions.
[12]Clause 13 of the Development Agreement.
[13] These were defined in Schedule A to the Development Agreement as including, for example, Milestone Event 1: the commencement of works on at least one Stage with a Milestone Date of within 18 months of the date of the agreement; Milestone Event 5: payment to VicUrban of 15 per cent of the Total Land Price, the Project External Infrastructure Contribution and the Project Gasworks Site Remediation Contribution determined as at the Milestone Date of within 42 months of the date of the agreement; and Milestone Event 9: payment to VicUrban of 65 per cent of the Total Land Price, the Project External Infrastructure Contribution and the Project Gasworks Site Remediation Contribution determined as at the Milestone Date of within 90 months of the date of the agreement. These terms are explained below.

(1) Objectives

The objectives of the Development Agreement reflected the functions conferred upon VicUrban under the Docklands Act 1991 (Vic), which included promoting and encouraging the involvement of the private sector in the development of the Docklands area; taking, supporting or promoting measures to encourage people to live and work in the area; creating in the area an attractive environment; and promoting, assisting and coordinating the economic, cultural and social development of the Docklands area.[14] VicUrban was specifically authorised to enter into agreements with other persons concerning the use or development of land in the Docklands area.[15] To that end, the Development Agreement included within its Recitals that:

D.The Authority has agreed to sell the Developer the Land on the terms and conditions in the Land Sale Contract and this Agreement.
E.The Authority and the Developer have agreed to the terms and conditions which will regulate the use and development of the Land.
F.The Authority and the Developer acknowledge that the development of the Land will need to be dynamic to achieve the Objectives.

[14]See s 10 of the Docklands Act.

[15]See s 24(2) of the Docklands Act.

The objectives of the 2001 Development Agreement were set out in cl 2:

The Authority and the Developer acknowledge and agree that the:
(a)functions of the Authority include those set out in section 10 of the [Docklands] Act;
(b)general purpose of the Act is to facilitate the development of the Docklands Area and to establish the Authority for the purposes of encouraging that development;
(c)Authority and the Developer will participate in the Developer’s Project for the purpose of implementing the Developer’s Project and achieving the Objectives set out in this Agreement;
(d)objectives for the development of the Precinct include:
(i)the intended purpose and objectives set out in the Bid Proposal;
(ii)the development of the Docklands Area as a place of character and quality in which to live and work, creating both a tourism asset and a boost to Melbourne’s prosperity;
(iii)development responsive to the characteristics of the Land and complementary with the characteristics of Melbourne;
(iv)the development of the Docklands Area as a waterfront place focussed on and utilising the Victoria Harbour and Yarra River;
(v)the development of waterfront areas in the Docklands Area as an authentic working harbour with natural, complementary waterfront, marine and working harbour activities;
(vi)development allowing a diversity of public uses and recreational and business activities;
(vii)development accessible to a diverse range of locals and visitors; and
(viii)development which is creative, innovative and consistent with good ecological sustainability principles;

(e)Authority and the Developer must act, co-operate and negotiate in good faith to agree such further terms and specifications requested by the Authority for the development of the Land in accordance with the Objectives, including, without limitation:
(i)attending meetings requested by the Authority; and
(ii)entering into any further agreements negotiated in good faith; and

(f)the Developer must develop by planning, designing, constructing and commissioning each Stage[16] in accordance with the terms and conditions of this Agreement.

[16]‘Stage’ was defined in cl 1.1 to mean ‘any part of the Land identified as a stage in the Staging Plan and includes the Grand Plaza Works’.

A ‘Default Event’ under the Development Agreement was defined to include, inter alia, a failure to comply with any provision of the Development Agreement or with the Land Sale Contract.[17] A ‘Financial Default’ meant ‘a failure to pay any money to VicUrban under the Development Agreement or a Land Sale Contract when due and payable’.[18] Clause 3.1 of the Development Agreement provided that LLD was obliged to satisfy VicUrban that it had ‘sufficient financial resources and/or debt and equity commitments to meet its obligations’. The land the subject of the Development Agreement was defined in cl 1.1 of the Development Agreement as follows:

Land means the whole or any part of the land contained in certificate of title volume 10269 folio 531 and known as Victoria Harbour Precinct, Docklands Area as set out in Schedule V[19] and includes Area A of the Gasworks Site. Where the Developer’s Project requires or relates to marinas, marina berths, water rights, water access, air rights and other interests in land, the expression ‘Land’ encompasses those other interests in the form and with the conditions negotiated between the Developer and the Authority.

[17]Clause 1.1.

[18]Clause 1.1.

[19]Schedule V was a diagram of the land.

(2) The Stages

There were seven Stages in the Project relevant to the appeals: Dock 5; Mosaic; C3/C4 (63-93 Merchant Street); C10 (Montage); C9 (Myer); V4 (‘MKWH’ (Merchant Key Worker Housing)); and V5 (‘Convesso’)[20] (collectively, ’the Stages’).[21]
[20]The Stages were set out in the ‘Staging Plan’. This was annexed as Schedule T to the Development Agreement. A ‘Staging Plan’ was defined in cl 1.1 as ‘a plan acceptable to the Authority acting reasonably to be provided at appropriate intervals of time and otherwise on the reasonable request of the Authority (a) detailing the physical and geographical evolution of the Developer’s Project from the commencement of the Works until Project Practical Completion; and (b) except to the extent that the parties acting reasonably otherwise agree in writing, confirming to the Authority that the physical and geographical growth of the Works will be continuous and contiguous from not more than two single points within the Land’.
[21]These seven are only some of the many Stages in the Project. The 2001 Development Agreement identified 35 Stages but this was increased in the 2006 Development Agreement. The names of the Stages were changed in the Staging Plan for the 2006 Development Agreement and reflect the names of the Stages under dispute. Reference to ‘the Stages’ is intended to be confined to the seven Stages under dispute, except where the context indicates otherwise.

Dock 5 was a 3,263 square metre holding in the Docklands area along the water frontage, having immediate harbour/promenade frontage and northern orientation over Victoria Harbour and the associated ‘NewQuay’ and ‘Waterfront City’ Docklands precincts.

Mosaic was a 2,532 square metre holding situated centrally within the Precinct, having primary frontage to Bourke Street and being within immediate proximity of Ericsson Australia, National Australia Bank and ‘Dock 5’ buildings.

C3/C4 (63-93 Merchant Street) was a 5,540 square metre retail and office building site with frontage along Merchant Street.

C10 (Montage) was a 2,675 square metre site, centrally located at 61-81 Navigation Drive and proximate to Dock 5, Mosaic, the National Australia Bank and Ericsson Australia.

C9 (Myer) was land at 800 Collins Street, directly opposite the developing ANZ headquarters.

V4 (MKWH) was land at 838 Bourke Street, an area of approximately 1,483 square metres.

V5 (Convesso) was an area of approximately 3,701 square metres at 848-868 Bourke Street.

‘Works’ were to be undertaken with respect to each Stage. ‘Works’ was defined, in cl 1.1, to mean ‘the works to be carried out by the Developer to complete the Developer’s Project in accordance with this Agreement and includes temporary and remedial works, landscaping and construction and installation of Developer’s Infrastructure and connection to the External Infrastructure’.

The definition of the ‘Works’ that LLD undertook to carry out did not include the provision of external infrastructure or other matters for which VicUrban took primary responsibility.

(3)LLD’s Key Obligations - Land Sale Contracts & additional payments

Apart from the primary obligation to construct the Developer’s Project, there were two key obligations undertaken by LLD under the 2001 Development Agreement and reaffirmed in the 2006 and 2008 Development Agreements, although the terminology and the method of calculation sometimes changed. The first was to enter into ‘Land Sale Contracts’ for each Stage (cl 4.1(a)), subject to the satisfaction of conditions precedent with respect to the viability of funding and other commitments (cl 4.2), and secondly, to pay a multiplicity of payments in respect of each Stage, including the ‘Stage Land Payment’. Apart from the Stage Land Payment, under the 2001 Development Agreement LLD was obliged to make a variety of additional payments, including the ‘Minimum External Infrastructure Contribution’, the ‘Minimum Gasworks Site Remediation Contribution’, the ‘Stage Integrated Public Art Contribution’, as well as other amounts due and payable (cl 4.7). Collectively these additional payments, including those arising from the 2006 and 2008 Development Agreements, can be

referred to as ‘the contribution payments’.[22] Some of the contribution payments were calculated by reference to the projected gross proceeds to be received on sale to third parties and were to be adjusted, by reference to various reconciliation dates, once the sale proceeds had been received. The Stage Land Payment was not calculated on this basis.

[22]The contribution payments included the External Infrastructure Contribution (including the Base External Infrastructure Contribution); The Gasworks Site Remediation Contribution (including the Base Gasworks Site Remediation Contribution); the Integrated Public Art Contribution; the Grand Plaza Retention Amount; the Grand Plaza Additional Payment; the Grand Plaza Contribution; the Additional Land Payment; the Final Land Payment; the Additional Authority Payment; the Estimate of Outstanding Amounts; the Estimated Land Payment; the Estimated External Infrastructure Contribution; the Estimated Gas Site Remediation and the non-monetary consideration. See Reasons, [6], See further [121] (Table 2: Payments Made (Dock 5, Mosaic, C3/C4, C10)), [122] (Table 3: Payments Made (C9, V4, and V5)). These terms are explained below.

While I consider the exact definitions below, in general terms, the ‘Stage Land Payment’ was a payment to be made by LLD, for a stipulated price, in relation to the transfer of the land for each Stage; the ‘Minimum External Infrastructure Contribution’ was a payment to be made as a contribution to services and transport connections to the Precinct, linking the Precinct and the Docklands area to the Central Business District of Melbourne and to adjoining suburbs, to be constructed outside the boundaries of the relevant Stages; the ‘Minimum Gasworks Site Remediation Contribution’ was a payment to be made as a contribution to the remediation of the former eight hectare West Melbourne Gasworks once occupied to the east of the Precinct; and the ‘Stage Integrated Public Art Contribution’ was a payment to be made as a contribution to art works which had been designed, created or commissioned in respect of external public spaces, complementary to or integrated with the Project. There were relevantly seven major pieces of public art all of which were located outside the Precinct but in the general Docklands area.

Clause 4.1 - Obligation to enter into Land Sale Contracts

Clause 4.1(a) of the Development Agreement provided for the execution by VicUrban and LLD of Land Sale Contracts for the transfer of land in respect of each separate Stage:

Subject to clause 4.2, the Authority and the Developer must enter into and settle a Land Sale Contract for the purchase by the Developer of each Stage for the Stage Land Payment on or before the Stage Release Date for that Stage.

Clause 4.2 set out a series of conditions precedent, the satisfaction of which by LLD was necessary before VicUrban would enter into a Land Sale Contract for a Stage. These included matters relating to the development, valuation and administration of the Stage in accordance with which LLD was obliged to deliver to VicUrban:

(a)evidence that the Developer has, or has obtained from the Financiers, sufficient funding to finance the Works on the Stage, the Developer’s Infrastructure, the Minimum External Infrastructure Contribution, the Gasworks Site Remediation Contribution and any other financial obligations under this Agreement;
(b)the Stage Feasibility Report[23] together with an amended Schedule C if the projected gross revenue on sale for the Stage differs from the Projected Gross Revenue on Sale for the Stage as specified in Column E of clause 1.2 of Schedule C as amended from time to time in accordance with this Agreement;
[23]A ‘Stage Feasibility Report’ was defined in cl 1.1 as ‘a feasibility report for a Stage which shows the viability of the development of the Stage and which shows the Developer’s projected gross revenue on sale for that Stage and all Future Stages’.
(c)evidence of any relevant Precommitments;
(d)the Security;
(e)copies of Planning Approval for the Stage;
(f)details of the Stage Development Cost;
(g)evidence of Approval of the Site Based Environmental Management Plan for the relevant Stage by the relevant Government Agencies in accordance with clauses 7.1 and 7.2;
(h)evidence that the Developer is a party to a binding contract for construction of the Works relating to the Land or the Stage (as the case may be) under which the construction contractor’s obligations are consistent with the obligations of the Developer under this Agreement;
(i)notification of a Date for Stage Practical Completion; [24]
[24]‘Stage Practical Completion’ was defined to mean when the Works for that Stage were completed in accordance with the approved design documentation.
(j)the following documents executed by all parties to the document other than the Authority;
(a)Building Certifier Deed;
(b)Independent Assessor Deed; and
(c)any Registrable Agreement referred to in Schedule Q;

(k)confirmation that the Stage is in accordance with the Staging Plan;
(l)confirmation of the Works Programme for the Stage;
(m)confirmation that, if there is a subsisting Default Event in respect of which notice has been served under clause 20.1, the Developer is using its best endeavours to cure the Default Event as required in clauses 20.2 and 20.3;
(n)confirmation that the Developer has set aside sufficient Human Services Land to meet the requirements of clause 11.8;
(o)confirmation that the Developer has entered into a section 173 agreement having substantially the same effect as the agreement annexed as Schedule E or as otherwise Approved by the Authority which Approval must not be unreasonably withheld; and
(p)confirmation of the detailed indicative plan for expenditure in respect of;
(a)Integrated Public Art in public spaces relating to individual buildings (as referred to in clause 10.1(a)(ii)); and
(b)Integrated Public Art in public spaces within the Victoria Harbour Precinct (as referred to in clause 10.1(b)(ii)).

Land Sale Contract

‘Land Sale Contract’ was defined to mean:

any contract of sale between the Authority and the Developer for a Stage, or the Land, substantially in the form set out in Schedule S.

Schedule S contained the generic Land Sale Contract. The Vendor was VicUrban and the Purchaser was left blank, as was the description of ‘the land’, the property address and the purchase price. The Land Sale Contract incorporated the defined terms from the Development Agreement[25] and provided that ‘this contract and the Development Agreement constitute the entire agreement between the parties for the sale and purchase of the Property’.[26] It provided that the purchaser had inspected the property and acknowledged the identity and condition of the land[27] and would not make any requisition or objection, claim compensation or refuse payment of the price in relation to or arising out of the condition of the Property.[28] With respect to the Land Condition it provided that:[29]

Clause 7.9 of the Development Agreement applies to this contract as though the Vendor is the ‘Authority’ and the Purchaser is the ‘Developer’ for the purposes of that clause.

[25]Clause 1.9, Schedule S Land Sale Contract.

[26]Clause 6, Schedule S Land Sale Contract.

[27]Clause 3.1, Schedule S Land Sale Contract.

[28]Clause 3.2(c), Schedule S Land Sale Contract.

[29]Clause 3.4., Schedule S Land Sale Contract.

Clause 7.9 of the Development Agreement provided, inter alia, that the Developer accepted the condition of the land at the date of the execution of the Development Agreement[30] and would not make any claim for compensation in respect of the condition of the land.[31]
[30]Clause 7.9(c).
[31]Clause 7.9(d).

Clause 7.2 of the Land Sale Contract linked default under the Development Agreement to default under the Land Sale Contract as follows:

The Purchaser acknowledges that a Material Default by the Purchaser under the Development Agreement will constitute a default under this contract. The Vendor will be entitled to immediately terminate this contract if it has a right to terminate the Development Agreement, and the deposit will not be refunded to the Purchaser.

The specific Land Sale Contracts for the relevant Stages are dealt with below.[32]
Stage Release Date
[32]See [87]-[110] below.
‘Stage Release Date’ was defined as follows:

Stage Release Date in relation to a Stage means the date specified in the Staging Plan as the date for the release[33] of the relevant Stage pursuant to clause 4.1, as extended from time to time with the approval of the Authority which approval must not be withheld unless the extension of that date would result in:
(a)the Developer failing to achieve a Milestone Event by the Milestone Date; or

(b) a Sunset Event occurring.

[33]These dates were set out in Schedule T.

The ‘Actual Stage Release Date’ was defined, in relation to a Stage, as the date on which LLD took title to the Stage.[34]
Stage Land Payment
[34]Pursuant to cl 4.1.
Amongst the key definitions[35] was that of ‘Stage Land Payment’:

Stage Land Payment means the Developer’s contribution for each Stage as specified in Column B of clause 1.2 of Schedule C, as varied and escalated in accordance with clauses 1.3 and 1.4 of Schedule C from time to time.

[35]In cl 1.1.

The Stage Land Payment was defined by reference to cl 1.2 of Schedule C, as were many of the relevant payments. Clause 1.2 of Schedule C is reproduced below.[36] I discuss its effect further below.[37]
[36]At [70] below.
[37]See [70]-[77] below.

The amount payable as the Stage Land Payment for each Stage on its release was determined as approximately 2.74 per cent of the Projected Gross Revenue on Sale referable to the Stage being released.[38] It was a proportion of the total land price for all the Stages of the Project ($49.7 million). The Stage Land Payment for each Stage was subject to escalation provisions relating to changes made to the Projected Gross Revenue on Sale for each Stage; the Stage Land Payment did not itself provide VicUrban with a specified share of the actual proceeds of sale,[39] nor was it one of the payments that was calculated by reference to a distribution of actual proceeds of sale.
[38]Reasons, [21].
[39]See the Appendix. This is discussed at [249] below.

LLD contended that the consideration for each transfer of land was, generally, the Stage Land Payment for that Stage, that is, the amount recorded as the purchase price in each Land Sale Contract.[40] It paid duty on that footing. There were three exceptions where the unencumbered value of the land at the time of the transfer was greater than the purchase price, namely, Mosaic, V4 (MKWH), and C10 (Montage) Stages. In those cases, duty was paid on the unencumbered land value. As mentioned above, the assessments issued by the Commissioner were calculated on the basis that the consideration for the transfer of the land included LLD’s obligation to make the contribution payments as well as the Stage Land Payment.
[40]This was also the amount (with the inclusion of GST) specified as the consideration in the land transfer instruments.

The requirement that LLD make a Stage Land Payment applied to all Stages.

Clause 4.7 – Obligation to make Payments to the Authority

Clause 4.7(a)(i) of the Development Agreement imposed a series of obligations for payment upon LLD, referable to a Stage, before the date on which LLD took title to that Stage. The first of these was the Stage Land Payment, discussed above. There were other payments due and payable before LLD took title to a Stage that are dealt with in detail below.

Clause 4.7(a)(ii) imposed additional obligations for payment by LLD on or before the Initial Reconciliation Date, that is, 28 days after the first receipt by LLD of any proceeds of sale in respect of that Stage.[41] The ‘Actual Gross Proceeds of Sale’ meant ‘the total of all monies and the market value of non-monetary consideration received in respect of a sale or other dealing with a Stage’.[42]
[41]Clause 1.1. The Proceeds might also alternatively be received by LLD’s financier.
[42]Clause 1.1. It included interest earned on the monies.

Clause 4.7 provided:

(a) The Developer must:
(i)on or before each Actual Stage Release Date pay the Authority in respect of that Stage an amount equal to the sum of:
(A) the Stage Land Payment;
(B)on account of the Project External Infrastructure Contribution, the Minimum External Infrastructure Contribution;
(C)on account of the Project Gasworks Site Remediation Contribution, the Minimum Gasworks Site Remediation Contribution;

(D) the Stage Integrated Public Art Contribution; and
(E)any other amounts due and payable by the Developer to the Authority under this Agreement.

(ii)on or before the Initial Reconciliation Date, distribute the amount of the Actual Gross Proceeds of Sale received by the Developer in the following order and priority:
(A)the sum by which 2.74% of Actual Gross Proceeds of Sale exceeds the Stage Land Payment for that Stage;
(B)on account of the Project External Infrastructure Contribution, the sum by which 1.35% of Actual Gross Proceeds of Sale exceeds the Minimum External Infrastructure Contribution paid under clause 4.7(a)(i)(B);
(C)on account of the Project Gasworks Site Remediation Contribution, the sum by which 1.55% of Actual Gross Proceeds of Sale exceeds the Minimum Gasworks Site Remediation Contribution paid under clause 4.7(a)(i)(C),
to the Authority; and
(D)in payment to the Developer of the balance of the Actual Gross Proceeds of Sale.

A range of payments was also to be made at subsequent reconciliation dates, ‘Interim Reconciliation Dates’[43] (which occurred bi-annually until 2 years after Stage Practical Completion) and a ‘Stage Reconciliation Date’ (2 years after Stage Practical Completion),[44] further completing the distribution of proceeds from sale.
[43]Clause 4.7(b).
[44]Clause 4.7(c). If a completed non-residential development had not been sold by LLD to a third party on or before the Stage Reconciliation Date, LLD was obliged, at the Stage Reconciliation Date, to pay to VicUrban the difference between 2.74 per cent of the Market Value of the completed unsold non-residential development and the Stage Land Payment: cl 4.7(d). A Valuer had to be appointed to determine Market Value: cl 4.8.

It is apparent that while cl 4.7(a)(i) governed the range of payments to be made by LLD to VicUrban before LLD took title to each Stage, cl 4.7(a)(ii) was intended to operate as a mechanism to provide VicUrban with a share of the proceeds made by LLD on the sale or other dealing with each Stage. By the use of this mechanism VicUrban shared in the proceeds that LLD made from the Project, the Minimum Contributions paid by LLD being taken into account, and going some way towards, the returns that VicUrban was to receive from the Development Agreement. Clause 4.7(a)(ii) made manifest that the parties to the Development Agreement, VicUrban and LLD, had a continuing legal relationship well after the transfer of the land in respect of each Stage and that this relationship went well beyond Vendor and Purchaser of land.
Minimum External Infrastructure Contribution
The ‘Minimum External Infrastructure Contribution’ was defined to mean:[45]

The Developer’s minimum contribution to the cost of the External Infrastructure for each Stage specified in Column C of clause 1.2 of Schedule C as varied and escalated in accordance with clauses 1.3 and 1.4 of Schedule C from time to time.

[45]Clause 1.1.

‘External Infrastructure’ was the infrastructure designed to ‘deliver services, transport connections and utilities’ including earthworks; drainage; water supply works; and traffic works. These included the extension of Collins Street from Spencer Street to Docklands, a pedestrian and cycle bridge and a pedestrian bridge to Etihad Stadium.[46] These matters were set out in Schedule U. VicUrban warranted, pursuant to cl 11.1 of the Development Agreement, that ‘certain elements of External Infrastructure are installed and completed substantially as set out in Schedule U’. LLD warranted that the External Infrastructure ‘will be adequate for LLD’s project’.[47] The External Infrastructure was to be constructed outside the boundaries of the relevant Stages, that is, outside the boundaries of the land transferred to LLD.
[46]Reasons, [7].
[47]Clause 11.2.

The Minimum External Infrastructure Contribution was paid on account of the ‘Project External Infrastructure Contribution’[48] which was in turn defined[49] as ‘the Developer’s contribution to the cost of the External Infrastructure’, that is, the costs incurred by VicUrban in providing the external infrastructure.
[48]See cl 4.7(a)(i)(B).
[49]Clause 1.1.

The payments were calculated as a proportion of either the projected or the actual proceeds of sale of each Stage. The payment to be made before LLD took title to a Stage (under cl 4.7(a)(i)(B)) was calculated by reference to the Projected Gross Revenue on sale of each Stage. The payment to be made by LLD after the sale of a Stage and before the Initial Reconciliation Date (under cl 4.7(a)(ii)(B)) was calculated as an amount by which 1.35 per cent of the Actual Gross Proceeds of Sale exceeded the Minimum External Infrastructure Contribution.

There was a stipulated maximum to this contribution of $23.6 million,[50] subject to variation and escalation. Once the cap was reached, no further contributions in respect of external infrastructure would be payable on the release of subsequent Stages.[51]
[50]This maximum was provided for in the definition of ‘Project External Infrastructure Contribution’ in cl 1.1 of the Development Agreement.
[51]Clause 4.7(f) provided that LLD’s obligations under cl 4.7(a)(i)(B) and cl 4.7(a)(ii)(B) would cease on the Project External Infrastructure Contribution being paid in full to VicUrban.

The contribution to external infrastructure was distinct from the obligation on LLD to install and maintain the ‘Developer’s Infrastructure’,[52] which included ‘all Services, means of access, Human Services and other infrastructure necessary or desirable for the Developer’s Project and including the Bourke Street Extension and the Collins Street Extension but excluding External Infrastructure’.[53]
[52]Clause 11.6.
[53]Clause 1.1.

Some of the terminology changed in the 2006 and 2008 Development Agreement, LLD being required to pay a ‘Base External Infrastructure Contribution’ on or before it took title to each Stage until the ‘Balance of the Base External Infrastructure Contribution’ had been paid.[54] The ‘Base External Infrastructure Contribution’ was defined in cl 1.1 of the 2006 Development Agreement and the 2008 Development Agreement to mean $23.6 million subject to escalation provisions, and the ‘Balance of the Base External Infrastructure Contribution’ as that amount less the sum of all payments made on account thereof under the Development Agreement. A further payment on account of the Base External Infrastructure Contribution was due on or before the Initial Reconciliation Date for each Stage.[55]
[54]2006 Development Agreement, cls 4.7(a)(i)(A)(II), 4.7(a)(i)(C)(II); 2008 Development Agreement, cls 4.7(a)(i)(A)(II), 4.7(a)(i)(C)(II). Under the 2008 Development Agreement, each of the Stage Land Payment, the Base External Infrastructure Contribution and the Base Gasworks Site Remediation Contribution were calculated as being 90 per cent of a fixed percentage of the Projected Gross Revenue on the sale of the initial build out. See further [95]-[96] below.
[55]2006 Development Agreement, cl 4.7(b)(ii); 2008 Development Agreement cl 4.7(b)(ii).

In summary, and as is apparent from the terms of the clauses identified above, under the Development Agreement LLD assumed an obligation to pay $23.6 million, with escalation, towards the costs incurred by VicUrban in relation to the construction of infrastructure works on land outside of any of the Stages transferred to it. The contribution was made in instalments, initially payable on the release of each Stage to LLD and later on the receipt of sale proceeds in respect of each Stage, until the agreed contribution was paid in full.

The Commissioner assessed an amount paid by LLD in respect of external infrastructure for all Stages except the C3/C4 Stage.
Minimum Gasworks Site Remediation Contribution
As mentioned above, the Gasworks Site was the site of the former West Melbourne Gasworks. It appears that waste products from gas production had been deposited into ponds and wells on this site when the Gasworks had been active. When decommissioned, the site had been demolished to ground level and a clean up notice was issued for the site by the Environment Protection Authority.[56] The Gasworks Site Remediation was a remediation of the West Melbourne Gasworks Site pursuant to the Gasworks Site Remediation Contract[57] entered into for the purpose of ensuring ‘that the Gasworks Site is suitable to be used for undifferentiated use as parkland and open space, high density residential and/or commercial use, subject to the conditions on the Gasworks Statement of Environmental Audit’.[58]
[56]Pursuant to s 62A of the Environment Protection Act 1970 (Vic).
[57]Between VicUrban and the Enterra Joint Venture.
[58]Clause 7.8 of the Development Agreement.

The Gasworks Site is located to the east of the Precinct, but overlaps with the area of the C9 (Myer) and C10 (Montage) Stages and part of the Mosaic and C3/C4 Stages.[59]
[59]LLD’s Submissions, [33].

The ‘Minimum Gasworks Site Remediation Contribution’ was defined to mean:[60]

The Developer’s minimum contribution to the Gasworks Site Remediation for each Stage as specified in Column D of clause 1.2 of Schedule C, as varied and escalated in accordance with clauses 1.3 and 1.4 of Schedule C from time to time.

[60]Clause 1.1.

Similar to the contributions made in respect of external infrastructure, the contribution LLD was obliged to make to the Gasworks Site Remediation was payable in instalments on the release of each Stage to LLD and on subsequent reconciliation dates, and was capped.

The payments were structured so that under the 2001 Development Agreement LLD was required to pay the Minimum Gasworks Remediation Contribution on or before the Actual Stage Release Date, and a further payment on or before the Initial Reconciliation Date calculated as an amount by which 1.55 per cent of the Actual Gross Proceeds of Sale exceeded the Minimum Gasworks Site Remediation Contribution. Each of these payments was made on account of the ‘Project Gasworks Site Remediation Contribution’, that is, the ‘Developer’s Contribution to the cost of the Gasworks Site Remediation to a maximum of $27 million as varied and escalated’. The obligation to make these payments ceased once the Project Gasworks Site Remediation Contribution had been paid in full. [61]
[61]In accordance with the definition of ‘Project Gasworks Site Remediation Contribution’ and cl 4.7(g) whereby LLD’s obligation to make the payments specified in cls 4.7(a)(i)(C) and 4.7(a)(ii)(C) would cease when the Project Gasworks Site Remediation Contribution was paid in full to VicUrban.

Under the 2006 Development Agreement and the 2008 Development Agreement, LLD was required to pay a ‘Base Gasworks Site Remediation Contribution’ on or before each Actual Stage Release Date[62] until the ‘Balance of the Base Gasworks Site Remediation Contribution’ had been paid, that is, an amount equal to the Base Gasworks Site Remediation Contribution less the sum of all payments to VicUrban on account thereof.[63] The ‘Base Gasworks Site Remediation Contribution’ was defined, under cl 1.1, to mean $27 million subject to escalation provisions. On or before the Initial Reconciliation Date for each Stage a further payment on account of the Base Gasworks Site Remediation Contribution was due and payable.[64]
[62]2006 Development Agreement, cls 4.7(a)(i)(A)(III) and 4.7(a)(i)(C)(III). 2008 Development Agreement, cls 4.7(a)(i)(A)(III) and 4.7(a)(i)(C)(III).
[63]Clause 1.1.
[64]2006 Development Agreement and 2008 Development Agreement, Clause 4.7(b)(iii).

In summary, under the Development Agreement, LLD assumed an obligation to pay $27 million, with escalation, towards the costs incurred by VicUrban in relation to the remediation of the former West Melbourne Gas Works site. The contribution was made in instalments, initially payable on the release of each Stage to LLD and later on the receipt of sale proceeds in respect of each Stage, until the agreed contribution was paid in full.

The Commissioner assessed an amount paid by LLD in respect of gasworks site remediation in respect of all Stages except the C3/C4 Stage.
Stage Integrated Public Art Contribution
The Stage Integrated Public Art Contribution was a contribution to be made by LLD to the costs incurred by VicUrban in purchasing and commissioning artworks (for example, outdoor sculptures) in public spaces within the Docklands area generally. LLD was required to pay the contribution to VicUrban, which was in turn obliged to spend that amount on Integrated Public Art in the Docklands area.[65] It was defined to mean 0.2 per cent of the Stage Development Cost.[66] VicUrban was empowered to form an advisory committee as to how and when to spend the amounts received.[67] LLD was entitled to be represented on the committee.[68]
[65]Clause 4.7(a)(iii) and cl 10.1(c).
[66]Clause 1.1.
[67]Clause 10.2.
[68]Ibid.

The public art contribution was in addition to the obligation undertaken by LLD with respect to the allocation of funds towards integrated public art in the public spaces relating to individual buildings or in public spaces within the Precinct.[69] LLD was itself responsible for expenditure on public art on the land comprising each Stage, both with respect to the internal and external public spaces of buildings and the external public spaces on the land.[70]
[69]Clause 10.1.
[70]Clause 10.1(a) and (b).

The seven art works chosen to be exhibited in public spaces generally in the Docklands area, and to which the Stage Integrated Public Art Contribution was addressed, were: ‘Cow up a Tree’ by John Kelly; ‘Eagle’ by Bruce Armstrong; ‘Webb Bridge’ by Robert Owen & DCM; ‘Blowhole’ by Duncan Stemler; ‘Reed Vessel’ by Virginia King; ‘Continuum’ by Michael Snape; and ‘Shoal Fly By’ by Cat McLeod and Michael Bellemo. They were all located outside the boundaries of the relevant Stages and outside the boundaries of the Precinct.

The Commissioner assessed an amount paid by LLD in respect of integrated public art in respect of all Stages.
Schedule C - Table of Base Amounts of Payments
Clause 1.2 of Schedule C to the 2001 Development Agreement is a Table (Table 1) that sets out the Base Amounts for each Stage on Stage Release. Schedule C provided the benchmark by reference to which many of the contributions discussed above were defined.

Table 1: Base Amounts for each Stage on Stage Release

Column A

Stage
Column B
Stage Land Payment Column C
Minimum External Infrastructure Contribution Column D
Gasworks Site Remediation Contribution Column E
Projected Gross Revenue on Sale

Stage 1A 2,108,770 1,001,349 1,145,612 76,872,000

Stage 2A    658,375    312,629    357,668 24,000,000

Stage 3B    427,738    203,111    232,373 15,592,500

Stage 3rB    658,375    312,629    357,668 24,000,000

Stage 4B    658,375    312,629    357,668 24,000,000

Stage 5B 1,183,408    561,940    642,898 43,139,250

Stage 5rB    658,375    312,629    357,668 24,000,000

Stage 6D    370,706    176,029    201,390 13,513,500

Stage 6rD    651,517    309,372    353,943 23,750,000

Stage 7D 382,927    181,830    208,029 13,959,000

Stage 7rD    737,242    350,079    400,514 26,875,000

Stage 8E 2,451,787 1,164,229 1,331,957 89,376,000

Stage 9E 1,502,521    713,471    816,259 54,772,000

Stage 10C    855,476    406,222    464,745 31,185,000

Stage 11C

Stage 12C    767,816    364,597    417,123 27,989,500

Stage 13C 1,083,602    514,548    588,677 39,501,000

Stage 14C    874,486    415,249    475,073 31,878,000

Stage 15C 1,265,259    600,807    687,364 46,123,000

Stage 16C 1,330,740    631,901    722,937 48,510,000

Stage 17C 1,817,621    863,096    987,440 66,258,500

Stage 18F 2,790,576 1,325,102 1,516,007 101,726,000

Stage 19F 1,945,223    923,687 1,056,761 70,910,000

Stage 20G 2,587,851 1,228,839 1,405,875   94,336,000

Stage 21-1H 2,482,621 1,178,870 1,348,708 90,500,000

Stage 21-2H 1,674,082    794,936    909,461 61,026,000

Stage 22-1H 2,531,807 1,202,226 1,375,428 92,293,000

Stage 22-2H 1,140,634    541,629    619,660 41,580,000

Stage 23L 3,012,064 1,430,276 1,636,332 109,800,000

Stage 24L 3,136,881 1,489,545 1,704,140 114,350,000

Stage 25L 3,235,637 1,536,439 1,757,791 117,950,000

Stage 26L 1,382,587    656,520    751,103 50,400,000

Stage 27L 1,162,360    551,946    631,463 42,372,000

Stage 29L    950,453    451,322    516,343 34,647,250

Stage 30K 1,222,108    580,317    663,922 44,550,000

Total Base Amounts 49,700,000 23,600,000 27,000,000 1,811,734,500

The Table sets out in 5 separate columns the Stage Number (Column A); the Stage Land Payment for that Stage (Column B); the Minimum External Infrastructure Contribution (Column C); the Minimum Gasworks Site Remediation Contribution (Column D); and the Projected Gross Revenue on Sale (Column E). For example, as can be seen from Table 1, for Stage 1A the Stage Land Payment was $2,108,770; the Minimum External Infrastructure Contribution was $1,001,349; the Minimum Gasworks Site Remediation Contribution was $1,145,612 and the Projected Gross Revenue on Sale was $76,872,000.

The total amount of the Projected Gross Revenue on Sale (Column E) with respect to all Stages was $1,811,734,500.

The Total for the Stage Land Payments (Column B) was $49,700,000.[71] It was this figure which was the ‘Total Land Price’ as defined under cl 1.1:

Total Land Price means the Developer’s contribution for the cost of the Land being the sum of $49.7 million as varied and escalated from time to time in accordance with clause 1.5 of Schedule C.

[71]This figure (with escalations) became the ‘Base Land Payment’ in the 2006 Development Agreement.

The ‘Stage Land Payment’ can thus be seen as LLD’s contribution in respect of the land for each Stage, which was a proportion of the total land price of $49.7 million subject to escalation provisions.[72] A deposit of $5 million (representing about 10 per cent of the total land price) was payable on the execution of the Development Agreement.
[72]2006 and 2008 Development Agreements, cl 1.1, definitions of ‘Base Land Payment’ (meaning $49,700,004 plus escalation) and ‘Stage Land Payment’.

Column B of cl 1.2 of Schedule C indicated that the parties had agreed a price for the total land and agreed a break-up for each parcel of land that was to be escalated according to the revised estimates of the projected gross revenue on sale for each Stage. Those escalations included the operation of cl 1.3 of Schedule C which allowed for an adjustment of the base amounts set out in Columns B, C and D for all Future Stages where the projected gross revenue on sale for a Stage differed from the base amount set out in Column E. Thus, the agreed price for the land included a component for the development potential of the land adjusted by reference to revised estimates of the projected gross revenue on sale for that land. That is, the parties fixed the price of the land by reference to its development potential but only within the confines of the extent to which they agreed. This point was emphasised by LLD on the appeals. Schedule C relevantly provided:[73]
[73]Emphasis added.

1.3 Adjustment to Guaranteed Minimum Payments for each Stage on Stage Release

If the project[ed] gross revenue on sale for a Stage (as specified in the Stage Feasibility Report [a Stage not yet transferred[74]]) differs from the base amount set out in Column E for that Stage (as amended from time to time in accordance with clause 1.3), each of the base amounts set out in Columns B, C, and D of clause 1.2 for all Future Stages (which for the avoidance of doubt includes the Stage the subject of the Stage Feasibility Report) will be adjusted in accordance with the following formula:
A = X/Y x Z
A = the new base amount to be set out in each of Columns B, C or D of clause 1.2 (as applicable) for each Future Stage;
X =the revised projected gross revenue on sale for a Stage as specified in the Stage Feasibility Report;
Y = the total projected gross revenue for all Future Stages as specified in the Stage Feasibility Report;
Z =the total of all base amounts set out in each of Columns B, C and D (as applicable) for all Future Stages.

[74]See Example of Adjustment of Columns B and E in the Appendix.

Clause 1.4 of Schedule C dealt with escalation of the base amounts for each Stage from the Base Date[75] until the Stage Release Date by reference to the Consumer Price Index. Clause 1.5 provided for annual adjustments of the Total Land Price, the Project External Infrastructure Contribution and the Project Gasworks Site Remediation Contribution in accordance with a formula reflecting what was owed, what had been paid, and percentage increases in the Consumer Price Index from the previous Project Payments Review Date (that date being on each anniversary of the Base Date) to the current one.
[75]Under the 2001 Development Agreement, the ‘Base Date’ was defined as 30 September 2000 (cl 1.1).

In summary, and in anticipation of the submissions as recorded below, the principal submission of LLD on the appeals was that duty was only payable on the Stage Land Payment for each parcel of land with the exception of the three parcels of land for which the unencumbered value was higher than the Stage Land Payment (Mosaic, V4 (MKWH) and C10 (Montage) Stages), and not on a sum that included the External Infrastructure Contribution and the Gasworks Site Remediation Contribution, or any of the other contribution payments.

Payments for the Grand Plaza

The Grand Plaza is a large rectangular area running to the north east of Stage VI,[76] alongside Etihad Stadium. The construction works in relation to the Grand Plaza involved, amongst other things, the construction of a waterfront promenade and associated landscaping and enhancements, including the relocation of a tramway. Those construction works were undertaken outside the boundaries of the relevant Stages in relation to which an assessment was made.
[76]This was a Stage that was not the subject of the appeals.

Under the 2001 Development Agreement, LLD was required to undertake the construction works in relation to the Grand Plaza at its own expense, without any obligation to make any payment to VicUrban in respect of those works.[77] It was obliged to spend not less than $20 million in respect of the Grand Plaza Works or those Works in conjunction with other Works that would enhance the Grand Plaza Works. LLD acknowledged that the title would vest in the body responsible from time to time of the municipal governance of the Docklands Area.[78]
[77]Clause 13.2.
[78]The $20 million expenditure was to include at least $5 million on the Stage One Grand Plaza Works, to be completed by 30 June 2003, for which VicUrban would reimburse LLD: cls 13.2(a)(ii)(v), (d) and (e).

Under the 2006 Development Agreement, LLD retained responsibility for the construction of the Grand Plaza Works, but a new cl 13.2A required LLD to accrue a ‘Grand Plaza Retention Levy’, being an amount equal to 1.3 per cent of the Actual Gross Proceeds of Sale. These amounts, together with any amounts contributed by VicUrban under cl 13.2A(f),[79] formed the ‘Grand Plaza Retention Amount’, against which LLD was to deduct its progress claims with respect to costs incurred in respect of the Grand Plaza Works.[80] Clause 13.2A governed the manner in which LLD was to account for the costs of the Grand Plaza Works, but the Grand Plaza Retention Amount did not involve the payment of any amount to or for the benefit of VicUrban except in the event that the Development Agreement was terminated.[81]
[79]Clause 13.2A(f) of the 2006 Development Agreement provided for VicUrban to contribute funds to cover any shortfall if the Grand Plaza Retention Levy expected to be received in respect of a Stage was up to 5 per cent under the estimated cost to construct the next Grand Plaza Stage. LLD was required to repay any such amount from future amounts accrued in accordance with cl 13.2A(b).
[80]Clause 13.2A(c).
[81]Clause 13.2A(d) and (e).

The Grand Plaza Retention Amount was relevant to Stages C10 (Montage) and C9 (Myer).

Under the 2008 Development Agreement VicUrban assumed the obligation to procure the construction of the Grand Plaza Works at its expense.[82] In return, LLD agreed to pay to VicUrban a ‘Grand Plaza Contribution’ and any ‘Grand Plaza Additional Payment’.
[82]Clause 13.2 (a).

With effect from 10 May 2007, LLD was required to make a ‘Grand Plaza Contribution’ payment of 1.3 per cent of Projected Gross Revenue on Sale on or before the Actual Stage Release Date,[83] until the full amount of the Grand Plaza Contribution had been paid. The full amount of the ‘Grand Plaza Contribution’ was the sum of $22.8 million. [84]
[83]There were exceptions.
[84]Clause 1.1.

The Grand Plaza Contribution was relevant to the V4 (MKWH) and V5 (Convesso) Stages.

The ‘Grand Plaza Additional Payment’ was an amount equal to 50 per cent of the difference between 6.2 per cent of Projected Gross Revenue on Sale and the Projected Stage Infrastructure Cost.[85] It was payable on or before the Actual Stage Release Date, but was subsequently reconciled against actual figures on the Initial Reconciliation Date.[86] This additional payment was made because VicUrban had agreed that LLD was not required to pay a Grand Plaza Contribution in respect of another particular Stage, the ANZ Stage (Y1 and Y2).[87]
[85]Clause 1.1. Clauses 13(d) and (e) of the 2008 Development Agreement.
[86]Clause 13.2(e) of the 2008 Development Agreement.
[87]Clause 13.2(c)(ii) of the 2008 Development Agreement.

The Grand Plaza Additional Payment was relevant to the C9 (Myer) Stage.

Specific Stages & Specific Payments

To the extent that the Land Sale Contracts differed, they did so with respect to the amount of the Stage Land Payment that was to be paid by the time title to the Stage was transferred to LLD, as well as with respect to the dates on which the Stage Land Payment and other amounts were due and payable. Other differences material to the appeals are set out below.
Dock 5 & the Final Land Payment
The Dock 5 Land Sale Contract was executed between LLD and VicUrban on 21 July 2004 for the agreed price of $4,323,364 (excluding GST), with a 10 per cent deposit of $432,336.40. The Actual Stage Release Date was also 21 July 2004. It contained Special Condition 19, varying the terms of the Development Agreement with respect to Dock 5,[88] and expressly obliging the Purchaser, within the context of the obligations assumed under the Land Sale Contract, to pay the Vendor contribution payments:
[88]Clause 19(d) and cl 4.7A. This was further reflected in cl 10(a) of the Second Deed of Variation of Development Agreement dated 20 September 2005 containing specific provisions relating to Dock 5 that inserted a new Schedule NN (relating to Dock 5) into the Development Agreement. See also cl 4.7A of the 2008 Development Agreement.

ADDITIONAL PAYMENTS TO VENDOR
(a)On the Day of Sale, in addition to the Deposit, the Purchaser must pay to the Vendor the following amounts:
(i)the Minimum External Infrastructure Contribution for the Stage of which the Land forms part being the amount of $2,130,000.00; and
(ii)$2,079,100.00 on account of the Minimum Gasworks Site Remediation Contribution for the Stage of which the Land forms part.

(b) On the Due Date, [that is, the earlier of the date being five business days after either Practical Completion of the Dock 5 Stage or of notice being given by LLD that it wished to pay the final instalment and receive title to the land[89]], in addition to the Balance of the Price, the Purchaser must pay to the vendor the following amounts:
(i)the balance of the Minimum Gasworks Site Remediation Contribution for the Stage of which the Land forms part being the amount of $366,900.00; and
(ii)the Stage Integrated Public Art Contribution for the Stage of which the Land forms a part being the amount of $192,000.00.

[89]Defined as the ‘Due Date’ in accordance with Special Condition 17.

LLD was also obliged to make a ‘Final Land Payment’ with respect to the Dock 5 Stage, which was assessed by the Commissioner. The ‘Final Land Payment’ arose from the manner in which the Development Agreement provided for the parties to share in the proceeds of sale of the Stages following their development by LLD. As mentioned above, pursuant to cl 4.1(a) of the Development Agreement, VicUrban and LLD entered into a Land Sale Contract for the purchase of each Stage for the ‘Stage Land Payment’, which was a specified price, calculated by reference to 2.74 per cent of the projected or anticipated proceeds of sale of the developed Stage. The Stage Land Payment was payable on or before the Actual Stage Release Date.

If the actual proceeds of sale in respect of a Stage exceeded the anticipated returns, the Development Agreement provided for LLD to make further payments to VicUrban comprising the amount by which 2.74 per cent of the Actual Gross Proceeds of Sale exceeded the Stage Land Payment. This was reflected especially in cl 4.7(a)(ii)(A) of the 2001 Development Agreement.[90] The subsequent reconciliation was to enable VicUrban to share in the benefit of any additional revenue generated from the ultimate sale of the developed land and became known as the ‘Final Land Payment’.[91]
Mosaic
[90]It was also reflected in cls 4.7(b), (c) and (e). With respect to the 2006 Development Agreement and the 2008 Development Agreement, it was reflected in cls 4.7(b)(i), (c)(i), (d)(i), and (f).
[91]This was not a defined term.
The Mosaic contract was a standard contract, in that it had no special conditions. It was executed between LLD and VicUrban on 4 April 2007 for the agreed price of $1,228,979 (GST exclusive) with a deposit of $1. The Actual Stage Release Date was also 4 April 2007. The agreement was for the land in the condition it was then in, which LLD, the purchaser, specifically agreed it was accepting. By agreeing to cl 4.1 LLD acknowledged that it had inspected the property and confirmed that the identity and condition of the Property was as described in the Particulars of sale. LLD accepted, in cl 4.2(c), that it could not object, claim compensation or refuse payment of the price in relation to the condition of the property. Clause 7.9 of the Development Agreement applied to the contract as though the Vendor was VicUrban and the purchaser was LLD for the purposes of that clause.[92]
[92]By operation of cl 4.4. of the Mosaic Land Sale Contract. See cl 7.9 of the Development Agreement at [34] above. Clause 4 of the Mosaic Land Sale Contract reflected cl 3 of the generic Land Sale Contract in Schedule S to the Development Agreement.
C3/C4 Stage, Additional Land Payment, Additional Authority Payment & Estimated amounts
On 20 December 2007, VicUrban and LLD entered into a Land Sale Contract in relation to the C3/C4 Stage. The Actual Stage Release Date was also 20 December 2007. The agreed price was $924,800.00 (GST exclusive). A deposit of $1 was paid.

The Commissioner assessed an amount in respect of an ‘Additional Land Payment’ for this Stage of a similar character to that of the ‘Final Land Payment’ assessed in respect of Dock 5.[93]
[93]See Reasons, [28].

Furthermore, the Commissioner assessed an amount in respect of an ‘Additional Authority Payment’ made by LLD. This payment reflected the somewhat different method of calculating the obligations for payment under cl 4.7 introduced by the 2006 Development Agreement that depended upon a distinction between payments made in respect of the ‘Initial Build Out’ and payments made in respect of the ‘Additional Build Out’.

The ‘Initial Build Out’ referred to that part of the Works that would not result in the development of the Land exceeding any of the initial build out limits for each of the residential, commercial, retail, mixed use and public attractor components of the Works.[94] The ‘Additional Build Out’ referred to that part of the Works that would result in the development of the land beyond those limits to a specified maximum.
[94]Clause 1.1. The initial build out limits were stipulated in Schedule OO.

Under the 2006 Development Agreement and the 2008 Development Agreement, the ‘Additional Authority Payment’ was made in respect of the Additional Build Out. An amount was payable on or before the Actual Stage Release Date based on Projected Gross Revenue on Sale, and further reconciliation dates based on Actual Gross Proceeds of Sale.[95]
[95]Clauses 4.7(a)(ii)(B), (b)(iv), (c)(ii), d(ii), (e)(ii) and (f).

Clause 11.3 of the 2006 Development Agreement provided that VicUrban ‘may elect to allocate all or part of the Additional Authority Amount to public infrastructure comprised of infrastructure works and community focussed projects which will be of benefit to residents, workers and visitors of the Docklands Area, including without limitation … the extension of tram lines from the corner of Collins Street and Bourke Street through Victoria Square to the start of the public area at the western end of the north wharf … the installation of tiles at the Grand Plaza … [and] the completion of road works to complete the Harbour Esplanade linkage between Collins Street and Bourke Street’.[96]
[96]The ‘Additional Authority Amount’ meant the amount comprising all Additional Authority Payments made by LLD to VicUrban less sums deducted: cl 1.1. See also cl 11.13 of the 2008 Development Agreement in largely similar terms.

The Commissioner also assessed an amount in respect of ‘Estimate of Outstanding Amounts’ in respect of the C3/C4 Stage, in an undifferentiated manner, without otherwise specifying the nature or composition of those amounts.[97] It was accepted by LLD that this was based on the Commissioner’s estimate of the future amounts of the various contribution payments by LLD to VicUrban pursuant to the Development Agreement.[98]
C10 (Montage) Stage, Estimated amounts & Non-monetary consideration
[97]Reasons, [6].
[98]See the Act, s 30(1), and the Taxation Administration Act 1997, s 11(2), which gives the Commissioner the power to assess on the basis of estimates when final figures are not available.
On 17 April 2008, VicUrban and LLD entered into a Land Sale Contract in relation to the ‘C10’ Stage. The Actual Stage Release Date was also 17 April 2008. The sale price was $1,539,966.57, although this was not stipulated in the Land Sale Contract. The Commissioner assessed an amount in respect of an ‘Estimate of Outstanding Amounts’ in a similar manner to that assessed for the C3/C4 Stage.

The Commissioner also assessed an amount by way of ‘non-monetary consideration’ in respect of the C10 (Montage) Stage relating to the value of construction works, including roads and associated infrastructure on land adjoining the C9 (Myer) Stage and the C10 (Montage) Stage, undertaken pursuant to a Construction Licence Agreement. The construction works were carried out pursuant to a Construction Licence Agreement between VicUrban and LLD.[99]
[99]Made on 5 February 2008.

The value of the construction works was referred to in the C10 (Montage) Land Sale Contract for the purpose of calculating goods and services tax (GST).

Special Condition 10.3 of the C10 (Montage) Land Sale Contract provided that:

The parties acknowledge and agree for GST purposes:
(a)The consideration for the Land, which the Purchaser will provide to the Vendor, includes, but is not limited to;
(i) the Price; and
(ii)Works on Area 1, with a GST exclusive market value of $1,908,836.

C9 (Myer) Stage, Additional Authority Payment, Estimated amounts & Non-monetary consideration

The C9 (Myer) Land Sale Contract was executed on 7 May 2008 between Lend Lease Real Estate Investments Pty Ltd (‘LLREI’) and VicUrban with a purchase price of $4,761,821 and a deposit of $1. The Actual Stage Release Date was also 7 May 2008. In respect of the C9 (Myer) Stage LLD was obliged to pay an ‘Additional Authority Payment’, as with the C3/C4 Stage.

Special Condition 11 of the Land Sale Contract provided that ‘to complete settlement’ the Purchaser must also pay to the Vendor, in addition to the Additional Authority Payment, the Stage Integrated Public Art Contribution; the Base External Infrastructure Contribution; and the Base Gasworks Site Remediation Contribution.[100] Special Condition 12 specified the reconciliation payments. This was similar to Special Condition 19 in the Dock 5 Land Sale Contract[101] in that the obligation to make contribution payments was contained within the Land Sale Contract itself.
[100]ALLREI and Lend Lease Development Pty Ltd were parties to the LLREI Development Agreement that was annexed as Annexure B to the C9 Land Sale Contract.
[101]See [88] above.

The C9 (Myer) Stage Deed, also executed on 7 May 2008, between VicUrban, Lend Lease Development Pty Ltd and the Lend Lease Corporation Ltd (LLC) (as Performance Guarantor), noted that VicUrban and Lend Lease Development Pty Ltd had agreed that despite the provisions of the Development Agreement, for the purposes of the sale of the C9 (Myer) Stage by VicUrban to LLREI, the provisions set out in the C9 (Myer) Stage Deed applied for the C9 (Myer) Stage only. Clause 2.2 provided that cls 4.7(c), 4.7(d), 4.7(e) and 4.7(f) of the Schedule to the Development Agreement did not apply and that, inter alia, the Base External Infrastructure Contribution shall be $1,534,658 (excluding GST) and the Base Gasworks Site Remediation Contribution shall be $1,770,759 (excluding GST). Clause 2.3(b) provided that if LLREI made the contribution payments this would discharge LLD’s payment obligations under cl 4.7 of the Development Agreement for the C9 (Myer) Stage.

While the Commissioner submitted that he relied only upon invoices paid by LLD to VicUrban, in assessing duty in respect of payments relating to the Grand Plaza, there is nothing in the reasons of the judge to indicate that he was aware of this or took it into account in arriving at his conclusions. Nor could that negative the difficulty in including the Grand Plaza Retention Amount as a payment made to move the transfer of the land.
(iii) The Additional Authority Payment
The contest over the Additional Authority Payment related to a further issue involving timing.[374] The Commissioner was correct to submit that the obligation to make the payment had its source in the 2006 Development Agreement which was executed on 22 June 2006, before the transfers of title in respect of the Stages for which the payments were assessed, namely, the C3/C4 Stage and the C9 (Myer) Stage.[375] However, LLD was also correct to submit that the payment related not to the land but to a feature of the development of the land by LLD (exceeding the initial build out limits). In that sense, although the obligation may have been assumed before the transfer of title to the relevant Stages it was inherently a payment relating to construction and development and not a payment that moved the transfer of the land.
(iv) Non-monetary consideration
[374]See [94]-[97] above. This was the eighth specific error argued for by LLD. See [184] above.
[375]See [201] above.
The Commissioner was correct to submit[376] that, with respect to the C9 (Myer) Stage and C10 (Montage) Stage, the parties’ agreement to characterise the non-monetary consideration as consideration for the land (or the right to acquire the Stage) ‘for GST purposes’ does not preclude it from also being made ‘for’ the transfer within the meaning of s 20(1) of the Act. However, I consider that the non-monetary consideration was not part of the consideration for the transfer of the land.[377] I do not consider that the non-monetary consideration exhibits any characteristics which I have not already rejected as insufficient to establish the nexus required.
(v) Estimated amounts
[376]See the Commissioner’s submissions at [201] above.
[377]This was the ninth specific error identified by LLD. See [185] above.
With respect to the C9 (Myer) Stage, the amounts with respect to the Estimated Land Payment,[378] Estimated External Infrastructure Contribution and Estimated Gas Site Remediation should be dealt with in the same manner as those amounts of which they are estimates. The same applies to the undifferentiated estimated amounts in respect of the C3/C4 Stage and the C10 (Montage) Stage as LLD has been successful with respect to all the contribution payments.
[378]Presumably, the Commissioner must have understood this as reflecting the character of the Final Land Payment or the Additional Land Payment as there was no difficulty in ascertaining the Stage Land Payment.

Conclusion on the appeals

I consider that the judge was wrong to conclude that each of the contribution payments was consideration for the transfer of the land. He should have held that the consideration for the transfer of the Land was the Stage Land Payment, being the price specified in Land Sale Contract. I consider that the judge was wrong in failing to recognise that the contribution payments were for matters that were separate and distinct from the transfer of the land. He ought to have held that each of the contribution payments was ‘for’ something other than the transfer of the land and that the consideration ‘for’ the dutiable transaction was solely that which moved the part of the composite whole comprising the transfer of the land. It follows that I would uphold Grounds 1, 2, 4, and 7 of the grounds of appeal.[379]
[379]As described in [168] above. This has the effect that Ground 6 of the appeal in respect of Mosaic, V4 (MKWH) and V5 (Convesso) is also allowed.

I have also concluded that the judge shifted his focus from the nature of the dutiable property and in effect conflated the development of the Precinct with the transfer of the land. I accept Ground 3.

I have accepted that the judge erred, in particular, by arriving at his conclusion that the contribution payments were part of the consideration for the transfer of the land on the basis that (1) various contribution payments were payable before the transfer of title; (2) the works were beneficial to the land or essential or necessary for the development of the land; (3) the obligations were integrated within a composite development and (4) all the amounts were ‘all “for” the land in the form and state intended to be secured through development’. I accept Ground 5.

In particular, I have accepted that the judge was wrong to include as part of the consideration for the transfer of the land: (1) the Grand Plaza Retention Amount and the Grand Plaza Additional Payment in respect of the C9 (Myer) Stage; (2) the Grand Plaza Contribution with respect to the V5 (Convesso) Stage and the V4 (MKWH) Stage; and (3) the Grand Plaza Retention Amount in respect of the C10 (Montage) Stage. It follows that I accept the additional paragraphs of Ground 5 with respect to those Stages.

With respect to Dock 5, I have accepted that Final Land Payment was not a ‘top up’ payment and Special Condition 19 was not the operative provision determining the payments to be made by LLD. I accept Ground 6 of the notice of appeal in relation to Dock 5.

With respect to the C9 (Myer Stage), I have concluded that the judge erred by finding that the non-monetary consideration comprising works on Area 2 was part of the consideration for the transfer of the land and erred by finding that Special Conditions 11 and 12 of the C9 (Myer) Land Sale Contract secured receipt of the contribution payments as part of the consideration for the transfer of the land. I accept Ground 6 of the notice of appeal in relation to the C9 (Myer) Stage.

With respect to the C10 (Montage) Stage, I have concluded that the judge erred by finding that the non-monetary consideration comprising works on Area 1 was part of the consideration for the transfer of the land. I accept Ground 6 of the notice of appeal in relation to the C10 (Montage) Stage.

With respect to the C3/C4 Stage, I have concluded that the judge erred by finding that each of the Additional Land Payment, the Additional Authority Payment and the Estimate of Outstanding Amounts were part of the consideration for the transfer of the land. I accept Ground 6 of the notice of appeal in relation to the C3/C4 Stage.

The appeals should be allowed.

The Notices of Contention

The Notices of Contention relied on by the Commissioner in each appeal had two grounds:

Ground 1: The Respondent be granted leave pursuant to s 109 of the Taxation Administration Act 1997 to rely upon s 21(1) of the Duties Act 2000 as an additional ground for the disallowance of LLD’s objection dated 20 July 2009.[380]
[380]This was a common ground in respect of all eight appeals. The date of 20 July 2009 related to the Dock 5 objection the subject of Appeal number S APCI 2012/0054. The other notices of contention reflected the relevant dates of objection to the assessment of duty of the other Stages.
Ground 2: That the following payments made pursuant to the Development Agreement entered into between LLD and the VicUrban, being namely:
the payment on account of the Project External Infrastructure Contribution;[381]
[381]In respect of the two appeals relating to Dock 5.
the payment on account of the Project Gasworks Site Remediation Contribution;[382]
[382]Ibid.
the Stage Integrated Public Art Contribution;[383]
[383]In respect of all eight appeals.
the payment made pursuant to clause 4.7(a)(ii)(A), (b), (c), and (e) of the Development Agreement (‘Final Land Payment’);[384]
[384]In respect of the Dock 5 appeal 2012/0054.
the Grand Plaza Additional Payment;[385]
[385]In respect of the C9 (Myer) Stage.
the Estimated Land Payment;[386]
[386]Ibid.
the Estimated External Infrastructure Contribution;[387]
[387]Ibid.
the Estimated Gasworks Site Remediation Contribution;[388]
[388]Ibid.
the payment on account of the Base External Infrastructure Contribution;[389]
[389]In respect of the C9 (Myer) Stage; the V5 (Convesso) Stage; the Mosaic Stage; the C10 (Montage) Stage; and the V4 (MKWH) Stage.
the payment on account of the Base Gasworks Site Remediation Contribution;[390]
the payment on account of the Grand Plaza Contribution;[391]
an amount by way of non-monetary consideration;[392]
a Grand Plaza Retention Amount;[393]
an Additional Authority Payment in respect of the Additional Build Out;[394]
an amount by way of an Estimate of Outstanding Amounts;[395] and
a payment made pursuant to cl 4.7(b)(i),(c)(i),(d)(i) and (f) (‘Additional Land Payment’).[396]
are taken to be included in the consideration for the transfer of the relevant dutiable property for the purposes of ss 20(1) and 21(1) of the Duties Act 2000.

[390]Ibid.

[391]In respect of the V5 (Convesso) Stage and the V4 (MKWH) Stage.

[392]In respect of the C9 (Myer) Stage and the C10 (Montage) Stage.

[393]Ibid.

[394]In respect of the C9 (Myer) Stage and C3/C4 Stage.

[395]In respect of the C10 (Montage) Stage and the C3/C4 Stage.

[396]In respect of the C3/C4 Stage.

(1) Ground 1 – Application to expand case

Section 109 of the Taxation Administration Act 1997 (Vic) provides:

On a review or an appeal –
(a) the taxpayer’s case is limited to the grounds of the objection; and
(b)the Commissioner’s case is limited to the grounds on which the objection was disallowed –

unless the Tribunal or Court otherwise orders.

The effect of s 109 is that on an appeal limits are imposed on both the taxpayer and the Commissioner; the taxpayer’s case is limited to the grounds of objection it relied on and the Commissioner’s is limited to the grounds on which he disallowed the objection. The Commissioner did not rely upon s 21(1) of the Act in disallowing LLD’s objections. It was thus incumbent upon the Commissioner to seek an order in the proceedings before the judge to be permitted to expand his case beyond the grounds of disallowance upon which he relied.

Section 21(1) of the Act relevantly provides:

The consideration for the transfer of dutiable property is taken to include the amount or value of all encumbrances, whether certain or contingent, subject to which the dutiable property is transferred.

There was no application made before the judge under s 109 of the Taxation Administration Act. However, it appears that s 21(1) was mentioned before his Honour towards the end of the oral submissions but not extensively argued.[397] After the hearing, LLD notified the Court that the Commissioner’s grounds for disallowance did not extend to s 21(1).[398] The Commissioner filed further submissions in reliance of s 21(1) in which the Commissioner raised the question of leave and urged that leave be granted.[399] The judge had not given permission, or made a direction, for the filing of any further submissions.[400] The judge refused to deal with the issue and was critical of both parties, most particularly the Commissioner for not having made a formal application to the Court.[401]
[397]Reasons, [47].
[398]Ibid.
[399]Ibid [49].
[400]Ibid.
[401]Ibid.

At the hearing of the appeals, the Commissioner formally sought leave to rely on s 21(1) of the Act. He supported the application on the basis that the additional ground involved a purely legal issue that would not require additional evidence to be led and which would not have altered the evidence led below. This was conceded by LLD.

LLD submitted that the order sought under s 109 of the Taxation Administration Act is not analogous to a grant of leave to a party to raise a point of law not argued below, or to add an additional ground of appeal, because the effect of s 109 is that, by force of statute, reliance on s 21(1) of the Act was outside of the scope of the proceedings before the judge unless he otherwise ordered. The refusal of the judge to deal with the issue should not be disturbed given that no application for the necessary order was made before the judge.

There is much to be said for the approach adopted by LLD, particularly given the unsatisfactory way in which the issue was raised before the judge. Nevertheless, given that the ground would not have altered the evidence led before the judge, nor did it require additional evidence to be led on the appeals, and LLD had proper notice that the Commissioner would formally seek leave in this Court, in my opinion leave should be granted to permit the Commissioner to rely on s 21(1).

(2) Ground 2 - Encumbrances

The Commissioner submitted that, as mentioned above,[402] it was apparent from the terms of the Development Agreement that the obligations to make the contribution payments were covenants intended to ‘run with the land’ at law and equity and were made the subject of registrable agreements and registered on title. Clause 1.8(b) of the Development Agreement provided:

The Authority and the Developer agree and declare that the Developer’s obligations under this Agreement are intended to take effect as covenants which must be annexed to and run at law and equity with the Land and bind the Developer, its successors, transferees and permitted assigns and the registered proprietor or proprietors for the time being of the Land and every part of the Land.

[402]See [200] above.

Clause 1.9 of the Development Agreement provided that:

(a)The Authority may make an application under section 181 of the Planning and Environment Act to the Registrar of Titles for the entry of a Registrable Agreement on the certificate of title to the Land and if the Land is subject to a Plan of Subdivision, on every certificate of title issued on registration of the Plan of Subdivision. The Developer must use its best endeavours to assist the Authority or comply with any requests from the Authority in respect of this clause 1.9.
(b) The Authority will, upon the written application of the Developer, execute, at the Developer’s expense, all documents necessary to remove any memorandum of a Registrable Agreement as an encumbrance upon and affecting the relevant certificate of title(s) once the Registrable Agreement is ended, which … will be when the Works on the land described in the relevant certificate of title have reached Practical Completion.

Registration on title had the effect that it was reinforced by statute that the obligation to make the contribution payments ran with the land.[403] If LLD failed to discharge those obligations, and transferred its interest to another before the date of practical completion, the obligations would be assumed by the transferee and could be enforced by VicUrban without any concerns as to lack of privity of contract.[404]
[403]Under s 182 of the Planning and Environment Act 1987 (Vic), the burden of any covenant in a registered agreement ‘runs with the land’.
[404]Indeed, cl 5.1 of the Registrable Agreements (Schedules I and J to the Development Agreement) provided that LLD, if it had not discharged its obligations to make the contribution payments, could not sell the land without procuring the new owner to enter into an agreement with VicUrban on substantially the same terms and conditions as those contained in the Development Agreement.

So much can be accepted. The real contest lay in the question of whether those features were sufficient to render the obligation to make the contribution payments an ‘encumbrance’ within the meaning of s 21(1), given that ordinary contractual obligations, for example, to construct a building, would not be so.[405]
[405]In this respect, LLD relied on s 21(3) which excludes from the consideration for the transfer of land any amount paid or payable in respect of the construction of a building on or after the date on which the contract of sale was entered into.

The Commissioner submitted that in this context ‘encumbrance’ reflected its broad ordinary meaning which was ‘a burden or claim on property’. The obligation to make the contribution payments, he submitted, constituted a burden or claim on property. Both he and LLD relied upon the observations made by O’Bryan J in Commissioner of State Revenue v Bradney Pty Ltd.[406]
[406](1996) 34 ATR 233 (‘Bradney’).

In Bradney the Commissioner assessed the transfer of land in Lonsdale Street, Melbourne, as including the value of a lessee’s interest on the site. The lessee’s interest had been valued at $11,700,000 being a 50-year lease pursuant to which no rent was payable. The purchaser had bought the freehold interest in the premises, subject to the lease, for $380,000, the market value of which was $398,000. The Commissioner assessed the transfer on sale to duty of $715,000 on the basis that the land was to be valued at $13 million. The issue before O’Bryan J was the meaning to be given to the word ‘encumbrance’ in the Stamps Act 1958 (Vic). He acknowledged

the ordinary meaning of the word:[407]
Is a lease an ‘encumbrance’ for the purposes of the Act? The ordinary meaning of encumbrance is: ‘a burden or claim on property, as a mortgage’.

[407]Ibid 234.

He considered, however, that in revenue law a restricted interpretation should be adopted:[408]

The word ‘encumbrance’ is a word of wide meaning. In the context of a deed, a conveyance or a will, it will usually bear its dictionary meaning but in the context of revenue legislation a more restricted meaning may be appropriate in the absence of a definition.

[408]Ibid 235.

He rejected the view that the meaning of ‘encumbrance’ in the law of wills, or in the context of vendor and purchaser law, or in the context of legislation concerned with the conveyance of real property, such as the Transfer of Land Act 1958 (Vic), or in the context of the imposition of land tax, payable upon the unimproved value of the land, was helpful in determining its meaning for the purposes of the imposition of stamp duty. He said:[409]

The word ‘encumbrance’ ‘takes its precise meaning from the particular context in which it appears.

[409]Ibid 236-7, referring to a statement made by Wells J in Harry v Valuer-General (SA) (1975) 12 SASR 446, 450.

He considered whether the meaning of ‘encumbrance’, within the context of the Stamps Act, included a leasehold interest. He held that it did not:[410]

I have reached the conclusion that ‘encumbrances’ in the Act should bear its historical meaning, something in the nature of a mortgage or a charge. … I agree with the decision of the tribunal that the word ‘encumbrance’ carries a meaning in the Act which does not include a lease.

[410]Bradney (1996) 34 ATR 233, 237. See also Pioneer (2002) 209 CLR 651, 668 [48].

Covenants in a lease which ‘touch and concern’ the land ‘run with the land’,[411] that is, they can be enforced despite the lack of privity of contract, by an assignee of

the lessee or a transferee of the reversion.[412]

[411]A lease may also include personal covenants that are enforceable between the original parties but not otherwise: Simmons v Lee [1998] 2 Qd R 671, 677; Swift Investments v Combined English Stores Group Plc [1989] AC 632, 642.

[412]Lang v Asemo Pty Ltd [1989] VR 773, 776.

LLD submitted that if a leasehold interest was not an encumbrance within the meaning of the Act, despite the fact that it runs with the land, this supported the proposition that the obligation to make the contribution payments was not in the nature of an encumbrance within the meaning of the Act. The obligation did not create an interest in the nature of a charge which permitted recourse against the land for the satisfaction of a debt.[413]
[413]See Beconwood Securities Pty Ltd v Australian and New Zealand Banking Group Ltd (2008) 246 ALR 361, 370 [38] (Finkelstein J).

While the Planning and Environment Act 1987 (Vic) provides for recourse to the land to secure performance of certain obligations under registrable agreements,[414] the registrable agreements made between LLD and VicUrban do not include the necessary type of condition.
[414]Section 175, which deals with bonds and guarantees, provides that ‘(4) Any money payable under this section is a charge on the land which is the subject of this agreement’.

In my opinion, the obligation assumed by LLD to make the contribution payments was not an ‘encumbrance’ within the meaning of s 21(1) of the Act.

The Notices of Contention should be dismissed.

KYROU AJA:

I agree with Tate JA.

---

APPENDIX

Column A Stage	Column B Stage Land Payment	Column C Minimum External Infrastructure Contribution	Column D Gasworks Site Remediation Contribution	Column E Projected Gross Revenue on Sale
Stage 1A	2,108,770	1,001,349	1,145,612	76,872,000
Stage 2A	658,375	312,629	357,668	24,000,000
Stage 3B	427,738	203,111	232,373	15,592,500
Stage 3rB	658,375	312,629	357,668	24,000,000
Stage 4B	658,375	312,629	357,668	24,000,000
Stage 5B	1,183,408	561,940	642,898	43,139,250
Stage 5rB	658,375	312,629	357,668	24,000,000
Stage 6D	370,706	176,029	201,390	13,513,500
Stage 6rD	651,517	309,372	353,943	23,750,000
Stage 7D	382,927	181,830	208,029	13,959,000
Stage 7rD	737,242	350,079	400,514	26,875,000
Stage 8E	2,451,787	1,164,229	1,331,957	89,376,000
Stage 9E	1,502,521	713,471	816,259	54,772,000
Stage 10C	855,476	406,222	464,745	31,185,000
Stage 11C
Stage 12C	767,816	364,597	417,123	27,989,500
Stage 13C	1,083,602	514,548	588,677	39,501,000
Stage 14C	874,486	415,249	475,073	31,878,000
Stage 15C	1,265,259	600,807	687,364	46,123,000
Stage 16C	1,330,740	631,901	722,937	48,510,000
Stage 17C	1,817,621	863,096	987,440	66,258,500
Stage 18F	2,790,576	1,325,102	1,516,007	101,726,000
Stage 19F	1,945,223	923,687	1,056,761	70,910,000
Stage 20G	2,587,851	1,228,839	1,405,875	94,336,000
Stage 21-1H	2,482,621	1,178,870	1,348,708	90,500,000
Stage 21-2H	1,674,082	794,936	909,461	61,026,000
Stage 22-1H	2,531,807	1,202,226	1,375,428	92,293,000
Stage 22-2H	1,140,634	541,629	619,660	41,580,000
Stage 23L	3,012,064	1,430,276	1,636,332	109,800,000
Stage 24L	3,136,881	1,489,545	1,704,140	114,350,000
Stage 25L	3,235,637	1,536,439	1,757,791	117,950,000
Stage 26L	1,382,587	656,520	751,103	50,400,000
Stage 27L	1,162,360	551,946	631,463	42,372,000
Stage 29L	950,453	451,322	516,343	34,647,250
Stage 30K	1,222,108	580,317	663,922	44,550,000
Total Base Amounts	49,700,000	23,600,000	27,000,000	1,811,734,500

[2013] VSCA 207

15 August 2013