Ver Custodian Pty Limited (as trustee for the Ver Trust) v Commissioner of State Revenue
[2022] VSC 33
•11 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S ECI 2020 03120
| VER CUSTODIAN PTY LIMITED (ACN 612 669 520) AS TRUSTEE FOR THE VER TRUST | Plaintiff |
| v | |
| COMMISSIONER OF STATE REVENUE | Defendant |
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JUDGE: | GARDE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 November 2021 |
DATE OF JUDGMENT: | 11 February 2022 |
CASE MAY BE CITED AS: | VER Custodian Pty Limited (as trustee for the VER Trust) v Commissioner of State Revenue |
MEDIUM NEUTRAL CITATION: | [2022] VSC 33 |
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DUTY – Initial Public Offering – Transfer of land – Corporate reconstruction exemption – Whether eligible transaction – Whether exemption granted – Whether exemption should be revoked – Stapled securities consisting of units and shares – Effect of allotment and issue of shares – When units in stapled securities created – Exemption upheld – Duties Act 2000 (Vic) ss 250(1), 250A–250D, sch 2 cl 52; State Taxation Acts Amendment Act 2019 (Vic) ss 25, 34.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Crutchfield QC with Mr N Walter | Gilbert + Tobin |
| For the Defendant | Mr D Williams QC with Ms M Baker | State Revenue Office Victoria |
HIS HONOUR:
Introduction
VER Custodian Pty Limited (ACN 612 669 520) (the ‘taxpayer’) as trustee for the VER Trust appeals from the disallowance by the Commissioner of State Revenue (‘Commissioner’) of an objection (‘objection’) to the assessment of duty (‘assessment’) on seven transfers of land in the amount of $31,189,125 and interest of $4,683,464.16 under s 106(1)(a) of the Taxation Administration Act 1997 (Vic) (‘Tax Act’).
This appeal arises out of the 2016 Initial Public Offering (‘IPO’) of the Viva Energy REIT. Before the IPO was implemented, Viva Energy Australia Pty Ltd (ACN 004 610 459) (‘Viva Energy’), a wholly owned subsidiary of Viva Energy Australia Group Pty Ltd (ACN 004 400 220) (‘VEAG’), was the registered proprietor of Victorian freehold petrol station sites and associated plant and equipment (‘properties’). VEAG was the immediate parent of a group of companies (‘Viva Group’).
As part of implementing the IPO, VEAG established a wholly owned REIT which was to hold the properties, separated from the rest of the group and listed on the Australian Securities Exchange (‘ASX’). This occurred as follows:
(a) various companies were incorporated, namely:
(i) Viva Energy REIT Limited (ACN 612 986 517) (‘REIT Co’), a wholly owned subsidiary of VEAG;
(ii) VER Limited (ACN 609 868 000), a wholly owned subsidiary of REIT Co; and
(iii) the taxpayer, a wholly owned subsidiary of VER Limited;
(b) VER Limited was the responsible entity (‘Responsible Entity’) of a managed investment scheme (‘scheme’), known as the Viva Energy REIT Trust (‘REIT Trust’);
(c) units in the scheme were stapled to shares in REIT Co ( ‘stapled securities’);
(d) the taxpayer was the trustee of the VER Trust, which was a unit trust; and
(e) the scheme held all the units in the VER Trust.
The listing of the stapled securities on the ASX occurred by way of four offers:
(a) an Institutional Offer – an offer to institutional investors which included a bookbuild process and cornerstone investor process;
(b) a Broker Firm Offer – an offer to residents of Australia and New Zealand by way of selected brokers;
(c) a Priority Offer – an offer of securities to certain investors who were invited to participate; and
(d) an Employee Offer – an offer to certain employees of REIT Co or Viva Energy.
On 27 April 2016, the taxpayer sought an exemption from stamp duty from the Commissioner in respect of the proposed transfers of the properties.
On 30 June 2016, the Commissioner wrote to the taxpayer advising that the Commissioner was satisfied that the proposed transfers qualified for exemption under the corporate reconstruction exemption contained in s 250B of the Duties Act 2000 (Vic) (‘Act’). The exemption was subject to a condition under s 250C(1) of the Act.
The IPO was conducted according to the following timetable:
(a) on 26 July 2016, the Broker Firm Offer, Priority Offer and Employee Offer periods commenced;
(b) on 28 July 2016, the Broker Firm Offer, Priority Offer and Employee Offer periods closed;
(c) on 28 and 29 July 2016, a bookbuild was completed as part of the Institutional Offer;
(d) on 3 August 2016, the stapled securities commenced trading on a conditional and deferred settlement basis on the ASX;
(e) on 8 August 2016 (‘Transfer Date’), seven instruments of transfer of land (‘transfers’) were executed, by which Viva Energy transferred the properties to the taxpayer in return for consideration of $567,075,000;
(f) on the same day, VEAG was issued with 276,060,624 stapled securities, holding all of those securities on its own account;
(g) on 9 August 2016 (‘Settlement Date’), payments for stapled securities were accepted; and
(h) on 10 August 2016 (‘Allotment Date’), 414,090,937 stapled securities were issued and allotted to persons who had successfully applied for them, and from that date they traded on a non-conditional basis. The issue and allotment of the stapled securities reduced VEAG’s ownership from 100% of the stapled securities to approximately 40%.
On 24 September 2018, the Commissioner’s delegate determined that the transfers were not eligible for the corporate reconstruction exemption, and assessed the taxpayer to pay stamp duty in the amount of $31,189,125.
On 2 November 2018, the taxpayer objected to the assessment.
On 12 May 2020, the Commissioner issued a notice of determination disallowing the objection.
On 1 June 2020, the taxpayer requested that the matter be set down for hearing as an appeal to the Supreme Court of Victoria.
Transaction documents
The key transaction documents were:
(a) the Prospectus;
(b) the Scheme Deed;
(c) the Restructure Implementation Deed;
(d) the Offer Management Agreement (‘OMA’);
(e) the Cornerstone Commitment Letters; and
(f) the Master ECM Terms.
The Prospectus
The Prospectus, dated 22 July 2016, described each of the four offer processes for the IPO. It also set out the timetable for the IPO. The text underneath the timetable stated:
The timetable above is indicative only. Viva Energy REIT, in conjunction with the Joint Lead Managers, reserves the right to amend any or all of these dates subject to the Corporations Act, the Listing Rules and other applicable laws, including closing the Offer early, extending the Offer, deferring the Allotment or accepting late Applications either generally or in particular cases, or to withdraw the Offer, without prior notice.
Clause 5.3 of the Prospectus provided a description of the stapled securities:
The Stapled Securities will be stapled on and from Allotment pursuant to the Constitutions and the Stapling Deed and will trade on ASX as stapled securities (if quotation is accepted). The Units and the Shares will be “stapled” in the sense that a Securityholder cannot transfer a Unit or Share without also transferring the Unit or Share to which it is stapled to the same person. The Company and the Responsible Entity have obligations to ensure that if there is an issue or dealing with a Share, there must be an identical and corresponding issue or dealing with a Unit to the same transferee (and vice versa).
Each Stapled Security in Viva Energy REIT will comprise:
· one Unit in the Trust; and
· one Share in the Company.
Clause 5.10 of the Prospectus gave REIT Co and the Responsible Entity the right to withdraw the IPO:
Viva Energy REIT may withdraw the Offer at any time before the issue of Shares and Units (which will form Stapled Securities on Allotment) to successful Applicants or bidders under the Institutional Offer, Broker Firm Offer, the Priority Offer and Viva Energy and Viva Energy REIT Employee Offer. If the Offer, or any part of it, does not proceed, all relevant Application Monies will be refunded (without interest).
Viva Energy REIT and the Joint Lead Managers also reserve the right, subject to the Corporations Act, to extend the Offer or any part of it, accept late Applications or bids either generally or in particular cases, reject any Application or bid, or allocate to any Applicant fewer Stapled Securities than the amount applied for.
Clause 5.13.3 of the Prospectus set out the basis on which the conditional and deferred settlement trading was to occur:
It is expected that trading of the Stapled Securities will commence on or about Wednesday, 3 August 2016, initially on a conditional and deferred settlement basis.
The contracts formed on acceptance of Applications will be conditional on Settlement and the issue of Stapled Securities occurring. Trades occurring on ASX before Settlement and the issue of Stapled Securities occurring will be conditional on Settlement and issue occurring.
Conditional trading will continue until Viva Energy REIT has advised ASX that Settlement and issue of the Stapled Securities has occurred, which is expected to be on or about Wednesday, 10 August 2016. Trading will then be on an unconditional but deferred settlement basis until Viva Energy REIT has advised ASX that holding statements have been despatched to Securityholders …
If settlement has not occurred within 14 days (or such longer period as the ASX allows) after the day Stapled Securities are first quoted on ASX, the Offer and all contracts arising on acceptance of the Offer will be cancelled and of no further effect and all Application Monies will be refunded (without interest). In these circumstances, all purchases and sales made through ASX participating organisations during the conditional trading period will be cancelled and of no effect.
The glossary section of the Prospectus defines the term ‘Settlement’ as ‘settlement in respect of the Stapled Securities the subject of the Offer Management Agreement and associated settlement support arrangements’.
The Scheme Deed
The scheme was established by the Scheme Deed dated 14 June 2016, which was relevantly amended four times:
(a)by a deed of variation dated 21 June 2016;
(b)by a second deed of variation dated 5 July 2016;
(c)by a supplemental deed dated 10 July 2016, which became effective on 11 July 2016; and
(d)by a supplemental deed dated 8 August 2016, which took effect when the deed was lodged with the Australian Securities and Investments Commission.
The second deed of variation dated 5 July 2016 relevantly amended cls 5.8 and 7.11 of the Scheme Deed to the form described below.
Relevant provisions of the Scheme Deed include:
(a) clause 1.3, which provides that:
For the purposes of this deed, if the provisions of the Corporations Act and the Listing Rules, ASX Settlement Operating Rules or this deed, conflict on the same matter, the provisions of the Corporations Act prevail to the extent applicable.
(b)clause 1.5, which provides that:
(a)If there is an inconsistency between any Stapling Provision and any other provision of this deed, then the Stapling Provision prevails to the extent of the inconsistency, except where this would result in a breach of the Listing Rules, the ASX Settlement Operating Rules, the Corporations Act or any other law. The Stapling Provision prevails in this way, even if such other provision is expressed to apply notwithstanding any other provision of this deed.
(b)Where the Stapling Provisions do not apply or cease to apply, a provision of this deed that relates to, or is connected with, Stapling will continue to apply to the extent that the provision does not relate to Stapling.
(c)Stapled Units are intended to be Stapled to Attached Securities in a ratio of one to one. It is the intention of the Responsible Entity (and as more specifically set out in this deed) that for as long as the Stapling Provisions apply:
(i)Viva Energy REIT Ltd ordinary shares will be Attached Securities;
(ii)the Members holding Units shall be the holders of Attached Securities;
(iii)as far as the law permits, a Unit and its Attached Securities shall be treated as one security; and
(iv)no issue or transfer of a Unit is to occur without the corresponding Attached Securities also being issued or transferred (as applicable) at the same time and to the same person.
(c)clause 4.1, which provides that:
The Scheme is established when Units are first issued.
(d)clause 5.2, which provides that:
(a)A Unit confers on its holder an undivided absolute, vested and indefeasible beneficial interest in the Scheme Property as a whole, subject to Scheme Liabilities. It does not confer on a Member an interest in any particular Scheme Property.
(b)All Units confer identical interests and rights except as otherwise provided in this deed. In the case of conflict, the interests of Members holding Units will prevail over the interests of holders of Options.
(e)clause 5.8, which provides that:
An applicant for Units in the Scheme acquires an interest in the Scheme on the earlier of the date on which the applicant becomes a Member and the date on which that applicant is entered on the Register as the holder of Units.
(f)clause 7.1, which provides that:
(a)Unless the Responsible Entity determines otherwise, to be valid, an application for Units must be:
(i) in writing, in a form approved by the Responsible Entity;
(ii)while Stapling applies in respect of Units, at the same time, include an application for an identical number of Attached Securities;
(iii)if required by the Responsible Entity or law, signed by or for the applicant;
(iv)accompanied by the Application Money or a transfer in respect of an asset other than Cash; and
(v)lodged with the Responsible Entity or its custodian or agent at a place fixed by it for that purpose.
(b)If approved by the Responsible Entity, the application may be lodged with the Responsible Entity electronically.
(g)clause 7.8, which provides that:
(a)The Responsible Entity may reject an application for Units without giving a reason.
(b)While Stapling applies, the Responsible Entity must reject an application for Units in a class which are Stapled if the applicant does not apply for an identical number of Attached Securities and if an identical number of Attached Securities will not be issued to the applicant at the same time as the Units.
(h)clause 7.10, which includes the following:
Units are created and issued when the Responsible Entity has agreed to accept the Application (if relevant) and has received either the consideration or a commitment in a form acceptable to the Responsible Entity to provide the consideration.
(i)clause 7.11, which provides that:
A Unit is taken to be issued on the earlier of the date on which the applicant becomes a Member and the date on which the name of the person to whom it is issued is entered in the Register as the holder of the Unit.
(j)clause 13.3, which provides that:
The Responsible Entity may treat a registered Member as the holder and absolute owner of Units registered in the Member’s name on the Register and is not bound to take notice of any trust or equity affecting a Unit. Entry on the Register is conclusive evidence of a Member’s title to Units.
Clause 21 of the Scheme Deed contains stapling provisions which are given precedence by cl 1.5(a). Relevant parts of cl 21 include:
(a)clause 21.1, which includes the following:
On, or prior to, the date the Units and Attached Securities are Listed, each:
(a)ordinary Unit must be Stapled to one of each ordinary Attached Security to form a Stapled Security;
(b)clause 21.2, which provides that:
While Stapling applies, the number of issued Units must equal the number of Attached Securities in each of the Stapled Entities on issue at that time.
(c)clause 21.3, which includes:
(a)The Responsible Entity must not do, nor refrain from doing, anything that would directly or indirectly result in a Unit no longer being Stapled to an Attached Security to form a Stapled Security … In particular the Responsible Entity must not reorganise (within the meaning given in Listing Rules 7.18 to 7.24 (inclusive) including any consolidation, division, subdivision, cancellation, buy back of any capital) any Units unless at the same time the Attached Securities that are Stapled to those Units are also reorganised so that the person holding Units holds an equal number of each Attached Security.
(b)While Stapling applies, the Responsible Entity must use reasonable endeavours to ensure that Units are dealt with in a manner consistent with the constitutions of the Stapled Entities.
Schedule 1 to the Scheme Deed is the dictionary, and defines ‘Member’ to have the meaning given in s 9 of the Corporations Act 2001 (Cth) (‘Corporations Act’).
Section 9 of the Corporations Act defines:
(a)‘member’, in relation to a managed investment scheme, to mean ‘a person who holds an interest in the scheme’;
(b)‘interest’ in a managed investment scheme to mean ‘a right to benefits produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not)’; and
(c)‘benefit’ relevantly to mean ‘any benefit, whether by way of payment of cash or otherwise’.
The Restructure Implementation Deed
The Restructure Implementation Deed is dated 10 July 2016, and contains a number of relevant provisions:
(a)clause 2.2, which provides that:
Viva Energy, the Responsible Entity and [REIT Co] each acknowledge and agree that:
(a)they must ensure that the Registry is not directed to issue, and does not cause the issue of, any Offer Security to any investor under the Offer at any time prior to the Settlement Date;
(b)the resolutions of the directors of the Responsible Entity and [REIT Co] to issue the Offer Securities pursuant to the Offer were passed on or before the date of this deed but are conditional on, and shall have no force or effect at any time prior to the Settlement Date; and
(c)neither the Responsible Entity nor [REIT Co] shall, at any time prior to the Settlement Date, accept any application for Offer Securities which, if accepted, would result in the formation of an agreement for the allotment of Offer Securities to the applicant.
(b)clause 3.1, which relevantly provides that:
The Restructure Steps … shall only occur, and the parties shall only be required to complete those steps, if each of the following conditions precedent has been satisfied:
(a) (Offer Management Agreement)
(i)each condition precedent set out in clause 3.1 and the conditions precedent set out in clauses 3.2(a), (b), (c), (e), (f) and (j)(i) of the Offer Management Agreement has been satisfied or waived in accordance with its terms; and
(ii)as at the first time when all of the conditions precedent identified in clause 3.1(a)(i) have been satisfied, none of the remaining conditions precedent in clause 3.2 of the Offer Management Agreement has become incapable of being satisfied, and Viva Energy (acting in good faith) has confirmed to each other party that it is not aware of any fact, matter of [sic] circumstance that is reasonably likely to result in any such condition precedent not being satisfied at (or by) the time specified in the Offer Management Agreement for the satisfaction of that condition precedent …
(c)clause 4.1, which relevantly provides that:
(a)Subject to the satisfaction of the Conditions Precedent … the Restructure Steps will occur:
…
(iv)in the case of Restructure Step 7 (Settlement of the Offer), on the Settlement Date; and
(v)in the case of Restructure Step 8 (Allotment of the Offer Securities) … as early as practicable on the Allotment Date and in the order set out in this clause 4.
(b)The actions to take place as contemplated by this clause 4 are interdependent such that if one action does not take place, then without prejudice to any rights available to any party as a consequence:
(i)there is no obligation on any party to undertake or perform any of the other actions;
(ii)the Restructure Steps are taken not to have occurred and to the extent that such actions have already been undertaken, the parties must do everything reasonably required to reverse those actions; and
(iii)each party must return to the other parties all documents delivered to it under this deed and must each repay to the other parties all payments received by it under this deed, without prejudice to any other rights any party may have in respect of that failure.
(d)clauses 4.3 to 4.15, which specify in detail the actions required on each Restructure Step, including the settlement of the subscription of the Offer Securities, and the Allotment of Offer Securities.
The Offer Management Agreement
Under the OMA dated 11 July 2016, REIT Co and VER Limited (collectively described as the ‘Issuer’) appointed Deutsche Bank AG and Merrill Lynch Equities (Australia) Limited (together, the ‘Lead Managers’) to manage the IPO. Viva Energy was described as the Guarantor. The OMA described how the Lead Managers, the Responsible Entity and REIT Co would conduct the IPO:
(a)clause 2.1 provided for the appointment by the Issuer of the Lead Managers on an exclusive basis to act as the lead managers for, and to arrange and manage, the Offer on the terms of the OMA;
(b)clause 2.4(a) provided a discretion for the withdrawal of the IPO:
The parties agree and acknowledge that, following consultation with the Lead Managers, the Issuer and the Guarantor may jointly withdraw the Offer and the Offer Documents and terminate this Agreement at any time prior to Successful Completion of the Bookbuild for whatever reason …
(c)clause 4.1 provided that:
The Issuer must:
(a)conduct the Offer in accordance with the Timetable, the Offer Documents, this Agreement, the Constitutions, the ASX Listing Rules, the Corporations Act and any other applicable laws; and
(b)keep the Lead Managers reasonably informed as to the progress of the Offer.
(d)clause 5.1 made provision for applications for stapled securities:
(a)The parties acknowledge and agree that Valid Applications under the Offer may be scaled back or rejected as a result of the allocations of Offer Securities made under clause 5.2.
(b)Subject to clauses 5.1(a) and 5.2, the Issuer must accept all Valid Applications under the Offer for the Offer Securities.
(e)clause 5.2(a) provided that:
The following matters will be determined by agreement of the Lead Managers and the Guarantor (each acting reasonably) on or before the Allocation Date:
(i)the number of Offer Securities to be allocated to the Broker Firm Offer and the identity and level of participation of brokers participating in the Broker Firm Offer;
(ii)the number of Offer Securities to be allocated to the Employee Offer, provided that the Offer Securities allocated under the Employee Offer do not have an aggregate value at the Offer Price in excess of $10 million;
(iii)the number of Offer Securities to be allocated to the Institutional Offer and the identity and level of participation of Institutional Investors under the Institutional Offer; and
(iv)the number of Offer Securities to be allocated to the Priority Offer, provided that such Offer Securities (in aggregate) do not exceed 750,000 (in number).
(f)clause 5.3(a) dealt with the allotment of stapled securities:
Subject to clause 5.3(b), the Issuer must take all necessary and appropriate steps to allot all of the Offer Securities by 10.00am on the Allotment Date to persons to whom allocations have been made under clause 5.2 for which Valid Applications have been received and application monies have been received.
(g)clause 5.4 dealt with settlement of subscriptions:
To the extent practicable, settlement of the subscription of the Offer Securities in respect of each category of the Offer will occur as follows:
(a)the payments will be due and settlement of the Institutional Offer and Broker Firm Offer will take place on the Settlement Date on a DvP basis in accordance with the CHESS Rules. Deutsche Bank or a Related Body Corporate of Deutsche Bank (the Settlement Agent) will act as a broker under the CHESS Rules and manage settlement on behalf of the Issuer and the Issuer must take all necessary or appropriate steps in connection with such settlement as directed by the Lead Managers, including issuing Allocation Interests in respect of the relevant Stapled Securities to the Settlement Agent; and
(b)the Registry will act as settlement agent and manage settlement of the Employee Offer and the Priority Offer on behalf of the Issuer.
(h)under cl 10.1(m), the Issuer and the Guarantor undertook not to withdraw the offer other than in accordance with the OMA;
(i)clause 13.1 provided for termination by one or both of the Lead Managers ‘without cost or liability to itself or the other Lead Manager ... at any time prior to 10.00am on the Settlement Date after the Lead Manager becomes aware of the happening of any one or more of the events set out in Schedule 6’; and
(j)schedule 6 listed a wide range of termination events, including the withdrawal by the Issuer of the combined prospectus and product disclosure statement or the Offer.
The Cornerstone Commitment Letters and the Master ECM Terms
The Institutional Offer involved a bookbuild and a cornerstone investor process. On 6 July 2016, the Lead Managers sent letters (‘Cornerstone Commitment Letters’) to the cornerstone investors. One of the Cornerstone Commitment Letters was sent to Perpetual Investment Management Ltd (‘Perpetual’), and relevant parts included:
(a) section 3 of the letter, which stated:
Subject to Section 4 of this Letter, the Lead Managers are pleased to confirm that You have been allocated a firm commitment of [35 million] Stapled Securities …
(b) section 4 of the letter, which set out Perpetual’s obligations:
You irrevocably agree to apply for, and pay the Price for, the number of Commitment Securities determined in accordance with Section 3 above on the terms of this Letter and the Master ECM Terms as applied by and incorporated by reference into this Letter and in accordance with the Timetable …
Once the Bookbuild has been completed, You will be sent a Confirmation (Commitment Confirmation) confirming that You are irrevocably obliged to apply via a CARD Form attached to such Commitment Confirmation. The Commitment Confirmation and the Master ECM Terms will apply to Your acquisition of the Commitment Securities …
The provision to You of the Commitment Confirmation does not supersede, replace or in any way limit, Your obligations arising under this Letter, including, without limitation, Your irrevocable obligation to apply for, and pay the Price for, the number of Commitment Securities specified in Section 3 above. However, in the event that the Offer is withdrawn by the Offerors for any reason, your obligation to apply for, and pay the Price for, the number of Commitment Securities in Section 3 above will terminate
…
Any issue or transfer of Commitment Securities to You is subject to the completion of the Offer and the Lead Managers not otherwise terminating the Lead Manager Agreement prior to the Settlement Date.
(c) section 6 of the letter, which stated that:
The General Acknowledgements and the following Additional Acknowledgements apply …
You acknowledge that:
You have received a copy of a draft Offer Document relating to the Offer (Pathfinder) or a draft International Offering Circular (as applicable) …
Your subscription for the Commitment Securities will be made pursuant to the final Offer Document and the final International Offering Circular (as applicable). Irrespective of any differences between the Pathfinder and the draft International Offering Circular and the final Offer Document or the final International Offering Circular, You will continue to be bound by Your commitment to subscribe for the Commitment Securities under the final Offer Document and the final International Offering Circular (as applicable).
The Cornerstone Commitment Letter incorporated by reference the Master ECM Terms. The ‘General Acknowledgements’ referred to in section 6 of the Cornerstone Commitment Letter are set out in sch 1 of the Master ECM Terms. The General Acknowledgement in cl 8 of s 1 of that schedule is as follows:
The Timetable and the dates or times on the timetable for the Offer set out in the version of the Information Materials provided to You are indicative only and may be changed at any time and the Offer (or a part thereof) may be modified or withdrawn at any time (without consultation with You). You acknowledge that You are bound to acquire Your Allocation notwithstanding any change to the Timetable.
Clause 3 of the Master ECM Terms relevantly provided that:
(a)At the close of the bookbuild, Your Bid is a binding and irrevocable offer by You to acquire such number of Securities nominated by You (subject to final allocations) at the Price and on and subject to these Terms, which is capable of immediate acceptance in full or in part by the Lead Manager. By making Your Bid, you make the General Acknowledgements, General Warranties, General Undertakings …
(b)Your Bid will be accepted if You receive an allocation of Securities in relation to an Offer. This acceptance may be communicated to You by any means and You will be sent a Confirmation acknowledging Your Allocation.
(c)You must execute the Confirmation of Allocation … and return it to the Lead Manager as soon as possible after You receive the Confirmation and in any event before the time for return specified in the Confirmation. The Confirmation of Allocation documents Your agreement to acquire Your Allocation subject to the Terms and all the General and Additional Acknowledgments …
Clause 9 of the Master ECM Terms included the following provisions:
(a)Any issue or transfer of Securities to You as a result of Your Allocation is subject to execution of the Lead Manager Agreement (if applicable) and completion of the Offer.
(b)You agree to accept, and undertake to not challenge, the decisions and actions of the Lead Manager under the Lead Manager Agreement and agree that, if made, Your Allocation does not oblige the Lead Manager to consult with You as to any matter or qualify the exercise or non-exercise of the rights of the Lead Manager under the Lead Manager Agreement in any way, including in particular the exercise of any right of termination. You will continue to be bound to acquire Your Allocation unless the Lead Manager Agreement is terminated in accordance with its terms. In this event, Your rights and obligations under these Terms to acquire Your Allocation will terminate without cost or liability to the Lead Manager.
Statutory provisions: the corporate reconstruction exemption
At the relevant time, corporate reconstruction was the subject of Pt 2 Div 1 of the Act. A corporate reconstruction exemption was available in certain circumstances where the taxpayer sought and obtained an exemption from the Commissioner.
Section 250(1) of the Act defined ‘corporation’ for the purposes of Div 1 to include, among other things, a unit trust scheme. A unit trust scheme was defined in s 3 of the Act to mean:
… any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust;
Section 250(1) of the Act defined the expression ‘corporate group’ to mean ‘a parent corporation and the subsidiaries of that parent corporation’.
‘Parent corporation’ was defined in s 250(1) to mean a corporation that directly or indirectly:
(a)holds at least 90% of the beneficial ownership of another corporation (the subsidiary); and
(b)has the ability to cast, or to control the casting of, at least 90% of the maximum number of votes that may be cast at a general meeting of the subsidiary …
Section 250A of the Act defined an ‘eligible transaction’ to mean:
any of the following that occurs on or after 1 January 2004 –
(a)a transfer of dutiable property from one member of a corporate group to another member of the group; or …
Section 250B of the Act relevantly provided as follows:
(1)A member of a relevant corporate group may apply to the Commissioner for an exemption under this Division –
(a)any time before the eligible transaction occurs to which the application relates …
(2)The Commissioner must grant an exemption from duty … if the Commissioner is satisfied that –
(a)the instrument or transfer is, or arises out of, an eligible transaction; and
(b)the eligible transaction does not arise from arrangements or a scheme devised for the principal purpose of taking advantage of the benefit of this section; and
(c)the conditions of the exemption, if any, will be met by the applicant.
Section 250C provided as follows:
(1)An exemption granted under this Division is subject to any conditions specified by the Commissioner.
(2)If an exemption is granted under this Division, the conditions of the exemption are binding on each member of this corporate group.
The Commissioner had the power to revoke an exemption in specified circumstances. Section 250D of the Act relevantly provided that:
(1)The Commissioner may revoke an exemption granted under this Division if –
(a)the members of the relevant corporate group do not remain members of the group for a period of at least 3 years commencing immediately after the day on which the transaction occurred in respect of which the exemption was granted; or …
(b)the instrument or transfer of dutiable property is not, or does not arise out of, an eligible transaction …
(2)Subsection (1)(a) does not apply if the Commissioner is satisfied that a corporation that was a member of the relevant corporate group on the day on which the transaction occurred in respect of which the exemption was granted ceases to be a member of the group by virtue of –
(a)a public float that occurred within 12 months after the day on which the transaction occurred …
The term ‘public float’ was defined by s 250D(3) of the Act to mean:
a share float or an offer of units to create a public unit trust scheme –
(a)the shares or units of which are quoted on the ASX or a recognised stock exchange and are offered to the public generally; and
(b)of which the issue of the shares or units to the public does not give any person and their related persons (other than the corporate entity that floated the shares or units) a combined beneficial interest in the floated entity greater than 20%; and
(c)that is not part of a scheme for the purpose of minimising duty otherwise payable under this Act.
Pt 2 Div 1 of the Act was substantially amended by the State Taxation Acts Amendment Act 2019 (Vic) (‘Amendment Act’). Section 25 of the Amendment Act repealed ss 250C and 250D of the Act. However, s 34 of the Amendment Act gave effect to transitional arrangements which preserve the Commissioner’s powers under the previous legislation in respect of eligible transactions entered into before 1 July 2019.
The relevant transitional provision was inserted by the Amendment Act as cl 52 of sch 2 of the Act, which provides in relation to corporate reconstructions:
(1)The old provisions apply in respect of an eligible transaction (within the meaning of section 250A as in force immediately before 1 July 2019) if the agreement or arrangement for the eligible transaction was entered into before 1 July 2019.
(2) Without limiting subclause (1), the Commissioner may –
(a)on application, grant an exemption under the old provisions in respect of an eligible transaction the agreement or arrangement for which was entered into before 1 July 2019; and
(b)revoke or deal with the exemption under the old provisions as if they had not been amended by the [Amendment Act].
(3)Despite the [Amendment Act], an exemption granted by the Commissioner under the old provisions that is in effect immediately before 1 July 2019 –
(a) continues in effect on and after that day; and
(b) the old provisions continue to apply to the exemption.
(4) In this clause –
old provisions means Division 1 of Part 2 of Chapter 11 as in force immediately before 1 July 2019.
Applications for an exemption and procedural history
On 24 September 2015, PwC acting for the Viva Group wrote to the Commissioner in these terms:
On behalf of the Viva Group, by letter dated 14 August 2015, we advised your office of the proposed internal corporate reconstruction of the Viva Group and the anticipated listing of a real estate investment trust on the [ASX]…
In our Original Application, we requested the Commissioner of State Revenue (Commissioner) confirm corporate reconstruction exemptions pursuant to section 250B of [the Act] would be provided in respect of the following transactions:
•The transfer of freehold petrol retail sites together with associated equipment [‘Freehold Sites’] from Viva Energy to Property Co…; and
•The transfer of the Freehold Sites from Property Co to the Custodian of the Property Trust…
Recently, it has come to our client’s attention that the proposed internal corporate reconstruction of the Viva Group will need to be revised to better accommodate certain arrangements in connection with the alliance agreement with Coles. As such, it is now contemplated that the Freehold Sites will be transferred directly from Viva Energy to the trustee of the Property Trust …
Accordingly, on behalf of the Viva Group, we withdraw the corporate reconstruction exemption application in respect of the Transfer to Property Co …
We request the Commissioner confirm that a corporate reconstruction exemption pursuant to section 250B of the Act will be provided in respect of the transfer of the Freehold Sites directly from Viva Energy to the trustee of the Property Trust …
3. Request for exemption
We request the Commissioner grant a corporate reconstruction exemption pursuant to section 250B of the Act in respect of the Updated Transfer to Property Trust on the basis the transaction satisfies the exemption criteria set out under Chapter 11, Part 2 of the Act and confirm that any corporate reconstruction exemption granted will not be revoked upon the public float of the Holding Trust (as requested in our Original Application).
We also request the Commissioner confirm any corporate reconstruction exemption approval provided in respect of the Updated Transfer to Property Trust will apply if the transaction occurs in March 2016 (even if this is outside the ordinary 4 month timeframe).
The application enclosed various relevant documents, including a completed and certified application form for a corporate reconstruction exemption.
By letter dated 16 December 2015, a delegate of the Commissioner responded to the request for an exemption:
I refer to your initial submission dated 14 August 2015 and to the revised submission dated 24 September 2015.
The matter concerns the proposed transfer of the properties listed in the schedule attached to this decision letter, from Viva Energy Australia Pty Ltd to the Trustee of the Property Trust (the Proposed Transfers).
Exemption under section 250B
Based on the information provided, the Commissioner of State Revenue is satisfied that the Proposed Transfers qualify for exemption from duty pursuant to the corporate reconstruction exemption contained in section 250B of the Duties Act 2000 (the Act). Please lodge the completed transfer instruments for stamping within 4 months from the date of this letter, otherwise a fresh application may have to be made.
Please note that pursuant to section 250C(1) of the Act, the exemption granted in this matter is subject to the condition that the following documents are provided at the time the executed transfers of land are submitted to the SRO for stamping –
1.Copies of the executed Trust Deed and Unit Registers for the Holding Trust and the Property Trust; and
2.Copy of the final version of the PDS in respect of the proposed float of the Holding Trust.
Revocation of exemption
As you are aware certain changes in circumstances may result in revocation of a corporate reconstruction exemption. Further, there are notification requirements in respect of such a change in circumstances. In this regard, the SRO must be notified of any change in circumstance that may result in revocation of an exemption within 28 days of the change otherwise significant penalties may apply – see section 250J of the Act. For further details of a change in circumstance that may result in revocation of an exemption please refer to section 250D(1) of the Act.
In your submission you have indicated that it is the intention of the VIVA Group to list the Holding Trust on the ASX post the Proposed Transfers. You have advised that this will occur by way of an IPO of approximately 50%-70% of the units in the Holding Trust (the IPO). You concede that this will break the relevant corporate group but seek confirmation that the listing will come within the exceptions to revocation on the basis that the breaking of the corporate group will be by virtue of a public float (i.e. the exception in section 250D(2)(a) of the Act).
At this time, the Commissioner cannot make a determination in regards to the status of the IPO as a public float as there is insufficient information available to make such a determination. However, I can advise that the IPO will constitute a public float as defined in section 250D(3) of the Act if –
(a)the units in the Holding Trust are quoted on the ASX or a recognised stock exchange and are offered to the public generally; and
(b)the issue of units to the public does not give any person and their related persons (other than the corporate entity that floated the units) a combined beneficial interest in the Holding Trust greater than 20%; and
(c)it is not part of a scheme for the purpose of minimising duty otherwise payable under the Act.
On 27 April 2016, PwC wrote to the Commissioner as follows:
On behalf of the Viva Group, by letter dated 24 September 2015, we advised your office of the proposed internal corporate reconstruction of the Viva Group and the anticipated listing of a real estate investment trust on the [ASX]…
By letter dated 16 December 2015, an exemption from duty was granted under s 250B of the [Act] on the proposed transaction as set out in our Earlier Application.
As the anticipated transaction has been delayed, our client has taken the opportunity to consider an alternative transaction structure to meet its objective of listing a real estate investment trust on the ASX and to this end has proposed an alternative to the corporate reconstruction outlined in our Earlier Application. As a result of the proposed alternative, we request the [Commissioner] re-confirm the availability of stamp duty relief based on the alternative facts as outlined below.
Accordingly, on behalf of the Viva Group, we request the Commissioner to confirm that a corporate reconstruction exemption pursuant to section 250B of the Act will be provided in respect of the Proposed Transaction (as defined below).
We also seek confirmation that the listing of Holding Trust on the ASX after the Proposed Transaction (as defined below) will come within the exceptions to revocation of a corporate reconstruction exemption on the basis that the breaking of the corporate group will be by virtue of a public float (an exception under section 250D(2)(a) of the Act).
…
9. Request for corporate reconstruction exemptions
We request that the Commissioner grant a corporate reconstruction exemption in respect of the Proposed Transaction pursuant to section 250B on the basis that the Proposed Transaction satisfies the exemption criteria.
We also ask that the Commissioner confirm that any exemption granted will not be revoked as a result of the IPO and listing of Holding Trust on the ASX.
As the Proposed Transaction is anticipated to occur early July 2016, we would appreciate the Commissioner’s urgent consideration of this application.
On 27 April 2016, the REIT Trust was yet to be established, and was referred to as the ‘Holding Trust’. Likewise, the VER Trust was yet to be established and was referred to as the ‘Property Trust’. At this time, the agreements and instruments of transfer for the proposed transactions were in the process of being drafted.
On 28 June 2016, a revenue specialist of the State Revenue Office (‘SRO’) wrote to PwC asking for, among other things, confirmation of the proposed trustee of the Holding Trust and whether the scheme deed had been changed since the version previously provided. By reply email on the same day, he was advised that the trustee of the Holding Trust was VER Limited, and the trustee of the Property Trust was to be the taxpayer. He was also advised that while the scheme deed had been updated, there had been no substantive changes to the deed. He was provided with a copy of the updated draft scheme deed for the REIT Trust dated 3 June 2016.
At this time, the draft scheme deed contained the following provisions:
5.8 Treatment of applicants
An applicant for Units in the Scheme does not acquire an interest in the Scheme until that applicant is entered on the Register as the holder of the Units.
…
7.10 Issue of Units
Units are created and issued when the Responsible Entity has agreed to accept the Application (if relevant) and has received either the consideration or a commitment in a form acceptable to the Responsible Entity to provide the consideration. Units issued against consideration paid other than in cleared funds are void if the funds are not subsequently cleared in accordance with clause 7.3 or the consideration is not provided or transferred at or within the time specified by the Responsible Entity.
7.11 When Units are issued
A Unit is taken to be issued when the name of the person to whom it is issued is entered into the Register as holder of the Unit.
Following the provision of further documents and information to the SRO, a delegate of the Commissioner wrote to PwC on 30 June 2016 (‘30 June 2016 letter’) under the heading of ‘Viva Group – Corporate reconstruction exemption request’ in these terms:
I refer to your initial submissions dated 14 August 2015 and 24 September 2015 and to your revised submission dated 27 April 2016.
The matter concerns the proposed transfer of the properties listed in the schedule attached to this decision letter, from Viva Energy to the Property Trust (the Proposed Transfers).
Exemption under section 250B
Based on the information provided, the [Commissioner] is satisfied that the Proposed Transfers qualify for exemption from duty pursuant to the corporate reconstruction exemption contained in section 250B of the Duties Act 2000 (the Act). Please lodge the completed transfer instruments (the Transfers) for stamping no later than 4 months from the date of this letter, otherwise a fresh application will have to be made. The Transfers should be submitted to the SRO, along with a copy of this decision letter, via the SRO’s Duties-On-Line system. Please notify me once the Transfers have been lodged.
Please note that pursuant to section 250C(1) of the Act, the exemption granted in this matter is subject to the condition that the following documents are provided at the time the executed Transfers are submitted to the SRO for stamping –
1.Copies of the executed Trust Deeds and Unit Registers for the Holding Trust and the Property Trust; and
2.Copy of the final version of the PDS in respect of the proposed float of the Holding Trust.
Revocation of exemption
As you are aware certain changes in circumstances may result in revocation of a corporate reconstruction exemption. Further, there are notification requirements in respect of such a change in circumstances. In this regard, the SRO must be notified of any change in circumstance that may result in revocation of an exemption within 28 days of the change otherwise significant penalties may apply – see section 250J of the Act. For further details of a change in circumstance that may result in revocation of an exemption please refer to section 250D(1) of the Act.
In your submission you have indicated that it is the intention of the VIVA Group to list the Holding Trust on the ASX post the Proposed Transfers. You have advised that this will occur by way of an IPO of approximately 50%-70% of the units in the Holding Trust (the IPO). You concede that this will break the relevant corporate group but seek confirmation that the listing will come within the exceptions to revocation on the basis that the breaking of the corporate group will be by virtue of a public float (i.e. the exception in section 250D(2)(a) of the Act).
At this time, the Commissioner cannot make a determination in regards to the status of the IPO as a public float as there is insufficient information available to make such a determination. However, I can advise that the IPO will constitute a public float as defined in section 250D(3) of the Act if –
(a)the units in the Holding Trust are quoted on the ASX or a recognised stock exchange and are offered to the public generally; and
(b)the issue of units to the public does not give any person and their related persons (other than the corporate entity that floated the units) a combined beneficial interest in the Holding Trust greater than 20%; and
(c)it is not part of a scheme for the purpose of minimising duty otherwise payable under the Act.
On 5 September 2016, PwC wrote to the Commissioner:
(a) confirming that the instruments of transfer had been executed on 8 August 2016, and had been submitted to the Commissioner;
(b) providing copies of the documents requested by the Commissioner as a condition of the grant of the exemption, including a copy of the PDS and an unexecuted and undated scheme deed of the REIT Trust; and
(c) advising the Commissioner that the IPO had resulted in a change of circumstances for the purposes of s 250J of the Act, and that the cessation of the corporate group resulted from the units in the REIT Trust being issued to the public under the PDS.
Clauses 5.8 and 7.11 of the unexecuted copy of the scheme deed provided to the Commissioner on 5 September 2016 were in different terms to those in the draft provided on 28 June 2016. In this later version, cls 5.8 and 7.11 stated:
5.8 Treatment of applicants
An applicant for Units in the Scheme acquires an interest in the Scheme on the earlier of the date on which the applicant becomes a Member and the date on which that applicant is entered on the Register as the holder of the Units …
7.11 When Units are issued
A Unit is taken to be issued on the earlier of the date on which the applicant becomes a Member and the date on which the name of the person to whom it is issued is entered in the Register as the holder of the Unit.
On 15 September 2016, the Commissioner wrote to PwC stating that he had become aware that a number of notice of initial substantial holder statements had been lodged with the ASX before 10 August 2016, which indicated that the corporate group was broken prior to the execution of the transfers on 8 August 2016. The Commissioner requested further information to allow him to assess whether the corporate group was still intact when the transfers were executed.
By letter dated 29 October 2016, the taxpayer replied to the Commissioner’s letter of 15 September 2016, providing further information concerning elements of the IPO, including the institutional bookbuild component, in respect of which certain institutional investors were said to have been ‘allocated’ but not ‘allotted’ stapled securities before 10 August 2016. The letter provided the following information about the composition of stapled securities issued as part of the IPO:
Institutional Offer 344,370,753 Broker Firm Offer 68,183,000 Priority Offer 795,454 Employee Offer 741,730 Total Stapled Securities issued under the Offer 414,090,937
The documents attached to the taxpayer’s letter included a further copy of the Scheme Deed, executed and dated 14 June 2016. This version of the Scheme Deed had been submitted for stamping and had a certificate of duty dated 22 June 2016 attached to it. Clauses 5.8 and 7.11 of this version of the Scheme Deed were in the same form as those set out in the draft dated 3 June 2016 provided to the Commissioner on 28 June 2016.
On 13 December 2016, the Commissioner wrote to the taxpayer notifying it that the Viva Group had been selected for an investigation under s 73 of the Tax Act. That letter stated:
[It] was both reasonably presumed and expected that VEAG would, unequivocally, hold 100% of the beneficial ownership of the holding trust to be created until sometime after the [properties] had been transferred … the Commissioner is not sufficiently satisfied as to the extent of VEAG’s beneficial ownership of the [REIT Trust] at the time of the transfers …
Twenty-one months later, the SRO wrote to the taxpayer’s solicitors by letter dated 24 September 2018, which included the following:
As the Commissioner has not granted an exemption under section 250B(2) of the Act in respect of the Transfers, it is not necessary for the Commissioner to consider section 250D of the Act (revocation of exemption) because it does not apply.
Notwithstanding, the Commissioner considers it appropriate in the circumstances to advise that based on the available documents and information, the Commissioner is not satisfied that the IPO constituted a public float, as defined in section 250D(3) of the Act. This is because the Commissioner is not satisfied that the stapled securities in Viva Energy REIT were offered to the public generally.
The only part of the Offer under the IPO capable of being made to the public generally was the Broker Firm Offer, and the Commissioner is not satisfied that this particular offer was made to the public generally. Even if it was, the Broker Firm Offer accounted for only 16.47% of the stapled securities in Viva Energy REIT issued under the IPO, which is considered insufficient to characterise the entire Offer under the IPO as having been made to the public generally.
The letter enclosed notice of assessment no 17627108, which required the taxpayer to pay duty of $31,189,125 by 25 October 2018.
On 1 November 2018, the taxpayer provided a detailed notice of objection to the assessment. The two grounds of objection were, in substance:
(a) the transfers qualified for the corporate reconstruction exemption; and
(b) there was no revocation of the corporate reconstruction exemption.
On 12 May 2020, a delegate of the Commissioner determined to disallow the objection.
On 13 August 2021, I made a consent order under s 109(b) of the Tax Act, which allowed the Commissioner to rely on grounds additional to the Commissioner’s primary ground that no exemption was validly granted under s 250B(2) of the Act. The additional grounds were, in substance, that:
(a) the Commissioner was and is entitled to revoke the exemption under s 250D(1)(a) of the Act on the basis that the transfer of the lands was not, and did not arise out of, an eligible transaction; and
(b) alternatively, the Commissioner is entitled to revoke the exemption under s 250D(1)(a) of the Act on the basis that:
(iv) the members of the relevant corporate group did not remain members of the group for a period of at least 3 years commencing immediately after the day on which the transaction occurred; and
(v) s 250D(2)(a) of the Act does not apply to deny the operation of s 250D(1)(a) because the Commissioner is not satisfied that a corporation that was a member of the relevant corporate group on the day that the transactions occurred ceased to be a member of the corporate group as a result of a public float, as defined in s 250D(3).
Establishment
The REIT Trust was established under the Scheme Deed dated 14 June 2016. VER Limited was appointed as the trustee of the REIT Trust, and as the responsible entity for the scheme for the purposes of the Corporations Act.
The REIT Trust was established when units in it were first issued. The register of unitholders maintained by the REIT Trust shows that VEAG held the first units in the REIT Trust, and was the only unitholder at 8 August 2016.
The taxpayer was incorporated as a company on 27 May 2016 as a wholly owned subsidiary of VEAG. The shares in the taxpayer were transferred from VEAG to REIT Co on 21 June 2016.
REIT Co was registered on 14 June 2016 as a wholly owned subsidiary of VEAG.
The VER Trust was established by deed poll dated 14 June 2016. The initial unitholder of the VER Trust was VER Limited as trustee for the REIT Trust.
The restructure process
Under the terms of the Restructure Implementation Deed, the parties agreed to implement Restructure Steps set out in cls 4.3 to 4.15. The steps included:
(a) Step 1: execution of the ‘Restructure Documents’, including a Sale and Purchase Agreement (‘SPA’) to be entered into by Viva Energy and the taxpayer in respect of the properties, and a Stapling Deed to be entered into by REIT Co and the Responsible Entity – this is said to have occurred at 10:01am on 8 August 2016 according to the Register of Restructure Steps;
(b) Step 3: completion of the SPA, pursuant to which legal and beneficial title in the properties was transferred to the taxpayer from Viva Energy in return for the payment of the purchase price. This was satisfied by the taxpayer providing promissory notes – this is said to have occurred at 10:10am on 8 August 2016;
(c) Step 5: the Responsible Entity and REIT Co were to issue the ‘Viva Energy Offer Securities’, being the stapled securities to be issued to VEAG in return for Viva Energy endorsing and delivering the promissory notes provided by the taxpayer to REIT Co and the REIT Trust – this is said to have occurred at 11:45am on 8 August 2016;
(d) Step 7: settlement of the subscription of the ‘Offer Securities’, in accordance with cl 5.4 of the OMA – this is said to have occurred at 3:00pm on 9 August 2016 ; and
(e) Step 8: REIT Co was to notify each party that all the Offer Securities had been allotted in accordance with cl 5.3 of the OMA – this is said to have occurred at 8:22am on the Allotment Date.
Issues for determination
The following issues have been raised by the parties for determination:
(a) whether the 30 June 2016 letter was the grant of an exemption under s 250B(2) of the Act;
(b) whether the exemption was valid and arose out of an eligible transaction within the meaning of s 250A of the Act; and
(c) whether the Commissioner can or should revoke the exemption under s 250D(1)(a) of the Act on the basis that the Commissioner should be satisfied that the VER Trust ceased to be a member of the corporate group by virtue of a ‘public float’ within the meaning of s 250D(3) that occurred within 12 months after the day on which the transaction occurred.
This judgment addresses the first two issues but not the third issue for the reasons which follow. Resolution of the first two issues is sufficient to determine whether the assessment should be set aside or reduced.
Did the 30 June 2016 letter constitute a valid grant of an exemption under s 250B(2)?
The taxpayer submitted that:
(a) the 30 June 2016 letter shows that the Commissioner’s delegate directed himself to the relevant test in s 250B of the Act, reached the requisite state of satisfaction, granted the exemption, and informed the taxpayer of the decision;
(b) while there were subsequent amendments to the Scheme Deed, the amendments did not relevantly alter the character of the transaction; and
(c) the 30 June 2016 letter was not merely indicative advice.
The Commissioner submitted:
(a) the letter was indicative advice given by the Commissioner in respect of a draft version of the Scheme Deed;
(b) it was necessary for the Commissioner to be satisfied of the matters set out in s 250B(2) of the Act by reference to the actual transaction documents;
(c) the Scheme Deed was amended in a number of critical respects not brought to the Commissioner’s attention; and
(d) the state of satisfaction reached in respect of the draft transaction documents was a nullity and of no effect.
Analysis
There is nothing in the 30 June 2016 letter which suggests that it was merely indicative. The word ‘indicative’ or a similar qualifying word is not to be found in the letter. The letter clearly states that the Commissioner is satisfied that the proposed transfers qualify for exemption from duty pursuant to the corporate reconstruction exemption contained in s 250B of the Act. The letter makes direct reference to the Commissioner’s power to grant an exemption and the state of satisfaction necessary if an exemption is to be granted. There is no ambiguity as to what was intended by the Commissioner’s delegate.
The 30 June 2016 letter is responsive to requests made by PwC on behalf of the Viva Group for the grant of a corporate reconstruction exemption under s 250B of the Act. It follows an earlier letter in very similar terms signed by the same delegate, and goes on to refer to ‘the exemption granted in this matter’. There can be no doubt that the delegate who signed the letter considered that he had granted an exemption.
The grant of an exemption is confirmed by the imposition of a condition on the exemption under s 250C(1) of the Act. Plainly there would be no reason to impose a condition under s 250C(1) unless an exemption had been granted under s 250B.
The subsequent references to revocation of a corporate reconstruction exemption in the letter again confirm that the delegate intended to grant an exemption. The letter advises that the Commissioner cannot make a determination in regard to the status of the IPO or a public float, as there is insufficient information available to make such a determination. The letter then recites the requirements of s 250D(3) of the Act. The references to revocation are wholly consistent with the grant of an exemption in the first part of the letter. There would be little point in a discussion of revocation unless an exemption had been granted.
Section 250B is expressed in a mandatory form directing the Commissioner to grant an exemption if satisfied of certain matters. It is evident that the delegate, who was a revenue specialist, was satisfied of the necessary matters. There is nothing in the letter which suggests that the delegate misunderstood the requirements of s 250B of the Act or was mistaken or confused in any way.
Conclusion
I reject the Commissioner’s submission that no exemption was given. It is true that the transaction documents were not in their final form (although they were close to it), but that is a matter for the Commissioner or his delegate as the decision maker to take into account when considering whether to grant an exemption. The Commissioner had a wide discretion under s 250C(1) to impose conditions. The condition making power offered a simple mechanism to ensure that any subsequent changes were compliant with the requirements of exemption under the Act. In fact, the only condition imposed was to the effect that certain documents when executed be submitted to the SRO for stamping together with a copy of the final version of the PDS.
Section 250B(1)(a) provides for applications for an exemption to be made at any time before the eligible transaction occurs to which the application relates. At such a time, documentation will inevitably be in draft. It is self-evident that the numerous complex legal documents found in IPOs are prone to change having regard to the needs and requirements of multiple stakeholders and regulators as well as market conditions. It was quintessentially a matter for the Commissioner or his delegate to determine on the documentation and information available at the time whether there was a sufficient level of satisfaction as to the requirements in s 250B(2) to grant an exemption, and, if an exemption were to be granted, what conditions should be imposed under s 250C(1).
I conclude that the 30 June 2016 letter was intended to be, and was in fact, the grant of a corporate reconstruction exemption under s 250B of the Act.
Principles of construction of commercial contracts
Before addressing the second issue, it is appropriate to consider the relevant principles for the construction of commercial contracts.
A plurality of the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd stated the principles in these terms:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice.
...
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.[1]
[1](2015) 256 CLR 104, 116–7 [46]–[51] (French CJ, Nettle and Gordon JJ) (citations omitted).
These principles have been consistently applied in Victoria.[2]
[2]See Perpetual Ltd v Myer Pty Ltd[2019] VSCA 98, [75] (Whelan, Niall and Hargrave JJA); PCCEF Pty Ltd v Geelong Football Club Ltd[2019] VSCA 144, [27] (Whelan, McLeish and Emerton JJA); Knights Quest Pty Ltd v Daiwa Can Company (2018) 366 ALR 557, 578–9 [88] (Beach, Kyrou and Hargrave JJA).
Likewise, in Toll (FGCT) Pty Limited v Alphapharm Pty Limited, the High Court said:
References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. [3]
[3](2004) 219 CLR 165, 179 (citation omitted).
To the same effect, in Maggbury Pty Limited v Hafele Australia Pty Limited, Gleeson CJ and Gummow and Hayne JJ said that a court construing a contract will ascertain:
the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.[4]
[4](2001) 210 CLR 181, 188, quoting Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912 (Hoffmann LJ).
These principles were summarised by the Court of Appeal in Adaz Nominees Pty Ltd v Castleway Pty Ltd,[5] where the majority said:
[5][2020] VSCA 201, [70] (Whelan JA and Riordan AJA) (citations omitted).
To construe the terms of a commercial contract, the Court asks ‘what a reasonable businessperson would have understood those terms to mean’. To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’, and the Court applies the following principles:
[a]The terms are construed objectively, and the subjective intentions of the parties are irrelevant.
[b]The objective approach requires reference to the text and its ordinary meaning, together with:
(i)the context, being the entire text of the contract including matters referred to in the text; and
(ii) the purpose.
These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.
[c]Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business common sense is a topic on which reasonable minds may differ.
[d]If, after completion of this process, the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.
[e]However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.
[f]Post-contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.
Was the exemption valid as arising out of an eligible transaction?
The parties’ submissions
The Commissioner submitted that the exemption (if granted) was not a valid exemption arising out of an eligible transaction because the transfers were not a transfer of dutiable property from one member of a corporate group to another member of a corporate group. The transfers could be an eligible transaction only if VEAG was the parent corporation of Viva Energy as the transferor and the VER Trust as the transferee on the Transfer Date. The Commissioner accepted that VEAG was the parent corporation of Viva Energy on the Transfer Date. The question raised by the Commissioner was whether VEAG through the REIT Trust held at least 90% of the beneficial ownership of the VER Trust on the Transfer Date and had the ability to cast or control the casting of 90% of the maximum number of votes that may be cast at a general meeting of the VER Trust.
The registers of unitholders showed that VEAG held legal title to all of the units on issue in the REIT Trust on the Transfer Date, and the REIT Trust in turn held all of the units on issue in the VER Trust. However, the Commissioner contended that VEAG did not have the beneficial ownership of over 90% of the units in the REIT Trust and consequently the VER Trust on the Transfer Date.
The Commissioner advanced a complex submission in support of this contention, the key steps of which were as follows:
(a) the term ‘beneficial ownership’ did not have an established legal meaning and must be construed in the context in which it was used;
(b) the meaning of ‘beneficial ownership’ was not always co-extensive with the concept of equitable ownership;
(c) VEAG’s percentage of beneficial ownership of the VER Trust at the Transfer Date should be established by looking to VEAG’s proportionate ownership of the units in the REIT Trust as at the same date;
(d) the question was resolved by determining the time at which the new units in the REIT Trust were issued under the Scheme Deed as a result of the IPO;
(e) once the units came into existence, VEAG’s beneficial ownership of the REIT Trust was diluted below 90% because the units in the REIT Trust were issued to other parties;
(f) clause 7.10 of the Scheme Deed provided for the creation and issue of units at the time when the Responsible Entity agreed to accept the application for units, and had received either the consideration or a commitment in a form acceptable to the Responsible Entity to provide the consideration;
(g) the question of when the units were created or issued under cl 7.10 was a question of fact to be determined having regard to the terms of the OMA and the times at which the various steps occurred;
(h) a number of cornerstone investors took the view that they held substantial interests in the REIT Trust prior to the Transfer Date;
(i) clause 3(b) of the Master ECM Terms, when read with the conditions in the Cornerstone Commitment Letters, had the effect that each cornerstone investor’s binding and irrevocable offer to acquire the securities was accepted by the Lead Managers at such time as the Lead Managers agreed to allocate securities to the investor;
(j) the Allocation Date was defined to be 29 July 2016, and the allocations to cornerstone investors were confirmed to have been made on or around 1 August 2016;
(k) by 29 July 2016, each cornerstone investor and the Lead Managers had agreed that the cornerstone investor would be allocated securities, including the relevant units, which the cornerstone investor had irrevocably agreed to acquire and for which the cornerstone investor had irrevocably agreed to pay the price on 9 August 2016;
(l) the Lead Managers were parties to the OMA with Viva Energy, REIT Co and the Responsible Entity, under which all valid applications were to be accepted subject only to the allocation process which had occurred by 29 July 2016;
(m) from 29 July 2016, the cornerstone investors had a binding contract with the Lead Managers for the allotment of stapled securities on 10 August 2016 which was conditional on completion occurring; and
(n) there was no discretion remaining under the OMA which would have allowed the Issuer to withdraw the offer after 29 July 2016.
The taxpayer submitted that:
(a) there was no disturbance of VEAG’s beneficial ownership of, and voting control over, the scheme and the VER Trust until the Allotment Date, as it was only on that date that the allocated offer scheme units were created and issued by the Responsible Entity/REIT Co to the successful applicants including the institutional investors;
(b) as the stapled securities notionally allocated to certain investors did not exist until the Allotment Date, none of the prospective investors had any beneficial ownership of, or voting control over, the scheme before the Allotment Date;
(c) the Responsible Entity and REIT Co had rights to withdraw the IPO (or vary the timetable) at any time before allotment occurred;
(d) had such a withdrawal occurred, the relevant stapled securities would never have come into existence; and
(e) the participants in the Institutional Offer had no beneficial interest in the stapled securities as at 29 July 2016 or on the Transfer Date.
When were the stapled securities issued?
There is an insurmountable difficulty in the Commissioner’s submission. This arises from the fact that the stapled securities consist of a unit in the REIT Trust and an attached share in the REIT Co. The Commissioner observed in his submissions that:
This proceeding is not concerned with the sale of a pre-existing asset. Rather, the question in this case is when the units in the REIT Trust were created as a result of the IPO as a result of being “issued” in accordance with the Scheme Deed. The time at which this occurred is critical because it is not possible to have a beneficial interest of any kind in future property.[6]
[6]Referring to Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, 16 (Dixon CJ), 24 (Windeyer J) and Federal Commissioner of Taxation v Everett (1980) 143 CLR 440, 450–1 (Barwick CJ, Stephen, Mason and Wilson JJ). Emphasis added.
When did the attached shares come into existence?
The Commissioner then observed that it may be accepted that shares in a company are issued when they are allotted. However, he contended that the time when the units were issued is to be found in the effect of the terms of the Scheme Deed.
The Commissioner referred to the decision of Central Piggery Co Ltd v McNicoll, where Dixon J said:
Speaking generally the word “issue” used in relation to shares means, where an allotment has taken place, that the shareholder is put in control of the shares allotted. A step amounts to issuing shares if it involves the investing of the shareholder with complete control over the shares.[7]
[7](1949) 78 CLR 594, 599–600. Cited or applied in various decisions, see e.g. Awap Sgt 26 Investment Limited v CN 2000 Holdings Ltd [2020] WASCA 74, [165]; Beck v Weinstock (2013) 251 CLR 425, 433 (French CJ); Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 312 (Brennan J); Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336, 371–2 (Mason J), 425–6 (Aickin J).
In the same decision, Latham CJ held that the issue of shares ended in the issue of shares to a specific person.[8] Rich J held that shares were turned from nominal capital into effective capital upon being issued. A resolution to issue shares did not become binding on the company until the shares were delivered and accepted. It was not the first step which counted but the final step.[9]
[8](1949) 78 CLR 594, 598.
[9]Ibid.
Likewise, in Macarthur Cook Real Estate Funds Ltd v APN Funds Management Limited, Nettle JA said as to the clauses of a unit subscription and put option deed:
As such, they reflect the general conception of ‘issue’ (as it is used in relation to shares and kindred interests) as an act of putting the share or interest holder in control of the allotted share or interest as by the entry of the share or interest holder’s name on the register or by some other step by which title is completed.[10]
[10][2013] VSCA 240, [26] (Redlich JA and Hargrave AJA agreeing).
In Awap Sgt 26 Investment Limited v CN 2000 Holdings Ltd, the Western Australian Court of Appeal described the relevant meaning of the word ‘issue’ as follows:
When used in relation to allotted shares, the reference to an ‘issue’ of shares is ordinarily to an act which completes the title of the allottee or puts the allottee in control of the shares allotted.[11]
[11][2020] WASCA 74, [165] (Buss P, Mitchell JA and Hill J).
In Pilmer v Duke Group Limited (in liq), the plurality of the High Court held that:
Before the shares in question were issued, they did not exist as an item of property whether of the company or anyone else. It was the act of issuing the shares and agreeing to allot them which created the relevant item of property – property which was never owned by the company.[12]
[12](2001) 207 CLR 165, 179 (McHugh, Gummow, Hayne and Callinan JJ) (citations omitted).
In a similar vein, Aickin J observed in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd that:
The process of allotment and issue, in the sense indicated by Dixon J “speaking generally”, involves the creation of property, a process the completion of which requires an entry in the share register of the company concerned. “Unissued shares” do not constitute individual items of property but indicate merely the number of shares which a company may issue without increasing its nominal capital in accordance with the Companies Acts or Ordinances. It is thus only upon issue, as distinct from allotment, that individual shares come into existence as separate items of property, a process which logically must include entry in the share register for without such entry there will not have been, to use the words of Dixon J, “the investing of the shareholder with complete control over the shares”.[13]
[13](1981) 146 CLR 336, 427 (citation omitted).
The result as far as the issue of shares in REIT Co is concerned is that the shares did not exist until issued and allotted on the Allotment Date. No rights, whether actual, prospective or contingent or of any other kind, did or could have existed in the shares prior to the Allotment Date. The Commissioner did not contend to the contrary.
When did the attached units come into existence?
As noted above, the Commissioner conceded in his submissions that it was not possible to have a beneficial interest of any kind in future property.[14]
[14]Citing Federal Commissioner of Taxation v Everett (1980) 143 CLR 440. See also Booth v Federal Commissioner of Taxation (1987) 164 CLR 159, 167 (Mason CJ), 177 (Toohey and Gaudron JJ).
French CJ and Keane J observed in Howard v Federal Commissioner of Taxation as follows:
This Court in Federal Commissioner of Taxation v Everett distinguished between an equitable assignment of present property for value, carrying with it a right to future income, and a like assignment of mere future income, dissociated from the proprietary interest with which it is ordinarily associated. The latter takes effect “when the entitlement to that income crystallises or when it is received, and not before”.[15]
[15](2014) 253 CLR 83, 103 (citations omitted).
Clause 1.5(a) of the Scheme Deed gives the stapling provisions precedence over the other provisions of the Scheme Deed, including cls 5.8, 7.10 and 7.11 relied on by the Commissioner.
Clause 1.5(c)(iii) provides in substance that, as far as the law permits, a unit in the REIT Trust and the corresponding share in REIT Co shall be treated as one security.
Clause 1.5(c)(iv) provides in substance that no issue or transfer of a unit is to occur without the corresponding share also being issued or transferred at the same time and to the same person.
It follows that rights or interests cannot exist in a unit unless the same rights and interests also exist in relation to an attached share. This is because the unit cannot be alienated or transferred without the attached share.
The effect of the various provisions in cl 1.5 is buttressed by cls 21.1 to 21.3 of the Scheme Deed. Clause 21.1(a) provides in substance that each ordinary unit must be stapled to a share. Clause 21.2 relevantly provides that the number of issued units must equal the number of stapled shares. Clause 21.3 goes further, relevantly prohibiting the Responsible Entity from doing anything that would directly or indirectly result in a unit no longer being stapled to a share to form a stapled security. These overriding stapling provisions bring with them the inevitable consequence that third party rights or interests cannot exist in units unless the same rights or interests exist in relation to attached shares.
The consequence is that, at the relevant time, VEAG’s beneficial ownership of the VER Trust could not be diminished or diluted below 90% by the issue of units in the REIT Trust to cornerstone or other investors, because no right of beneficial ownership was, or could be at that time, conferred on the other parties in an attached share. An interest in a unit required a simultaneous interest in an attached share. The shares did not exist until the Allotment Date. Although a number of cornerstone investors took the view that they held substantial interests in the REIT Trust prior to the Transfer Date, this was not in fact the position because no corresponding interests in the shares in REIT Co existed at that time prior to the Allotment Date.
Effect of the other transaction documents
The Commissioner’s position is not assisted by the provisions of the other transaction documents. These documents did not, and were not expressed to, override, modify or amend the Scheme Deed.
Clause 4.1 of the OMA required the Issuer to conduct the offer in accordance with various things including the OMA, the Scheme Deed and applicable laws.
The expression ‘Offer Securities’ was defined in sch 2 of the OMA to mean ‘the Stapled Securities being offered for subscription under the Offer’. In turn, ‘Stapled Security’ was defined to mean ‘the stapled share and unit described as a Stapled Security in the PDS … each comprising a fully paid ordinary share in [REIT Co] stapled to a unit in the Trust in accordance with the Stapling Deed’.
Clause 5.1(b) of the OMA dealt with the acceptance of valid applications for the ‘Offer Securities’. Likewise, cl 5.3(a) spoke in terms of the allotment of ‘Offer Securities’ by 10:00am on the Allotment Date.
The Cornerstone Commitment Letters define the term ‘Securities’ as:
Fully paid stapled securities in the Offerors, comprising one ordinary share in [REIT Co] stapled to one unit in the Trust …
The expression ‘Commitment Securities’ is defined in s 3 of the Cornerstone Commitment Letters in terms of the number of Stapled Securities allocated by the Lead Managers. Again, there is nothing in the Cornerstone Commitment Letters to override, modify or amend the stapling requirements or other provisions of the Scheme Deed.
The Master ECM Terms do not take the matter further, defining the expressions ‘Offer’, ‘Offeror’ and ‘Security’ in general terms, but relevantly conformable with the Scheme Deed.
Clause 2.2(a) of the Restructure Implementation Deed contains in substance an acknowledgment and agreement by Viva Energy, the Responsible Entity and REIT Co not to issue or cause the issue of any of the stapled securities to any investor under the offer at any time prior to the Settlement Date. By cl 2.2(c), the Responsible Entity and REIT Co in substance agreed not to accept prior to the Settlement Date any applications for stapled securities which, if accepted, would result in the formation of an agreement for the allotment of stapled securities.
Clause 5.13.3 of the Prospectus described the contracts formed on acceptance of applications as conditional on settlement and on the issue of stapled securities.
Right to withdraw and cancel the IPO
The construction of the Scheme Deed and the other documents which I have outlined above is supported by the provisions which permit the withdrawal and cancellation of the IPO at any time before the Settlement Date. If the IPO were withdrawn or cancelled, then no stapled securities would have come into existence for investors.
Clause 5.10 of the Prospectus gave the Responsible Entity and REIT Co the right to withdraw the IPO at any time before the issue of the shares and units which were to form the stapled securities on allotment. In that event, application monies were to be refunded without interest.
Clause 5.13.3 of the Prospectus provided for the cancellation of the IPO and all contracts arising on acceptance of the IPO if settlement had not occurred within 14 days after first quotation of the stapled securities on the ASX, or such longer period as the ASX allowed. In those circumstances, all purchases and sales made through ASX participating organisations during the conditional trading period would be cancelled and of no effect.
Clause 2.4(a) of the OMA also provided for the withdrawal of the Offer and the Offer Documents and the termination of the OMA at any time prior to successful completion of the bookbuild for whatever reason. Clause 13.1 provided for termination by one or both of the Lead Managers without cost or liability at any time prior to 10:00am on the Settlement Date after the Lead Manager became aware of the happening of any one of the events set out in sch 6.
Section 4 of the Cornerstone Commitment Letters advised investors that in the event that the IPO was withdrawn for any reason, their obligation to apply for, and pay the price for, Commitment Securities would terminate. It also advised investors that any issue or transfer of Commitment Securities was subject to completion of the IPO and the Lead Managers not otherwise terminating the Lead Manager Agreement prior to the Settlement Date.
Section 6 of the Cornerstone Commitment Letters referred to the ‘General acknowledgments’ found in sch 1 of the Master ECM Terms. One such General acknowledgment was that the Offer (or a part thereof) may be modified or withdrawn at any time (without consultation).
Clause 9(a) of the Master ECM Terms provided in substance that any issue or transfer of securities to an investor as a result of an allocation was subject to completion of the Offer.
Conclusion
For these reasons, the Commissioner’s submission that the exemption did not arise out of an eligible transaction within the meaning of s 250A of the Act must fail. Rights and interests in the units in favour of third parties could not arise unless and until similar rights and interests arose in the attached shares. As the REIT Co shares did not come into existence until the Allotment Date, the cornerstone investors did not have any beneficial ownership of, or rights or interests in, the units under the Scheme Deed until the Allotment Date.
This construction of the transaction documentation is consistent with the rights of the scheme promoters to withdraw and cancel the IPO at any time up to the Settlement Date.
It follows that the grant of an exemption under s 250B of the Act by the Commissioner’s delegate on 30 June 2016 was correct and appropriate. The exemption granted was valid, and arose out of an eligible transaction within the meaning of s 250A of the Act.
As the exemption granted on 30 June 2016 is valid and has not subsequently been revoked, it follows that the assessment must be set aside or reduced to nil.
Revocation of the exemption
During the trial I expressed doubt as to whether, if I came to the view that an exemption had been validly granted, I could decide the question of whether the Commissioner could or should act under s 250D of the Act and revoke the exemption granted in the 30 June 2016 letter. This was because the Commissioner had not in fact determined to revoke the exemption for the reason that the Commissioner maintained the position that no valid exemption had been granted.
The taxpayer submitted that following the consent order made on 13 August 2021, all issues were justiciable despite the fact that the Commissioner had not decided to revoke the exemption under s 250D of the Act. In the meantime, s 250D has been repealed and its exercise is dependent on transitional provisions.
The Commissioner submitted that the proper course was not to determine the correctness of a revocation decision not yet made by the Commissioner, but to leave the matter with the Commissioner to decide in accordance with law. Senior counsel for the Commissioner submitted that if the Court wished to give guidance as to revocation, this would assist the Commissioner. However the Commissioner would still need to make a decision as to revocation. If the decision were the subject of an objection, there could be a separate appeal to the Court.
The Commissioner has the benefit of experienced senior and junior counsel who can provide advice as to the law and its proper application. It is not the role of the Court to give advice to the Commissioner as to whether the exemption could or should be revoked or as to how revocation decision making should be undertaken. There may be additional information or submissions placed before the Commissioner before any decision as to revocation is made. In the event of a later appeal, the Court would be assisted by the decision and reasons of the primary decision maker.
In my view, it is premature and inappropriate for the Court to pre-empt any decision of the Commissioner as to revocation. The Court’s jurisdiction arises from s 106(1)(a) of the Tax Act, and is founded on the Commissioner’s determination of the taxpayer’s objection to the assessment. Due process should be observed. It is a matter for the Commissioner to decide in accordance with law whether the statutory requirements for revocation have been met.
Orders
The appeal will be allowed, and the Court will make an order under s 112(1) of the Tax Act that the assessment be reduced to nil.
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