Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue

[2022] NSWSC 1074

Supreme Court

New South Wales

Medium Neutral Citation:

Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 1074

Hearing dates:

14 – 16 February 2022

Date of orders:

12 August 2022

Decision date:

12 August 2022

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Set aside the defendant’s Further Amended Assessment, dated 25 August 2021, in whole.

2.   The parties are to file and serve submissions on the question of costs within 14 days of the publication of these reasons (including whether, and if so why, an oral hearing on costs is sought or that issue can be dealt with on the papers).

Catchwords:

TAXES AND DUTIES — Landholder duty — Landholdings — Threshold value — Whether Power Stations located on land were landholdings within the meaning of the Duties Act 1997 (NSW) — Whether Power Stations were fixtures or innominate sui generis property

TAXES AND DUTIES — Dutiable transactions — Dutiable value — Property — Whether methodology in SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395 applicable

TAXES AND DUTIES — Dutiable transactions — Dutiable property — Goods — Whether Power Stations could be characterised as “goods”

Legislation Cited:

Duties Act 1997 (NSW), ss 23(1), 26, 145, 146, 147, 155, 163, Pt 4, Ch 4

Duties Amendment (Abolition of State Taxes) Act 2006 (NSW), s 26A(1)

Electricity Generator Assets (Authorised Transactions) Act 2012 (NSW), ss 7, 9, 13, Sch 4

Energy Services Corporations (Eraring Energy) Regulation 2000 (NSW)

Energy Services Corporations Act 1995 (NSW), s 6A, cl 3, Sch 5

Personal Property Securities Act 2009 (Cth), s 267

Petroleum Pipelines Act 1969 (WA)

Real Property Act 1900 (NSW), s 42

Sale of Goods Act 1923 (NSW), ss 26, 27, 28

Stamp Act 1921 (WA)

Stamp Duties Act 1920 (NSW)

Stamp Duties Act 1920-1933 (NSW), s 43A(2)

State Revenue and Other Legislation Amendment (Budget Measures) Act 2013 (NSW)

State Revenue Legislation Further Amendment Act 2009 (NSW)

Taxation Administration Act 1996 (NSW), ss 97(1)(a), 101(1)(a)

Valuation of Land Act 1916 (NSW), s 6A

Water Management Act 2000 (NSW), s 371

Cases Cited:

Alcan (NT) Alumina v Commissioner of Taxes (2007) 19 NTLR 153; [2007] NTSC 9

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

Auckland City Council v Ports of Auckland [2000] NZCA 190, [2000] 3 NZLR 614

Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322

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

Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630; [2010] VSC 464

Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462; [2011] NSWCA 325

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

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

Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1; [2013] HCA 2

Commissioner of State Revenue v TEC Desert Pty Ltd (2009) 40 WAR 344; [2009] WASCA 128

Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150; [2001] FCA 365

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

Elitestone Ltd v Morris [1997] 1 WLR 687

Empire Securities Pty Ltd v Miocevich [2008] WASCA 52

Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186; [2011] WASCA 228

Federal Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150; [2001] FCA 365

Federal Commissioner of Taxation v Miley (2017) 106 ATR 779; [2017] FCA 1396

Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106

Lees & Leech Pty Ltd v Commissioner of Taxation (Cth) (1997) 73 FCR 136; [1997] FCA 404

Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305

May v Ceedive (2006) 13 BPR 24,147; [2006] NSWCA 369

McDonald’s Australia Ltd v Chief Commissioner of State Revenue (2005) 58 ATR 260; [2005] NSWSC 6

Metal Manufacturers v Commissioner of Taxation (1999) 43 ATR 375; [1999] FCA 1712

Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154

MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451

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

North Shore Gas Company Limited v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7

Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (2017) 93 NSWLR 765; [2017] NSWCA 8

R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; [1982] HCA 69

Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) (2013) 97 ATR 904; [2013] NSWCA 470

Spencer v The Commonwealth (1906) 5 CLR 418; [1907] HCA 82

SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395

The Noordam (No 2) [1920] AC 904

Valuer-General Victoria v AWF Prop Co 2 Pty Ltd [2021] VSCA 274

Vopak Terminal Darwin Pty Limited v Natural Fuels Darwin Pty Limited (Subject to Deed of Company Arrangement) (2009) 258 ALR 89; [2009] FCA 742

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

Winston Smith v Chief Commissioner of State Revenue [2019] NSWCA 75

Texts Cited:

R Abbs “The Law of Fixtures: Informed Principle or Independent Predilection?” (2004) 11 Australian Property Law Journal 31

W Woodfall, Landlord and Tenant (looseleaf ed, 1998, Sweet & Maxwell)

Category:

Principal judgment

Parties:

Meridian Energy Australia Pty Ltd (Plaintiff)
Chief Commissioner of State Revenue (Defendant)

Representation:

Counsel:
M Richmond SC with NYH Li (Plaintiff)
S Balafoutis SC with S Kanagaratnam and O Berkmann (Defendant)

Solicitors:
PwC (Plaintiff)
Crown Solicitor’s Office (Defendant)

File Number(s):

2020/223736

Publication restriction:

Nil

Judgment

1. HER HONOUR: By summons filed on 31 July 2020, the plaintiff, Meridian Energy Australia Pty Ltd (Meridian), seeks a review pursuant to s 97(1)(a) of the Taxation Administration Act 1996 (NSW) (Taxation Administration Act) of the Duties Notice of Assessment made on 25 August 2021 (the Assessment) by the defendant, the Chief Commissioner of State Revenue (Chief Commissioner), under Ch 4 of the Duties Act 1997 (NSW) (Duties Act), in respect of Meridian’s acquisition of 100% of the shares in GSP Energy Pty Ltd (GSP) from Trustpower Limited (Trustpower) on 29 March 2018 for over $160 million (the Acquisition). The amount of duty in question is $7,979,740, calculated on land holdings and goods valued by the Chief Commissioner in the amount of $145.35 million.

2. Under the Duties Act, landholder duty is paid on the acquisition of entities with land holdings valued at more than $2 million. Once the threshold value of the land holdings is exceeded, duty is calculated on the total value of the landholder’s land and goods. The present dispute goes to the question whether the threshold value of land holdings was exceeded and, if it was, to the total value of the landholder’s land and goods.

3. At the time of the Acquisition, GSP was the operator of three hydro-electric power stations in New South Wales, located at Lake Burrinjuck, Keepit and Hume, respectively (collectively referred to in these reasons as the Power Stations) and the lessee of the land on which the Power Stations are situated pursuant to leases entered into in 2014 (the Leases). GSP’s access to the water required for the operation of the Power Stations (and its licence to access the Power Stations themselves) was pursuant to Water Agreements entered into with the State Water Corporation (SWC). Meridian emphasises that its right to use the Power Stations (and infrastructure therein) derives not from the Leases but from its ownership of the Power Station assets (pursuant to statutory Vesting Orders to which I will refer in due course).

4. There is no dispute that the Acquisition (of 100% of the issued shares in GSP) was a “relevant acquisition”. The dispute is as to whether GSP was a “landholder” within the meaning of Ch 4. Meridian contends that the Assessment should be set aside because GSP was not a landholder within the meaning of Ch 4 of the Duties Act at the time of the Acquisition (as GSP’s interests in land did not exceed $2 million). In the alternative, Meridian submits that the Assessment should be set aside and an assessment of a lesser amount should be made.

5. One of the principal differences between the parties is as to the nature of GSP’s interest in the Power Stations or how the Power Stations are to be characterised. Meridian contends that GSP’s interest in the Power Stations is an innominate sui generis property interest which cannot be classified as land or goods, which was created by virtue of a statutory Vesting Order; whereas the Chief Commissioner says that the Power Stations are fixtures (being part of the leased land).

6. The Chief Commissioner denies that the effect of the statutory Vesting Order was to sever the Power Stations from the land on which they are situated or to grant a sui generis property interest to GSP; and contends that the Leases ought to be valued on the basis that they include the inherent right to exploit the fixtures. Alternatively, the Chief Commissioner says that, if the landlord’s interest in the Power Stations was conveyed to GSP and the Power Stations are not an interest in land, then the Power Stations are “goods” and the Leases are worth more than $2 million. Regardless of whether the Power Stations are land or goods, the Chief Commissioner says that GSP had landholdings worth more than $2 million and that the total value of its landholdings and goods remains at $145.35 million (such that the Assessment is correct).

7. The Chief Commissioner contends that the value of the Leases at the relevant time (valued in two components – by reference to the right to exploit and use the fixed plant and equipment in the Power Stations and to the value of the lease of the bare land) was $144.85 million and the value of GSP’s goods was $500,000. Hence, the Chief Commissioner has assessed duty on the sum of those items, namely, $145.35 million. Meridian says that no duty is payable because the Leases have less than nil value (or alternatively are valued at negative $2 million).

8. The expert valuers who gave evidence in the proceeding disagree as to the value to be attributed to the Leases and the Water Agreements, respectively (the significance of this being that it is accepted that the Water Agreements are non-land assets and do not fall within the definition of “goods”).

9. The nature of a review of the kind here sought was explained by Payne JA in SPIC Pacific HydroPty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395 (SPIC Pacific Hydro) (at [54]ff). Relevantly, it is not limited to considering whether there was error by the Chief Commissioner; rather, the correct application of the legislation to the facts at hand must be determined.

Background

Power Stations

10. As noted above, at the time of the Acquisition, GSP was the operator of three hydro-electric power stations (the Keepit Power Station on the Namoi River, the Burrinjuck Power Station on the Murrumbidgee River, and the Hume Power Station on the Murray River) (see the affidavit affirmed on 3 December 2020 by Angus David Holcombe, Head of Asset Development for Meridian, at [4]-[5]) . The Power Stations had been built between 1928 and 2002 (see Plaintiff’s Amended Appeal Statement at [14]; Defendant’s Further Amended Appeal Statement at [16]); and each has at all relevant times been located on land owned by statutory corporations. At the time of the Acquisition, the land was owned by the Water Administration Ministerial Corporation (WAMC), a statutory body established under s 371 of the Water Management Act 2000 (NSW). The predecessor statutory corporations to WAMC include the Electrical Assets Ministerial Holding Corporation (EAMHC) and the Water Resources Commission.

11. Burrinjuck Power Station (Station No 2) was commissioned in 1938 (units 3 & 4). (Burrinjuck Station No 1 – units 1 & 2 – was commissioned in 1928 but decommissioned in 1974.) Hume Power Station was commissioned in 1957. Keepit Power Station was commissioned in 1960 (and upgraded in 1983). A new unit was installed at the Burrinjuck Power Station and the existing units in Burrunjuck Station No 2 were upgraded in 2002.

Position prior to 2000

12. Prior to the incorporation of Eraring Energy (see below), the Electricity Commission of New South Wales (trading as Pacific Power) had generating assets that included the Power Stations (see Plaintiff’s Amended Appeal Statement at [15]; Defendant’s Further Amended Appeal Statement at [16](e)).

13. With respect to the Burrinjuck Power Station, it appears that this was the subject of a lease granted by WAMC to Pacific Power in 1998 (1998 Lease) (marked as Ex J in the hearing). There is no evidence of any lease in respect of the other two Power Stations (Hume and Keepit) at this time.

14. Clauses 6(g) and 12 of the 1998 Lease provide that the operator of the Burrinjuck Power Station is entitled to remove its fixtures at the determination of the 1998 Lease but that, if it fails to do so, those fixtures become the property of the lessor (thus broadly reflecting the position at law with respect to tenant’s fixtures – see SPIC Pacific Hydro at [76]-[79]). The Chief Commissioner points out that there is no evidence about how much of the plant and equipment attached to the Burrinjuck land could be characterised as Pacific Power’s fixtures.

15. As there is no evidence about any lease of the land for the Hume and Keepit Power Stations prior to 2000, the Chief Commissioner submits that it should be inferred that the general law applies, such that Pacific Power’s interest with respect to any fixtures was comprised by the rights conferred on tenants who install fixtures on a landlord’s property. Again, the Chief Commissioner points out that there is no evidence about how much of the plant and equipment attached to the Hume and Keepit land could be characterised in that way.

16. The Chief Commissioner emphasises that, in accordance with general law principles applicable to tenant’s fixtures, until the tenant removes them tenant’s fixtures remain part of the land and are thus owned by the landlord; and that, while the tenant has a right under law to remove the fixtures during or at the end of the tenancy, if the tenant fails to do so the tenant loses that right and the fixtures become the absolute property of the landlord (reference here being made to Lees & Leech Pty Ltd v Commissioner of Taxation (Cth) (1997) 73 FCR 136; [1997] FCA 404 at 149 per Hill J; Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 at [27]-[28] per EM Heenan AJA (with whom Pullin and Miller JJA agreed)). This is relevant to the Chief Commissioner’s argument as to the effect of the 2000 (and subsequent) Vesting Order(s) (see below).

Eraring Energy

17. On 1 July 2000, Eraring Energy was incorporated as a statutory corporation (see s 6A of the Energy Services Corporations Act 1995 (NSW) (Energy Services Corporations Act) and cl 3 of the Energy Services Corporations (Eraring Energy) Regulation 2000 (NSW)).

2000 Vesting Order

18. On 1 July 2002, the Treasurer ordered (pursuant to cl 3 of Sch 5 of the Energy Services Corporation Act) that the “nominated staff, assets, rights and liabilities of Pacific Power” be transferred to Eraring Energy on 2 August 2000 (2000 Vesting Order).

19. Meridian says that, pursuant to the 2000 Vesting Order, Eraring Energy acquired the generating assets of Pacific Power, including the Power Stations. The Chief Commissioner says, on the other hand, that Meridian has not adduced any evidence of what staff, assets, rights and liabilities were transferred by this order, noting that the relevant provision of the Energy Services Corporation Act empowered the Treasurer to direct that “any specified staff, assets, rights or liabilities of Pacific Power be transferred to such energy services corporation”, it does not appear to be in dispute that, after the 2000 Vesting Order, Eraring Energy assumed the operation of the Power Stations (see below); and the Chief Commissioner accepts that the generating assets of Pacific Power included the Power Stations (see the Defendant’s Further Amended Appeal Statement at [16](e)).

20. The Chief Commissioner emphasises that Pacific Power was not the owner of the leased land on which the Power Stations operated when the 2000 Vesting Order was made (noting the reference to the lease between WAMC and Pacific Power for the Burrinjuck Dam that was in existence in 1998, being Ex J) (see the 2014 Burrinjuck Lease, cl 1.1(e)).

21. The Chief Commissioner argues that the effect of the 2000 Vesting Order was to transfer Pacific Power’s assets (including its interest as lessee or tenant of the leased land) to Eraring Energy but contends that the effect of the 2000 Vesting Order was not (and could not be) to transfer the fixtures owned by the owner of the land (WAMC) to Eraring Energy (since tenants’ fixtures remain part of the freehold land until and unless the fixtures are physically removed – see SPIC Pacific Hydro at [139]). The Chief Commissioner notes that there is no reference in the 2000 Vesting Order to WAMC, nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to Eraring Energy. Further, the Chief Commissioner points out that the legislation which authorised the making of the order (the Energy Services Corporation Act) only permitted a transfer of assets from Pacific Power (not from WAMC). In other words, the Chief Commissioner maintains that the 2000 Vesting Order did not sever the fixtures from the leased land. (I address Meridian’s response to this contention in due course.)

Commencement of operations by Eraring Energy

22. On 2 August 2000, Eraring Energy commenced operation as an electricity generator energy services corporation (see Exhibit MSW-1 to the affidavit of Michael Shannon Wixted, Senior Solicitor at the Crown Solicitor’s office with carriage of the matter on behalf of the Chief Commissioner, affirmed 28 April 2021 at 90-91, marked as Ex 1 in the hearing).

Agreement for Lease between WAMC and Eraring Energy

23. Schedule 1 of the 2013 Vesting Order provides that, on 1 March 2002, Eraring Energy and WAMC entered into an Agreement for Lease in respect of Burrinjuck Dam (see Ex 1 at 2615-2621). This appears, however, to be a reference to the 1998 Lease, in light of the definition of “Existing Lease” in the 2014 Burrinjuck Lease (see also T 174.33-48). It does not, therefore, appear that the 2002 Lease did in fact exist, but rather was an erroneous reference to the 1998 Lease.

Incorporation of GSP

24. On 20 June 2002, GSP was incorporated (then known as Sellicks Hill Wind Farm Pty Ltd) (see Ex 1 at 97). (Later, in June 2014, the company name was changed to GSP Energy Pty Ltd – i.e., GSP, as here defined (Ex 1 at 97).)

Incorporation of Green State Power

25. On 4 June 2013, Green State Power Pty Ltd (Green State Power) was incorporated as a state-owned corporation (Plaintiff’s Amended Appeal Statement at [17]; Defendant’s Further Amended Appeal Statement at [16](g)) pursuant to s 9 of the Electricity Generator Assets (Authorised Transactions) Act 2012 (NSW) (EGA Act) (see further the Green State Power Constitution, Ex 1 at 106 and 115, cl 1.10 which provides for the establishment of Green State Power). Green State Power is not related to GSP.

2013 Vesting Order

26. On 30 July 2013, the Treasurer made the Electricity Generator Assets (Authorised Transactions) (Eraring Energy Excluded Assets) Order 2013 (the 2013 Vesting Order or Eraring Vesting Order) (see Ex 1 at 167).

27. Section 7 of the EGA Act confers power on the Treasurer to exercise all such functions as are necessary or convenient for the purposes of an authorised transaction. Section 13 empowers the Treasurer to make Vesting Orders under Sch 4 of the EGA Act for the purposes of an authorised transaction.

26. Relevantly, cl 2 of Schedule 4 of the EGA Act provides that:

The Treasurer may, by order (a vesting order), vest assets, rights and liabilities of a public sector agency that is an electricity generator or transaction entity in a person specified in the order as the transferee.

29. Schedule 1 of the EGA Act defines “assets” to mean:

any legal or equitable estate or interest (whether present or future, whether vested or contingent and whether personal or assignable) in real or personal property of any description (including money), and includes securities, choses in action and documents.

30. The Chief Commissioner says that the effect of this legislation is thus to permit the Treasurer to make a transfer of assets from one named entity to another.

31. Clause 3 of Sch 4 of the EGA Act sets out the effect of a vesting order, providing, relevantly, that:

(1)   When any assets, rights or liabilities are vested by a vesting order, the following provisions have effect (subject to the vesting order):

(a)   the assets vest in the transferee by virtue of this clause and without the need for any conveyance, transfer, assignment or assurance,

…

(d)   the transferee has all the entitlements and obligations of the transferor in relation to the assets, rights and liabilities that the transferor would have had but for the order, whether or not those entitlements and obligations were actual or potential at the time the order took effect,

…

32. Clause 7 of Sch 4 of the EGA Act provides for the vesting of interests in land:

(1)    A vesting order may vest an interest in respect of land vested in the transferor without vesting the whole of the interests of the transferor in that land.

(2)    If the interest vested is not a separate interest, the order operates to create the interest vested in such terms as are specified in the order.

(3)    This clause does not limit any other provision of this Schedule.

33. The 2013 Vesting Order vested in Green State Power all of “the assets, rights and liabilities of Eraring Energy” described in Sch 1 (cl 3). Schedule 1 contained two parts.

34. Paragraph 1 of Sch 1 vested in Green State Power “all of the assets, rights and liabilities of Eraring Energy in, attaching to or running with the property identified below” (and contained Part A – headed Freehold Property and Part B – headed Leasehold Property). Clause 4 defines “property” as “the real property identified in paragraph 1 of Schedule 1”. Part B of par 1 of Sch 1 included the “Agreement for Lease (Burrinjuck Power Station)”, erroneously referring to a Lease commencing 1 March 2002, apparently being a reference to the 1998 Lease (see above) (see Ex 1 at 163-165).

35. Paragraph 2 of Sch 1 vested in Green State Power all “assets, rights and liabilities of Eraring Energy in all fixtures, chattels, plant, equipment, infrastructure, facilities and other tangible property located at or on the Property and to the extent owned, benefitting, burdening or used by Eraring Energy in connection with the Excluded Assets Business”. The reference to Excluded Assets Business included the business carried on in respect of the Renewable Assets which was in turn defined to include the three Power Stations (Ex 1 at 161). Paragraph 2 of Sch 1 was headed “Property, Plant and Equipment”. At subpar (a), reference is made to the “assets, rights and liabilities of Eraring Energy in all fixtures, chattels, plant, equipment, infrastructure, facilities and other tangible property located at or on the Property” (including Burrinjuck Dam) and subpar (c) makes reference to “[t]he other property listed in Annexure 2”, which listed a large number of specified property, plant and equipment (PPE). Sub-paragraph (c) vested the “things” in Sch 2 in Green State Power.

36. To anticipate at this stage the parties’ submissions, which I will address in due course, Meridian emphasises that par 1 of Sch 1 of the 2013 Vesting Order vested freehold or leasehold and other forms of real property; whereas par 2 of Sch 1 vested other forms of PPE ; and Meridian says that the 2013 Vesting Order, coupled with cl 3 of Sch 4 of the EGA Act, operated to sever the Power Stations from the land and vest ownership of them (an innominate sui generis interest – not being an interest in land) in Eraring Energy. The Chief Commissioner, on the other hand, says that the effect of the 2013 Vesting Order (like the 2000 Vesting Order) was to transfer the assets of the previous energy operator (i.e., Eraring Energy), including its interest as lessee or tenant of the Leased Land, to the future energy operator (i.e., Green State Power).

37. The Chief Commissioner says that the effect of the 2013 Vesting Order was not (and could not be) to sever the fixtures from WAMC’s land and transfer the fixtures from WAMC to Green State Power. The Chief Commissioner points out there is no reference in the 2013 Vesting Order to WAMC (or its predecessors), nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to Green State Power. The Chief Commissioner says that the reference in par 2 of Sch 1 of the Vesting Order to the plant and equipment that was to be transferred to Green State Power (see cl 4.3) must be read, in the context of cl 2 of Sch 4 of the EGA Act and cl 3 of the 2013 Vesting Order, as Eraring Energy’s interest in the plant and equipment. The Chief Commissioner maintains that Eraring Energy’s interest was as the lessee under the 1998 Lease and successor of the tenant which had installed the fixtures.

38. Meridian contends, to the contrary, that the only interests in land transferred by the 2013 Vesting Order were those set out in par 1 of Sch 1 and that they did not include the leasehold interests in respect of the land on which the Power Stations were situated.

Privatisation of Green State Power’s assets

39. On 14 May 2014, in anticipation of the privatisation of Green State Power’s assets, application was made (by a Form 11R lodged with the Registrar General) to change the registered proprietor of the freehold on which the Hume Power Station was located (the Hume freehold) from the Water Resources Commission to WAMC (see Ex 1 at 172). The form referred to the operation of legislation which provided that WAMC was the same legal entity as the Water Resources Commission.

40. On 23 June 2014, as noted above, there was a name change in relation to Sellicks Hill Wind Farm Pty Ltd to GSP.

41. On the same day (23 June 2014), the New South Wales Government, Green State Power and GSP entered into a Sale and Purchase Agreement (Green State Power Assets) (here referred to as the Privatisation Agreement).

42. By cl 2.1 of the Privatisation Agreement, Green State Power agreed to sell, and GSP agreed to purchase, the “Green State Power Assets”. Clause 2.5(b) provided that (subject to the satisfaction of all obligations in cl 2.4 and satisfaction of all Completion Requirements) the Privatisation Agreement would complete by the Treasurer making the Vesting Order set out in Sch 9 of the Privatisation Agreement. Recital D noted that the “transfers will be effected by the Treasurer making the Vesting Order under the Act”.

43. The “Green State Power Assets” were defined in cl 1.1 as meaning the Vendor’s (i.e., Green State Power’s) interest in, among other things, the: Generation Assets (at (a)); Green State Power Contracts (at (b)); Property Interests (at (c)) and at (g) the Privatisation Agreement provided as follows:

(g)   other assets, rights and liabilities comprising the Green State Power Business to be vested in the Purchaser under the Vesting Order including:

(i)    plant and equipment;

(ii)    consumables and spares;

(iii)    vehicles; and

(iv)    books and records …

44. The Generation Assets were defined by cl 1.1 to include, inter alia: the Burrinjuck Hydro Power Station (the 27.2 megawatt power station at Burrinjuck Dam comprising generation units 3, 4 and 5); the Keepit Hydro Power Station (the 7.2 megawatt hydro power station located at Keepit Dam); and the Hume Hydro Power Station (the 58 megawatt hydro power station located at Hume Dam).

45. The Green State Power Contracts were those contracts that were to be vested in GSP by the Vesting Order as specified in Annexure 6 of the 2013 Vesting Order.

46. The Property Interests were defined by cl 1.1 to include the Freehold Property, Leases, Easements and Licences and all interests and privileges arising in connection with them. The Freehold Property and Leases were listed in Sch 12 of the Privatisation Agreement.

47. The Chief Commissioner emphasises that the definition of Green State Power Assets refers to the “Vendor’s interest” in the defined assets and says that Green State Power agreed to transfer its existing interest in the Power Stations, without defining what that interest was. In response to the reliance by the Chief Commissioner on the Privatisation Agreement, Meridian submits that it is relevant to note that cl 6 of Sch 1 of the Privatisation Agreement sets out the Vendor Warranties which include a warranty that Green State Power “is the sole legal and beneficial owner of its interest in the Green State Power Assets”, (and such assets include the Power Stations). Meridian thus submits that the warranty records the effect of the 2013 Vesting Order which was to vest in Green State Power “sole legal and beneficial” ownership of the Power Stations, being an interest not derivative of the grant of a leasehold interest (see Meridian’s submissions in reply, dated 14 February 2022, at [7]).

48. On 30 June 2014, EAMHC compulsorily acquired the freehold land on which the Keepit and Burrinjuck Dams were situated (the Keepit Freehold and the Burrinjuck Freehold) and vested that land in WAMC (Ex 1 at 174-194 and 209-238). Pausing here, I note that it seems odd that the land would be compulsorily acquired and then vested in WAMC, who, under the terms of the 1998 Lease, was the registered proprietor of (at least) the Burrinjuck property but this was not explored in the respective submissions.

49. On 2 July 2014, the Electricity Generator Assets (Authorised Transactions) (Electricity Assets Ministerial Holding Corporation – Keepit and Burrinjuck Property Interests) Order 2014 (First Property Interests Vesting Order) was made, to vest the assets of the EAMHC (including the freehold and “any improvements” on which the Keepit and Burrinjuck Power Stations were situated) from EAMHC to WAMC. On the same day, a Form 11R was lodged with the Registrar General to register WAMC as the registered proprietor of the Keepit Freehold and Burrinjuck Freehold (Exhibit MSW-1 at 174-194); (Ex 1 at 209-238).

50. Thus, by early July 2014, WAMC was the registered proprietor of all of the freehold on which the Power Stations were situated.

Grant of leases

51. On 11 July 2014, WAMC granted the Keepit Lease, the Burrinjuck Lease and the Hume Lease to Green State Power (collectively, the Leases). Each Lease commenced on 18 July 2014 and was for a term of 30 years with 3 x 10 year options to renew.

52. Clause 13.5 of each Lease, to which I refer as it is raised in the context of the parties’ submissions, provides that:

For the avoidance of doubt, despite any provision of law to the contrary, it is the intention of the parties that all fixtures, fittings, assets and other items installed on or in the Land by the Lessee or otherwise used in connection with its business are to be classified as Assets in accordance with the provisions of the [“Deed of Agreement” or “Water Agreement”] and will remain the property of the Lessee at all times, regardless of their nature, their degree of affixation to the Land or any other relevant matter.

2014 Vesting Order

53. On 17 July 2014, the Treasurer made the Electricity Generator Assets (Authorised Transactions) (Green State Power Assets) Order 2014 (2014 Vesting Order) to vest the Power Stations, the Leases and other assets of Green State Power in GSP. The making of the 2014 Vesting Order effected the completion of the 2014 Agreement under which the Green State Power assets were transferred to GSP.

54. The 2014 Vesting Order vested in GSP all of “the assets, rights and liabilities of Green State Power” listed or described in Sch 1 (cl 3). Clause 2 of the Vesting Order provided that the Vesting Order has effect from 11.59pm on the Completion Date (which is defined in the Vesting Order as 17 July 2014).

55. Paragraph 1 of Sch 1 of the 2014 Vesting Order vested in GSP all assets, rights and liabilities of Green State Power in, attaching to or running with, any real property owned or occupied by Green State Power in connection with the Green State Power Business. Part B of par 1 of Sch 1 vested inter alia the Keepit Lease, Burrinjuck Lease and Hume Lease in GSP.

56. Paragraph 2 of Sch 1 of the 2014 Vesting Order vested in GSP:

The assets, rights and liabilities of Green State Power in all fixtures, inventory, chattels, plant, equipment, infrastructure, facilities and other tangible property including those located at or on the property, or located at or on the property the subject of (or affected by) a real property interest identified in Section 1 [includes the Leased Land], to the extent owned or used by Green State Power in connection with the Green State Power Business “including the property identified below:

(a)   All of the fixed assets listed in Annexure 1 – Green State Power Generation Assets;

(b)   All of the moveable assets listed in Annexure 2 – Green State Power Moveable Assets;

(c)   All of the spare parts listed in Annexure 3 – Green State Power Inventory and Spares;

(d)   All of the motor vehicles listed in Annexure 4 – Green State Power Vehicle Assets; and

(e)   All of the information technology assets listed in Annexure 5 – Green State Power IT Assets”.

57. Annexure 1 of the 2014 Vesting Order listed the physical assets that constitute the Power Stations.

58. Paragraph 3 of Sch 1 of the 2014 Vesting Order vested in GSP all “assets, rights and liabilities of Green State Power in all contracts, purchase orders, undertakings, representations, deeds, agreements or legally enforceable arrangements to the extent entered into by, or benefitting or burdening Green State Power in connection with the Green State Power Business”. Annexure 6 of the 2014 Vesting Order listed the contracts to be vested in GSP, including the Water Agreements.

59. The Chief Commissioner says that the effect of the 2014 Vesting Order (like that of the 2000 and 2013 Vesting Orders) was to transfer the assets of the previous energy operator (i.e., Green State Power), including its interest as lessee of the leased land, to the future energy operator (i.e., GSP); and that the effect of the 2014 Vesting Order was not (and could not be) to transfer the fixtures from WAMC to GSP. Again, the Chief Commissioner notes that there is no reference in the 2014 Vesting Order to WAMC (or its predecessors), nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to GSP.

Meridian’s acquisition of GSP

60. On 21 December 2017, Meridian and Trustpower entered into a Share Sale Agreement pursuant to which Meridian acquired 100% of the shares in GSP from Trustpower (Plaintiff’s Amended Appeal Statement at [11]; Defendant’s Further Amended Appeal Statement at [16](a)). The Acquisition completed on 29 March 2018 (Plaintiff’s Amended Appeal Statement at [11]; Defendant’s Further Amended Appeal Statement at [16](a)).

GSP’s interests in freehold land

61. As at 29 March 2018, GSP was the registered proprietor of freehold land at Pejar in New South Wales (Pejar Land). The Pejar Land has a registered land value of $16,300.

The Assessment

62. On 28 June 2018, Meridian lodged, on a without prejudice basis, a Form ODA 043A (being an acquisition statement made upon the acquisition of an interest in a private landholder) in respect of the Acquisition.

63. On 20 December 2018, the Chief Commissioner assessed Meridian to duty in the amount of $9,225,490, on the basis that the unencumbered value of GSP’s land holdings and goods was $168 million. On 18 February 2019, Meridian lodged an objection against this assessment.

64. On 4 June 2020, the Chief Commissioner allowed Meridian’s objection in part and determined that Meridian was liable for duty of $8,170,337, on the basis that the unencumbered value of GSP’s land holdings and goods was $148,815,340.

65. On 31 July 2020, Meridian filed its summons in the present proceeding, seeking review of that amended assessment pursuant to s 97(1)(a) of the Taxation Administration Act. On 25 February 2021, Meridian filed its Amended Appeal Statement (Plaintiff’s Amended Appeal Statement).

66. On 25 August 2021, the Chief Commissioner issued a further amended assessment (the Assessment which is now the subject of review), on the basis that the dutiable value of GSP’s land holdings and goods was $145,350,000 (reduced from $146,670,000) and assessing the duty payable as $7,979,740 (reduced from $8,052,340) (see further the letter dated 23 August 2021 from NSW Revenue setting out the basis for the relevant amendments to the assessment).

67. On 26 August 2021, the Chief Commissioner filed a Further Amended Appeal Statement (Defendant’s Further Amended Appeal Statement).

Duties Act

68. The Assessment was issued pursuant to the significant landholder acquisition provisions of the Duties Act as at 29 March 2018 (it has since been amended). Relevantly, those provisions are as follows.

69. Section 146 provides that a landholder includes a private company that has land holdings in New South Wales with a threshold value of $2 million or more.

70. As to the threshold value of a private company’s land holdings, s 146A provided at the relevant time that:

(1)    For the purposes of this Chapter, the threshold value of the land holdings of a unit trust scheme, private company or listed company is the total value of all land holdings in New South Wales of the unit trust scheme or company.

(2)    For a land holding that consists of an estate in fee simple in land (other than a strata lot), the value of the land holding is the registered land value of the land as at 1 July in the previous year.

…

(7) For any land holding for which a value cannot be obtained under the above provisions, the value of the land holding is the unencumbered value of the land holding, determined in the same way as it is for dutiable property under Chapter 2.

(8)    For the purposes of this section, the registered land value of land (including a parcel) is the land value of the land as entered in the Register of Land Values kept by the Valuer-General under section 14CC of the Valuation of Land Act 1916.

…

71. Here, there is no question that GSP did not hold an estate in fee simple and hence subs (2) does not apply; the relevant provision for determination of the threshold value of GSP’s land holdings is thus subs (7).

72. Section 147 defines a land holding to mean an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor. The Dictionary to the Duties Act defines interest to include an estate or proprietary right.

73. Section 23(1) of the Duties Act defines the “unencumbered value” of dutiable property as the value of the property determined without regard to any encumbrance to which the property is subject.

74. Section 163G of the Duties Act, which is here invoked by Meridian in the event that the Power Station assets are not landholdings but are held to be “goods”, provides that:

If the Chief Commissioner is satisfied that the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales of a landholder, the Chief Commissioner may disregard the value of the goods in determining the duty chargeable under this Chapter.

Evidence

75. Meridian filed lay affidavit evidence from: Simon Rooke, solicitor at PricewaterhouseCoopers and solicitor on record for the plaintiff, by affidavit sworn 31 July 2020; Angus David Holcombe, Head of Asset Development for Meridian Energy, by affidavit affirmed 3 December 2020 to which was exhibited Ex ADH-1 (marked as Ex A in the hearing); and Bradley Douglas Wilkins, Hydro Engineer for Meridian, by affidavits affirmed 18 June 2021 with Ex BDW-1 (marked as Ex B in the hearing) and 12 July 2021.

75. Meridian adduced expert evidence from: Mr Cameron Dunsford, a Managing Principal for RHAS, an operating division of Aon Risk Solutions and a property valuer, by affidavit affirmed 3 December 2020, together with a valuation report dated 28 November 2018 entitled “Meridian Energy Australia Pty Limited Valuation of [N]ominated infrastructure, Buildings, Plant and Equipment for Tax – V1.0” (Income Tax Report) and a letter dated 7 May 2019 entitled “Re: Meridian Energy Australia Pty Limited acquisition of GSP Energy Pty Ltd – Valuation of Infrastructure, Buildings, Plant and Equipment for Stamp Duty purposes” (Stamp Duty Report); Mr Antony Bryn Samuel, a chartered accountant, by reports dated 3 December 2020 (marked as Ex C in the hearing) and 5 July 2021 (marked as Ex D in the hearing), respectively; and Mr Michael Charles Dyson, a property valuer (three reports dated 3 December 2020, one in respect of each of the Burrinjuck, Keepit and Hume Power Stations respectively titled “Market Value of Leasehold Interest” (the Dyson Burrinjuck Report; Dyson Hume Report; and the Dyson Keepit Report).

76. The Chief Commissioner filed an affidavit affirmed 28 April 2021 of Michael Shannon Wixted, Senior Solicitor at the Crown Solicitor’s office with carriage of the matter on behalf of the Chief Commissioner, together with Ex MSW-1 (marked Ex 1 in the hearing) and expert evidence from Mr Grant Kepler, a property valuer, by affidavit affirmed 24 November 2021 (Kepler Report).

77. Mr Samuel and Mr Kepler prepared a joint report dated 13 August 2021 (Joint Report) (marked Ex L in the hearing).

78. None of the lay witnesses was cross-examined; nor was Mr Dunsford. Mr Dyson was cross-examined on his report; and Mr Samuel and Mr Kepler gave concurrent evidence and were cross-examined on their reports. No issues of credit arise.

Issues

80. The issues for determination have been identified by Meridian as follows: first, whether, at the time of the Acquisition, the Power Stations were land holdings within the meaning of s 146 of the Duties Act; second, what is the correct valuation of the Leases and Water Agreements; third, whether the Power Stations are “goods”; fourth, the exercise of the s 163G “discretion”; and, fifth, flowing from the determination of the first four issues, the dutiable value of the Acquisition.

Issue 1 – Whether the Power Stations were land holdings

81. In summary, Meridian maintains that the Power Stations were not land holdings at the time of Acquisition. It is said that, to the extent that the Power Stations had once been part of the freehold on which they are situated (and Meridian’s submissions seem to accept that the Power Stations were indeed embedded in so as to become part and parcel of the freehold land), the 2013 Vesting Order had the effect of creating and vesting in Green State Power a sui generis property interest in the Power Stations to be held in gross; and that, thereupon, the Power Stations lost their character as land (and as interests in land).

82. Meridian thus says that the effect of the subsequent 2014 Vesting Order was to convey Green State Power’s (sui generis property) interest in the Power Stations to GSP; and that these Power Station interests were never held by GSP as interests in land. As the 2014 Vesting Order was effective from 11.59pm on 17 July 2014 (prior to the commencement of the respective Leases on 18 July 2014), Meridian says that WAMC, as lessor under the respective Leases, never acquired an interest in the Power Stations (which had already by then been conveyed in gross to GSP).

83. The Chief Commissioner, on the other hand, as adverted to above, contends that the effect of the statutory Vesting Orders was not to enact a statutory severance of the Power Stations from the land upon which they were situated; rather, that the Vesting Orders had the effect of transferring the existing assets of the tenant of the leased land to the future tenant of the leased land (i.e., that Pacific Power’s existing interest in the leased land was transferred to Green State Power and then transferred again to GSP). The Chief Commissioner says that there is no support in the language of the Vesting Orders for Meridian’s proposition that the respective Vesting Orders severed the fixtures from the leased land; and that it was outside the statutory power to make such a Vesting Order, the power being limited to the transfer of the existing interests of the previous tenant of the leased land.

84. I address in more detail below the respective submissions on this issue.

Meridian’s submissions as to the first issue

85. As to the approach to the characterisation of property interests created by statute, Meridian refers to R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; [1982] HCA 69 at 344 per Mason J, as his Honour then was, for the proposition that property interests owing their existence to statute should be characterised in the light of the relevant statutory provisions without attaching undue significance to similarities to a common law analogue.

86. In this regard, emphasis is placed by Meridian on the decision in Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118; [1967] HCA 41 (North Shore Gas (No 2)) where the plurality (Barwick CJ, McTiernan, Kitto and Taylor JJ) at 127 pointed to the fallacy of assimilating the exercise of a statutory right (there, the power to lay and maintain pipes) to categories of interest in land known to the common law. Their Honours there cited the judgment of Evershed J (as his Honour then was) in Newcastle-under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 (Newcastle-under-Lyme) at 103, where reference is made to the general rule that no greater rights or interests should be treated as conferred (on the donee of the relevant power) than are necessary for the fulfilment of the object of the statute. Meridian notes that Windeyer J, in his concurring judgment in North Shore Gas (No 2) said (at 133) that where Parliament confers innominate statutory rights “there is no need for lawyers to insist on finding an old name for them, when they are in fact sui generis”.

87. Meridian also refers to the approach to the characterisation of statutory rights articulated by Basten JA (as his Honour then was) in Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 (CCSR v Pacific National) (at [68]) and approved by the High Court on appeal in Asciano Services Pty Limited v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46 (Asciano HCA), namely that:

… The correct approach is to identify the nature of any power or interest conferred on a statutory authority pursuant to its constituting regime, or any other Act relevant to it, and to identify such consequences as may flow from that scheme without assuming that the legal consequences will be those which would flow from an analogous general law categorisation of the power or interest.

88. It is noted that in Asciano HCA (at [26]), the plurality (Gummow, Kirby, Hayne, Crennan and Kiefel JJ) accepted the appellant’s submission to the effect that there was nothing to be gained from a consideration of the grantor’s rights to use land upon or in which the facilities were constructed or embedded by reference to principles relevant to land under the general law.

89. Meridian notes that these principles were subsequently applied in Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186; [2011] WASCA 228, where McLure P (Buss JA, as his Honour then was, and Murphy JA agreeing), considering whether or not certain pipelines constituted land for the purposes of the Stamp Act 1921 (WA), held (at [75]) that whether and what type of interest the appellants had in the pipelines was answerable solely by reference to the provisions of the legislation (the Petroleum Pipelines Act 1969 (WA)) and that, in that context, the general law could not intrude to change the character of the pipelines from personal property to real property.

90. In the present case, as to the nature of the Power Stations prior to the making of the Vesting Orders, Meridian argues that the Power Stations are so connected with their respective dams which are in turn embedded into the land that they became part and parcel of the land upon their construction (referring to the depictions in Mr Wilkins’ first affidavit at [10] and [19]). Meridian argues that, in that sense, the Power Stations were not fixtures which might have been independently conveyed in equity (referring to Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 108 FCR 27; [2001] FCA 366 (Eastern Nitrogen v FCT) at [45] per Carr J and Federal Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150; [2001] FCA 365 at [56]-[57] per Sundberg J) but fall instead within the third of the categories of things within the three-fold classification preferred by Lord Lloyd of Berwick in Elitestone Ltd v Morris [1997] 1 WLR 687 (Elitestone) (at 690-691), namely, an object that is “part and parcel of the land itself”. (His Lordship had there referred to the classification suggested in W Woodfall, Landlord and Tenant (looseleaf ed, 1998, Sweet & Maxwell) vol 1, [13.131] of objects being: chattel; fixture; or an object that is “part and parcel of the land itself”.) Meridian also refers in this regard to the decision of Lindgren J in Vopak Terminal Darwin Pty Limited v Natural Fuels Darwin Pty Limited (Subject to Deed of Company Arrangement) (2009) 258 ALR 89; [2009] FCA 742 (Vopak Terminal Darwin) at [51], where his Honour (in obiter) considered that objects falling with the category of things “part and parcel of the land” would include (among other things) materials brought onto land that could only be removed by being destroyed.

91. Meridian contends that (although part and parcel of the land on which they were situated) the Power Stations could be (and were) conveyed by a Vesting Order made under the EGA Act (for which cl 7 of Sch 4 makes express provision).

92. As to the effect of the 2013 Vesting Order on Green State Power, Meridian says that, by force of cl 3 of Sch 4 and cl 7 of Sch 4 of the EGA Act, an interest in the Power Stations was conveyed to Green State Power without the need for any conveyance, transfer, assignment or assurance.

93. Meridian argues that the 2013 Vesting Order did not grant to Green State Power an interest in the relevant freehold or a leasehold interest in the land on which the Power Stations were located. It is noted that at the time that the 2013 Vesting Order was made, the Hume freehold was held by the Water Resources Commission (not Eraring Energy) and that the Burrinjuck and Keepit Power Stations were held by their former owners (prior to their compulsory acquisition by the State of New South Wales on 30 June 2014).

94. Meridian thus contends that, immediately prior to the making of the 2013 Vesting Order, the Power Stations were part and parcel of the land on which they were situated; and says that, whatever impediment there might have existed at general law to a conveyance of the Power Stations separately from the land, this does not apply to cl 7(1) of Sch 4 of the EGA Act, which expressly enabled the vesting of something which is part of land without vesting the whole of the interests of the transferor in that land. It is submitted that where, as in the present case, the interests sought to be conveyed by the Vesting Order are not separate interests in land, the EGA Act enables the creation of sui generis property interests in such terms as are specified in the order (reference here being made to cl 7(2) of Sch 4 of the EGA Act).

95. Meridian says that the Power Stations were conveyed by force of par 2 of Sch 1 of the 2013 Vesting Order (headed “Property, Plant and Equipment”) as they met the description of all “plant, equipment, infrastructure, facilities and other tangible property … to the extent owned, benefitting, burdening or used by Eraring Energy in connection with the business carried on by Eraring Energy in respect of the “Hume, Burrinjuck and Keepit hydro power stations” (reference here being made to the definition of Excluded Assets Business and Renewable Assets in Ex 1 at 160-161). Excluded Assets Business being defined as “the business carried on in respect of the Renewable Assets and other Excluded Assets” and Renewable Assets being defined as “the assets, rights and liabilities of Eraring Energy in connection with the ownership and operation of the … Hume, Burrinjuck, Brown Mountain, Warragamba, and Keepit hydro power stations”. Whether or not the Power Stations were plant, equipment, infrastructure or facilities, Meridian says that they at least met the description of “tangible property”; and Meridian contends that the Power Stations were thereby conveyed in gross to Green State Power as an innominate sui generis property interest that is not an interest in land.

96. Thus, it is argued that Green State Power commenced holding the Power Stations in gross and not in connection with any interest in land.

97. Meridian says that the result was that Green State Power did not acquire any interest in the freehold land on which the Power Stations were situated (whether as lessee or otherwise) under the 2013 Vesting Order and Green State Power’s interest in the Power Stations was not dependent on the grant of any lease (or other interest in land) by the registered proprietor of the freehold land on which the Power Stations were situated. Thus, it is contended that the Power Stations thereby lost their character as land from the effective time of the 2013 Vesting Order.

98. As to the effect of the 2014 Vesting Order on GSP, Meridian says that, upon the making of that order, the Power Stations held by Green State Power became vested in GSP and GSP continued holding the Power Stations as innominate sui generis property interests (not being an interest in land). It is submitted that nothing in the making of the 2014 Vesting Order or the acquisition of the Power Stations or Leases by GSP caused the Power Stations to change their character or to take on the character of an interest in land.

99. It is noted that the Power Stations were vested in GSP by force of paragraph 2 of Sch 1 of the 2014 Vesting Order and that the physical assets constituting the Power Stations were expressly incorporated in Annexure 1 of the 2014 Vesting Order. Meridian says that the Power Stations were vested in GSP by virtue of cl 3(1)(a) of Sch 4 of the EGA Act without the need for any conveyance, transfer, assignment or assurance. It is noted that, by cl 3(1)(d) of Sch 4, GSP has all the entitlements and obligations of Green State Power in relation to Power Stations that Green State Power would have had but for the 2014 Vesting Order, whether or not those entitlements and obligations were actual or potential at the time the order took effect.

100. Meridian points out that GSP acquired its interest in the Power Stations as at 11.59pm on 17 July 2014; and GSP did not acquire its leasehold interest in the respective Leases until 18 July 2014. Meridian says that, between the effective time of the 2014 Vesting Order and the commencement time of the Leases, GSP held the Power Stations in gross (similar to the manner in which Green State Power held the Power Stations); and that there is no mechanism in the EGA Act that changes the nature of GSP’s interest in the Power Stations after the commencement of the Leases.

101. Meridian argues that the character of the Power Stations is confirmed by the fact that the 2014 Vesting Order does not describe the Power Stations as interests in land or as any part of any interest in land (noting that the Power Stations are not mentioned in par 1 of Sch 1 of the 2014 Vesting Order but are instead particularised in Annexure 1 of the 2014 Vesting Order, being a list of “Green State Power Generation Assets”).

102. Meridian says that the rights acquired by GSP pursuant to the 2014 Vesting Order remained sui generis property interests vested by force of the EGA Act which deliberately permitted the Power Stations to be held in gross separate from the interests in the land upon which they were situated. It is said that no greater rights or interests should be treated as conferred on GSP than is necessary for the fulfilment of the object of the statute (using the language of Evershed J (as his Lordship then was) in Newcastle-under Lyme, referred to above, at 103); and that it would be erroneous to reason by analogy that GSP obtained an equitable or other interest in a fixture in situ unsevered from the land on which the Power Stations stand.

103. Meridian thus contends that the Power Stations were granted to Green State Power, and then GSP, by force of Vesting Orders made pursuant to the EGA Act as property interests of a sui generis nature because they were held in gross independent of any interest in land. Meridian says that the Power Stations do not form an interest in land within the meaning of s 147 of the Duties Act and therefore the only interests in land held by GSP at the time of the Acquisition were the Pejar Land and the Leases. As noted above, the Pejar Land has a registered land value of $16,300. Meridian contends (see the second issue below) that the leases are of no value. If those contentions are correct, then the significant landholder acquisition provisions would not be applicable because the threshold value would not have been reached. (The Chief Commissioner, as will be seen, maintains that even if what GSP held in relation to the Power Stations was a sui generis interest, the value of the leases exceeds the threshold landholding value.)

Chief Commissioner’s submissions as to the first issue

104. The Chief Commissioner says that Meridian’s first contention (that the various statutory vesting orders created in GSP a sui generis property interest in the Power Stations, with the result that the Power Stations were no longer fixtures forming part of the leased land; and not separately an interest in land) is incorrect for the following two reasons.

105. First, the Chief Commissioner says that Meridian mischaracterises the effect of the statutory Vesting Orders. The Chief Commissioner contends that the Vesting Orders simply transferred the previous tenant’s interest in the Power Stations to GSP; and that they did not have the effect of severing the Power Stations (as fixtures) from the leased land, extinguishing the rights of the owner of the leased land with respect to the Power Stations or creating any new sui generis property interest. The Chief Commissioner contends that the Power Stations remain as fixtures, forming part of the leased land.

106. Second, the Chief Commissioner argues that if (which is denied) the effect of the statutory Vesting Orders was to sever the Power Stations from the leased land, then the nature of the rights created in GSP in the Power Stations depends upon the manner in which those rights were transferred to GSP. It is said that if a statute severed the Power Stations from the leased land, the nature of GSP’s rights would depend upon the terms of the statute but that Meridian has identified no statute that severed the Power Stations from the leased land. The Chief Commissioner says that, if the Power Stations were conveyed from the owner of the leased land to GSP or its predecessors, then GSP would have an equitable interest in the fixtures; and points to the lack of any evidence that the Power Stations were so conveyed.

107. As to the effect of the statutory Vesting Orders, the Chief Commissioner analyses the position from the starting point of the distinction between the owner of the leased land and the operator of the Power Stations, noting that, at all material times, they have been different entities. As set out in the chronology above, the owner of the leased land presently is WAMC (see the Leases). The Chief Commissioner points out that at earlier times, the owner of the leased land has been the predecessor statutory corporations to WAMC, including EAMHC and the Water Resources Commission.

104. As noted above, the Chief Commissioner contends that the effect of the relevant Vesting Orders was not to enact a statutory severance of the Power Stations from the land upon which they were situated; rather, the Chief Commissioner says that the Vesting Orders had the effect of transferring the existing assets of the tenant of the leased land to the future tenant of the leased land (i.e., that Pacific Power’s existing interest in the leased land was transferred to Green State Power and then transferred again to GSP).

105. As to Meridian’s contention (that, assuming the effect of the Vesting Orders was to sever the Power Stations from the leased land, the Vesting Orders created new rights in GSP in the Power Stations which are a sui generis property interest and not to be characterised as an interest in land), the Chief Commissioner maintains that the assumption underlying this contention is incorrect. The Chief Commissioner contends that the Vesting Orders did not sever the Power Stations from the leased land nor did they transfer WAMC’s ownership of the Power Stations (as fixtures) to GSP. However, the Chief Commissioner argues that, even if such a transfer did occur, the result is that GSP’s interest in the Power Stations is an interest in land.

106. The Chief Commissioner points to the need for careful attention to be given to the terms of the statute when determining whether new rights created by statute may be characterised as land; pointing by way of example to the North Shore Gas (No 2) decision to which Meridian has referred. It is noted that the High Court there considered that the statutory scheme that granted the gas company the right to use the land by placing and maintaining its pipes under the street and permitted the local council to direct the gas company to alter the location of those pipes (see at 133 of that judgment) did not grant an interest in land because the exercise of the power to lay pipes under another person’s land was not considered to confer an interest in that other person’s land (see at 127-128).

107. The Chief Commissioner argues that the cases cited by Meridian in this respect are not of assistance since they are all concerned with the nature of rights granted by statute; whereas the Chief Commissioner says that the Vesting Orders do not grant any new rights – they merely effect a transfer of the existing rights owned by the previous tenant of the leased land to the new tenant (and hence it is said that no debate about the terms of a statutory scheme to grant new rights arises where there is no such scheme).

108. In response to the submission by Meridian (at [60]-[62]) that the Power Stations are so connected with the land that they have become part and parcel of the land (and therefore are not fixtures which might have been independently conveyed in equity), the Chief Commissioner says the following.

109. First, that Meridian’s argument is irrelevant as there is no evidence to suggest that the owner of the leased land did convey the Power Stations to GSP or its predecessors.

110. Second, while the Chief Commissioner does not cavil with the proposition that the Power Stations are so connected with the land that they have become “part and parcel” of the land, the Chief Commissioner argues that this is simply another way of saying that the Power Stations are “fixtures” (and that there is no real distinction between these two terms). It is said that the reference to items that are “fixtures” and items that are “part and parcel” of the land was an attempt to re-cast a broad category of fixtures into two sub-categories (that attempt being more readily explicable if one does not ordinarily think of a building as a fixture) (reference here being made by the Chief Commissioner to Auckland City Council v Ports of Auckland [2000] NZCA 190, [2000] 3 NZLR 614 at [72] per McGrath J; and R Abbs “The Law of Fixtures: Informed Principle or Independent Predilection?” (2004) 11 Australian Property Law Journal 31 at 36-38). In any event, the Chief Commissioner says that this three-fold categorisation has not been adopted in Australia. While this may be so, and the High Court has not expressly adopted this approach, it has nonetheless been hinted at by the New South Wales Court of Appeal, where Hodgson JA referred to railway infrastructure as being so “integrated into land as not to be distinguishable from land” (see CCSR v Pacific National at [27] and Vopak Terminal Darwin at [51] per Lindgren J).

111. Third, the Chief Commissioner points to authorities where it has been held that if an owner of land purports to transfer fixtures to a third party then that third party’s interest in the fixtures is at least an equitable (and perhaps legal) interest in the land (citing Metal Manufacturers v Commissioner of Taxation (1999) 43 ATR 375; [1999] FCA 1712 at [189] and [196] per Emmett J as his Honour then was; Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150; [2001] FCA 365 at [56] and [57] per Sundberg J, with whom Lee and Carr JJ agreed; Eastern Nitrogen v FCT at [45], [46], [50] per Carr J, with whom Lee and Sundberg JJ agreed; Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 (Vopak Terminals Australia) at [80] per Ormiston JA, with whom Warren CJ and Buchanan JA agreed; Commissioner of State Revenue v TEC Desert Pty Ltd (2009) 40 WAR 344; [2009] WASCA 128 (TEC Desert) at [86] and [117] per Wheeler JA, [226] Per McLure JA, as her Honour then was; and SPIC Pacific Hydro at [150]).

112. The Chief Commissioner submits that Meridian’s contention (that Vesting Orders created in GSP a sui generis property interest in the Power Stations) mischaracterises the effect of the Vesting Orders and that those orders transferred the previous tenant’s interest in the Power Stations to GSP (they did not have the effect of severing the Power Stations (as fixtures) from the leased land). The Chief Commissioner says that the Power Stations remain as fixtures, forming part of the leased land.

113. Further, the Chief Commissioner argues that, even if the Vesting Orders did create a sui generis property interest in GSP in the Power Stations, that interest was created on the date of the 2000 Vesting Order in July 2000. The Chief Commissioner says that this means that all assets installed after that date remain as fixtures, forming part of the leased land. The Chief Commissioner points out that Mr Dunsford identifies in his report (see the affidavit of Cameron Dunsford affirmed 3 December 2020, and Mr Dunsford’s valuation report dated 28 November 2018 at Annexure CD-2 to that affidavit) that a substantial proportion of the assets comprising the Power Stations were installed after that date (see also the affidavit of Angus Holcombe affirmed 3 December 2020). The Chief Commissioner says that it follows that, even on Meridian’s case, a substantial proportion of the Power Stations remain as fixtures, forming part of the leased land.

114. If it is held that the Power Stations are fixtures, then the Chief Commissioner argues that Meridian’s third and fourth contentions (i.e., as to whether the Power Stations are goods and the exercise of the power under s 163G of the Duties Act) do not arise. In those circumstances, the Chief Commissioner understands that Meridian also accepts that the (so-called) “Pacific Hydro Methodology” applies (see below) and the only remaining issues are remediation costs and the value of the right to lease the unimproved leased land (both of which are addressed in submissions on the second issue below). Pausing here, Meridian in its reply submissions says that the report of Mr Samuel in this regard relies on an instructed assumption. Meridian made clear in the course of the hearing that it does not accept that the “Pacific Hydro Methodology” applies in this case (see at T 23-26).

Meridian’s submissions in reply as to the first issue

119. In reply submissions as to the effect or operation of the Vesting Orders, Meridian cavils with the submission by the Chief Commissioner that the effect of the 2013 Vesting Order was to transfer the assets of Eraring Energy “including its interest as lessee of the Leased Land” to Green State Power.

120. Meridian says that the only interests in land transferred by the 2013 Vesting Order were those set out in par 1 of Sch 1 of the 2013 Vesting Order. Meridian contends that par 1 of Sch 1 of the 2013 Vesting Order is exhaustive in that it provides that “[t]he assets, rights and liabilities of Eraring Energy in, attaching to or running with any of the property identified below, or arising as a result of ownership, occupation or possession of the property” (emphasis as per Meridian’s submissions).

121. The 2013 Vesting Order refers to the “Agreement for Lease (Burrinjuck Power Station)” in part B of par 1 of Sch 1 of the 2013 Vesting Order; but goes on specifically to particularise the vesting of the Power Stations as interests other than land by Annexure 2 of the Vesting Order, which lists “Property, Plant and Equipment”.

122. Meridian says that it does not appear to be contested by the Chief Commissioner that the 2013 Vesting Order was competent to vest an interest in all Power Stations (including the Hume and Keepit Power Stations) in Green State Power (referring to [28] and [29] of the Chief Commissioner’s submissions). Meridian argues that, by omission from par 1 of Sch 1 of the 2013 Vesting Order, Eraring Energy’s interest in the Hume and Keepit Power Stations did not fall to be vested in Green State Power as an interest in land. It is submitted that the only form in which they could be received by Green State Power was as Property, Plant and Equipment pursuant to par 2 of Sch 1 of the 2013 Vesting Order and Annexure 2 to that Vesting Order, which enumerates the Power Stations as “Property, Plant and Equipment”. Meridian notes that cl 7(2) of Sch 4 of the EGA Act has the effect that par 2 of Sch 1 of the 2013 Vesting Order creates in Green State Power an interest in the Hume and Keepit Power Stations (and so much of the Burrinjuck Power Station) in the form of “Property, Plant and Equipment” other than “Real Property”. Meridian says that this is confirmed by subpar (c) of par 2 of Sch 1 which vests in Green State Power the identified items in Annexure 2 (being the Power Station assets) as “things”, and not merely Eraring Energy’s interest in those things.

123. Insofar as the Chief Commissioner relies (at [31] of his submissions) on the terms of the Privatisation Agreement between the State of New South Wales, Green State Power and GSP, Meridian notes that cl 6 of Sch 1 of the Privatisation Agreement sets out the Vendor Warranties, including a warranty that Green State Power “is the sole legal and beneficial owner of its interest in the Green State Power Assets”. It is noted that (as the Chief Commissioner accepts) the Green State Power Assets include the Power Stations. Meridian says that the warranty coincidentally records the effect of the 2013 Vesting Order, which was to vest in Green State Power “sole legal and beneficial” ownership of the Power Stations, being an interest not derivative of, nor dependent on, the grant of a leasehold interest by a third party.

124. Meridian says that (contrary to the Chief Commissioner’s submissions at [29] and [36]), it was not necessary for the 2013 Vesting Order or the 2014 Vesting Order expressly to refer to WAMC (even if WAMC were the holder of the freehold land) because it is sufficient for the two Vesting Orders to pick up the Power Station assets of Eraring Energy (and Green State Power) (specifically identified as particular things in each case) and to vest them in the transferee as “Property, Plant and Equipment”.

125. Meridian says that (contrary to the Chief Commissioner’s submissions at [38]) the evidence is inconsistent with the contention that Pacific Power, Eraring Energy, Green State Power and GSP were only successors in title of leasehold interests in the Power Stations. It is said that the evidence goes only as high as an inference that Pacific Power held a lease of the Burrinjuck land. Further, Meridian says that the existence of a former lease between WAMC and Pacific Power of the Burrinjuck Freehold does not prevent cl 7(2) of Sch 4 of the EGA Act from enabling the Minister to create sui generis statutory rights in respect of property that was formerly part of the land owned by another government entity by vesting order.

126. As to the submission by the Chief Commissioner (at [40]) that (even if the Vesting Orders severed the Power Stations from the leased land or transferred, to GSP, WAMC’s ownership of the Power Stations (as fixtures)), “GSP’s interest in the Power Stations is an interest in land”, Meridian says that such a contention would invite disharmony between the EGA Act and the Real Property Act 1900 (NSW) (Real Property Act).

127. Meridian says that that conflict arises by reference to the following matters. First, that cl 7 of Sch 4 of the EGA Act enables the Treasurer to vest an interest “in respect of land” which does not have to be the whole of the interests of the transferor in that land and the statutory language is not limited to subdivisions or lesser estates carved from larger estates. Second, that cl 7(2) of Sch 4 facilitates the creation of those partial interests “in respect of land”. Third, that the EGA Act otherwise does not restrict the registered proprietor of the land, from which a partial interest has been vested in the transferee, from conveying the underlying freehold to a third party. Fourth, that s 42 of the Real Property Act would confer on the third party transferee the freehold title “absolutely free from all other estates and interests” that are not recorded on the Register other than those in s 42(1)(a)-(d). Fifth, that if the partial interest vested by cl 7(2) of Sch 4 of the EGA Act remained an estate or interest in respect of land, s 42 of the Real Property Act would defeat the plain intention of cl 7 of Sch 4 and of purpose of the EGA Act as a whole.

128. Meridian contends that two statutes which share a field of operation should be construed in a way which best achieves an harmonious result (reference here being made to Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1; [2013] HCA 2 at [78] per Crennan, Kiefel (as her Honour then was) and Bell JJ, and at [98] per Gageler J (albeit that his Honour dissented on the outcome)). Meridian says that, to the extent that the Real Property Act and the EGA Act concern the regulation of title to property they should be construed harmoniously; and that sui generis property interests which have been vested by force of the EGA Act should not be defeated by the indefeasibility provisions of the Real Property Act. Meridian argues that an harmonious construction would give full force to cl 7(2) of Sch 4 of the EGA Act by recognising that the interests in respect of land vested separately to the land and as things (“Property, Plant and Equipment”), rather than land, lose their character as an “estate or interest” in the land within the meaning of s 42 of the Real Property Act.

129. As to the Chief Commissioner’s submission (at [49]) that, even if the Vesting Orders did create sui generis property interests, they could only do so upon the making of the 2000 Vesting Order, Meridian says that, to the extent that the Vesting Orders are found to have been capable of giving rise to sui generis property interests, then the 2013 Vesting Order and 2014 Vesting Order were capable of achieving that result irrespective of the effect of the 2000 Vesting Order. Accordingly, it is submitted that Power Station assets installed by Eraring Energy and Green State Power were vested in GSP as sui generis property rights and not as land.

130. In further written submissions addressing the Chief Commissioner’s invocation in opening submissions of the nemo dat principle, Meridian says that the consideration of this principle must be qualified by the statutory scheme enacted by the EGA Act. Meridian says that the nemo dat principle is not an inflexible rule but, rather, the common law’s attempt to balance competing principles, referring to what was said by Lord Denning in Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322 (at 337). Meridian also points out that the nemo dat principle admits of exceptions by statute (referring by way of example to s 42 of the Real Property Act, ss 26 to 28 of the Sale of Goods Act 1923 (NSW) and s 267 of the Personal Property Securities Act 2009 (Cth)); and Meridian argues that this is also the case with the EGA Act. Meridian submits that the EGA Act can vest things not otherwise recognised as property interests by the common law, including allowing the transfer of a lessee’s “assets” fixed on another person’s land.

131. As to the proper construction of the EGA Act, Meridian notes that cl 2 of Sch of the EGA Act provides that the Treasurer may vest “assets rights and liabilities” and that the definition of “assets” (see as extracted earlier) includes unassignable legal or equitable interests and future property. Meridian emphasises that cl 3(1)(d) of Sch 4 of the EGA Act (which vests assets, rights and liabilities of the transferor “whether or not those entitlements and obligations were actual or potential at the time the order took effect”) expressly refers to “potential” entitlements and obligations.

132. Meridian argues that the legislation permits the separate vesting of a lessee’s interest in fixtures on leased land without their physical severance (as an exception to the nemo dat principle), noting that the 2013 Vesting Order vested the Agreement For Lease (Burrinjuck Power Station) as an interest in land by par 1 of Sch 1 (which exhaustively lists the “Real Property” interests vested in Green State Power) (read with Ex K, being a redacted copy of the entire Vesting Order); and that the assets of Eraring Energy that meet the description in par 2 of the 2013 Vesting Order are specifically vested as “Property, Plant and Equipment” (which includes assets constituting the Burrinjuck Power Station, the Hume Power Station and the Keepit Power Station).

133. Meridian thus maintains its contention that the 2013 Vesting Order vests the assets constituting the Hume Power Station and the Keepit Power Station separately from any interest in the underlying land. Meridian says that the presumption of regularity applies to presume that Eraring Energy owned the Hume Power Station and the Keepit Power Station immediately prior to the making of the Vesting Order (Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154 at 164 per McHugh JA, as his Honour then was).

134. It is noted that the 2014 Vesting Order separately vested in GSP the leases as interests in real property and the Property, Plant and Equipment constituting the Power Stations as things specifically listed in Annexure 1.

135. Meridian says that a comparison of the 2013 Vesting Order Annexure 2 and the 2014 GSP Vesting Order Annexure 1 shows the deliberate inheritance by GSP of Eraring Energy’s “Property, Plant and Equipment” (i.e., the Power Station Assets) as specific assets not as land.

Determination of the first issue

136. Tracking through the operation of the Vesting Orders from 2000, there is at first blush much to support the argument of the Chief Commissioner that all that was conveyed by the respective Vesting Orders was an interest in the Power Stations as fixtures (and hence that GSP held an interest in land in the Power Stations for the purposes of considering the landholder duty provisions).

137. That is because Pacific Power was not the owner of the land on which the Power Stations were situated and (whether by the terms of a lease conferring upon it a right of removal or on the application of the common law principles relating to tenants’ fixtures) if the Power Stations were installed by it (or a predecessor) on the land as a tenant’s fixture ownership would be in the owner of the land unless and until the exercise of the right to remove the fixture; and hence, at the time of the 2000 Vesting Order, the right or interest of Pacific Power in the Power Stations would be simply the right of removal (subject to the provisions of any relevant lease) not as owner of the assets.

The mains and service pipes are fixtures, and in my opinion are not chattels personal.

288. The Chief Commissioner says that his Honour’s comment applies with equal force to the facts of the present case. It is said that the component parts of the Power Stations form part of a going concern, were transacted together and operate as an integral whole to produce electricity; and that, likewise, the Vesting Orders do not put the Power Stations “out of the classification [as fixtures] to which otherwise it would belong”. The Chief Commissioner says that North Shore Gas (No 1) is an authority for the proposition that a power network embedded into the ground is properly classified as a collective of fixtures, not goods; and that this is consistent with the Chief Commissioner’s primary position that the Power Stations are fixtures. If that is the case, then it is said that Meridian’s third contention does not arise.

289. Alternatively, if it is held (as the Chief Commissioner submits) that the Power Stations are not a sui generis property interest and it is held (contrary to the Chief Commissioner’s submissions) that they are not fixtures, then it is said that the Power Stations must, necessarily and in the context of s 155 of the Duties Act, be goods.

290. The Chief Commissioner (as does Meridian) refers to The Noordam, where it was said that the word “goods” was of very general “and quite indefinite import” and primarily derived its meaning from the context in which it was used.

291. Reference is also made to Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) (2013) 97 ATR 904; [2013] NSWCA 470 at [131], where Gleeson JA (Beazley P, as Her Excellency then was, agreeing) applied The Noordam in support of a finding that “goods” in the Duties Act included coins and banknotes, noting that the definition of “goods” depended entirely on the context in which it was used. The Chief Commissioner also refers to Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43, where McMurdo P said at [6] that the ordinary meaning of “goods” is “possessions, especially moveable effects or personal chattels”.

292. The Chief Commissioner says that, in the present case, the relevant context is s 155 of the Duties Act which stipulates how duty is charged on relevant acquisitions (private landholders), in the following terms:

How duty is charged on relevant acquisitions--private landholders

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

293. It is said that the purpose of s 155 is to provide the methodology by which duty is to be calculated on a relevant acquisition in a private landholder; that the section presupposes a relevant acquisition and calls for the identification of “the unencumbered value of all land holdings and goods of the landholder”; and that the purpose of the section appears to be to determine the value of all assets of the landholder that may be classified as land or otherwise be in a tangible form (goods).

294. In those circumstances, the Chief Commissioner submits that the term “goods” is of sufficient breadth to capture the Power Stations, if they are not otherwise classified as land. It is said that Power Stations are comprised of many items which would individually be classified as goods; and that the only reason to remove them from that classification is if the Power Stations are classified as land. The Chief Commissioner argues that, if they do not fall within that classification, then it is consistent with the text of s 155 and the ordinary meaning of “goods” that the Power Stations be classified as goods.

295. The Chief Commissioner thus says that Meridian’s third contention should be dismissed; that it does not arise because the Power Stations are part of the leased land; but that if it be held that the Power Stations are not part of the leased land, and are not otherwise an interest in land, then the Power Stations ought to be classified as goods under the Duties Act.

Determination of the third issue

296. I accept that, as recognised in The Noordam, the word “goods” is of very general “and quite indefinite import” and primarily derives its meaning from the context in which it is used (here, s 163K of the Duties Act) and that it may be accepted that the intent of the legislature was to levy tax on “the unencumbered value of all land holdings and goods of the landholder” requiring a determination of the value of all assets of the landholder that may be classified as land or otherwise be in a tangible form. However, I have great difficulty in seeing the Power Stations as being “goods” under any ordinary meaning attributed to tangible personal property. The fact that the Power Stations (formerly fixtures or items “part and parcel of the land” if that classification be correct) have been statutorily severed from the land (and exist as an innominate sui generis property interest) does not transmute them into goods simply because it might be thought that this should be treated as part of the assets on which an impost for landholder duty should be made.

297. In the circumstances were it to have arisen I would have concluded that the Power Stations or Power Station assets in the ownership of Meridian are not goods.

Issue 4 – Exercise of the s 163G “discretion”

Meridian’s submissions as to the fourth issue

298. Meridian says that, in the event that the Acquisition is found to be a relevant acquisition (about which there is no dispute – it is) and it is found that the Power Stations were goods and the value of GSP’s goods at the time of the Acquisition is not less than 90% of the total unencumbered value of all land holdings and goods, then the power in s 163G of the Duties Act should be exercised and the value of goods should be disregarded in determining the duty chargeable to Meridian. Given my conclusion above, this issue does not arise but, again, for completeness I deal briefly with it.

299. It is noted that, in the case of a power which may be exercised by the Chief Commissioner, the Court must itself consider the correct application of the Duties Act to the materials before the Court, including how any power conferred by those provisions should be exercised (reference being made to Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462; [2011] NSWCA 325 at [168] per Sackville AJA (with whom Giles and Macfarlan JJA agreed); Winston Smith v Chief Commissioner of State Revenue [2019] NSWCA 75 at [2] per Meagher JA (with whom Payne JA and Sackville AJA agreed)).

300. Meridian says that, on its proper construction, s 163G of the Duties Act should be construed as prescribing a mandatory rule whereby, if the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales of the landholder, the Chief Commissioner must disregard the value of the goods in determining the duty chargeable under Ch 4.

301. It is noted that when a statute uses the expression “may” there is a question whether the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised, so that in those events the “may” becomes a “must” (Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 at 134-135 per Windeyer J).

302. Meridian says that the textual indicator that s 163G of the Duties Act is mandatory is that s 163G prescribes a singular criterion for when the power is enlivened, which is when the unencumbered value of all goods comprises not less than 90% of the total unencumbered value of all land holdings and goods; and that it does not require the Chief Commissioner to make any evaluative judgment. Meridian says that the mandatory nature of s 163G is also confirmed by its legislative history.

303. Meridian notes that s 163G was introduced by the State Revenue Legislation Further Amendment Act 2009 (NSW), which introduced wholesale amendments to the charging of duty on the acquisition of entities holding interests in land by repealing former Ch 4A and substituting in its place Ch 4; and that s 163G is the policy equivalent of former s 163B(1)(b) which provided that for the purposes of former Ch 4A an entity is “land rich” if it had land holdings in New South Wales with an unencumbered value of $2 million or more and its land holdings in all places comprise 60% or more of the unencumbered value of all its property. Thus, it is noted that s 163G substitutes a former 60% rule with the current 90% rule.

304. Further, Meridian notes that s 163G is also the Ch 4 analogue of s 26 found in Ch 2 of the Duties Act and Meridian says that the legislative history of s 26 also confirms the mandatory nature of current ss 26 and 163G.

305. Prior to 30 June 2013, s 26 provided:

The Chief Commissioner, if satisfied that it would not be just and reasonable in the circumstances to charge duty on the dutiable value of all the dutiable property in a dutiable transaction involving goods and other property, may disregard the value of the goods, or any of them, in determining the dutiable value of the property involved.

306. It is noted that in this form it was substantially similar to s 43A(2) of the Stamp Duties Act 1920 (NSW) which provided that certain conveyances or agreements were chargeable with ad valorem duty “except in so far as the Chief Commissioner is satisfied that it would not be just and reasonable in the circumstances”; and that the statutory language in s 43A(2) and former s 26 called for an evaluative judgment in the exercise of the discretion conferred on the Chief Commissioner.

307. Meridian points out that the uncertainty as to the scope of s 26 of the Duties Act gave rise to Revenue Ruling DUT 004, which expressed the Chief Commissioner’s view that the discretion fell to be exercised where goods comprised 90% or more of the value of the property the subject of the dutiable transaction (see McDonald’s Australia Ltd v Chief Commissioner of State Revenue (2005) 58 ATR 260; [2005] NSWSC 6 (McDonald’s Australia) at [91] per Gzell J); and that the prescriptive application of Revenue Ruling DUT 004 led to criticism by Gzell J in McDonald’s Australia at [91] and [94].

308. Subsequently, the present form of s 26 was introduced by the Duties Amendment (Abolition of State Taxes) Act 2006 (NSW) which enacted a new s 26A(1) as follows:

If a dutiable transaction involves goods and other dutiable property, the Chief Commissioner may disregard the value of the goods in the transaction if satisfied that the dutiable value of the other property does not exceed 10% of the dutiable value of all the dutiable property in the transaction.

309. Section 26 was amended and s 26A was repealed by the State Revenue and Other Legislation Amendment (Budget Measures) Act 2013 (NSW). From 1 July 2013, s 26 provided:

If a dutiable transaction involves goods and other dutiable property, the Chief Commissioner may disregard the value of the goods in the transaction if the dutiable value of the other property does not exceed 10% of the dutiable value of all the dutiable property in the transaction.

310. Meridian says that the modern form of the dispensation in the current s 26 and s 163G of the Duties Act evidences a deliberate departure from the evaluative “just and reasonable” judgments and the adoption of a discrete percentage based criterion for the dispensation of duty.

311. Accordingly, Meridian says that s 163G should be construed as a mandatory rule requiring the Chief Commissioner to disregard the value of goods in determining the duty chargeable under Chapter 4 if the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales.

312. However, Meridian says that, if s 163G is discretionary, then the discretion should be exercised consistent with the policy of Ch 4 (citing Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630; [2010] VSC 464 at [27]-[29] per Pagone J). Meridian says that even if s 163G is not construed as a mandatory direction to the Chief Commissioner, the policy purpose of s 163G is still to avoid charging duty on relevant acquisitions of entities whose value is substantially attributable to goods instead of interests in land.

313. Meridian argues in this regard that the value of GSP is substantially attributable to its capacity to sell electricity; and that, to generate electricity, GSP uses the water fuel granted to it by the Water Agreements to power the Power Stations which were vested in it by the Vesting Orders. It is said that the Leases grant GSP access to the Power Stations but are otherwise not profit leases which GSP could assign for gain. Given the separate vesting of the Power Stations, the Water Agreements and the Leases, it is said that the Leases are not commercially valuable independent of GSP’s business as a going concern. Meridian says that substantially the whole of the value of GSP’s business is therefore attributable to the business it conducts using its tangible and intangible assets rather than attributable to its interests in land.

314. Meridian says that landholder duty charged by Ch 4 is an alternative to transfer duty charged by Ch 2 of the Duties Act (referring to the note under s 145 of the Duties Act, as confirming this). Meridian says that, just as s 26 has the effect of excising from the duty base ad valorem duty on goods if the dutiable transaction of property other than goods does not exceed 10% of the dutiable value of the dutiable property in the transaction (i.e., that goods making up at least 90% of the value of the transaction), s 163G should be construed with the same policy of disregarding the landholder’s goods where the value of those goods is not less than 90% of the value of landholder’s land holdings and goods. It is submitted that the s 163G discretion should be exercised in a manner that gives an harmonious operation to the Duties Act as a whole.

315. Meridian points out that Mr Kepler’s lease valuation methodology reveals that the value of GSP’s interest in the lease of the bare land ($13.85 million to $28.85 million subject to up to $30 million of remediation costs) is only a small proportion of GSP’s total assets ($172.2 million) (see the Joint Report at [19]). Meridian says that the fraction that GSP’s leasehold interest bears to GSP’s total assets is even more stark if the Pacific Hydro Methodology is applicable only by reason of GSP’s recently installed 66kV switching skids at the Hume Power Station ($2.9 million to $172.2 million) (see the Joint Report at [18]).

316. Thus, Meridian says that it if is found that GSP was a landholder at the time of the Acquisition then the value of GSP’s goods at $131.4 million constituted of $131 million of buildings, property plant and equipment fixed to the land (see Mr Kepler’s Report dated 24 November 2021 at [92]-[93]) plus $0.5 million of portable plant and equipment (Kepler Report at [93]) should be excised from the calculation of dutiable value.

317. Accordingly, from the Chief Commissioner’s assessment of dutiable value at $145,350,000 in the Further Amended Assessment, Meridian says that there should be deducted a further $131,400,000 to arrive at a dutiable value of $13,950,000 to reflect the removal of the value of GSP’s goods from the Chief Commissioner’s calculation of dutiable value.

Chief Commissioner’s submissions as to the fourth issue

318. As to Meridian’s contention that, in the event that the Power Stations are found to be goods, the discretion conferred by s 163G of the Duties Act should be exercised so that the value of the Power Stations is disregarded in determining the amount of duty payable (see Meridian’s submissions at [107]-[128]), the Chief Commissioner says that, for Meridian to make this contention good, it must establish that: the Power Stations are (contrary to its earlier submission) goods; the value of the Power Stations, at the time of the Acquisition, was not less than 90% of the total unencumbered value of GSP’s land holdings and goods; and s 163G of the Duties Act ought to apply such that the value of the Power Stations should be disregarded in determining the duty chargeable.

319. The Chief Commissioner’s primary position is that the Power Stations are not goods; rather that they are fixtures forming part of the leased land (again citing Meridian’s submission that the Power Stations “are so connected with their respective dams which is in turn embedded into the land that they became part and parcel of the land” – see Meridian’s submissions at [62]). On that basis it is said that s 163G has no application to the facts of this case.

320. If, contrary to the Chief Commissioner’s primary submission, it is held that the Power Stations are goods, then the Chief Commissioner notes that Meridian must establish that the value of the Power Stations at the time of the Acquisition was not less than 90% of the total unencumbered value of GSP’s land holdings and goods. It is said that the determination of that question will depend on the expert evidence and the impact, if any, on the obligation to remediate. It is noted that there are various possible scenarios in which the value of GSP’s goods will be less than 90% of GSP’s total land holdings and goods even if Meridian establishes that the Power Stations are goods.

321. The Chief Commissioner posits, by way of example, the scenario that it be found that: the total unencumbered value of GSP’s land holdings and goods was $145.35 million; Mr Kepler correctly valued the Lease of the unimproved leased land at $13.85 million; the skid is an interest in land, because it was installed by GSP after the 2014 Vesting Order, and is valued at $2.9 million; the portable plant and equipment is valued at $0.5 million; and the Power Stations are goods (contrary to the Chief Commissioner’s primary submission) and valued at $128.1 million (being $131 million less $2.9 million for the skid).

322. The Chief Commissioner says that, in that scenario, the value of GSP’s goods at the time of the Acquisition was less than 90% of the total unencumbered value of GSP’s land holdings and goods (i.e., $128,600,000/$145,350,000 or 88.48%); and, therefore, the discretion in s 163G of the Duties Act is not enlivened.

323. The Chief Commissioner accepts that if it be found that the value of GSP’s goods at the time of the Acquisition was 90% or more of GSP’s total land holdings and goods, then the discretion under s 163G is enlivened; and agrees that, in this case, the Court ought to disregard the value of the goods in determining the duty chargeable under Ch 4. In those circumstances, the Chief Commissioner says that it is not necessary to decide whether the discretion should be construed as mandatory.

Determination of the fourth issue

324. Given the position of the Chief Commissioner that (in the event that s 163G of the Duties Act is enlivened, the discretion should be exercised) it is not necessary to entertain the debate as to whether “may” means “must”; and it is not appropriate that I here enter into debate on that issue (it should be determined after proper consideration in a case in which it is determinative). As it is, on the conclusions reached above, s 163G is not enlivened, so the question whether the discretion is or should be exercised does not arise.

Issue 5 – Dutiable value of the Acquisition

325. Meridian says that the dutiable value of the Acquisition is nil because the methodology in SPIC Pacific Hydro is inapplicable to valuing GSP’s Leases, the value of GSP’s leasehold interest is nil and the Acquisition is not a relevant acquisition.

325. If the Acquisition is a relevant acquisition because the methodology in SPIC Pacific Hydro is applicable and s 163G of the Duties Act applies, then Meridian says that the dutiable value of the acquisition should be $2.9 million as set out in Mr Samuel’s calculations at [18] of the Joint Report.

326. If the Acquisition is a relevant acquisition because the methodology in SPIC Pacific Hydro is applicable and s 163G does not apply, then Meridian says that the dutiable value of the acquisition is $99.3 million as the net of $131 million (being the PPE leases) plus $0.5 million (being the portable plant and equipment), plus negative $2.2 million (being the bare land Leases) plus negative $30 million (being the remediation costs) set out in the second column of Mr Samuel’s calculations at [19] of the Joint Report.

327. Meridian says that the Further Amended Assessment is also excessive because the Chief Commissioner has undervalued the Water Agreements by at least $13.85 million when their actual value is $27.7 million (if the Pacific Hydro Methodology does not apply) or at least $29.9 million and up to $59.9 million (if the Pacific Hydro Methodology applies) as valued by Mr Samuel (see the Joint Report at [17] and [19]).

328. Meridian thus contends that the Further Amended Assessment should be set aside in whole or, in the alternative, set aside in part and an assessment issue for a lesser amount of duty on the basis that the dutiable value of the acquisition exclude the value of GSP’s interest in goods or, in the further alternative, on the basis that no amount of the residual is allocated to the value of GSP’s Leases. Meridian wishes to be heard on costs in any event.

329. The Chief Commissioner submits that the summons filed on 31 July 2020 be dismissed; and that the Court should, pursuant to s 101(1)(a) of the Taxation Administration Act confirm the assessment issued to Meridian.

Determination of the fifth issue

331. Having regard to the conclusions reached above, and the calculations set out in the aide memoire (set out above), the Further Amended Assessment should be set aside in whole. I find that the dutiable value of the Acquisition is nil on the basis that the Power Stations were not landholdings in the relevant sense, nor is the Pacific Hydro Methodology applicable in valuing GSP’s Leases (although it does apply to the skids), and that therefore the Acquisition was not a relevant acquisition within the meaning of the Duties Act.

Costs

332. Both parties sought to be heard on costs, so I will make directions for that to occur.

Orders

333. On the basis of the foregoing, I make the following orders:

1. Set aside the defendant’s Further Amended Assessment, dated 25 August 2021, in whole.

2. The parties are to file and serve submissions on the question of costs within 14 days of the publication of these reasons (including whether, and if so why, an oral hearing on costs is sought or that issue can be dealt with on the papers).

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Decision last updated: 12 August 2022