Lend Lease Development Pty Ltd v Commissioner of State Revenue (Vic)
[2012] VSC 108
•27 March 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List F
No. 02661 of 2011
No. 02663 of 2011
No. 02667 of 2011
No. 02676 of 2011
No. 02677 of 2011
No. 02678 of 2011
| LEND LEASE DEVELOPMENT PTY LTD | Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
List F
No. 02665 of 2011
| LEND LEASE REAL ESTATE INVESTMENTS LTD | Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
List F
No. 02707 of 2011
| LEND LEASE IMT 2 PTY LTD | Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 – 14 December 2011 | |
DATE OF JUDGMENT: | 27 March 2012 | |
CASE MAY BE CITED AS: | 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 | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 108 | |
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STAMP DUTIES – Assessment – Agreements for sale of dutiable property – Condition of transfer for additional payments to be made in addition to the amount for the land – Whether payment of additional amounts were “consideration for” the dutiable transaction – Nexus required between consideration and the dutiable transaction – Duties Act 2000 (Vic) ss 11, 20(1), 21(1), 25(1), 30(1) – Taxation Administration Act 1997 (Vic) ss 11(2), 109.
PRACTICE AND PROCEDURE – Whether communications from solicitors to the Court without leave is appropriate.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr M Moshinsky SC with Mr C Horan | Freehills |
| For the Respondent | Mr G Garde AO RFD QC with Ms C Button | Solicitor for the Commissioner of State Revenue |
HIS HONOUR:
The appellants in eight proceedings challenge assessments made under the Duties Act 2000 (Vic) raising similar questions with application to similar facts. The appellants may generally be referred to as LLD for convenience of exposition unless otherwise specifically identified. In each case, the primary question for determination is whether the consideration for transfers of land included various amounts paid or payable by one of the appellants to VicUrban in respect of infrastructure and construction works pursuant to the contractual arrangements governing the development of land in the Victoria Harbour Precinct in the Docklands area of Melbourne. In each case land was transferred to one of the appellants and in each case the transferee paid or was liable to pay amounts which the Commissioner has assessed for duty under s 20(1) of the Act.
On 18 May 2001 a development agreement (“the 2001 Development Agreement”) was entered into by Victorian Urban Development Authority (“VicUrban”) (then known as the Docklands Authority) and Lend Lease Development Pty Ltd as Developer. The 2001 Development Agreement was varied in 2006 with effect from 1 July 2005 (“the 2006 Development Agreement”) and was varied again in 2008 (“the 2008 Development Agreement”). Each version differs from the others in some respect but its terms remained essentially the same for the purposes of issues raised in these proceedings. I will adopt the practice used by the parties during the litigation of referring to the agreements as “the Development Agreement” unless reference to a specific version is necessary.
The Development Agreement did not itself effect a sale of any land but provided for the sale of land in stages over time in conjunction with the development of the land under the terms of the Development Agreement. The Development Agreement recited that the Docklands Authority had been established by the Docklands Authority Act 1991 (Vic) for the purpose of facilitating development of the Docklands area. LLD was defined in the Development Agreement as the developer which had submitted a successful bid proposal for the development of the land. The Development Agreement also recited that the Authority had agreed to sell the land to LLD on the terms and conditions contained in the Land Sale Contract (as defined) and those contained in the 2001 Development Agreement. It also recited that the Authority and the Developer had agreed to the terms and conditions which were to regulate the use and the development of the land.
The terms of the Development Agreement covered a broad range of matters dealing with the development of the land although it did not itself effect a dutiable sale or transfer. Clause 4.1 provided that the Authority and the Developer were to enter into and settle a Land Sale Contract for the purchase of land by the Developer of each stage of the development by the Stage Land Payment (as defined) on or before the Stage Release Date (as defined) for that stage. The arrangement entered into by the parties was, in general terms, that LLD would acquire land over stages by entering into specific land sale contracts and that the 2001 Development Agreement (and the later restatements and amendments of it) would govern the development more broadly.
Identifiable amounts were to be paid for specific parcels of land over stages. The transferee of the land was also to pay other amounts which were made payable under the Development Agreement. Seven parcels of land were transferred of relevance to these proceedings which may be referred to as Dock 5, Mosaic, C3/C4, C10 (Montage), C9 (Myer), V4 (MKWH) and V5 (Convesso). Each proceeding relates to one of these parcels of land although two proceedings relate to the Dock 5 land. That is because the Dock 5 parcel was reassessed for duty but the earlier assessment was not completely subsumed by the second. The Commissioner has assessed for duty in each case of the seven parcels of land the amount paid for the relevant land as determined by the relevant land sale contract but has also included in the assessment of duty other amounts payable by LLD (that is, by one of the appellants) by reference to the land. The additional amounts included in the Commissioner’s assessment, as I have indicated, were generically the same in more than one assessment and (in addition to the amount identified specifically for the land) included amounts payable for what may conveniently be described as External Infrastructure Contribution, Base External Infrastructure Contribution, Gasworks Site Remediation Contribution, Base Gasworks Site Remediation Contribution, Integrated Public Art Contribution, Grand Plaza Retention Amount, Grand Plaza Additional Amount, Grand Plaza Contribution, Additional Land Payment, Final Land Payment, Additional Authority Payment, Estimate of Outstanding Amounts, Estimated Land Payment, Estimated External Infrastructure Contribution, Estimated Gas Site Remediation, Non-monetary Contribution and GST.
The amounts in dispute were set out in a table prepared for the proceeding which identified the amounts included in each assessment by reference to a generic description of the type of payment and the transferees in question. Each of the additional amounts included in the assessments raise substantially the same issues in the case of the different assessments where an amount of that kind was included in the Commissioner’s assessments to different appellants. A modified version of the table is set out below for ease of reference although the Dock 5 land is listed only once.
Proceeding/Land
Payment Type
Dock 5
2667 of 2011
Mosaic
2661 of 2011
C3/C4
2677 of 2011
C10 (Montage)
2676 of 2011
Stage Land Payment (incl GST) 4,633,300 1,228,980 (ex GST) 1,017,280 1,539,966.57 External Infrastructure Contribution 2,130,000 583,093 (ex GST) 731,640.68 Base External Infrastructure Contribution Gasworks Site Remediation Contribution 2,446,000 672,800 (ex GST) 844,046.64 Base Gasworks Site Remediation Contribution
Integrated Public Art Contribution 211,200 63,000 (ex GST) 65,166.20 80,990.80 Grand Plaza Retention Amount 434,460.40 Grand Plaza Additional Payment Grand Plaza Contribution Additional Land Payment 588,495.60 Final Land Payment 318,198.83 Additional Authority Payment 451,059.40 Estimate of Outstanding Amounts 126,165.79 433,280.23 Estimated Land Payment Estimated External Infrastructure Contribution Estimated Gas Site Remediation Non-monetary consideration 2,099,719.60 GST 27,787.30 Total 9,738,698.83 2,575,660.30 2,248,166.99 6,164,104.92
Proceeding/Land
Payment Type
C9 (MYER)
2665 of 2011
V4 (MKWH)
2678 of 2011
V5 (Convesso)
2707 of 2011
Stage Land Payment (incl GST) 5,238,003.10 956,758.50 (ex GST) 7,964,518 External Infrastructure Contribution 453,936.60 (ex GST) 4,171,963 Base External Infrastructure Contribution 1,688,123.80 Gasworks Site Remediation Contribution 523,773 (ex GST) 4,790,033 Base Gasworks Site Remediation Contribution
1,947,834.90
Integrated Public Art Contribution 267,891.80 50,538 (ex GST) 331,175 Grand Plaza Retention Amount 2,761,315.70 Grand Plaza Additional Payment 3,494,063.93 Grand Plaza Contribution 504,374 (ex GST) 4,017,446 Additional Land Payment Final Land Payment Additional Authority Payment 1,716,744.70 Estimate of Outstanding Amounts Estimated Land Payment 702,000 Estimated External Infrastructure Contribution 197,000 Estimated Gas Site Remediation 262,000 Non-monetary consideration 4,281,052.60 GST 248,938.01 Total 22,556,030.53 2,738,318.11 21,275,135.00
It may be convenient to commence with the assessments made by the Commissioner in relation to the Dock 5 transfer in proceeding 2663 of 2011. Many of the facts and issues in that assessment are materially the same in the other appeals. Clause 4.7 of the 2001 Development Agreement provided for the payment to the Authority of various amounts including the Stage Land Payment (as defined). The Commissioner has also assessed to LLD the other amounts payable to VicUrban under the Development Agreement which the Commissioner contended to be referable to the land transferred in respect of the Dock 5 stage. One amount included was that arising from LLD’s obligation to contribute to the infrastructure costs on land outside of the stage land released to LLD under the land sale contract transferring the Dock 5 land. The external infrastructure essentially involved road works and other infrastructure linking the precinct and the Docklands area to the central business district of Melbourne and to adjoining suburbs. Those works included the extension of Collins Street from Spencer Street to Docklands, a pedestrian and cycle bridge and a pedestrian bridge to Etihad Stadium. Another amount assessed by the Commissioner was that payable for the remediation of the former eight hectare West Melbourne Gasworks Site once occupied to the east of the precinct. Waste products from gas production had been deposited into ponds and wells on the site during the life of the site. The site had only been demolished to ground level when it had been decommissioned and remediation works were commenced in August 1999 which were completed in 2002 pursuant to a clean up notice on the site given by the Environment Protection Authority under s 62A of the Environment Protection Act 1970 (Vic). A third amount assessed for duty in respect of the Dock 5 land was a percentage of the cost of public art placed in public spaces. Clause 10 of the 2001 Development Agreement required LLD to allocate a percentage of the Stage Development Cost (as defined) on Integrated Public Art (as defined) in public spaces relating to individual buildings, public spaces within the precinct, and public spaces generally within the Docklands area. The Development Agreement also required LLD to pay VicUrban an amount referred to as the Final Land Payment. This, in effect, was an amount of profits agreed to be paid to the Authority being the amount by which 2.74% of the Actual Gross Process Sale (as defined) exceeded the Stage Land Payment (as defined).
The Commissioner issued a Notice of Assessment on 1 May 2007 in relation to the transfer of the Dock 5 land. By that assessment the dutiable value of the land was determined to be $9,542,900.40. The land was valued on 9 November 2006 as $2,575,000. The contract price in the Land Sale Contract for the Dock 5 land (excluding GST) was $4,323,364. The Commissioner’s determination of the dutiable value included as the contract price $4,633,300 (including GST), $2,130,000 paid for External Infrastructure Contribution, $2,446,000 paid for Gasworks Site Remediation Contribution, $211,200 paid for Integrated Public Art Contribution (including GST), and an amount of $318,198.83 paid as the Final Land Payment.
Section 11 of the Duties Act 2000 (Vic) creates a liability for duty when a dutiable transaction occurs. The transfer of the Dock 5 land was a dutiable transaction which created a liability in LLD to pay duty on the dutiable value of the land transferred. The dutiable value is determined primarily by s 20(1) which provides:
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 (being the amount of a monetary consideration or the value of a non-monetary consideration); and
(b) the unencumbered value of the dutiable property.
Other provisions are relevant to determine the dutiable value of the transfers in these proceedings but the primary basis of duty depends upon identifying the “consideration (if any) for” the dutiable transaction. LLD contended that the consideration for the transfer of the relevant land was the contract price or the Stage Land Payment agreed between the parties as stated in the relevant land sale contract and the relevant instrument of transfer. LLD contended that only that amount was consideration which had been paid for the land. The Commissioner contended that the other amounts assessed were all part of the consideration for the transfer of the land. LLD placed reliance on the decision in Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties[1] and sought to distinguish the decision in Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd.[2] The Commissioner relied upon Dick Smith and sought to distinguish Bambro.
[1][1963] 63 SR (NSW) 522.
[2](2005) 221 CLR 496.
Bambro concerned an agreement for the sale of land for £600,000. The vendor had also agreed to erect buildings on the land after the conveyance for which the purchaser was to pay an additional amount of £1,405,000. The purchaser was entitled under the agreement to withhold the payment of the balance of the purchase money for the land until the buildings were completed. The sale of the land and the erection of the buildings were dependent upon each other and formed one entire bargain or transaction. The New South Wales Commissioner of Stamp Duties assessed the agreement for duty as a composite conveyance of land and buildings for the combined amount of £2,005,000. The court rejected the Commissioner’s contention and held that the dutiable value for the sale of land was the lesser amount of £600,000 which had been agreed between the parties rather than the combined amount which included the agreed price for the sale and erection of the buildings notwithstanding that the two matters were interwoven and interdependent. Sugerman J (with whom Collins and Macfarlan JJ agreed) concluded that the contract between the parties created both an agreement to sell land and an agreement by the vendor to build upon the land sold and that these were distinct matters.[3] The fact that the distinct matters were “interwoven or interlocked as one entire bargain or transaction, in which various events must stand or fall as a whole and with other interdependences between its parts”[4] did not alter the conclusion that they were distinct matters.
[3]Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties [1963] 63 SR (NSW) 522, 528.
[4]Ibid 529.
Dick Smith concerned the duty payable on the sale of shares under an agreement which provided that the price for the shares was to be approximately $114,000,000 minus a dividend amount equivalent to the company’s retained earnings to a maximum of $27,000,000. In that case the majority held that the consideration for the sale of the shares was the whole of the approximately $114m to be received by the vendor, and not the lesser amount which excluded the “dividend amount” vendor was to receive as a dividend upon its shares before completion of the contract. Gummow, Kirby and Hayne JJ said:
The consideration which moved the transfer by the Vendors to the Purchaser of the Shares which they owned in the Company was the performance by the Purchaser of the several promises recorded in the Agreement in consequence of which the Vendors received the sum of $114,139,649. It was only in return for that total sum (paid by the various steps and in the various forms required by the Agreement) that the Vendors were willing to transfer to the Purchaser the bundle of rights which their shareholding in the Company represented.
Noticing the several steps which the Agreement required to be undertaken in order to achieve that result must not be permitted to obscure that the amount of monetary consideration for the transaction of the sale and transfer of the Shares was the sum identified. That part of the amount was to come as a dividend from the Company, the Vendors' shares in which were being sold, rather than immediately from the Purchaser, does not deny that proposition.
That which passed to the Vendors "for" the transfers of the Shares was "consideration" which was "monetary" rather than "non-monetary" within the meaning of s 21(1) of the Act. The transaction was to be assessed to duty on the footing that it was performed on its terms and, completion having taken place before the Agreement was furnished by the Purchaser to the Commissioner, both sides addressed their arguments by reference to the implementation of the transaction. The Commissioner correctly took the stance that the intended result of the transaction, seen as a whole, was the receipt by the Vendors of $114,139,649.[5]
Their Honours concluded that the consideration for the transfer had been the “performance of all of the various stipulations in the Agreement, not merely the promises which the Purchaser made”[6] and, therefore, that the vendors had transferred the shares in return “for receiving some $114 million, of which part was received from the Company [as a dividend and not from the purchaser] because the parties had agreed that this should be so”.[7]
[5]Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, 519.
[6]Ibid 520.
[7]Ibid.
The fundamental enquiry in each case was what had been received as consideration “for” the dutiable transaction. That inquiry required an evaluation of the nexus between the consideration and the transfer. It will not be sufficient that there be some connection between consideration and transfer to conclude that one is “for” the other.[8] The legislative policy evident in s 20(1) is to require a particular connection between transfer and consideration for duty to be imposed. It has not adopted as the required connection that the consideration be “in respect of”, “in connection with” or “in relation to”[9] the transfer which may be thought to require something less than when the connection required by providing that the consideration must be “for” the transfer.[10] Even when the connection required may be that something be “in respect of” (or like expression) something else, the nexus between the two would need to be material and based upon rational and discernible links.[11] Dutiable transactions may occur in a broader context of transactions which do not attract duty. The legislature intended duty to be imposed upon the consideration for the dutiable transaction and not for other consideration for other connected transactions which are not otherwise dutiable. That may be seen by the legislature’s use of the words “consideration” (carrying the concept of that which “moves” the transaction) and “for” (requiring a nexus between consideration and transfer). It may also be seen in s 25(1) which requires that duty be imposed only upon that portion of consideration that relates to dutiable property where that section operates. Interdependence of mutual promises are not sufficient to determine whether a payment was “for” the dutiable transaction, as can be seen from the decision in Bambro. In Dick Smith it was significant that the vendors were intended to receive the amount of approximately $114m notwithstanding that the vendor, as shareholder, may have been able before the sale (independently of the agreement) to have a dividend declared for that part of the total amount received but which was financed by the purchaser.[12] In that case the purchaser had promised to fund the company’s payment of the dividend to its shareholder and in fact received the dividend amount together with the stipulated purchase price. In contrast, in Bambro, it was said to be “crucial” to the outcome in that case that the conveyance was “to precede building”.[13] The two matters in Bambro were interlocked and legally interdependent but the dutiable conveyance of the land was to precede the building upon the land.
[8]See Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation (1953) 89 CLR 428, 454 (Fullagar J); State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412, 416 (Taylor J); J & G Knowles & Associates v Federal Commissioner of Taxation (2000) 96 FCR 402.
[9]See Federal Commissioner of Taxation v Scully (2000) 201 CLR 148, 182 [68] (Kirby J, but in dissent in the outcome); see also Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110, 111 (Mann CJ); State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412; J & G Knowles and Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402, 410 (Heerey, Merkel and Finkelstein JJ); Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45.
[10]Federal Commissioner of Taxation v Scully (2000) 201 CLR 148, 182 [68] (Kirby J, but in dissent in the outcome).
[11]Technical Products Pty Ltd v State Government (1989) 167 CLR 45, 47 (Brennan, Deane and Gaudron JJ), 51 (Dawson J); J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402, 410 (Heerey, Merkel and Finkelstein JJ).
[12]Cf. Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, 508 (Gleeson CJ and Callinan J dissenting).
[13](1963) 63 SR (NSW) 522, 529 (Sugerman J).
The importance of the nexus required to determine dutiability may be seen by judicial observations about the meaning of the word “consideration”. In Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW)[14] Dixon J said that the word “consideration”[15] was concerned to make liable the money or value “passing which moves the conveyance or transfer”[16] rather than having the meaning of conveyance in the law of simple contracts.[17] It may not matter whether the required nexus between amount and transfer lies in the meaning of “consideration” or in the effect of the word “for” in the composite phrase “the consideration (if any) for the dutiable transaction” now found in s 20(1)(a) of the Duties Act 2000 (Vic). What is essential is that there be identified, and be made liable to duty, that which moves the transfer. A transfer may be contingent upon a separate matter without the contingency being part of the moving consideration for the transfer.[18] A purchase of land and business may be interdependent such that the promise to purchase stock may be an interdependent promise in the one agreement with the sale of land without the consideration for the stock being consideration for the land. The promise to pay for the stock (or such other promises as may typically be found in such dealings like the promise to assume employee entitlements) may be a necessary promise of the composite whole but it would not be accurate to attribute the promise to purchase the stock as being for the land. In the case of composite promises or composite transactions it will be necessary to take care to ensure that what is attributed as the consideration for the dutiable transaction is relevantly that which moves that part of the composite whole.[19] That will involve notions of causation and attribution[20] to determine what the consideration “really paid for”.[21]
[14](1948) 77 CLR 143.
[15]In the Stamp Duties Act 1920-1940 (NSW), s 66.
[16](1948) 77 CLR 143, 152.
[17]Ibid; see also Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) (1958) 100 CLR 392, 415 (Kitto J); Stock v Commissioner of Probate Duties (Vic) [1976] VR 106.
[18]Oakland Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2009) ATR 824, 827 [21]–[22] (Gzell J).
[19]See also Commissioner of Taxation v Sun Alliance Investments Pty Ltd (in liq) (2005) 225 CLR 488, especially 514–5 [80] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).
[20]Ibid.
[21]ColonialMutual Life Assurance Society Ltd v Federal Commissioner of Taxation (1953) 89 CLR 428, 454 (Fullagar J); see also: Federal Commissioner of Taxation v Rowe (1997) 187 CLR 266, 292 (Gaudron, Gummow and Kirby JJ); Federal Coke Co Pty Ltd v Federal Commissioner of Taxation (1977) 34 FLR 375, 402 (Brennan J).
The question arising in relation to the Dock 5 assessment is whether the amounts payable by LLD under the Development Agreement as External Infrastructure Contribution, Gasworks Site Remediation Contribution, Integrated Public Art Contribution, Final Land Payment including GST were part of the “consideration for” the dutiable transfer of the Dock 5 land. The subject matter of each payment is capable of being conceived as something distinct from the land but it does not follow from that that the payment for the other subject matter is not also consideration for the dutiable transaction.[22] Although it may be possible to conceive of the subject matter of these payments as different from the Dock 5 land, they are not distinct or separate or distinct matters in the same way as the subsequent cost of construction of the building in Bambro. In this case the subject matters separately identified and made payable by separate qualifications were all part of, or ancillary to, the land acquired.
[22]CCH, Duties and Levies ¶6-012; Davis v Commissioner of Stamp Duties (NSW) (1995) 95 ATR 4245; M’Innes v Inland Revenue Commissioners [1934] SC 424; cf. Kimbers v Inland Revenue Commissioners [1936] 1 KB 132.
The sale of the Dock 5 land was completed on 15 November 2006. The specific version of the Development Agreement applicable at that time was the 2006 version. The recitals to the 2006 Development Agreement, like all versions of the Development Agreement, made clear that it was concerned with the development and sale of land. Recital D stated that the Authority had agreed to sell the land to the Developer on the terms and conditions contained “in the land sale contract and this Agreement” (my emphasis). The land sale contract by which the Dock 5 land was sold was never intended or contemplated by the parties as a separate transaction which stood outside the Development Agreement. The “Land Sale Contract” was defined in the Development Agreement as “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”. The “Land” was defined to mean the whole of the precinct including the “Gasworks Site” which was defined to mean the area identified in the plan attached as Schedule AA.
The Development Agreement was a comprehensive document embracing, amongst other things, the specific terms on which specific sales of land were to occur in stages over time. It dealt with a variety of matters including the amounts payable at various stages and the registration of the Development Agreement for various statutory purposes. The transfer of the Dock 5 land occurred as part of the overarching agreement entered into between a developer and a statutory authority charged with developing the Docklands area. Under the Docklands Act 1991 (Vic), VicUrban had been given comprehensive functions to redevelop the Docklands area of Melbourne including the Victoria Harbour Precinct. The precinct was to be converted from an old disused industrial area with little or no modern infrastructure and significant contamination problems to an area where people could live, work and find recreation. Infrastructure, remediation, art and other works were beneficial, essential and part of the redevelopment of the land in the precinct. The Development Agreement, as amended from time to time, was the commercial deal struck between the Developer and the Authority to bring about the development of the land and included a payment to the Authority of a percentage of the Developer’s gross realisation from its development on each parcel of land sold. A significance of this aspect of the arrangement between the parties is that the amount stated as consideration for the sale of each parcel of land in the Development Agreement was seen as part of the total basket of rights and obligations between the parties requiring adjustment.
LLD’s contributions to infrastructure, remediation of the gasworks site and public art were required to be paid before title was transferred.[23] Payment of those amounts was required as a condition of the transfer. Much, if not all, of the development and work to which the payments related was to improve the land or its enjoyment before transfer. Neither LLD, nor any of the appellants, were ever to purchase or acquire the land other than as improved by the works and development. The Dock 5 land may have been sold pursuant to a separate Land Sale Contract and was given effect to by a separate instrument of transfer, but the agreement to sell the land, and the obligations to pay money, was also to be found in the Development Agreement. Recital D had stated that to be the case and the terms of the Development Agreement gave effect to the recital. Clause 4.1(a) provided:
Subject to cl 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.
“Actual Stage Release Date” was defined to mean in relation to a “Stage” the date the developer “takes title to the Stage” pursuant to cl 4.1. “Stage” and “Actual Stage Release Date” were both amongst the many defined terms in the Development Agreement.
[23]Cf. Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties (1963) 63 SR (NSW) 522.
Clause 4.2 (to which cl 4.1 was subject) set out a series of conditions precedent to the release of land to LLD. The clause specifically prohibited the Authority to enter into a land sale contract for any stage or for the land, or to allow LLD to take possession of a stage or the land, unless certain conditions had been satisfied. Amongst those conditions was the delivery by LLD to the Authority of any registrable agreement referred to in Schedule Q. Clause 4.1(c) itself contained an acknowledgement by the Developer that the sale of land in stages under each land sale contract would be subject to the specified encumbrances affecting each stage including those specified in Schedule Q as well as the easements reasonably required for the provision of external infrastructure and any other infrastructure or service servicing the land or the Docklands Area. The encumbrances in Schedule Q included the registrable agreement intended to be made under s 24(a) of the Planning and Environment Act 1987 (Vic) and made in the form found in Schedule J to the Development Agreement. Such agreements were specifically referred to in the Dock 5 Land Sale Contract. Special Condition 18 of the Dock 5 Land Sale Contract provided that the purchaser would execute and deliver to the vendor on the day of sale the agreements made under s 173 of the Planning and Environment Act 1987 (Vic) including the registrable agreements.
Payment of the amounts disputed in relation to the Dock 5 land was required before transfer of title. Clause 3.1 of the Development Agreement provided for the Developer to pay a non-refundable amount of $5,000,000 on or before signing that agreement. The Dock 5 Land Sale Contract provided for a further deposit in respect of the Dock 5 land of $432,336.40. Clause 4.7 of the 2001 Development Agreement had also required that the Developer pay on or before each Actual Stage Release Date (namely, before the date of taking title) the sum of, (a) the Stage Land Payment, (b) the Minimum External Infrastructure Contribution, (c) 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 the 2001 Development Agreement. Clause 4.7 of the 2006 Development Agreement was in different terms from those in cl 4.7 of the 2001 Development Agreement but obligations to make those kinds of payments arose by cl 4.7A of the 2006 Development Agreement and by Special Condition 19 of the Dock 5 Land Sale Contract.
Clause 4.7A of the 2006 Development Agreement varied and replaced the payment obligations in cl 4.7(a) in respect of the Dock 5 stage. The clause also provided for payment of the amounts in the special conditions of the Dock 5 Land Sale Contract. Special Condition 17 of the Dock 5 Land Sale Contract provided for the payment of the balance of the price of $3,891,027.60 by a specified date. Special Condition 19 of the Dock 5 Land Sale Contract provided for the payment on the day of sale of $2,130,000 for the Minimum External Infrastructure Contribution for the stage, and $2,079,100 on account of the Minimum Gasworks Site Remediation Contribution for the stage of which Dock 5 land formed a part. Special Condition 19(b) provided that on “the Due Date” (a defined term) the purchaser was also to pay the balance of $366,900 for the Minimum Gasworks Site Remediation Contribution for the stage in which the Dock 5 land formed a part and $192,000 for the Stage Integrated Public Arts Contribution for the stage of which the land formed part.
The successive versions of the Development Agreement did not alter for duty purposes the fundamental nature of the payments and obligations of the Developer and Authority. The 2001 Development Agreement contained a table in Schedule C of the base amounts on stage release for each stage for the project. The Stage Land Payment in the table was approximately 2.74% of the Projected Gross Revenue on Sale as at each stage of the development. In other words, the amount payable as the Stage Land Payment for each stage on Stage Release was determined by the parties as approximately 2.74% of the Projected Gross Revenue referable to the stage being released. Clause 1.2 to Schedule C set out the base amounts for each stage on stage release of the Stage Land Payment, the Minimum External Infrastructure Contribution, the Minimum Gasworks Site Remediation Contribution and the Projected Gross Revenue on capitalist sales. Clause 4.7 of the 2001 Development Agreement had made payable the scheduled amounts on or before each Actual Stage Release Date, in addition to the Integrated Public Art Contribution and any other amounts due and payable by the Developer to the Authority under the Development Agreement. The Minimal External Infrastructure Contribution and the Minimum Gasworks Site Remediation Contribution were each made payable under cl 4.7 as “on account” of the Project External Infrastructure Contribution and the Project Gasworks Site Remuneration Contribution (as defined) respectively. The scheduled Stage Land Payment was not fixed by market value but as a percentage share of the revenue from sales. Clause 4.7(a)(ii) ensured that the Authority received from the Developer the amount of the Actual Gross Proceeds Sale received by the Developer in an order taking account of any excess received as against the percentages stipulated in Schedule C. The Final Land Payment was simply a “top up payment”, to ensure that LLD receive 2.74% of the actual Gross Proceeds Sales where that amount exceeded the projected realisations upon which the figure in the Dock 5 Land Sale Contract was calculated. The 2006 Development Agreement did not materially alter the nature of the payment made as the Final Land Payment in respect of the Dock 5 land. Clause 4 in the 2006 Development Agreement was affected by cl 4.7A but its terms did not alter the nature of the Final Land Payment as being a top up specifically provided for and made payable before completion of the contract and taking title to the Dock 5 land.
The amount payable for the Stage Land Payment was based on gross revenue from sales under the 2001 Development Agreement. The Project External Infrastructure Contribution and the Project Gasworks Site Remuneration Contributions were fixed but were subject to escalation. The 2001 Development Agreement provided for top up payments over and above the initial minimum contributions but these amounts were capped. In relation to the Dock 5 land, however, the operative provisions determining the payments to be made by LLD was Special Condition 19 of the Dock 5 Land Sale Contract rather than the 2001 Development Agreement. Special Condition 19(d) of the Land Sale Contract expressed the parties’ acknowledgement and agreement that the terms of Special Condition 19 varied the terms of the Development Agreement in respect of the Dock 5 stage except to the extent that the Land Sale Contract was rescinded or terminated as a result of a default by the purchaser. Clause 4.7A of the 2006 Development Agreement reflected the special provisions made by Special Condition 19 of the Dock 5 Land Sale Contract.
Special Condition 19 in the Dock 5 Land Sale Contract is headed “Additional Payments to Vendor” and required LLD to pay the Minimum External Infrastructure Contribution fixed in the amount of $2,130,000, and the amount of $2,079,100 on account of the Minimum Gasworks Site Remediation Contribution. The condition provided for the balance of $366,900 for the Minimum Gasworks Site Remediation Contribution, and $192,000 for the Stage Integrated Public Art Contribution, to be paid on the “Due Date”, which was defined as a date upon which payment of the balance of the purchase price was due under Special Condition 17. That date, according to Special Condition 17, was the earlier of the date being five business days after the stage practical completion of the Dock 5 stage or of notice being given by LLD that it wished to pay the final instalment and to receive title to the land. Each amount, however, was payable under the contract for the purchase of the Dock 5 land and was one of the promises given for each conveyance.
The payments made by LLD for infrastructure, Gasworks remediation and public art were all part of what it sought to acquire from the authority as part of the land at the relevant stage. The infrastructure in respect of which the Project External Infrastructure Contribution was payable was dealt with by cl 11 of the Development Agreement. Clause 11.1 of the 2001 Development Agreement and of the 2006 Development Agreement (and of relevance to other land, the 2008 Development Agreement), provided a warranty by the Authority that elements of the external infrastructure set out in Schedule U were “installed and completed substantially as set out in Schedule U”. The schedule listed drawings of the external infrastructure which the Authority had warranted would be undertaken by or for VicUrban. It included roads and drainage, water supply, traffic signal layout for the area, the Little Collins Street subway and walkway, aspects of the Bourke Street extension and a pedestrian bridge. All of these items were substantially in place at the time of the 2001 Development Agreement and were works necessary for the development of the precinct, including the specific parcels of land subsequently sold during the various stages. It was the benefit of those works which were being paid by LLD as part of the land, albeit that the amounts were identified by specific reference to the infrastructure warranted as having been provided. The separate identification of amounts payable, and the parties allocation of those amounts to particular items of an overall project, does not make the individual items any less part of the whole and of consideration “for” the land. The separate identification of amounts agreed by parties for the walls, roof or doors of a home on land would not exclude them from the consideration for the land unless, as was the case in Bambro, they were truly distinct matters.
The Development Agreement provided for 1% of the Stage Development Cost for each stage to be applied towards Integrated Public Art. Clause 10.1 of the 2001 Development Agreement required the Developer to pay to the Authority the Stage Integrated Public Art Contribution in accordance with cl 4 (namely before release of title to any stage). A portion of that 1%, namely 0.2%, was to be paid to the authority in accordance with cl 4.7(a)(i)(D) which, like the Stage Land Payment, the Minimal External Infrastructure Contribution and the Minimum Gasworks Site Remediation Contribution, was to be paid “on or before each Actual Stage Release Date”. These provisions were affected by Special Condition 19 of the Dock 5 Land Sale Contract, which required the Integrated Public Art Contribution for the stage of $192,000 to be paid on the Due Date, being the day the contract was to settle and the title transferred.
It is clear from the Development Agreement, as varied from time to time, that the Developer was to pay various amounts for a variety of matters as part of the land to be released to the Developer for sale. The fact of allocation of amounts for specific matters does not gainsay that the amounts were part of the consideration for the land acquired. The obligations were not only interdependent but wholly integrated with one composite development project undertaken by the Authority and the Developer. LLD had promised to pay amounts including the Stage Land Payment, the External Infrastructure Contribution, the Gasworks Site Remediation Contribution and the Integrated Public Art Contribution, as part of the consideration “for” the land to be acquired. It also promised to pay a top up payment (the Final Land Payment), where the actual proceeds of sale exceeded the predicted proceeds of sale. VicUrban transferred the Dock 5 land pursuant to the Dock 5 Land Sale Contract and the 2006 Development Agreement, in return for receiving a total amount which the parties had agreed would be paid under the terms of the 2006 Development Agreement and the Dock 5 Land Sale Contract. All of the amounts (apart from the Final Land Payment amount) was specifically provided for by the Dock 5 Land Sale Contract and the 2006 Development Agreement. The external infrastructure works, the works to remediate the Gasworks Site and the public artworks were all undertaken to turn the precinct from a disused industrial site isolated from Melbourne and lacking infrastructure, into an area for commercial and residential buildings to be built, sold and leased on parcels of land acquired by LLD. All of the money paid pursuant to the 2006 Development Agreement and the Dock 5 Land Sale Contract was for the Dock 5 land, in the sense of having “moved” the transfer of that land.
I will deal later with the inclusion of GST as part of the amount brought to duty, but each of the other assessments appear to me to raise the same issues as those raised by the assessments in the Dock 5 land. In the case of the Dock 5 land they were assessed on a GST inclusive basis, but in the case of the Mosaic land and the V4 (MKWH) assessments, they were assessed on a GST exclusive basis with the GST amounts identified as a separate total in the assessment.
The assessment concerning the C4 land arose from its transfer by instrument dated 25 July 2008 registered on 3 November 2008 pursuant to a contract executed by LLD on 30 October 2007 but under which the date of sale was specified as 20 December 2007. The amounts issued in this assessment are the same as those raised in the Dock 5 assessment. Accordingly the Integrated Public Art Contribution component need not be considered again. The additional issues raised are (a) that the Final Land Payment in this case is described as an “Additional Land Payment” of $588,495.60, (b) that there was an Additional Authority Payment of $451,059.40 and (c) that there was an Estimate of Outstanding Amounts of $126,165.79.
In contrast to the Dock 5 proceeding, the Development Agreement specifically referable to the C4 land was the 2008 Development Agreement. However, its terms did not change the essential features of the payment arrangements from those in the previous versions of the Development Agreement. Clause 4.7(a) continued to require the payment for the Stage Land Payment (now 90% of the “Projected Gross Revenue on Sale [Initial Build Out]”), a Base External Infrastructure Contribution (90% of 1.3% of Projected Gross Revenue on Sale Initial Build Out), and a Base Gasworks Site Remediation Contribution (90% of 1.5% of the Projected Gross Revenue on Sale Initial Build Out) on or before the Actual Stage Release Date (as defined). The total amounts payable for the External Infrastructure Contribution and the Gasworks Site Remediation Contribution continued to be capped but were subject to escalation. Clause 4.7 continued to provide for a “top up” payment where the Actual Gross Proceeds of Sale exceeded the Stage Land Payment for the stage. Clause 4.7 of the 2006 Development Agreement and of the 2008 Development Agreement also provided for an Additional Authority Payment in respect of works resulting in development exceeding the initial build out limits set out in Schedule OO. The Additional Authority Payment, like the Stage Land Payment, was a fixed figure to provide VicUrban with a share of the proceeds of sale of the additional building which was ultimately agreed at 2.8% of the Actual Gross Proceeds of Sale after build out.
A difference between the 2001 Development Agreement and the subsequent Development Agreements of 2006 and 2008 was that the latter two provided an effective cap on the amount payable for the land as a whole whereas the 2001 Development Agreement ensured that VicUrban received 2.74% of the Actual Gross Proceeds of Sale as the Stage Land Payment. A number of clauses were introduced into the 2006 Development Agreement and the 2008 Development Agreement which had the effect that in some circumstances the Stage Land Payment would be zero, or an amount of only 10% of 2.74% of the Projected Gross Revenue on Sale Initial Build Out. This illustrates that the land was acquired as part of an overall project and paid for by the various amounts which together formed part of the project and of the precinct’s development.
The Additional Land Payment included in the C4 assessment was a top up payment of the kind I have previously described, where the Actual Gross Proceeds of Sale exceeded the Anticipated Gross Proceeds upon which the price specified in the C4 Land Sale Contract was based. The fact that the Additional Land Payment was payable on a date after the transfer of the C4 land does not alter its character as consideration “for” the transfer. The payment was, rather, an adjustment of the earlier amount reflecting the parties intention to ensure that they arrived at the intended result, namely, that VicUrban receive payment of 2.74% of the proceeds of sale. The Additional Authority Payment of $451,095.40 in this proceeding was an additional amount, as previously described, payable under cl 4.7(a)(ii)(B) of the 2008 Development Agreement. The inclusion in the assessment of an amount on an estimate, included as the Estimated Outstanding Amounts in the C4 assessment, is contemplated and permitted by the Duties Act 2000 (Vic). Section 30(1) of the Duties Act 2000 (Vic) permits the Commissioner to make an assessment by way of an estimate under s 11(2) of the Taxation Administration Act 1997 (Vic) if the full dutiable value of dutiable property which is the subject of a dutiable transaction cannot be immediately ascertained. Each of the Additional Land Payment, Additional Authority Payment and Estimated Outstanding Amounts were “for” the C4 land acquired.
The Mosaic land was Lot 1 on a proposed Plan of Subdivision PS 545345Y being part of the land described in Certificate of Title volume 10947 folio 505. It was within the Gasworks Site which was the subject of the remediation works undertaken by VicUrban. The instrument for the transfer of the Mosaic land from VicUrban to LLD was dated 4 April 2007. The title records that the transfer was registered on 2 July 2007 and the contract for its sale was dated 4 April 2007 with a specified price of $1,228,980 excluding GST. The amounts included in the Commissioner’s assessment to duty was the $1,228,980 for the Stage Land Payment under the contract, together with the External Infrastructure Contribution of $583,093 (exclusive of GST), the Gasworks Site Remediation Contribution of $672,800 (exclusive of GST), the Integrated Public Art Contribution of $63,000 (inclusive of GST) and a GST component referable to each amount totalling $27,787.30. Except for the GST component, the items in the Mosaic assessment are similar to those in the Dock 5 assessment and accordingly need not be considered separately. I will deal later with the GST component of the assessment.
The assessment for the C10 (Montage) land included $1,539,966.57 in the dutiable value of the land for the Stage Land Payment, $731,640.68 for External Infrastructure Contribution, $844,046.64 for Gasworks Site Remediation Contribution, $80,990.80 for Integrated Public Art Contribution, $434,460.40 for Grand Plaza Retention Amount, $2,099,719.60 for Non-monetary Consideration and $433,280.23 as Estimate of Outstanding Amounts. The transfer for the land was dated 17 April 2008 and registered on 13 June 2008 on a contract of sale dated 17 April 2008. The price specified in the C10 sale contract was $1,485,222.00 exclusive of GST.
Save for the Grand Plaza Retention Amount and Non-monetary Consideration, the items in this assessment are similar to those in the previous assessments and need not be considered separately. The Grand Plaza Retention Amount had its origins in the 2001 Development Agreement which provided that the Developer was to construct the Grand Plaza. That obligation continued under the 2006 Development Agreement, with the addition of cl 13.2A, which provided for the Grand Plaza Retention Amount. That clause required LLD to retain 1% of the Actual Gross Proceeds of Sale from 1 July 2005, from which was to be paid the costs associated with the Grand Plaza works were to be paid. Clause 13.2(f) provided for VicUrban to make certain contributions to the Grand Plaza Retention Amount. VicUrban was required under the 2008 Development Agreement to procure the construction of the Grand Plaza works at its expense but the Developer was required to pay VicUrban the Grand Plaza Contribution and, where relevant, the Grand Plaza Additional Payment. With effect from 10 May 2007, LLD was required to pay the Grand Plaza Contribution to VicUrban on or before the Actual Stage Release Date, being the date of sale and before the transfer of title. These contributions are similar to the other amounts required to be paid on or before the Actual Stage Release Date under cl 4.7 of the Development Agreement. The provision of a Grand Plaza enhanced the amenity of the area and the precinct generally. The payment was relevantly “for” the land transferred as part of the consideration which moved the transfer.
The C10 (Montage) assessment also included an amount of $2,099,719.60 described as Non-monetary Consideration. VicUrban and LLD had entered into a construction licence agreement dated 4 February 2008. That agreement provided for the grant of a licence to LLD over the licensed area to construct the works defined as being the Initial Works and Public Area Works over the land including the C10 stage. Part of the area was outside the bounds of the C9 stage and the C10 stage. LLD paid a licence fee of $1,000 for a right of access. Special Condition 10.3 of the C10 Land Sale Contract, however, provided:
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;
(ii)Works on Area 1, with a GST exclusive market value of $1,908,836
Special Condition 10.3(b) went on to provide a set off between the GST amount payable by VicUrban to LLD in relation to the supply of works on Area 1 and the GST payable by LLD to VicUrban in respect of the supply of the land. The amount was omitted under the particulars of sale to the contract but its amount can readily be ascertained from the transfer of land subsequently filed for registration. The additional amount, however, was expressly agreed between the parties by Special Condition 10.3 to be part of the consideration for the land. Special Condition 10.3 provided an express acknowledgement that “the consideration for” the land included, and was not limited to, amongst other things, the works performed by LLD on Area 1 which was not land belonging to or to be acquired by LLD. The GST set off clause acknowledged that the provision of those works would result in a taxable supply by LLD to VicUrban. The condition was framed in terms that expressly encompassed the consequences of the performance of those works for GST purposes. The separate question of whether a dutiable amount was the GST exclusive amount or GST inclusive amount will be considered later. The works on Area 1 were both expressly stated to be consideration for the land and was part of what was acquired for the land. The land was to be developed with facilities and amenities, some of which were completed outside of the land itself.
The assessment for the C9 (Myer) land raises no additional issues from those previously considered although in the case of Stage Land Payment, External Infrastructure Contribution and Gasworks Site Remediation the amounts were assessed as estimates and in the case of External Infrastructure Contribution and Gasworks Site Remediation the amounts were also assessed as the “Base” contributions (as defined). It also included an amount of $3,494,063.93 described as a Grand Plaza Additional Payment, reflecting the fact that the Authority had agreed to reduce the land payment and contributions in respect of a stage outside of these proceedings and had agreed that LLD was not required to pay a Grand Plaza Contribution in respect of that stage. Instead LLD was required to pay an additional amount on the release of the C8 and C9 stages. Both the submissions of the taxpayer and the Commissioner treated the Grand Plaza Additional Payment in the same way as the Grand Plaza Retention Amount. Accordingly, the payment was relevantly “for” the land transferred as part of the consideration which moved the transfer for the reasons set out above in relation to the Grand Plaza Retention Amount.
The assessment also included an amount of Non-monetary Consideration. The price specified in the particulars of sale was $4,761,821 excluding GST. Special Condition 11 required settlement to take place in Victoria at the place specified by the vendor and in sub-clause 11(b), went on to provide:
To complete settlement, the Purchaser must also pay to the Vendor:
(i)the Additional Authority Payment;
(ii)the Stage Integrated Public Art Contribution;
(iii)the Base External Infrastructure Contribution; and
(iv)the Base Gasworks Site Remediation Contribution.
In this way the vendor secured receipt of those amounts before, and as part of the consideration for, the transfer of the land. Special Condition 12 dealt with top up payments and by express provision required the purchaser to pay the various top up amounts by which the Actual Gross Proceeds of Sale exceeded the Stage Land Payment, Base External Infrastructure Contribution, Base Gasworks Site Remuneration Contribution, and Additional Payments to the Authority.
In the case of the C9 (Myer) land, VicUrban had promised its transfer, along with all other stages comprising the land, to LLD under the Development Agreement. In the case of that land, however, LLD entered into a development agreement (“LLREI Development Agreement”) with Lend Lease Real Estate Investments Pty Ltd (“LLREI”) (being the appellant in proceeding 2665 of 2011 in relation to the C9 (Myer) land) and that company entered into the C9 (Myer) Land Sale Contract with VicUrban. The agreement between LLREI and LLD required the former to pay the “VicUrban development agreement contribution” of $5,852,480. The C9 (Myer) Land Sale Contract required that LLREI pay amounts including the Stage Land Payment as fixed by that contract, the Additional Authority Payment, the Stage Integrated Public Art Contribution, the Base External Infrastructure Contribution and the Base Gasworks Site Remediation Contribution. Each of these payments were required to be made “to complete settlement” and formed part of the promises given to obtain the land in the context of the overall development. Special Condition 7 of the C9 (Myer) Land Sale Contract provided that it constituted the entire agreement between the parties “for the sale and purchase” of the property superseding all previous negotiations and agreements in relation to the transaction but its terms incorporated and included the 2006 Development Agreement. As with the other transactions the amounts paid by the purchaser were all “for” the land in the form and state intended to be secured through the development. The infrastructure and gasworks remediation were to turn the precinct from a disused industrial site cut off from the Melbourne central business district and lacking the infrastructure necessary for its development, into an area for commercial and residential construction, sale and lease. Amounts paid in respect of the Grand Plaza and the public art, contributed to the amenity of the precinct by making it a place suitable for people to live, work and find recreation.
The sale of the land comprising the C4 Merchant Key Worker stage release (“V4 land”) raises an additional issue to those previously considered. The contract for its sale was dated 15 July 2008 as was the instrument of transfer. The price specified in the contract was $956,758.50 payable by LLD plus $1 paid by Melbourne Affordable Housing (“MAH”), on account of the deposit of which receipt was acknowledged in the particulars of sale to the V4 Land Sale Contract (exclusive of GST). The Commissioner calculated the dutiable value of the sale by including the Stage Land Payment amount disclosed in the particulars of sale, together with amounts for External Infrastructure Charge, Gasworks Site Remediation Contribution, Integrated Public Art Contribution, and Grand Plaza Contribution. To each amount was added an amount for GST. The contractual arrangements concerning most of those payments are exactly the same as I have previously considered and need not be repeated. In this case, however, LLD maintained that the dutiable amount for the land was not that disclosed in the particulars of sale but a higher amount as valued by Charter Keck Cramer (“the valuers”) in a valuation dated 20 August 2008.
Section 20(1) of the Duties Act 2000 (Vic) provides that the dutiable value of dutiable property is to be the greater of two amounts namely either (a) the consideration (if any) for the dutiable transaction or (b) the unencumbered value of the dutiable property. LLD contended that the dutiable amount for the V4 transaction was the unencumbered value of the dutiable property of $2,047,500 brought to duty under s 20(1)(b) rather than the consideration as assessed by the Commissioner under s 20(1)(a). The basis for that contention was essentially that the unencumbered “value” of the dutiable property was greater than the stated “consideration” appearing in the contract. The submission, however, fails to take into account the fact that the consideration under s 20(1)(a), which is to be compared with the unencumbered value of the dutiable property under s 20(1)(b), must be the total consideration for the whole of the dutiable transaction. In this case the total consideration, including each of the amounts payable by LLD included in the assessment, is greater than the unencumbered value of the dutiable property as disclosed in the valuation.
The last assessment to consider was that relating to the V5 (Convesso) land. The assessment was issued against Lend Lease INT 2 (HP) Pty Ltd (“LLMIT”) in respect of a contract for the sale of the V5 land dated 24 June 2010 being the same date as the transfer. The price specified in the V5 Land Sale Contract for the land was $7,697,764 excluding GST. The Commissioner determined the dutiable value of the transaction by adding to that amount the GST and the amounts (including GST) payable for Base External Infrastructure Contribution, Base Gasworks Site Remediation Contribution, Integrated Public Art Contribution and Grand Plaza Contribution. Each of these items has previously been considered.
The 2008 Development Agreement was that in force at the time of the sale of the V5 land. On 23 June 2010 LLMIT had entered into an agreement with LLD under which LLD was to provide defined services and LLMIT undertook to pay “Contribution Payments” defined as the Stage Integrated Public Art Contribution, the External Infrastructure Contribution, the Gasworks Remediation Contribution and the Grand Plaza Contribution. Clause 1.3(b)(2) of the Development Agreement entered into by LLMIT and LLD required those amounts to be paid to LLD or to VicUrban.
On 24 June 2010 VicUrban, LLD and Lend Lease Corporation Ltd (“LLC”) entered into an agreement referred to as the “V5 Stage Deed”. That deed recited as background that VicUrban and LLD had entered into the Development Agreement for the development of the V5 stage and that they and LLMIT had “entered into, or will enter into a contract of sale” for the V5 land. The deed further recited as background that:
VicUrban and the Developer have agreed that despite the provisions of the Development Agreement for the purposes of a sale of the Building Area by VicUrban to [LLMIT] and the development of the V5 Stage, the provisions set out in this deed apply for the V5 Stage only.
Clause 1.3(a)(ii) provided that the V5 Stage Deed did not release the Developer from any obligation under the Development Agreement relating to the V5 stage. Clause 2 of the V5 Stage Deed specified amounts payable in respect of the V5 stage and excluded the operation of specific payment obligations otherwise found in the Development Agreement. The V5 Stage Deed otherwise provided by its own terms for the timing of various payments and for top up payments based on the Actual Gross Proceeds of Sale. Clause 2.1 of the V5 Stage Deed provided that the amount payable for Integrated Public Art Contribution for that stage was to be $301,068 (excluding GST). Clause 2.2 excluded the operation of certain clauses of the Development Agreement but set out the GST exclusive amounts payable for the Stage Land Payment ($7,697,764), Base External Infrastructure Contribution ($3,792,694), Base Gasworks Site Remediation Contribution ($4,354,575) and Grand Plaza Contribution ($3,652,224). Clause 2.3 provided that 90% of the Stage Land Payment was to be paid on or before the day of sale, as defined in the V5 Land Sale Contract entered into on the same day. Clause 2.4 set out provisions for the quantum and timing of the other payments.
The specific contract for the sale of the V5 land was executed on 23 June 2010 with a date of sale of 24 June 2010. It provided for the payment of the purchase price but not specifically for the other amounts payable under the V5 Stage Deed. The V5 Land Sale Contract, however, did not operate without regard to the V5 Stage Deed. Special Condition 7 of the V5 Land Sale Contract did provide that it constituted the entire agreement between the parties “for the sale and purchase of the Property” and that it superseded “all previous negotiations and agreements in relation to the transaction”, but by Special Condition 8.2 the vendor was entitled immediately to terminate the contract if the vendor had a right “to terminate the Development Agreement”. The “Development Agreement” for this purpose was defined to mean the 2006 Development Agreement as varied by, amongst others, the V5 Stage Deed.
The promises in the V5 Land Sale Contract, the V5 Stage Deed and the Development Agreement (as varied) were all part of the consideration moving the transfer to LLMIT. The infrastructure and gasworks remediation were necessary to convert the precinct from its disused industrial state cut off from the Melbourne CBD lacking the infrastructure necessary for development into an area where buildings could be built, sold and leased on parcels acquired by LLD and LLMIT. The same is true of the amounts paid in respect of the Grand Plaza and the Public Art Contribution. Each contributed to the amenity of the land. They were necessary works for the development of the property which the purchaser from VicUrban was to lease or sell. The purchaser from VicUrban was not acquiring vacant land, it was acquiring land as agreed to be developed.
An issue arising throughout the assessments concerns whether the dutiable amount was to exclude GST. In each case the purchaser had an obligation to pay GST although in some cases the amounts were expressed in the agreements without GST. GST was payable pursuant to the A New Tax System (Goods and Services Act) 2000 (Cth) and the identification of the amounts payable as exclusive of GST did not prevent the GST amount also becoming payable by the party liable. Special Condition 10.3 of the C10 Land Sale Contract provided an illustration of a set off between the GST amount payable by VicUrban to LLD in relation to its supply of works and the GST payable by LLD to VicUrban in respect of the supply of that land. The obligation to pay GST arose however the amounts payable may have been expressed in the agreements. There was no exclusion of the liability for LLD to pay GST and, indeed, when GST was considered it was provided to be an obligation payable by the purchaser. Clause 4 of the Agreed Terms of the 2008 Development Agreement, for example, was headed “Goods and Services Tax” and made clear that each payment under the agreement “must be increased by an amount equal to any GST which VicUrban is or becomes liable to pay”. Accordingly the consideration for each of the amounts to be included in the assessments is properly to include a component for GST.
The Commissioner also sought to maintain the assessments on the basis that the additional amounts included in the calculation of the assessments were required to be included by s 21(1). That section provides:
The consideration for the transfer of dutiable property is taken to include the amount or value of all encumbrances, with a certain or contingent, subject to which the dutiable property is transferred.[24]
The hearing of the appeals was conducted upon the assumption that this ground could be relied upon by the Commissioner. The solicitors for the taxpayers, however, subsequently notified the court by communications, without application or leave, that the ground had not been raised in the Commissioner’s grounds of decision and, therefore, could not be raised without leave. The solicitor for the Commissioner responded by letter without application or leave.
[24]A provision said to be taken from the Stamp Act 1891 (UK) s 57 and to overturn the decision in Chandos (Marquis) v Inland Revenue Commissioners (1851) 6 Ex R 464; see B J Sims and A K Tavaré, Sergeant and Sims on Stamp Duties (7th ed, 1977), 129; cf. Thomson Lawbook Co, Hill Duties Legislation, vol 1 (at Update 50), [3.1421].
The method of communications adopted by both parties is an inappropriate way in which to have matters addressed by the court. Solicitors should be aware of the rules applicable to raising issues after hearing and, where appropriate, should apply for a proceeding to be relisted for further argument in public with the benefit of a controverter with an interest in the proceeding. Private communications by a party with the court undermines the appearance of its impartiality however helpful a party, or its advisor, might hope to be by the communication. The letter from the taxpayer’s solicitors did not, in express terms, make any submission about anything. It purported only to bring to the court’s attention the fact that an additional ground had been relied upon by the Commissioner which required leave and that leave had not been sought. All of this, if it were intended for the court to take into account, ought to have been brought to the attention of the court in public hearing in the presence of the Commissioner who might then have made submissions in response. At very least, however, the solicitors for the taxpayer ought to have given some explanation for the obvious failure on their part to have drawn any of this to the court’s attention during the hearing of the proceeding and, on any view, ought to have made some submission about what, if anything, the court should do about the matters raised on its clients’ behalf.
The response from the Commissioner was no more appropriate or helpful. It asserted that the proceeding had taken place with full argument on the question of the application of s 21(1) of the Duties Act 2000 (Vic) without objection. The letter from the Commissioner went on to say:
If the appellants are permitted to raise this objection now by way of their letter to the court, and if leave is required under s 109, then the Commissioner hereby seeks that leave. Leave could be granted (or refused) by his Honour upon the delivery of judgment. If the appellants oppose leave and if they seek to put submissions to the court in opposition, then the parties could do so by the exchange of written submissions rather than at a further hearing.
These comments make worse the position created by the correspondence from the parties rather than help in resolution of the matter. If the Commissioner relied upon a matter which the statute prevents the Commissioner from relying upon, then it is incumbent upon him (as a party and as a model litigant) to seek leave. The court cannot have jurisdiction over a matter which the statute excludes from the court’s jurisdiction in the informal way proposed by the Commissioner’s solicitor. It is no answer to say that the parties presented full argument to the court upon a mistaken assumption if the assumption was mistaken and if a consequence of the mistaken assumption is that the court lacks jurisdiction to deal with what the parties may have wished the court to consider. No attempt was made on behalf of the Commissioner to justify how the court might be permitted to take into account a ground in the face of s 109 of the Taxation and Administration Act 1997 (Vic). No explanation was given for the Commissioner’s apparent reliance upon a ground not previously relied upon. No explanation was given about a failure by the Commissioner in respect of an enactment for which the Commissioner has responsibility to administer. In these circumstances it seems to me that not dealing with the issue at all is to be preferred amongst the unsatisfactory courses available. It might have been otherwise if the issue sought to be relied upon was not excluded from an appeal unless leave were given. The Commissioner has not sought leave other than in the conditional way in the passage I have quoted above. Whether leave is to be sought is a matter upon which the Commissioner ought to have formed a view and made formal application for leave if he were of the view that leave was required. The Commissioner as public official and model litigant, and his legal advisers as officers of the court, should not engage with the Court by making submissions conditional upon the Court’s view about matters in dispute before the parties.
The final issue to consider is the Commissioner’s application of interest and penalties. Little was said in argument for or against the interest and penalty in each case. In some instances the taxpayer’s notice of objection did not raise a ground of appeal against the interest and penalty beyond such arguments as were raised against the primary tax. Thus, for example, in the Mosaic Notice of Objection the relevant taxpayer objected to penalties and interest “on the basis that the primary Assessment is incorrect for the reasons set out” in the grounds objecting to the primary tax and “are therefore inapplicable”. In some instances the objection, like that in the V4 Notice of Objection, went a little further by contending that, in addition to the ground just mentioned, objection to the imposition of penalty or interest was made on the basis that the taxpayer had already raised submissions similar to those in question and the Commissioner had taken no action for many months. In one of the Dock 5 objections (2663 of 2011) no ground of objection against a penalty or interest appeared in the Notice of Objection. In some instances the written submissions for the appellants went a little further than may have been open on the Notice of Objection. In the C3/C4 proceeding, for instance, the notice of objection contained at best two grounds: namely, that no penalty and interest was assessable because no primary tax was assessable, and no penalty or interest was payable because the issues raised were similar to those raised by related taxpayers already referred to this court and “upon which no action [had] been taken for many months”. The written submissions in the C3/C4 proceeding, however, appeared to raise additional grounds, namely, that the Commissioner had wrongly imposed penalty tax and interest at the premium rate, that the taxpayer had taken reasonable care to comply with the Act having regard to the nature and complexity of the matters, and that the status of the contribution payments was unresolved in the absence of any judicial decision.
The taxpayer in each case carried the burden of establishing that the assessments were incorrect. The state of the material in respect of penalty and interest does not discharge the burden. The Commissioner in each appeal asserted that he was correct to impose penalty by reference to a ruling in which he had expressed the view that the market rate component of interest would only be remitted in “exceptional circumstances”. Amongst the examples given in the ruling for remitting the premium component of interest are those where a taxpayer “took reasonable care to comply” with the Act. I have elsewhere doubted the correctness of the view that the discretion to remit can be fettered by imposing a threshold requirement of having to show “exceptional circumstances”. However, the taxpayer’s grounds of objection did not meaningfully challenge the application of the ruling in these proceedings. None of the taxpayers sought to amend the grounds of objection nor argue that any of the grounds (where there were any) against the imposition of penalty and interest challenged the terms of the ruling or its specific application in their case. In those circumstances the objections to the interest and penalties in the assessments will stand.
The orders in each of the proceedings will be to dismiss the appeal.
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