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

NEW SOUTH WALES COURT OF APPEAL

CITATION: TRUST COMPANY LIMITED v CHIEF COMMISSIONER OF STATE REVENUE [2007] NSWCA 255

FILE NUMBER(S):
40548/06

HEARING DATE(S): 30 July 2007

JUDGMENT DATE: 24 October 2007

PARTIES:
TRUST COMPANY LIMITED (ACN 004 027 749) (Appellant)
CHIEF COMMISSIONER OF STATE REVENUE (Respondent)

JUDGMENT OF: Mason P Giles JA Santow JA

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 2851/05

LOWER COURT JUDICIAL OFFICER: Gzell J

LOWER COURT DATE OF DECISION: 11 August 2006

LOWER COURT MEDIUM NEUTRAL CITATION:
[2006] NSWSC 792

COUNSEL:
T F Bathurst QC/ M Richmond (Appellant)
D McGovern SC/ R Hamilton SC (Respondent)

SOLICITORS:
Allens Arthur Robinson (Appellant)
I V Knight, Crown Solicitor (Respondent)

CATCHWORDS:
STAMP DUTIES – Whether s24 of the Duties Act 1997 (NSW) applied to a set of property arrangements whereby property consisting of land subject to shorter term existing leases was to be sold but before sale agreement was entered into but after sale was arranged concurrent 99-year leases were entered into in respect of the same land – effect of concurrent 99-year leases as giving rise to new property by way of a reversion expectant upon the 99-year leases and replacing earlier reversion expectant on existing leases or whether subject matter of the agreement for sale was simply land or fee simple over land throughout – arrangement within s24 notwithstanding that it predated the dutiable transaction.
STAMP DUTIES - identifying the dutiable property - whether land as physical property or interest in land - property sold was reversion subject to existing lease.
STATUTES - interpretation - purposive interpretation - Minister's speech in Parliament.

LEGISLATION CITED:
Conveyancing Act 1919, s19
Duties Act 1997 (NSW) s8, s9, s11, s21, s24,s25, s32
Interpretation Act 1987 s21, s33, s34
Local Government Act 1919
Real Property Act 1900, s40, s53
Stamps Act 1958 (Vic)
State Revenue Legislation Amendment Act 2002

CASES CITED:
Chelsea Investments Pty Ltd v Federal Commissioner of Taxation (1966) 115 CLR 1
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618
City of Rockingham v PMR Quarries Pty Ltd (2001) 118 LGERA 93
Commissioner of State Revenue (Vic) v Bradney Pty Ltd (1996) 34 ATR 233
Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651
Commissioner of Taxes v Camphin (1937) 57 CLR 127
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1980) 1 NSWLR 510
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1982) 149 CLR 431
GLG Australia Pty Ltd (2006) 225 ALR 643
Ingram v Inland Revenue Commissioners (2000) 1 AC 293
re Bolton; ex parte Beane (1987) 162 CLR 514
re Lehrer and the Real Property Act 1900 (1960) 61 SR (NSW) 365
Lord Ward v Lumley (1680) 5 H & N 88; 157 ER 1112
Mabo v The State of Queensland (No 2) (1992) 175 CLR 1
Radaich v Smith (1959) 101 CLR 209
Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1
Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351
The Wik People v The State of Queensland (1996) 187 CLR 1

DECISION:
Appeal dismissed.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40548/06
SC 2851/05
MASON P
GILES JA
SANTOW JA
Wednesday 24 October 2007

TRUST COMPANY LTD v CHIEF COMMISSIONER OF STATE REVENUE

JUDGMENT

MASON P: I have had the benefit of reading in draft the reasons of Giles JA and Santow JA. I gratefully adopt their summaries of the facts and issues.
At the material time s24 of the Duties Act 1997 provided:
24. Arrangements that reduce the dutiable value
An arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction is to be disregarded in determining the dutiable value of the dutiable property if:
(a)the dutiable transaction is between associated persons, or
(b)the Chief Commissioner is satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property.
This provision authorises an arrangement to be disregarded in determining the dutiable value of dutiable property if the arrangement is one “affecting” the dutiable value of dutiable property that is subject to a dutiable transaction provided also that conditions (a) or (b) are met.
In the present case, the dutiable transaction was the aggregation (see s25) of four contracts for sale of land entered into on 28 July 2004.
Giles JA explains why the dutiable property that was subject to that dutiable transaction was the reversion which had been created in each case by the earlier grant of a 99 year lease. This reversion – not the unqualified fee simple nor the land as physical property – was the relevant subject matter of the four contracts for sale.
The question remains: Was the arrangement that had been entered into earlier, in February-March 2002, one that was capable of satisfying the section? That the Chief Commissioner was satisfied in accordance with s24(b) was not in dispute.
Section 24 contains no requirement of contemporaneity. It is therefore not fatal to its application that the arrangement took place prior to the dutiable transaction, so long as condition (a) or (b) is also satisfied. This conclusion stems from the section’s silence about timing. It is also supported by the legislative history involving the removal of the earlier 12 months time limitation (see Santow JA at [92]).
An arrangement within the section can therefore be forward-looking. But it must still affect the dutiable value of the dutiable property that later becomes subject to a dutiable transaction. And, at least where s24(b) is engaged, the Chief Commissioner must be satisfied of the presence of a significant purpose of reducing the dutiable value of the dutiable property.
In my opinion, the entry into the 99 year leases did affect the dutiable value of the reversionary interests later contracted to be sold. And it was open to the Chief Commissioner to have the requisite satisfaction.
The leases were entered into as part of a scheme designed to reduce the duty payable in relation to the anticipated contracts for sale of the reversions. The reversions intended to be sold would not exist without the particular leases. The intended contracts for sale would involve the sale of those particular reversions.
The agreements for lease and the contemporaneous offer deeds also set up the structure whereby the overriding purpose of transferring the land to the respondent at the previously negotiated sale price would be achieved in an advantageous manner as regards its tax implications.
The appellant accepts that entry into the 99 year leases created the reversions that were later contracted to be sold. Its point, in brief, is that this did not mean that the arrangement affected the dutiable value of those reversions in the relevant sense of reducing that dutiable value. Giles JA would accept this submission. He has concluded that s24 did not extend to a transaction whose purpose was that the dutiable value of the dutiable property be less than the dutiable value of other property which would have been dutiable property the subject of the dutiable transaction but for the arrangement (my emphasis).
The words “arrangement” and “affecting” are broad in their scope and the general intent of s24 is patent. In these circumstances, I do not see why s24 calls to be read as restrictively as proposed by the appellant and found by Giles JA. I readily accept that s24 requires one to remain focussed upon the dutiable transaction itself (here the contracts to sell the reversions dependent on the 99 years leases). But it does not follow, in my respectful view, that the arrangement that purposefully created the reversion for the revenue-reducing purpose and as part of a scheme that was designed to include the particular contracts is incapable of being described as “affecting” the value of that reversion. It does so quite directly in that (a) without the leases there are no reversions; and (b) the term and terms of the leases affect and reduce the value of the reversion that comes to be sold.
The dutiable value of Blackacre subject to a five year lease may or may not be different to its value subject to a 99 year lease: the term and terms of the lease are highly relevant, as may be the identity of the lessee. In the present case, the Chief Commissioner was satisfied that a significant purpose of a party to the arrangement was the reduction of the dutiable value of the dutiable property. It may be taken that this satisfaction was based upon the conclusion that, for each of the four parcels of land, the 99 year lease was designed to reduced the value of the reversion that was subject to that lease and to do so in the context of the imminent sale of the reversion coupled with the other planned consequences of the total arrangement. In my opinion, this reasoning did not involve the Chief Commissioner having regard to property other than the property sold.
The appeal should be dismissed with costs.
GILES JA: I have had the advantage of reading the reasons of Santow JA in draft. Respectfully differing from his Honour, for the reasons which follow in my opinion the appeal should be allowed.
Facts
The detailed facts are set out in the reasons of Santow JA. In brief -
(a)the Church owned four parcels of land at Homebush Bay;
(b)each of the parcels was leased under one or more short-term leases, in the case of one of the parcels over part only of the parcel;
(c)“Heads of Agreement” were entered into by which it was proposed that the Church sell the parcels to the Trust, subject to the short-term leases, for $66 million;
(d)instead of sale in that manner –
(i)the Church leased the parcels to the Trust under 99 year leases concurrent with the short-term leases at a total rental, payable (and paid) immediately, of $65,120,125, which leases were registered; and
(ii)the Church then contracted to sell the parcels to the Trust, subject to the 99 year leases and the short term leases, for $1,850,000;
(e) transfers of the parcels were executed and registered.
I have telescoped or passed over corporate identities and a recitation of the instruments bringing about the sale and other details. Some details should be given of the contracts by which the parcels were sold.
There were four contracts, one for each of the parcels, using the 2000 edition of the Law Society and Real Estate Institute printed form. The printed form was extensively amended by additional clause 30, particularly by deletion of many of its clauses, and a number of additional clauses were added. The contracts were materially identical, and I will refer only to one contract.
By the operative clause on page 3, the vendor sold and the purchaser bought “the property”. The space against “Property” on the first page was completed, “The land, the improvements, all fixtures and the inclusions, but not the exclusions”. The space against “Land” on the first page was completed as to “Address” with a street address and as to “Plan” with lot numbers in a registered plan; as to “Title”, it was completed with folio identifiers and, by blocking in one of a number of alternative boxes, the selection of “TORRENS” and “FEE SIMPLE – ownership”.
By blocking in a box in a section headed “CHOICES” on page 2, the sale was “subject to tenancies disclosed in contract”. The short-term leases and the 99 year lease were annexed to the contract, and additional clause 52 included -
“(c)The Purchaser has been in control of the property as Lessee pursuant to a concurrent lease between the parties (Concurrent lease) and is aware of all matters pertaining to the property, the Leases and occupancies relating to the property and any other issues.
(d)The Purchaser acquires its legal interest in the property subject to the Concurrent Lease as existing at the date of this contract. There shall be no further adjustment of the rent paid by the Purchaser to the Vendor pursuant to the Concurrent Lease other than for any rates, taxes or outgoings payable by the Purchaser to the Vendor pursuant to the Concurrent Lease or the Offer Deed pursuant to which this contract arose.”
In these details of the contract I have taken it that the amendments to the printed form made by additional clause 30(a) and (b), purporting to delete “Page 1” and “Page 2”, did not delete the first two pages. If they were deleted there would be no identification of the parties, the property or the price, and many other necessary matters would be jettisoned. The Trust could not explain the purported deletion, but neither party contended for this result.
The issue
At the material time s 24 of the Duties Act 1997 (“the Act”), which has since been amended, provided -
“24 Arrangements that reduce the dutiable value
An arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction is to be disregarded in determining the dutiable value of the dutiable property if:
(a)the dutiable transaction is between associated persons, or
(b)the Chief Commissioner is satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property.”
Pursuant to s 25 of the Act the four contracts were to be aggregated and treated as a single dutiable transaction. The Chief Commissioner assessed duty on a sale for $66,965,625, as the aggregate unencumbered value of the parcels, on the basis that entry into the 99 year leases was an arrangement which could be disregarded pursuant to s 24 of the Act. He said in his ruling on the Trust’s objection -
“We are satisfied that the substance of the sale arrangement was to reduce the dutiable value of the dutiable property (being the estate in fee simple). That is, we consider that the purpose of entering into the concurrent leases was to reduce the dutiable value of the dutiable property, as the ultimate objective was to transfer the land and buildings to the Purchaser. In support of this contention, we would argue that under the arrangement the concurrent lessee/purchaser obtained rights equivalent to, or normally associated with that of an owner (such as the entitlement to receive all the rents and profits from the land).”
Despite the possibly wider first sentence, the entry into the 99 year leases was on the Chief Commissioner’s case the relevant arrangement. The issue was whether the Chief Commissioner was correct in regarding entry into the 99 year leases as an arrangement which could be disregarded. If he was correct, his satisfaction as to purpose was not in contest.

Other provisions of the Act

By s 8(1) of the Act duty was charged on “a transfer of dutiable property” (para (a)) and, amongst other transactions, “an agreement for the sale or transfer of dutiable property” (para (b)(i)). Section 8(2) provided that such a transfer or transaction “is a dutiable transaction for the purposes of this Act”. The effect of s 9 was that the duty charged on an agreement for the sale or transfer of dutiable property was charged as if it were a transfer of dutiable property, and that “the property agreed to be sold or transferred” was taken to be the property transferred.
By s 11(1) “dutiable property” was “any of the following”, there being set out a number of disparate paragraphs. They relevantly included “(a) land in New South Wales” and “(l) an interest in any dutiable property referred to in the preceding paragraphs of this section … “; thus an interest in land in New South Wales was dutiable property. Amongst the definitions in the Dictionary were “interest includes an estate or proprietary right” and “land includes stratum”.
Dutiable value was dealt with in Pt 2 of Ch 2 of the Act, which included s 24. Section 21(1) provided that “the dutiable value of dutiable property that is subject to a dutiable transaction” was the greater of the consideration for the dutiable transaction or the unencumbered value of the dutiable property.
Rates of duty were then dealt with in Pt 3 of Ch 2 of the Act. The general provision in s 32, applicable in the present case and subject to some particular provisions in succeeding sections, prescribed different rates according to brackets of “dutiable value of the dutiable property subject to the dutiable transaction”.
The competing positions
Each of the four contracts was an agreement for the sale or transfer of dutiable property (although identification of the dutiable property was contentious), and each was a dutiable transaction. Again speaking only of one contract, duty was to be charged as if it was a transfer of dutiable property, being the property agreed to be sold or transferred.
The Trust submitted, in summary, that the dutiable property subject to the dutiable transactions was the reversions expectant on the 99 year leases. It said that entry into the 99 year leases created the reversions, and so did not affect their dutiable value so as to reduce the dutiable value; nor could disregarding the 99 year leases have any consequences for the dutiable value of the reversions. It said that it followed that the Chief Commissioner could not be satisfied as to a purpose of reducing the dutiable value of the dutiable property, because the reversions were not reduced in dutiable value.
The Chief Commissioner submitted, in summary, that the dutiable property subject to the dutiable transaction was the land, or alternatively the fee simple in the land, and that entry into the 99 year leases affected the dutiable value of the land, or the fee simple, because the 99 year leases reduced its value. He said that disregarding the 99 year leases meant that the dutiable value of the dutiable property was the unencumbered value of the land, or the fee simple, subject to the short term leases. He submitted also, with a degree of diffidence, that even if the dutiable property subject to the dutiable transactions was as the Trust said, the arrangement did not have to be contemporaneous with or follow the creation of the dutiable property, and the entry into the 99 year leases affected the dutiable value of the dutiable property by determining the initial unencumbered value of the reversions expectant on the 99 year lease.
Affect by determining initial value of the reversion
It is convenient first to deal with the Chief Commissioner’s submission last mentioned, which finds favour with Santow JA. It departed from the Chief Commissioner’s expressed satisfaction as to purpose, which took the fee simple as the dutiable property. It is not necessary to consider whether, as the Chief Commissioner suggested, this Court could find the necessary purpose in his stead, since I do not think the submission should be accepted.
At the heart of the submission was that s 24 did not mandate that the dutiable property affected by an arrangement be in existence at the time of the arrangement. According to the submission, “affect” has a wide scope, and could readily extend s 24 to an arrangement which caused the dutiable property to have a particular value when it came into existence. That was then the dutiable value for the dutiable transaction.
The argument was good as far as it went; the first lines of s 24 could accommodate it. However, I do not think it adequately took account of questions thrown up by the balance of the section. Could the Chief Commissioner be satisfied as to a purpose of reduction of the dutiable value of the dutiable property? What was the effect of disregarding the arrangement? These were related questions. Reduction of the dutiable value of the dutiable property postulated a non-reduced dutiable value of the dutiable property, and if the arrangement was disregarded the dutiable value of the dutiable property was that non-reduced dutiable value. If the arrangement caused the dutiable property to have its initial value, what could the non-reduced dutiable value of the dutiable property be?

For s 24 to apply, the dutiable property subject to the dutiable transaction had to be so identified that it could be said that the dutiable property underwent a reduction in dutiable value; hence the Chief Commissioner’s identification as the land or the fee simple in the land, rejecting the Trust’s identification as the reversions expectant on the 99 year leases. I do not think that its words extended to a purpose that the dutiable value of the dutiable property be less than the dutiable value of other property which would have been dutiable property the subject of the dutiable transaction but for the arrangement; or to disregard of the arrangement, resulting in taking for duty purposes the dutiable value of the other property. In my opinion, s 24 was limited to where the dutiable property was affected by reduction of its dutiable value.
Identifying the dutiable property
Where duty is imposed on an instrument by reference to the value of what is conveyed or transferred, it is necessary accurately to identify the property conveyed or transferred by the dutiable instrument: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1982) 149 CLR 431 at 449 per Mason J; Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651 at [38] per Gleeson CJ and Gummow, Kirby and Hayne JJ. In the lastmentioned case their Honours adopted, at [41], observations by Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1980) 1 NSWLR 510 at 523 -
“ … that in some cases it may be necessary to look outside the instrument of conveyance or transfer in order to identify the property conveyed by the instrument. He gave as an example land under common law title which is subject to an easement created by a registered deed. A subsequent conveyance of the fee simple would be subject to the rights created by the previously registered deed. It may be necessary to look beyond a dutiable instrument to identify the property which the conveyor has available to convey.”
The necessity is no less where, as under the Act, duty also is charged on transactions. In the present case duty is relevantly charged by reference to the dutiable value of the dutiable property, being the property agreed to be sold or transferred. The property agreed to be sold or transferred by the four contracts, whether the land or an interest in the land and if so what interest, must be accurately identified.
The dutiable property was not the land
The Chief Commissioner submitted that the “subject matter of the dutiable transactions” was the land as physical property. The more correct question is whether the land as physical property was the property agreed to be sold or transferred. His argument in support of the submission was brief: that the contracts stated that the property the subject of the sale was “The land, the improvements, all fixtures and the inclusions, but not the exclusions”, and identified it by the street address and lot numbers and title details.
The Chief Commissioner referred in another connection to Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1. It should also be addressed in the present context.
Travinto Nominees Pty Ltd v Vlattas involved a sale of land subject to two leases, one a lease for five years from a stated date. The lease contained an option to renew for a further five years, but the option was not disclosed. The purchaser claimed under a clause in the contract providing for compensation for “error or misdescription of the property”. The case is usually cited for its consideration of the validity of the option and whether registration of the lease gave it indefeasibility. Another question was whether there was error or misdescription of the property. What was the property?
Barwick CJ referred (at 12) to a vendor’s obligation to show a good title to the land being sold, and continued (at 12-13) -
“The terms of a contract of sale may limit or vary these obligations, but, in my opinion, if the subject matter of the sale is an area of land, the conditions limiting or varying the implied obligations on the vendor as to the title to the land sold or as to delivery of vacant possession are not elements in the description of the thing sold. They are qualifications of the obligations of the vendor in relation to the conveyance or transfer of the title to the land or in relation to the requirement of vacant possession or as to both. A relevant example is the common condition of sale that the land is sold "subject to existing tenancies and occupancies". In my opinion, this limitation of the vendor's obligation to transfer a fee simple in possession or to give vacant possession does not form part of the description of the thing sold where the subject matter of the sale is land. Nor, in my opinion, does such a clause convert the subject matter of the sale from land into a reversion or reversionary interest in land.
The case is not different, in my opinion, if included in the existing tenancies and occupancies there is a lease for a term of years whether or not registered under the Real Property Act. The subject matter of the contract, in my opinion, remains the land but the obligation of the vendor is modified to the extent that the purchaser may not insist on vacant possession of the tenanted land or object to the existence of a term of years in the land; he must accept a conveyance or transfer which is subject to the outstanding tenancies or lease.
Of course, in every case the actual contract between the parties must be construed in order to decide whether the subject matter is land or some particular estate or interest in land. If a compensation clause such as cl. 8 makes error or misdescription of the property the criterion of its operation, what will satisfy its terms will depend primarily on what is the property sold. If it be land, the error or misdescription must, in my opinion, relate to the description of the land or to the improvements thereon. A statement as to the suitability of the land for some physical use may well form part of its relevant description. Again markings on plans may form part of that description. But where this is so, the error or misdescription still would relate to the description of the physical subject matter.
On the other hand, if the title to or an estate or interest in land be the subject matter of the contract, error or misdescription may relate to the title or the estate or interest rather than the land itself. … ”
The Chief Justice later said (at 14) -
“Earlier I indicated that, in my opinion, a sale of land subject to existing tenancies and occupancies is not a sale of a reversion. It is erroneous, in my opinion, to regard the subject matter of this sale as a reversion expectant on the two registered leases. Indeed, the land was sold as one parcel subject to two leases of lock-up shops, those shops not being the whole of the buildings on the land. Apparently a motion picture theatre was erected on the land, presumably in part at least above or round the lock-up shops. Of this vacant possession was to be given.”
His Honour concluded (at 15) that the property sold was the land as distinct from the title to it, referring to the description of the land by metes and bounds in a schedule. Hence he considered that the failure to disclose the option was not an error or misdescription of the property; it was not an error or misdescription of the physical subject matter.
McTiernan J agreed with the Chief Justice. Menzies J also considered that the words “error or misdescription of the property” covered only an erroneous description of the land sold and not an error in the statement of the title to it, saying (at 29) that this “appears from the way the expression ‘the property’ is used to refer to the land as a physical thing throughout the contract … “. Gibbs J did not deal with this question. Stephen J agreed that there was no error or misdescription of the property, saying (at 37) -
“The ‘property’ referred to in cl 8, and which that clause contemplated might be the subject of error or misdirection refers, I think, exclusively to the entity, the land being sold; this is made apparent from a number of passages throughout the conditions of sale.”
I will return to what Chief Justice’s opinion that a sale of land subject to existing tenancies and occupancies is not a sale of a reversion. For the present the point is that, on the construction of the particular contract, “the property” referred to the physical thing, so understood because of the description of an area of land (Barwick CJ) or the way those words were used in the contract (Menzies and Stephen JJ).
The four contracts did not have metes and bounds descriptions, but did state as the “Property” “The land, the improvements, all fixtures, and the inclusions, but not the exclusions.” While the printed form was much amended, cl 10 remained and, amongst other things, precluded a claim or requisition in respect of services to the property, any change in the property due to fair wear and tear before completion, or certain representations about “this contract, the property or the title”: the distinction between the property and the title may be noted. In additional clause 33 the purchaser acknowledged that it had made “such enquiries, inspections and investigations of the property” as it saw fit, that various representations including any relating to “the present state or condition of the property” were excluded, and that it “accepts the property in its condition and state of repair as at the date of this Contract”. There was a basis for concluding that, if the question had been one of error or misdescription of the property, the property was the physical thing.
However, the question is not one of error or misdescription of the property. It does not follow that for the purposes of the Act the property agreed to be sold or transferred was the land as physical property. Identifying the property the subject of a contract may depend on why the identification is required. In Travinto Nominees Pty Ltd v Vlattas it was required for the application of the error or misdescription clause, for which the land as a physical thing was distinguished from title to the land. For the purposes of the Act it is necessary to ask whether the property agreed to be sold or transferred was the land or an interest in the land, within one of the relevant descriptions of dutiable property in s 11(1), and the Act is not concerned with compensation for error or misdescription but with charging duty.
In legal usage “land” is not confined to the physical thing, and can mean one of many legal constructs involving an estate in the land or an interest in the land. By s 21(1) of the Interpretation Act 1987, in any Act or instrument it includes “messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, whatever may be the estate or interest therein”. Meanings of “land” are discussed in re Lehrer and the Real Property Act 1900 (1960) 61 SR (NSW) 365 in which it was held that at common law and in relation to subdivision of land under the Local Government Act 1919 the upper floor of a building or the air space it occupied was not land. No doubt for that reason the Dictionary fo the Act defined land to include a stratum, in doing so moving away from the meaning of the ground and what is erected on it.
It is not easy to see what land in New South Wales in para (a) of s 11(1) was meant to catch, when para (l) caught an interest in land in New South Wales. Whether or not a transfer of dutiable property or an agreement for the sale or transfer of dutiable property attracts duty at first sight involves the effect in law of the transfer or agreement. A transfer will ordinarily be of the legal construct, the land as a physical thing having no particular significance to the effect in law of the transfer, although the contract may for other purposes treat what is to be transferred as the physical thing, as in Travinto Nominees Pty Ltd v Vlattas. While many land sales can be spoken of in ordinary usage as a sale of the land as the physical thing, more accurately there is a transfer of the legal construct: for example, the land subject to an easement of which Hope JA spoke in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties could be seen in lay terms as the physical thing, but the conveyance was of the fee simple subject to the easement.
Assuming, however, that land as a physical thing can be dutiable property, I do not think the property agreed to be sold or transferred should be so identified in the present case. An interest in land is also dutiable property, and although the contracts for some purposes treated “the property” as the physical thing they made clear enough that what was sold and to be transferred was the Church’s interest in the land. As well as the reference to the land, the contracts gave title particulars, including the statements of fee simple and of subjection to the various leases. They made express by additional clause 52(c) and (d) that the Trust “acquires its legal interest in the property subject to the Concurrent Lease as existing at the date of this contract”, emphasising that what the transactions were to give the Trust was an interest in the property. What was given to the Trust was subject to the disclosed tenancies, including the 99 year leases, whereby the interest was subject to what the law recognised as proprietary interests (see later in these reasons). The clauses to which I have referred about the condition of the property excluded obligations concerning the physical state of the property, and pointed to a dealing with the Church’s interest in the land rather than the land as a physical thing. In my opinion, for the purposes of the Act the property agreed to be sold or transferred was not the land as physical property.
Identifying an interest in the land
English land law was moulded by the feudal doctrine of tenure, by which all land was held directly or indirectly of the King. The common law developed freehold estates, interests in land held of the King by one whose status was free: an estate in fee simple (which could descend to the holder’s heir), an estate in fee tail (which could descend to a restricted (“tailed”) category of heirs) and a life estate (which would end on the holder’s death). The holder had “seisin”, originally meaning only possession. He was, for example, “seised for an estate in fee simple”.
In language of ownership, the holder did not own the land, but owned his estate in the land. The fee simple is the largest estate known to law. Ownership of an estate in fee simple “is for almost all practical purposes, equivalent to ownership of the land itself: Mabo v The State of Queensland (No 2) (1992) 175 CLR 1 at 80 per Deane and Gaudron JJ.
Leases of land were recognised from early times, but stood outside the system of tenure and estates. A lease was initially regarded as a chattel, gaining the special description of a chattel real. It did not give the lessee seisin, which developed a specialised meaning. The lessee did have as against the lessor a right to exclusive possession, and was said to have an interest in the land. It was also called an estate in the land (eg Chelsea Investments Pty Ltd v Federal Commissioner of Taxation (1966) 115 CLR 1 at 6-7 per Windeyer J), but it was not an estate in the same sense as earlier mentioned: the lessee “had of course no estate in the feudal sense. What we now call a tenancy was not a tenure” (Chelsea Investments Pty Ltd v Federal Commissioner of Taxation at 6). It was a proprietary interest, more than the purely contractual right of a licensee: see Radaich v Smith (1959) 101 CLR 209 at 217 per Taylor J -
“The instrument either makes a grant of an interest in the land or it does not; if it does a leasehold interest is created and if it does not then nothing more than a licence is given.”
Upon the creation of the lessee’s interest in the land the lessor was said to have a reversion, also called a reversionary estate. As long ago as Lord Ward v Lumley (1680) 5 H & N 88; 157 ER 1112 it was said (at 94; 1114), “When a man demises land for a term of years, reserving to himself a rent, the effect of it is to create two estates, viz the estate of the lessee, and the reversion of the lessor … “. In Commissioner of Taxes v Camphin (1937) 57 CLR 127 Latham CJ (with whom Rich and McTiernan JJ agreed) said at 133 -
“When an owner of land grants a lease the lessee obtains a proprietary interest in the land, which is personal property, but the owner has not sold this personal property to the lessee. He himself never was the owner of that personal property. He has created a term in the lessee, and the lessee owns a proprietary interest which he did not own before, but that interest has not been sold to him. The transaction is properly described by saying that the owner of the land has leased his land and has created a term in the tenant and a reversion in himself.”
See also The Wik People v The State of Queensland (1996) 187 CLR 1 at 128 per Toohey J, referring to a reversion as the interest which remains in a grantor who creates out of his own estate a lesser estate. On the termination of the lease there returns to the lessor the right to possession.
Although its feudal origins were long past, the doctrine of tenure was translated to the Australian colonies, and with it the feudal estates in land and other estates or interests. They were recognised in statute law. In the Conveyancing Act 1919, for example, s 19 had the effect of converting an estate tail into an estate in fee simple, there were many references to an interest in land (such as in ss 23C, 23D), and s 117 provided for the lessee’s covenants to run with “the reversionary estate in the land … immediately expectant on the term granted by the lease”; s 118 to similar effect for the lessor’s covenants.
The estates and interests were adopted in the Torrens system of title by registration. In the Real Property Act 1900, the key s 42 provides that -
“ … the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall … hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except … “.
The estates or interests which can be recorded in folios include the fee simple, and the standard form of transfer is expressed to transfer “an estate in fee simple”. The Real Property Act also provides in s 53 for registration of leases, and s 40(3) specifically states -
“The person recorded in any folio of the Register as entitled to the land therein described shall be held in every Court to be seised of the reversion expectant upon any lease that may be recorded thereon, and to have all powers, rights, and remedies to which a reversioner is by law entitled, and shall be subject to all covenants and conditions therein expressed to be performed on the part of the lessor.”
The transfers executed by the Church pursuant to the contracts were in the standard form, and expressed transfers of “an estate in fee simple”.
The Chief Commissioner submitted to the effect that, the fee simple being an estate in the land, the lessor remains seised of the estate after granting a lease because the lessee’s interest is not properly an estate. The lessee’s interest in the land does not cut down the fee simple estate, and a conveyance or transfer of the reversion is in truth a conveyance or transfer of the fee simple, albeit subject to the lease. The property agreed to be sold or transferred in the present case was, if not the land as physical property, the fee simple, and in the Chief Commissioner’s submission the existence of the various leases went only to its value.
The Trust submitted to the effect that the grant of a lease creates a reversionary estate distinct from the fee simple, and what is conveyed or transferred is the reversion. The lessee’s interest is not “carved out of” the fee simple, with the fee simple remaining in the lessor subject to the lease. The Trust contrasted the grant of a lease with the creation of a trust over land, the creation of the trust reducing the value of the fee simple but not altering its nature: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (HC) at 474 per Brennan J; Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 at [60]-[61].

Each submission is correct so far as it goes, and as later explained I do not think that the identification of the interest in land in the present case is a choice between the fee simple and the reversion. The fee simple remains in the lessor, although the lessor parts with the right to possession, and the lessee’s interest (which has been described as “carved out of the freehold”, see Ingram v Inland Revenue Commissioners (2000) 1 AC 293 at 310 per Lord Hutton) co-exists with the estate in fee simple. But the lessor’s freehold estate subject to the lease is regarded as an interest in the land, the reversion, and it is correct to refer to it as such. Thus in Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd at [49] Gleeson CJ and Gummow, Kirby and Hayne JJ said of Commissioner of State Revenue (Vic) v Bradney Pty Ltd (1996) 34 ATR 233, in which the freehold was sold subject to a long term lease, “What was sold was the freehold interest subject to a pre-existing lease; the reversion”. The same correspondence between the fee simple subject to a lease and the reversion, although differently expressed, can be seen in City of Rockingham v PMR Quarries Pty Ltd (2001) 118 LGERA 93, where Hasluck J said at 98 -
“Once a lease has been created, the continuing interest in the land held by the landlord is the leasehold reversion. A further consequence of the doctrine of estates, whereby legal entitlements are separated from the land itself, is that the landlord as owner and holder of the leasehold reversion, is at liberty to sell the freehold estate during the term of the lease.”
The choice between the fee simple and the reversion is in the present context a false dichotomy. Rather, it is necessary to consider the nature and extent of the interest in land. Labels given to estates or interests according to ancient principles of land law are not taken up by the Act, which refers in general terms to an interest in land and elucidates that reference by the inclusory definition of an estate or proprietary right. The enquiry must seek accurately to identify the interest in land, not just by a label.
In Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd, after referring to the necessity for accurate identification of the estate or interest in real property conveyed or transferred by the dutiable instrument, Gleeson CJ and Gummow, Kirby and Hayne JJ said at [39] -
“An example (since reversed by legislation) of a provision in a dutiable instrument qualifying, and thus affecting the value of, the subject property is to be found in Stanyforth v Inland Revenue Commissioners, where a deed of partial resettlement of certain estates contained a power of revocation and new appointment. The House of Lords considered that in ascertaining the value, on a sale in the open market, of the property transferred or conveyed, it was necessary to consider the property "with all its incidents, including provisions for defeasance either in whole or in part, powers vested in persons not controlled by the vendor to create charges taking precedence of the property sold, and so forth". The power of revocation contained in the deed affected the nature, and therefore the value, of the subject matter of the conveyance or transfer.”
In that case the contract of sale provided for the vendor to retain contractual rights to tipping of waste on the land. The question was whether the value of the land was the amount for which the fee simple could be sold, or whether allowance should have been made for the contractual rights which diminished its value. The question was answered by regard to what was sold, not simply the value of what was sold.
Their Honours said (at [41]) that the tipping rights “rested in contract”, and their retention “did not create any proprietary interest which qualified [the vendor’s] title to the land”, and (at [44]) that the real property to be valued was the fee simple “unqualified by any exception or reservation, or any other outstanding proprietary interest”. Referring them to a broad equivalent to s 24 of the Act in s 63(3A) – (3C) of the Stamps Act 1958 (Vic), their Honours said (at [52]) that the tipping rights were not an interest which reduced the value of the property.
Implicit in this was that the property was not the fee simple without regard to other interests in the land, and that in identifying the property a proprietary interest which “affect[ed] the nature” of the property or “qualified the title to” the property would be taken into account. A lease is a proprietary interest, and on their Honour’s reasoning would be taken into account. That is confirmed by what their Honours said of Commissioner of State Revenue (Vic) v Bradney Pty Ltd. The Stamps Act (Vic) charged duty on a “conveyance of real property and land transfer”, and relevantly provided that the value of real property was the amount for which it might reasonably have been sold in the open market “free of encumbrances”. It was held, contrary to the Commissioner’s contention, that the lease subject to which the freehold was sold was not an encumbrance; “encumbrance” meant something in the nature of a mortgage or charge. Their Honours said (at [49]) of “the assumption upon which the argument [in that case] proceeded” -
“What was sold was the freehold interest subject to a pre-existing lease; the reversion. The pre-existing lease qualified the nature and extent of the proprietary interest that was available to be transferred. Subject to the possibility that it might be said to be an encumbrance, it was to be taken into account in considering the nature, and therefore the value, of the property that was transferred.”
In the adoption of Hope JA’s observations in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties in the Court of Appeal, their Honours also accepted identification of the property conveyed by an instrument as the fee simple subject to an easement, being “the property which the conveyor has to convey”.
In DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties in the High Court Mason J had given an example of the need accurately to identify the property conveyed or transferred by the dutiable instrument, saying (at 450) –
“A conveys an absolute estate in fee simple to B and takes from B a lease back for fifty years. If the appellant is correct, A has conveyed, not an absolute estate in fee simple, but the reversion expectant on the determination of a lease for fifty years and the conveyance is to be assessed for duty on this footing. How the lease is to be assessed on this approach does not emerge. Fortunately we do not have to solve this problem for the true position is that each instrument is to be separately assessed, the conveyance being assessed to duty on the property conveyed, viz an absolute estate in fee.”
In Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd Gleeson CJ and Gummow, Kirby and Hayne JJ said of this example (at [37]) that -
“ … it should be noted that there is a difference between the case of a pre-existing lease, and a conveyance of the reversion, on the one hand, and a conveyance of an absolute estate in fee simple with a lease back to the vendor. In its effect upon the financial position of a purchaser, the difference may be immaterial; but in considering liability to stamp duty it may be crucial.”
See also DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties in the Court of Appeal, in which Hope JA said (at 523) of the property conveyed by an instrument -
“Interests in the land may have been created before the relevant conveyance was executed, which, although not referred to in the conveyance, change the nature or limit the extent of the property conveyed. Thus a conveyor of land under common law title might validly create an easement over his land by a deed duly registered under the Registration of Deeds Act, 1897. Any subsequent conveyance by him of the legal fee simple would be subject to the rights created by the previously registered deed; and the property conveyed by or comprised in that subsequent conveyance would be the property subject to the easement.”
In Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue, again concerned with the value of property for the purposes of the Stamps Act (Vic), land was sold on which stood storage tanks and other fixtures which had been separately sold to Whitemark Rollover. It was held that the fixtures were not to be taken into account in arriving at the value of the land. Whitemark Rollover had acquired an equitable interest in the land and, with extensive reference to Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd amongst other cases, although the fee simple in the land was transferred the equitable interest was an outstanding proprietary interest which qualified the estate in the land. Although his Honour sometimes spoke of it more generally as if going to the value of the land, I understand Ormiston JA (with whom Warren CJ and Buchanan JA agreed) to have considered that outstanding interest meant that the property to be valued was the qualified vendor’s estate; see for example his Honour’s rejection (at [68]) of the Commissioner’s reliance on the transfer of an estate in fee simple -
“That, however, takes one very little further along the relevant path of enquiry. The language so used is required by the terms of the Transfer of Land Act 1958 and, in a sense, is a shorthand devised to allow the simple passing of interests in real estate from transferors to transferees, but it does not deny that under or pursuant to that act other interests not mentioned in the transfer may affect that which is transferred and that other interests which are incapable of registration may be enforced indirectly, in particular by the caveat procedure.”
The cases to which I have referred were not decided on the Act, and it is necessary always to attend to the language of the relevant statute. In my view, however, it is in accord with the Act’s description of dutiable property as an interest in land, expanded to an estate or proprietary interest, to identify the interest in land agreed to be sold or transferred taking account of a leasehold interest subject to which it is sold. What is agreed to be sold or transferred is a qualified interest in the land, and it would mis-identify the interest not to recognise the leasehold interest qualifying it. It is also what the vendor has to convey or transfer. It does not matter whether the interest is labelled the fee simple subject to the lease or the reversion expectant on the lease.
Returning to Travinto Nominees Pty Ltd v Vlattas, on which the Chief Commissioner relied, Barwick CJ’s observation (at 12) that a sale of land subject to existing tenancies and occupancies “does not convert the subject matter of the sale from land into a reversion or reversionary interest in land” was prefaced by the hypothesis, “if the subject matter of the sale is an area of land”. His Honour’s succinct opinion (at 14) that “a sale of land subject to existing tenancies and occupancies is not a sale of a reversion” harked back to his earlier observation. If the sale is of an area of land, by which his Honour appears to have meant land as the physical thing, that may be accepted. But I do not think that these passages deny that there can be a sale of a reversion, or stand against what I have said in the preceding paragraphs.
What interest in land in the present case?
Gzell J held that the dutiable property was the Church’s reversions, rather than the fee simple, concluding (at [49]) that “modern text writers, modern decisions of the Courts and the express terms of the Real Property Act 1900, recognize that a reversionary estate is created when a lease is granted”, and (at [51]) that “[t]he reversionary estates, and not the fee simple estates, were the dutiable property the subject of the dutiable transactions under the four contracts for sale”.
However, his Honour appears to have regarded the dutiable property as the reversions created when the short term leases were granted and expectant on the short term leases, and not the reversions expectant on the 99 year leases. The nub of his reasons at this point was -
“53 … When the existing leases were created by the Uniting Church bodies, the residue of those bodies’ interests in the properties constituted their reversionary estates. When the concurrent leases were granted, the concurrent leases constituted pro tanto dispositions of the reversions or leases of them.
54 In the case of the concurrent leases here in question, therefore, the Uniting Church bodies held reversionary estates when the concurrent leases were granted. The effect of the grants of the concurrent leases was to reduce the dutiable value of the reversions because the rent payable by the existing tenants to the Uniting Church bodies became payable to Trust Co during the term of the overlap between the leases.
55 In my view, therefore, the grants of the concurrent leases were arrangements affecting the dutiable value of the reversionary estates of the Uniting Church bodies. …
62 Trust Co submitted that the grant of each lease, whether concurrent or not, involved the creation of a new reversionary estate. I reject that submission.
63 The reversionary estate in land constitutes the residue of the grantor’s estate that has not been the subject of a disposal by grant. That residuary estate may be affected by later disposals by subsequent grants. Upon a later disposal, the reversionary estate does not cease to exist to be supplanted by a new one. The very nature of a reversion is that it is that interest in the land that has not been conveyed away. It is the retention by the grantor of the remaining interest in land consequent upon a grant of an estate that is less than the whole interest held by the grantor. As further dispositions are made, the reversionary estate is reduced. And, correspondingly, as one of a number of leases determines, the reversionary estate is augmented. But there must always be a reversionary estate when lesser estates have been carved out of land, because, as Blackstone said, the fee-simple of all lands must abide somewhere.”
In this, in my respectful view, his Honour’s reasoning went astray. The dutiable property was not the reversions as abstract interests in the land, so that they, the reversions, were affected by the grant of the 99 year leases. It was the reversions as they stood after the grant of the 99 year leases, being the Church’s interests in the land as qualified by both the short term leases and the 99 year leases.

A purposive construction?

Commissioner of State Revenue (Vic) v Bradney Pty Ltd was not concerned with the identification of what was conveyed or transferred. The question for the Court was treated as one of value, because the value of the freehold subject to the lease was much less than the value of the freehold free from the lease. However, payment of less duty by structuring a sale as the grant of a long term lease followed by transfer of the fee simple underlay the question, and structuring a sale in that manner received support when a lease was held not to be an encumbrance.
The Chief Commissioner submitted that s 24 in its form when the Act came into force was intended to overcome the effect of the decision, and to inhibit the payment of less duty by a sale so structured. He said that the intention was made clear on the introduction of the amended s 24 in the form presently relevant. The original s 24 had limited its application to when the dutiable transaction was less than 12 months after the arrangement. The amendment was made by the State Revenue Legislation Amendment Act 2002, and removed the limitation. At the second reading of the Bill the Parliamentary Secretary, Mr Whelan, said that amendments to the Act were necessary “to counter an increase in duty avoidance practices”. When the Bill was in the committee stage he said that methods of avoiding duty on the transfer of property by utilising long term leases had been “recently uncovered”, of which one scheme -
“ … involves a ‘purchaser’ entering a long-term lease, with any rent or premium payable on or soon after the commencement of the lease, and obtaining an option to purchase the fee simple, which has a reduced value because of the lease. After 12 months the lessee exercises the option and acquires the fee simple for a nominal amount. As the fee simple is acquired more than 12 months after the arrangement was entered into, the current avoidance provisions will not apply. The bill strengthens the current provisions by removing the 12-month time limit, so that the effect of the arrangement on the dutiable value of the property is disregarded if the transaction is between associated persons, or if the Chief Commissioner is satisfied that the purpose of the arrangement was to reduce the dutiable value.”
The Chief Commissioner submitted that the Act should be construed so as to promote its underlying purpose or object (Interpretation Act, s 33), and that “the purpose of Parliament in amending s 24 was to use it as a weapon against duty avoidance arrangements of this kind”. He said that the purpose was to be found from the extrinsic material (Interpretation Act, s 34(2)(f), (h)), and that in determining the meaning of s 24 consideration could be given to it because acceptance of the Trust’s submission would lead to a manifestly absurd or unreasonable result (Interpretation Act, s 34(1)(b)(ii)).
The purpose or object underlying the Act is not the same as the purpose in enacting s 24, and that a result is manifestly absurd or unreasonable must be found prior to regard to the extrinsic material. Unless the starting-point be that parties should structure their transactions so as to pay more duty than another structure would involve, it is by no means clear that the Act should be construed so as to give s 24 the widest reach, or that the result of sale in the manner adopted in the present case is manifestly absurd or unreasonable. Nothing in s 24 directs it at prior long term leases as distinct from other arrangements.
Be that as it may, the Parliamentary intention as expressed in the words of the Act, not the words of the responsible Minister, must govern its construction. As was said by Mason CJ and Wilson and Dawson JJ in re Bolton; ex parte Beane (1987) 162 CLR 514 at 518, while the Minister’s speech is available as an aid to interpretation, it is not determinative: “The words of a Minister must not be substituted for the text of the law”. The primacy of the words of the statute has recently been emphasised by Gleeson CJ and Gummow, Hayne and Heydon JJ in GLG Australia Pty Ltd (2006) 225 ALR 643 at [22]; the concluding sentence of the paragraph is, “The words of the statute, not non-statutory words seeking to explain them, have paramount significance”. Kirby J said at [82] -
“This Court has repeatedly insisted that the Second Reading and other speeches in Parliament may only be used to throw light on the meaning of legislative words, to the extent that such speeches are sustained by the legislative text as subsequently adopted. It is in the nature of parliamentary speeches that they commonly lack the precision of statutory language. They can sometimes be motivated by forensic and political factors. They occasionally stray into hyperbole. The rule of law requires that this Court give effect to the purpose of Parliament expressed in the law made by or under an enactment. It is not part of a court's function, as such, to give effect to parliamentary speeches, ministerial media releases or other informal statements unless, validly, they have the specific endorsement of a parliamentary enactment. Saying this is not to discourage the proper use of such materials. It is simply to insist on the primacy of the enacted law.”
It can be misleading to speak of “the legislative intention” or “the purpose of Parliament”, although they are useful phrases if properly understood: see Mason, “The Intent of Legislation”, (2006) 27 Aust Bar Rev 253. The legislature may have a target, but the legislation must hit it. Assuming the purpose as submitted by the Chief Commissioner, the words of s 24 did not carry it into effect.
Conclusion

The dutiable property subject to the dutiable transaction was the Church’s interests in the land as qualified by the 99 year leases. The entry into the 99 year leases did not affect the dutiable value of that dutiable property within the meaning of s 24 of the Act. The 99 year leases could not be disregarded in determining the dutiable value.
Orders
The Chief Commissioner did not suggest that the orders sought by the Trust, if its appeal were allowed, were inappropriate. One of the orders was a declaration that s 24 did not apply; that is sufficiently given effect by the other orders, and a declaration of a step in the reasoning to substantive orders should ordinarily not be made. Apart from the declaration, I adopt the substance of the orders sought by the Trust.
I propose the orders -
1. Appeal allowed and cross-appeal dismissed.
2. Set aside the orders made by Gzell J on 11 August 2006.
3.The decision of the Chief Commissioner dated 10 March 2005 whereby he disallowed the Trust’s objection dated 29 September 2004 (the Objection) against the Chief Commissioner’s assessment dated 31 August 2004 (the Assessment) be set aside.
4.Order that the Objection be allowed.
5.Order that the Assessment be set aside.
6.Order that the Chief Commissioner refund duty of $3,668,607.50 paid by the Trust pursuant to s 104 of the Taxation Administration Act 1996 (NSW), together with interest.
7.Order that the Chief Commissioner pay the Trust’s costs of the proceedings in the Equity Division and of the appeal and cross-appeal.
SANTOW JA:
INTRODUCTION
This appeal challenges the application of the avoidance provisions of s24 of the Duties Act 1997 (NSW) (the “Act”) to a set of property arrangements. Under them, property consisting of a reversionary estate in land passed in each case under an agreement for its sale. The value of what passed was depressed by a newly entered concurrent 99-year Lease on which the reversion was expectant. The new reversion brought about by the 99-year concurrent lease replaced and extinguished an earlier reversion over the same land. The latter was expectant on shorter-term existing leases. Hence the later reversion was of lesser dutiable value than the earlier one. The intended result was that less duty was payable overall than if the earlier and more valuable reversion had been sold. The question is whether s24, as in force at 28 July 2003 when the “dutiable transaction” under the Act took place, was capable of applying in the particular circumstances of the transaction and did so.
The appellant’s argument to the contrary, which failed at first instance, essentially was this. Section 24 could not apply, as the section required a reduction in the dutiable value of existing property the subject of the dutiable transaction, not the substitution of less valuable property for more valuable property, being here the two reversions.
The trial judge Gzell J held that s24 did apply, for reasons elaborated below; see Judgment at [53]-[54].
ELABORATION
Section 24 was at the relevant time framed in the following terms:
“24     Arrangements that reduce the dutiable value
An arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction is to be disregarded in determining the dutiable value of the dutiable property if:
(a)     the dutiable transaction is between associated persons, or
(b)     the Chief Commissioner is satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property.”
This version of s24 replaced an earlier version of s24, pursuant to the State Revenue Legislation Amendment Act 2002. Its legislative history, as an amendment moved during the second reading of the bill “to close a loophole with regard to the use of long-term leases rather than freehold ownership of a property” was recounted at [70] in the judgment:
[70]The amendment to the Duties Act 1997, s 24 was not included in the State Revenue Legislation Amendment Bill 2002 when it was originally introduced to Parliament. During the course of the second reading of the bill, the government introduced a number of amendments, including the amendment to s 24. In course of the debate, Mr J H Turner, Deputy Leader of the National Party, commented (Hansard, Legislative Assembly, 13 November 2002, at 6726):
’… these amendments seek to close a loophole with regard to the use of long-term leases rather than the freehold ownership of a property. As the rate of stamp duty on a lease, which is 35¢ per $100, is far lower than the rate of duty on the transfer of land — up to 5.5% — there is significant incentive to structure a property deal in this way.’
Mr Whelan, Parliamentary Secretary, responded:
’I foreshadow amendments to the bill. Since the introduction of the bill the Government’s attention has been drawn to the need to make further amendment to the Duties Act to counter an increase in duty avoidance practices. The Office of State Revenue monitors business practices to identify emerging trends that may result in revenue leakage. Recent evidence suggests an escalation in the use of certain practices to avoid duty. Any delay introducing these amendments has the potential to encourage more widespread use of the practices at significant risk to revenue. I commend the bill to the House.’ “
The primary judge observed:
”[71]But what the mover of the amendments thought, cannot be substituted for the text of the legislation. If authority be needed for that proposition, it was recently stated in Nominal Defendant v GLG Australia Pty Ltd (2006) 80 ALJR 688 at [22]: “The words of the statute, not non-statutory words seeking to explain them, have paramount significance.”
I pause to note that while this proposition is true, it does not preclude recourse to such parliamentary debates in order to ascertain legislative purpose and in particular the mischief sought to be remedied by legislation; see for one example among many the often quoted passage in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; 141 ALR 618 at 634-5 where Brennan CJ, Dawson, Toohey and Gummow JJ observed that:
”….. the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as [reference to reports of law reform bodies], one may discern the statute was intended to remedy: Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436 at 461, cited in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 312, 315. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent: Cooper Brooks (Wollongong) Pty Ltd v FCT (1981) 147 CLR 297 at 320-1.”
The dutiable transaction, entered into on 28 July 2003, consisted of four contracts for sale of land (“the contracts”). These contracts comprised four parcels of land then owned by two separate bodies of the Uniting Church in Australia. The land was located at Homebush Bay (“the properties”). The purchaser under the contracts for sale was the Trust Company of Australia Limited (“TCL”), the former name of the entity that is the appellant in this appeal. The respondent is the Chief Commissioner of State Revenue.
Each of the four parcels of land had been subject to a pre-existing lease though in the case of one parcel of land only, over only part of that land (“the existing leases”). Subsequently, and prior to sale, a longer term concurrent 99-year Lease over each parcel was granted by the Uniting Church as owner in favour of the appellant (“the concurrent leases”). They were accompanied by a put and call option to purchase in each case. The options were later exercised, and sale transactions were entered into pursuant to agreements for sale and subsequently brought to completion. The concurrent leases were stamped at a lesser rate of lease duty than applied to a sale and the sale was now of property of a lesser value. The result was a reduction in the aggregate duty on the overall transaction compared to the amount which would have been payable without the 99-year concurrent leases.
The central issue in this appeal is whether the primary judge erred in concluding that s24 of the Act applied so as to entitle the Commissioner to disregard the 99-year Lease over each of the relevant properties contracted to be sold.
The Chief Commissioner assessed each contract for sale, treating it as the relevant “dutiable transaction”. He did so in reliance on s24 and on the basis that the relevant “arrangement” for the purposes of s24 comprised the 99-year Leases; see Judgment at [9] and [60]. The total assessed duty was $3,668,607.50, based on the aggregate unencumbered value of the dutiable property, being $66,965,625.
That assessment was the subject of objection, dealt with by the Chief Commissioner in a letter dated 10 March 2005 as follows:
“Section 24(1)(b) of the Act required the Chief Commissioner to be satisfied that a significant purpose of the arrangement was the reduction of the dutiable value of the dutiable property.
We are satisfied that the substance of the sale arrangement was to reduce the dutiable value of the dutiable property (being the estate in fee simple). That is, we consider that the purpose of entering into the concurrent leases was to reduce the dutiable value of the dutiable property, as the ultimate objective was to transfer the land and buildings to the Purchaser. In support of this contention, we would argue that under the arrangement the concurrent lessee/Purchaser obtained rights equivalent to, or normally associated with that of an owner (such as the entitlement to receive all the rents and profits from the land).”; Blue 6.1284.
The appellant’s contention is essentially that, the first reversionary estate created by the existing leases having ceased to exist by reason of the later concurrent leases, the new reversionary estate subsuming it could not be said to have been reduced in dutiable value as required by s24(b), as the new reversion did not exist before entry of the concurrent leases. This was so, though the new reversion, expectant on 99-year Leases, had a lesser value than the reversionary estate it replaced as the latter was expectant on shorter-term leases.
The appellant’s contention on appeal was crystallised in these terms:
“The appellant (“TCL”) contends that:
(a)the dutiable property the subject of each Contract for Sale is the vendor’s reversionary estate in the land following the grant of the 99-year Lease – not, as the primary judge held [see paras [51], [53] and [62] – [63], Red, 29, 30, 31] the reversionary estate arising when the vendor granted each earlier lease over the land (see para 7(d) below);
(b)the ‘arrangement’, being each 99-year Lease, created that dutiable property and, for that reason, did not ‘affect’ the dutiable value of the dutiable property so as to reduce it;
(c)consequently, it cannot be said that any party to the ‘arrangement’ had the reduction of the dutiable value of the dutiable property as its significant purpose.”
The respondent cross-appealed as follows:
(1)The primary judge erred in finding that the dutiable property the subject of each of the contracts by the vendors was their reversionary estates expectant on the leases (at [51]).
(2)The primary judge should have held that the dutiable property the subject of the dutiable transactions under the four contracts for sale was the land or fee simple estate in each of the parcels of land transferred.
(3)The primary judge erred in finding that s24 of the Act (NSW) did not assist in maintaining the contention in paragraph (2) in the circumstances of this case (at [69]).
(4)The primary judge should have held that s24 operated to permit the concurrent leases to be disregarded because they constituted an arrangement which affected the dutiable value of dutiable property (being the land or the estate in fee simple in the land) the subject of a dutiable transaction, and because the Chief Commissioner could be satisfied that a significant purpose of a party to the arrangement was a reduction of the dutiable value of that dutiable property.
I elaborate below by way of chronology on the salient facts concerning the sale transactions, none of which are in dispute.
SALIENT FACTS
(1) 20 December 2001: A “heads of agreement” (no copy of which was before this Court) was entered into under which it was proposed that the Macquarie Goodman Industrial Trust would purchase four parcels of land, located respectively at 1-7 Carter Street, 9-13 Carter Street, 15 Carter Street and Lot 23 Uhrig Road, Homebush Bay, from the then owners. The then owner of the first property was The Uniting Church in Australia Property Trust (Q.), and of the other three Properties was The Uniting Church (NSW) Trust Association (collectively “the Uniting Church Bodies”). The total consideration for the sale was to be $66 million.
(2)30 January 2002: Macquarie Goodman put forward a proposal (Blue, 49-52, in particular Blue, 50E-K) that, instead of acquiring the properties by outright sale, the Uniting Church Bodies would enter into long-term concurrent leases of the Properties in favour of the appellant (known at that time as the Trust Company of Australia Limited or TCL). The parties were to enter into put and call options in respect of the properties, which were to be exercised no sooner than 12 months and 1 day after the commencement date of the concurrent leases.
(3)1 February 2002: The Uniting Church Bodies accepted the above proposal put forward by Macquarie Goodman.
(4)12 February 2002: The Uniting Church Bodies and TCL entered into four agreements for lease, one for each of the properties, under which the relevant Uniting Church Body agreed to grant a 99-year Lease of the land to TCL (“Agreements for Lease”); see Blue, 81-137, 138-189, 190-242 and 243-294 respectively.
Each Uniting Church Body and TCL then entered into a 99-year Lease in respect of each property (“99-year Lease”); see Blue, 295-312, 314-330, 332-348 and 349-365 respectively, pursuant to the Agreements for Lease. Under the 99-year Leases, TCL had no right to any refund of the rent in the event of early termination. The 99-year Leases were expressed to be subject to existing leases having a shorter term (“Existing Leases”). Three of the 99-year Leases appear to have been lodged for registration on 15 February 2002 (see Blue, 313), with the remaining 99-year Lease being lodged on 1 March 2002 (see Blue, 366). There does not appear to be any further indication, on the available evidence of the precise times of registration. The Existing Leases were over the entirety of the land in the case of all the properties except for the 15 Carter Street property, where the Existing Lease was over part only of the land that was the subject of the 99-year Lease.
TCL and the Uniting Church Bodies contemporaneously entered into four separate offer deeds (“Offer Deeds”); see Blue, 367-412, 413-458, 459-504 and 505-552 respectively under which the Uniting Church Bodies offered to sell each property (as described in a contract annexed to each Offer Deed) and TCL offered to buy each property, for a total consideration of $1,850,000.
(5)14 February 2002: The four 99-year Leases were stamped with lease duty (in aggregate) of $227,920.70 pursuant to Chapter 5 of the Act, and each Agreement for Lease was stamped with nominal duty of $2 (see the relevant Blue Appeal Book references above for each document).
(6)1 March 2002: Under each 99-year Lease the rent for the entire term was payable on the commencement date. That rent, amounting in aggregate to $65,120,125, was paid in full by 1 March 2002.
(8)13 November 2002: The State Revenue Legislation Amendment Act 2002 (NSW) commenced, amending inter alia s24 of the Duties Act. The amendments rendered the section in the form quoted above.
(9)12 and 13 March 2003: Four deeds of variation were entered into between the parties amending the Offer Deeds so that TCL was entitled to accept the offers to sell the Properties after the date 12 months and one day after the commencing date of the relevant 99-year Lease, but before 4pm on 31 July 2003.
(10)28 July 2003: TCL accepted the offers to sell made in the Offer Deeds and entered into four Contracts for Sale of Land (“contracts”), one for each of the properties, for a total consideration of $1,850,000. On the first page of each contract, the box marked “FEE SIMPLE – ownership” had been checked. Further, clause 52(c) and (d) of each contract stated that the purchase was to be made subject to the 99-year Lease for that property (referred to as the “Concurrent Lease”).
The Uniting Church Bodies executed transfers in registrable form in favour of TCL, pursuant to the contracts.
(11)30 August 2003: The respondent assessed the contracts for stamp duty.
The Primary Judgment
The appellant sought a review of the decision of the respondent in disallowing the objection, in the Supreme Court. The matter came before the primary judge for hearing on 19 July 2006 and was determined on 11 August 2006. The submissions put forward by the parties below were focused principally on the identification and characterisation of what was the dutiable property the subject of the contracts. The primary judge summarised the various arguments (and what his Honour described as a lack of argument as to duty avoidance purpose) as follows:
“10Trust Co submitted that the dutiable property the subject of the contracts for sale were the reversionary estates of the Uniting Church bodies and since those reversionary estates were created when the concurrent leases were granted, the arrangement identified by the Chief Commissioner could not have given rise to a reduction of the dutiable value of the dutiable property in question.
11Trust Co raised a secondary argument that the Duties Act 1997, s24 was an annihilating provision only, the Chief Commissioner had no power to reconstruct the transactions and if, contrary to the primary submission, the concurrent leases were to be ignored, no reversionary estate would exist and the dutiable value of the dutiable property would be the purchase price as its unencumbered value would be nil.
12Trust Co raised no argument against the proposition that a significant purpose of the rearranged transaction was the reduction of duty.
13The Chief Commissioner’s principal argument was that the dutiable property was the estate in fee simple in each parcel of land. That was how the properties were described. Further, it was submitted that as a matter of law, no reversion arises in a lessor upon the grant of a lease.
14The Chief Commissioner raised a secondary argument that if a reversionary estate arises on the creation of a lease, that reversionary estate already existed prior to the grant of the concurrent leases because of the existing leases with respect to each property.”

The reasons for the primary judge’s concluding in favour of the Chief Commissioner were summarised by the appellant in these terms:
(1)As a consequence of the grant of the 99-year Leases, all that the Uniting Church Bodies had left to convey to TCL, and all that they agreed to convey under the contracts, was the reversionary estate expectant on the 99-year Leases; Judgment [25].
(2)The fact that the lessor of land, as here, is the registered proprietor of an estate in fee simple in the land under the Real Property Act 1900 at the time a lease is granted does not deny the proposition that on the grant of the lease, a reversionary estate is created; Judgment [28]-[29], [34] and [49].
(3)The grant of a concurrent lease does not create a reversionary estate in the land – rather, a reversionary estate has been created by the grant of the earlier lease and the concurrent lease constitutes a pro tanto disposition of the reversionary estate under that earlier lease; Judgment [51], [53] and [62]-[63].
(4)As the 99-year Leases were concurrent leases, the dutiable property the subject of the dutiable transaction under each contract was the reversionary estate created by the grant of the earlier leases; Judgment [51] and [72].
(5)The effect of the grant of the 99-year Leases was to reduce the dutiable value of the reversionary estate created by the earlier leases; Judgment [54] and [63].
(6)The grant of each 99-year Lease was an arrangement affecting the dutiable value of the reversionary estate created by the grant of the earlier lease and, since “purpose was not put in issue by Trust Co”, the Commissioner was entitled to disregard the 99-year Leases under s24; Judgment [55] and [72].
The appellant agrees that steps (1) and (2) of the primary judge’s reasoning are correct. However, steps (3) and following are submitted by the appellant to be fundamentally flawed. The key error in the primary judge’s reasoning is said to arise at step (3). It is submitted that it was the primary judge’s conclusion that the grant of the 99-year Leases did not involve the creation of a new reversionary estate because they were concurrent leases. That led his Honour to incorrectly identify (at step (4)) the dutiable property the subject of each contract as being the reversionary estate created on the grant of the earlier leases over each property.
I should add to that summary what I consider to be an important elaboration of the primary judge’s reasons, namely that contained in [59], [62] and [63]:
”[59]In accordance with the decision in Ingram, a reversionary estate was created in a Uniting Church body that granted an earlier lease over part only of its land. When the later lease was granted to Trust Co, there was a pro tanto disposition of the reversionary estate, or a lease of it, so far as the portion already leased was concerned. And there was a reduction in the reversionary estate for that part of the lease to Trust Co that was over portion of the land not already leased. To the extent to which the earlier lease and the lease to Trust Co overlapped there was a reduction in the dutiable value of the reversion because, with respect to the portion already leased, Trust Co became entitled to the rent in place of the Uniting Church body.
……
[62]Trust Co submitted that the grant of each lease, whether concurrent or not, involved the creation of a new reversionary estate. I reject that submission.
[63]The reversionary estate in land constitutes the residue of the grantor’s estate that has not been the subject of a disposal by grant. That residuary estate may be affected by later disposals by subsequent grants. Upon a later disposal, the reversionary estate does not cease to exist to be supplanted by a new one. The very nature of a reversion is that it is that interest in the land that has not been conveyed away. It is the retention by the grantor of the remaining interest in land consequent upon a grant of an estate that is less than the whole interest held by the grantor. As further dispositions are made, the reversionary estate is reduced. And, correspondingly, as one of a number of leases determines, the reversionary estate is augmented. But there must always be a reversionary estate when lesser estates have been carved out of land, because, as Blackstone said, the fee-simple of all lands must abide somewhere.”
DISPOSITION
The trial judge noted (Judgment [55] and [60]), that the appellant did not put in issue the question of its purpose in undertaking the arrangement. The appellant did indeed concede below (Black, 7P-Q) and on appeal (see appeal transcript T, 20.34-35) that its purpose had been to minimise the amount of duty payable in the transaction. Yet it disputed, clearly at least on appeal (appeal transcript T, 20.30-33) whether that purpose was commensurate with the relevant purpose in s24 as it conceived it namely reduction in dutiable value of existing property. Taking the dutiable transaction to be the agreements for sale constituted by the four contracts, it could not be disputed that, looking at the prior steps, in particular entry into and subsequent registration of the 99-year concurrent leases, a significant purpose of the appellant was to bring about a situation whereby the dutiable value of the dutiable property the result of the concurrent leases was less than it would otherwise have been, with consequent reduction in the duty payable overall. The appellant as purchaser was of course liable for any duty.
For reasons elaborated below, I consider that those prior steps constituted “an arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction” within the opening words of s24 of the Act recognising the wide import of the word “affecting”. I consider that the Chief Commissioner was entitled to be satisfied that a significant purpose of the appellant as party to the arrangement “was the reduction of the dutiable value of the dutiable property”. I conclude that this entitled the Chief Commissioner, by application of s24 of the Act, to disregard those earlier steps consisting of the entry into and registration of concurrent leases when determining the dutiable value of the dutiable property.
Section 24 of the Act does not require that an arrangement affecting the dutiable value of dutiable property need be contemporaneous with the entry into of the dutiable transaction itself. Rather it may precede it as here. This is borne out by the legislative history of s24, set out in Hill, “Duties Legislation” (LBC Looseleaf):
”The main differences between the original section and that which replaced it in 2002 were that as originally enacted the arrangement affecting the dutiable value of dutiable property had to be entered into within 12 months before a dutiable transaction. Further, it was necessary under the previous section that the arrangement, whether or not between associated persons, be entered into with the intention of reducing the dutiable value of dutiable property. There was no longer a time limit and the arrangement might be disregarded for the purposes of calculating the duty on a dutiable transaction whenever the arrangement was entered into, so long as the dutiable transaction was between associated persons or the Chief Commissioner was satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property. Where the arrangement was between associated persons their purpose was irrelevant. It would not seem to have been necessary that at the time the arrangement was entered into any dutiable transaction was envisaged so long as a significant (not dominant or sole) purpose of the arrangement (if not between associated persons) was to reduce the dutiable value of dutiable property. Under the original section it was uncertain whether the intention required had to be the sole intention or whether it would suffice if it were the dominant intention. The section as amended in 2002 was itself replaced in 2003 by the State Legislation Further Amendment Act 2003.”
Section 24 is capable of applying if its two conditions are satisfied:
(a)there is an arrangement “affecting” the dutiable value of dutiable property; and
(b)the Chief Commissioner is satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property.
I consider that condition (a) was clearly satisfied, for reasons which I elaborate when dealing with condition (b). I consider that condition (b) above was also capable of being satisfied on two bases, elaborated below.
First, I consider condition (b) satisfied where a party, as here, causes existing property to be transmogrified into new property of lesser dutiable value, though this is by an arrangement entered into before the relevant dutiable transaction takes place, whereby the transmogrified property passes. That result was brought about by the interposition of a registered 99-year concurrent lease in each case, whose effect was to bring into being a less valuable reversion than pre-existed, so reducing “the dutiable value” of “dutiable property” as defined by the Act. That reduction was undeniably “a significant purpose” of the appellant, who paid substantially less duty as a result. There is, as I have said, no requirement for contemporaneity of the arrangement and the dutiable transaction.
In the present case both reversions were in relation to the same land. The only difference between them was the longer period of expectancy of the new reversion compared to the old. If it be concluded that they represented distinct albeit connected property interests, I consider that circumstance did not prevent s24 from applying. This is because I consider that s24 encompasses a reduction in dutiable value of dutiable property brought about by its transmogrification into dutiable property of lesser dutiable value. This is where, as here that comes about by virtue of an arrangement “affecting”, a word of wide ambit, the dutiable value of dutiable property that is subject to a dutiable transaction. That arrangement need not be contemporaneous with the dutiable transaction so long as the arrangement is in contemplation of it.
The argument to the contrary would construe the words of condition (b) so that it was only satisfied where precisely the same dutiable property suffers the reduction in its dutiable value as was the subject of the dutiable transaction. The argument would proceed on the basis that reduction of the dutiable value of the dutiable property necessarily presupposed a non-reduced dutiable value of that self-same property, not the substitution of other albeit related property of reduced dutiable value.
An immediate difficulty with such an interpretation is that it would render the legislation incapable of dealing with the very mischief to which it was directed, namely duty avoidance by the use of long-term leases. Indeed if one hypothesised a contemplated sale of freehold, not as here already subject to short-term lease, and then assumed one later interposed long-term leasehold before sale, the result, if this interpretation were correct, would be doubtful as to whether s24 applied. This is because the first (and only) interposed lease converts freehold to a reversion expectant on the lease. If the latter were treated as distinct property from the original freehold, then on this interpretation s24 would again be incapable of applying. Effectively, s24 on this interpretation was never capable of dealing at all with the mischief to which it was directed.
Doubt on the matter is recognised by Hill (supra) at 791, notwithstanding Commissioner of State Revenue (Vic) v Bradney Pty Ltd (1996) 34 ATR 233:
”If, on the other hand, the owner of a fee simple had, before transferring the fee simple, granted a lease to another and that lease had the effect of reducing the dutiable value of the fee simple (as would be the case if the rent was not a market rental) then the section would prima facie operate subject to the discretion of the Chief Commissioner, cf Commissioner of State Revenue (Vic) v Bradney Pty Ltd (1996) 34 ATR 233; 96 ATC 5130. One may, however, ask whether the section does operate if the landlord specifically sells his or her reversionary interest in the land. If that is the dutiable property, then it can be argued that the grant of the lease was not an agreement which was in respect of that reversionary interest. It must, however, be assumed that the section is intended to operate in a case such as Bradney.”
When one considers the sequence of events chronologically it further supports that both conditions of s24 were satisfied. The original heads of agreement involved the sale of the valuable reversion expectant on the shorter-term existing leases. Had (i) the anticipated sales occurred, and (ii) the dutiable transaction been entered into without interposition of the arrangement involving the grant of the 99-year Leases (with put and call options to purchase the properties subsequent to entry into those leases), the result would have been a dutiable transaction over property of much greater dutiable value.
By instead entering into and registering the 99-year concurrent leases, there came into being “an arrangement affecting the dutiable value of dutiable property” within s24 (condition (a)). That arrangement affected the dutiable value of dutiable property by transmogrifying it into dutiable property of lesser dutiable value than pre-existed. It can be taken that “a significant purpose” of the purchaser (the appellant) was “the reduction of the dutiable value of the dutiable property” the subject of the proposed sale transaction by this means (condition (b)).
Accordingly, even accepting that new property was brought into being as the appellant contends constituting distinct property from that which pre-existed before the concurrent leases, both conditions of s24 were in my judgment satisfied, so enabling the Chief Commissioner to disregard the concurrent leases and charge duty accordingly.
I shall demonstrate the steps leading to this result by closer reference to the relevant provisions of the Act and its overall structure. The Act commences with s8 which imposes duty on a series of identified transactions. Relevantly, s8(1)(b)(i) provides that: “This Chapter [2] charges duty on: … (b) the following transactions (i) an agreement for the sale or transfer of dutiable property”. “Dutiable property” is in turn defined by s11 as “any of the following”, being relevantly here “(a) land in New South Wales” and “(l) an interest in any dutiable property referred to in the preceding paragraphs of this section …”.
The present dutiable transaction, identified by reference to s8(1)(b)(i), comprises each contract for sale, as being an “agreement for sale or transfer of property”. Each was over land in New South Wales. More precisely each was over an interest in land in New South Wales consisting of a reversion expectant upon the relevant leases. Until the interposition of the concurrent 99-year Leases, the old reversion was expectant upon the shorter existing leases. Because under s11, “dutiable property” includes “(a) land in New South Wales” and also “(b) an interest in any dutiable property referred to in the preceding paragraphs …” it thus catches as “dutiable property” the reversion ultimately sold.
Section 9, in combination with ss21 and 32 brings about imposition of duty on the dutiable transaction above described. Thus s9(2) provides relevantly as follows:
“(2)Accordingly, for the purpose of charging duty under this Chapter, in relation to a dutiable transaction specified in Column 1 of the following Table:
(a)     the property specified opposite the dutiable transaction in Column 2 is taken to be the property transferred (and a reference in this Act to property transferred includes a reference to such property), and
(b)     the person specified opposite the dutiable transaction in Column 3 is taken to be the transferee of the dutiable property (and a reference in this Act to a transferee includes a reference to such a person), and
(c)      the transfer of the dutiable property is taken to have occurred at the time specified opposite the dutiable transaction in Column 4 (and a reference in this Act to the time at which a transfer occurs includes a reference to such a time).
Table

Column 1	Column 2	Column 3	Column 4
Dutiable transaction	Property transferred	Transferee	When transfer occurs
agreement for sale or transfer	The property agreed to be sold or transferred	the purchaser or transferee	when the agreement is entered into

Section 21 then provides that “the dutiable value of dutiable property that is subject to a dutiable transaction is the greater of (a) the consideration (if any) for the dutiable transaction and (b) the unencumbered value of the dutiable property”. The unencumbered value was the greater in the present case.
Section 23 requires that the unencumbered value of dutiable property be the value of the property determined without regard to any encumbrance to which the property is subject. Section 32 imposes the rate of duty chargeable on a dutiable transaction according to a progressive table.
For the purpose of applying s24 to the relevant agreement for sale, it does not matter whether each agreement is characterised as:
(a)an agreement to sell land or fee simple in New South Wales, subject to particular concurrent leases (as the primary judge in effect characterised what occurred); or
(b)as an agreement to sell an interest in land by way of reversion expectant upon those concurrent leases thus giving rise to the two successive reversions over the same land, differentiated only by their period of expectancy.
Either way, the dutiable value of the property so agreed to be transferred is “reduced” by the concurrent leases. This is so because, following entry into and registration of each of the 99-year concurrent leases, the dutiable property the subject of each agreement for sale came into being but at a reduced value, compared to the value of the pre-existing reversion without the 99-year concurrent leases. A significant purpose of the appellant in entering into such an arrangement for concurrent leases was undeniably to achieve that result; namely, reduction of dutiable value of the dutiable property in the manner described. That the concurrent leases caused distinct property to be brought into being (the new reversion) does not affect the application of s24 in these circumstances; the trial judge did not need to rely on step 3 in his reasons (see [106] above) to reach the result he did. That the successive reversions were in respect of the same land simply emphasises their being part of the same arrangement.
If I were wrong in my earlier reasoning for concluding that condition (b) was satisfied, there is another basis for reaching that conclusion.
Let it be assumed that s24 requires a reduction in the dutiable value of existing dutiable property that is subject to the dutiable transaction. At the highest level of generality, the dutiable property was throughout freehold land or fee simple, even if it were also a reversionary interest in that land. That accords with the earlier quoted definition of “dutiable property” in s11 as being “land in New South Wales” as well as “an interest in [land in New South Wales] …”. There was, on that analysis, a “reduction of the dutiable value of the dutiable property”, being the land throughout. It was brought about by interposing the 99-year concurrent lease in each case.
Even descending to the next level of generality, as did the primary judge, there was throughout a reversion. It was over the self-same land, whose dutiable value was reduced, by interposing the 99-year concurrent lease. All that was altered was the expectancy of that reversion. It was previously expectant on the short-term existing leases. Now it was expectant on the long-term concurrent leases. That simply reduced the value of the reversionary estate. But there was still an interest in land consisting of a reversionary interest, albeit reduced in dutiable value. That interpretation treats “the dutiable property” as being a reversionary interest in land, altering in quantitative but not qualitative terms, only as the expectancy period changes. That satisfies s24 insofar as both condition (a) and condition (b) are concerned. If “arrangement” in condition (a) is accepted as having the wider ambit implied by the word “affecting” one would not expect “arrangement” in condition (b) to have a narrower sense, limited to cases of reduction in value in already existing property and even in that situation, arguably incapable of dealing with an interposed lease. Such a result would render s24 incapable of remedying the very mischief to which it was directed. I do not consider that the words of s24 are so constrained as to require so incongruous a result, and that they should be given a purposive construction.
Conclusion

Once the arrangement is disregarded, as the Commissioner was entitled to do under s24, it is clear that the Commissioner, relying on s21(1)(b), was likewise entitled to determine the unencumbered value of the dutiable property as $66,965,625, being the value of all of the relevant property with vacant possession, and assess duty accordingly.
OVERALL CONCLUSION and ORDERS
I conclude that this appeal should fail and propose orders as follows:
(1) Appeal dismissed.
Appellant to pay the respondent’s costs.

LAST UPDATED: 26 October 2007