| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : WESTNET RAIL HOLDINGS NO 1 PTY LTD and COMMISSIONER OF STATE REVENUE [2012] WASAT 45 MEMBER : JUSTICE J A CHANEY (PRESIDENT) HEARD : 24 AND 25 AUGUST 2011 SUPPLEMENTARY SUBMISSIONS
11 AND 14 NOVEMBER 2011
DELIVERED : 9 MARCH 2012 FILE NO/S : CC 1605 of 2010 BETWEEN : WESTNET RAIL HOLDINGS NO 1 PTY LTD First Applicant
WESTNET WA RAIL PTY LIMITED
Second Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords: Stamp duty - Sale of shares - Whether company land-holder for purposes of Stamp Act - Right to use land - Whether interest in land - Whether Track Infrastructure is land - Whether Track Infrastructure is fixture
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Legislation: Government Railways Act 1904 (WA), s 2, s 4(2), s 8
Interpretation Act 1984 (WA), s 5
Land Administration Act 1997 (WA), s 18
Rail Freight System Act 2000 (WA), s 4, s 5, s 6, s 7, s 8, s 8(1), s 11, s 12, s 13, s 15, s 30, s 32, s 34, s 42, s 42(1)(a), s 42(1)(b), s 42(1)(c)(i), s 42(4), s 43, s 44, s 49, s 58, Pt 2, Pt 3, Div 4
Stamp Act 1921 (WA), s 76, s 76(1), s 76AO, s 76AP, s 76AP(2), s 76AP(3), s 76AP(4), Div 3, Pt IIIBA
Transport Administration Act 1988 (NSW), s 2 Result: Assessment set aside Category: B
Representation: Counsel:
First Applicant : C L Zelestis QC and J J Davis
Second Applicant : C L Zelestis QC and J J Davis
Respondent : S J Wright and B J Prentice
Solicitors:
First Applicant : Freehills
Second Applicant : Freehills
Respondent : State Solicitor for Western Australia
Case(s) referred to in decision(s):
Anthony v The Commonwealth of Australia (1973) 47 ALJR 83
Auckland City Council v Ports of Auckland Ltd [2000] 3 NZLR 614
Chief Commissioner of State Revenue v Pacific National (ACT) Ltd [2007] 70 NSWCA 325
CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98
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Elitestone Ltd v Morris [1997] 1 WLR 687
Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22 ATR 601
Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228
Gartside v Inland Revenue Commissioners (1968) AC 553
Heap v Hartley (1889) 42 Ch D 461
Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672
Lewis v Bell (1985) 1 NSWLR 731
Moore v Robinson (1880) 14 Ch D 379
Mullane v Mullane (1983) 158 CLR 436
National Dairies WA Ltd v Commissioner of State Revenue (WA) (2001) 24 WAR 70
NH Dunn Pty Ltd v LM Ericsson Pty Ltd [1980] ANZ ConvR 300
Radaich v Smith (1959) 101 CLR 209
Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1
Turner v Cameron (1870) 5 LR QB 306
West Canadian Collieries Ltd v Rinaldi [1936] 2 D.L.R. 601
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REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision 1 These proceedings concerned an issue as to whether or not a transfer of shares in a company which operated rail freight services in Western Australia should attract stamp duty on the basis that the company was a land-holder for the purposes of s 76AP(2) of the Stamp Act 1921 (WA). The answer to that question turned upon whether certain rights of access to land through which the railway lines passed, the track infrastructure, and certain other infrastructure, was land or an interest in land, for the purposes of the Stamp Act. 2 The Tribunal examined the nature of the rights enjoyed by the company, and the proper characterisation of the relevant items of infrastructure, and concluded that the company was not a land-holder for the purposes of the Stamp Act. On that basis, the Tribunal concluded that the decision of the Commissioner of State Revenue to disallow the objection by the purchasers of the shares should be set aside.
Introduction 3 On 30 August 2010, the Commissioner of State Revenue (Commissioner) disallowed an objection dated 1 March 2010 by WestNet WA Rail Pty Limited and WestNet Rail Holdings No 1 Pty Ltd, the applicants, to a duty assessment notice issued on 5 January 2010 in the sum of $71,345,520 (the assessment). The applicants applied to the Tribunal for a review of that decision. 4 The transaction the subject of the assessment is a share sale agreement dated 14 February 2006 (Share Sale Agreement) between Wesfarmers and Genesee & Wyoming Inc. and Wesfarmers Railroad Holdings Pty Limited (a subsidiary of Wesfarmers Ltd) and GWI Holdings Pty Ltd (a subsidiary of Genesee & Wyoming Inc.) as sellers and Babcock & Brown WA Rail Pty Ltd as buyer, the sellers agreed to sell and the buyer agreed to buy all of the shares in the issued capital of Australian Railway Group Pty Ltd (ARG) for the Purchase Price (as defined in the Share Sale Agreement). 5 Completion under the Share Sale Agreement (Acquisition) occurred on 1 June 2006. Upon its completion, the sellers delivered to the buyer executed share transfers relating to all of the shares on issue in ARG. (Page 5)
6 Following completion ARG changed its name to WestNet Rail Holdings No 1 Pty Ltd (WestNet) and Babcock and Brown WA Rail Pty Ltd changed its name to WestNet WA Rail Pty Limited (WWAR). 7 The assessment was made pursuant to Pt IIIBA, and in particular, s 76AO of the Stamp Act 1921 (WA) (Stamp Act) on the basis that the seller was a land-holder within the meaning of s 76AP of the Stamp Act. It is not in issue that WestNet, if it satisfies the description of a 'landholder', is a company to which Div 3 of Pt IIIBA applies. The expression 'land-holder' for the purposes of that Division is defined by s 76AP(2) which provides: (2) A corporation is a landholder for the purposes of this Division if at the time of a relevant acquisition - (a) it is entitled to land situated in Western Australia and the unencumbered value of the land is not less than $1 000 000, or it is entitled to land situated in Western Australia as a coowner of the freehold or of a lesser estate in the land and the value of the whole of the freehold or lesser estate is not less than $1 000 000; and (b) the value of all land to which the corporation is entitled, whether situated in Western Australia or elsewhere, is 60% or more of the value of all property to which it is entitled, other than property directed to be excluded by subsection (3), or if the Commissioner determines that paragraphs (a) and (b) would have applied to the corporation at the time of the relevant acquisition but for a transaction, or series of transactions, which in the Commissioner’s opinion had as its purpose, or one of its purposes, the defeat of the object of this Division. 8 At the time of Acquisition WestNet (formerly ARG) was the parent company of WestNet Narrow Gauge Pty Ltd (WestNet NG) and WestNet Standard Gauge Pty Ltd (WestNet SG) each of which was a party to agreements, which I will refer to as Land Use Agreements. It was not in issue that the entitlements of those subsidiary companies under the Land Use Agreements is an entitlement of WestNet for the purposes of s 76AP(2) by virtue of s 76AP(4). 9 Whether stamp duty the subject of the respondent’s assessment dated 5 January 2010 is payable depends on whether the first applicant (WestNet) was a 'land-holder', for the purposes of s 76AP(2) of the (Page 6)
Stamp Act, at the time of the Acquisition. It is that question that falls for determination in these proceedings. 10 Under s 76AP(2), WestNet was only a 'land-holder' if at the time of the Acquisition, the value of all 'land' (as defined in s 76(1)of the Stamp Act) to which it was entitled was 60% or more of the value of all property to which it was entitled (other than property excluded under s 76AP(3)). 11 As to the property to which WestNet was entitled as at the date of the acquisition, the parties agree that: • The total value of all relevant property was $1,479,791,427; • $448,221,427 of that total value relates to property that was not 'land'; • $109,812,000 of that total value relates to 'land'; and • The remainder of the total value of property, to which WestNet was entitled, namely $921,758,000, is split between three components. The parties disagree as to whether these components constituted 'land' for the purposes of s76(1). 12 The three components in question and their agreed values are: • the rights of WestNet SG and WestNet NG (both wholly owned subsidiaries of WestNet) under the Land Use Agreements to use the Corridor Land - agreed value $200,000,000; • that part of the 'Leased Railway Infrastructure', leased to WestNet SG and WestNet NG under the Land Use Agreements, that constituted 'Track Infrastructure' (as defined in para 2.4(e) of the statement of agreed facts, issues and documents) - agreed value $458,333,000; and • the balance of the 'Leased Railway Infrastructure', leased to WestNet SG and WestNet NG under the Land Use Agreements, ie that which did not constitute 'Track Infrastructure' - agreed value $263,425,000. (Page 7)
13 In light of the 60% requirement in s 76AP(2) and the agreed values described above, it is only if it is found that all three of these components constituted 'land' to which WestNet was entitled, that WestNet will have been a 'land-holder' and the applicants will be liable for the assessed stamp duty. 14 In other words, if it is found that any one of the three components did not constitute 'land' to which WestNet was entitled, the assessed stamp duty is not payable. So much is common ground. 15 The parties were agreed as to the issues and sub issues that fall for determination. Before addressing those issues it is necessary to place the issues into the background and context against which they arise.
Background 16 There has been in existence in Western Australia for more than a century, a railway network which at various times has comprised: 17 That railway network presently comprises, and at all material times comprised, approximately: 18 A chronology and selected historical documents were tendered to the Tribunal to demonstrate the historical development of the railway network. The respondent summarised, accurately, what those documents show as follows: (a) The current WestNet rail network represents the result of a process of construction of railways since the 1880s, as part of the expansion of the Colony’s and then the State’s economy. Some of the individual railways were constructed by private railway companies and subsequently purchased by the State government. (Page 8)
(b) The progressive expansion of the network over time is demonstrated by maps in the chronology …. For example, the Great South Railway (from Beverley to Albany) was built in 1889 in return for land grants and has remained ever since. This spawned the creation of new townsites along the route. (c) By the start of the 20th century, the main railway lines forming the current network were in place. (d) The current standard gauge railway from Perth to Kalgoorlie was built in the 1960s, replacing the narrow gauge which had been used since the late 1800s. The new standard gauge was the subject of an agreement between the Commonwealth and Western Australia and was at the time 'the Free World’s biggest single post war railway project'. It involved a very significant capital expenditure and required substantial earthworks and structures. It was intended to remain in place and service the needs of the State for an indefinite period.
(Chronology references omitted)
19 Up to 27 October 2000, the Narrow Gauge Network and the Standard Gauge Network, and other railway related assets, were vested in the Minister for Western Australian Government Railways, who was constituted as a body corporate with perpetual succession and a common seal (Minister), and were part of the 'government railway' for the purposes of the Government Railways Act 1904 (WA) (GR Act) - s 4(2) GR Act. 20 The administration of the GR Act is and was vested in The Western Australian Government Railways Commission (Commission) - GR Act s 8. 21 A ‘railway’ became part of the Narrow Gauge Network or the Standard Gauge Network upon being declared by notice in the Government Gazette – GR Act s 2. 22 A railway so gazetted included: • all land vested in the Crown in right of the State of Western Australia upon which the railway is constructed, or which was used in connection with or for the purpose of a railway; and • all branch lines, sidings, buildings, erections, walls, jetties, works, (Page 9)
• locomotives, motor cars, motor and other vehicles, rolling stock, plant, machinery, goods, chattels and other fixed or movable property of every description or kind belonging to the Crown in right of the State of Western Australia, and: Rail Freight Systems Act 2000 23 On 8 June 2000, the Rail Freight System Act 2000 (WA) (RFS Act) was assented to and came into effect.
24 The principal purposes of the RFS Act (as stated in the preamble) were to provide for:
25 Because the Land Use Agreements, which are the focus of this review, were made in accordance with the process and scheme of the RFS Act, it is necessary to examine the provisions of that Act in some detail. 26 By s 32 of the RFS Act, the Rail Corridor Minister was constituted as a body corporate. 27 By s 34 of the RFS Act, the Rail Corridor Minister could, by order published in the Government Gazette (Corridor Land Order), relevantly designate land that was part of a Government railway within s 2 of the GR Act, or other land used by or under the control of the Commission as 'Corridor Land'. (Page 10)
28 The effect of a Corridor Land Order on property that was a part of a government railway was dealt with by s 8 of the RFS Act, which relevantly provided: (1) If anything that is part of a Government railway is disposed of under Part 2, it ceases to be part of a Government railway when the right to occupy or possess it passes. (2) If land that becomes corridor land or anything on it is part of a Government railway the land or thing ceases to be part of a Government railway upon the land becoming corridor land unless the Minister orders otherwise under subsection (3). (3) Before land becomes corridor land, the Minister may, in writing, order that anything described in the order that is on the land does not cease to be part of a Government railway because of the land becoming corridor land. … 29 Section 4 to s 7 deal with questions of ownership and treatment of property for the purposes of the RFS Act. They provided: 4. References to things belonging to the State A reference in this Act to any land or thing belonging to the State includes a reference to any land or thing belonging to the State whether held by the Authority, any other State agency, or otherwise. 5. References to disposal of things belonging to the State For the purposes of this Act, requiring any land or thing belonging to the State to be conveyed to a different holder in such a way that it would still belong to the State is to be regarded as disposing of it, and accordingly a power to dispose of any land or thing belonging to the State includes a power to give the holder of the land or thing a requirement of that kind. 6. References to things on land Anything that is placed in, on, or over, or is buried in, land is on that land for the purposes of this Act. 7. Property in things on land Anything that is on land which, or an interest in which, is capable of being disposed of under Part 2 or any other corridor land - (Page 11)
(a) is not a part of the land, regardless of whether it is of the nature of a fixture; (b) is capable of being assigned separately from the land; and (c) is capable of being removed from the land by, or with the authority of, the owner of that thing. 30 Part 2 of the RFS Act is comprised by s 11 to s 30 and is entitled 'Disposal and Related Matters'. 31 In order to achieve the object of disposal of the rail freight business, the Minister administering the RFS Act was empowered to prepare and submit to the Treasurer a proposal to dispose of the Commission’s rail freight business and anything associated with that business in whole or part insofar as the things disposed of belonged to the State - RFS Act s 11. 32 Section 12 of the RFS Act provided that a proposal to dispose of land that is or is to be Corridor Land could not be approved by the Treasurer: 33 The Minister administering the RFS Act was empowered by s 13 to enter into any agreement on behalf of the State to give effect to a proposal that had been approved by the Treasurer. 34 Section 42 of the RFS Act is of particular importance in the present case. At the relevant time, it provided: (Page 12)
Government railway for the purposes of the Government Railways Act 1904; (c) generally manage, and do anything else in relation to - (i) corridor land; and (ii) anything belonging to the State that is on corridor land, is associated with the provision of a rail freight service, and is not part of a Government railway for the purposes of the Government Railways Act 1904. (2) For the purposes of the restriction in subsection (1)(a), any term for which there is an option to renew an interest is to be regarded as part of the term of the interest. (3) The powers given by subsection (1) apply to land and things belonging to the State even if they are not held by the Authority but before exercising powers in respect of land that is in the DBNGP corridor (as defined in Part 4 of the Dampier to Bunbury Pipeline Act 1997), or anything on that land, the Authority is required to consult with the DBNGP Land Access Minister (as defined in that Part). (4) Without limiting what else the Authority may do, the Authority may do, in relation to former Government railway land or anything on it that is associated with the provision of a rail freight service and is not part of a Government railway for the purposes of the Government Railways Act 1904, anything that the Authority could have done had the land not become corridor land. (5) Without limiting what else the Authority may do, Part VI of the Public Works Act 1902 applies, so far as it is consistent with the other provisions of this Act for it to do so, as if - but the regulations may modify or exclude the application of any provision of that Part under this subsection. (6) Nothing in subsection (1)(b) or (c)(ii) or subsection (4) or (5) limits the power of the Authority to dispose of, manage, or do anything else in relation to, anything, whether or not it is on corridor land or former Government railway land, if it belongs to the Authority. (Page 13)
35 Section 43 provided that: The Authority [The Rail Corridor Minister] is to perform any function given by this Act as may be necessary to fulfil the State’s obligations under an agreement under section 13. 36 Section 44 provided that: [The Commission or] [a]ny other person holding anything disposed of, or anything an interest in which is disposed of, under this Part by the Authority [the Rail Corridor Minister] is to convey what it was that the Authority disposed of. 37 Part 3 Div 4 provides for entry by the Minister or any person authorised by the Minister onto any land, premises or thing in certain circumstances. 38 Section 58 (within Pt 4) provides that an agreement under s 13 or an instrument under which a person holds an interest in corridor land under Pt 3 may provide for a party to be liable to pay an amount determined under the agreement or instrument, by way of civil penalty, in respect of a breach of the agreement or instrument. 39 The Land Use Agreements were entered into by the Rail Corridor Minister exercising his powers under the s 13 of the RFS Act. Whether WestNet was a landholder for the purposes of s 76AP of the Stamp Act turns on whether the rights or interests conveyed under the Land Use Agreements constituted land as defined in s 76. In order to construe the Land Use Agreements, it is first necessary to construe the relevant provisions of the RFS Act. 40 The principal question of construction that arises in relation to the RFS Act is whether it empowers disposal or conferral of contractual rights or interests over or in Corridor Land, or whether it empowers disposal only of proprietary interests in Corridor Land and does not authorise the disposal or conferral of contractual rights in relation to such land. I will return to that issue after consideration of the transactions that led to the making of the Land Use Agreements. (Page 14)
Sale of the Government railway 41 On 27 October 2000 the Rail Corridor Minister published an order under s 34 of the RFS Act entitled ‘Rail Freight System (Corridor Land) Order 2000’ (Corridor Land Designation Order) 42 The Corridor Land Designation Order designated certain land (Corridor Land) which was, as at that date, a Government railway identified by the schedules referred to in that Order, as corridor land for the purpose of the RFS Act. 43 The Corridor Land Designation Order included the land upon which the Narrow Gauge Network and Standard Gauge Network existed. 44 On 30 October 2000 the Honourable Murray Criddle MLC, Minister for Transport as Minister administering the RFS Act, the Commission, the Honourable Richard Fairfax Court MLA, Treasurer and Westrail Freight Employment Pty Ltd entered into agreements with AWR Holdings WA Pty Ltd, and Australian Western Railroad Pty Ltd as Purchasers, WestNet Standard Gauge Pty Ltd and WestNet Narrow Gauge Pty Ltd as Network Lessees, AWR Lease Co Pty Ltd as Substitute Sublessee and Australian Railroad Group Pty Ltd as Guarantor for the sale of certain assets, and the assumption of certain liabilities, of the business of carrying goods by rail and road conducted by the Commission under the Government Railways Act (Business Sale Agreement). 45 Contemporaneously with the Business Sale Agreement, the Honourable Murray Criddle MLC, the Commission and the Honourable Richard Fairfax Court MLA as Treasurer entered into: • a Rail Freight Corridor Land Use Agreement (Narrow Gauge) and Railway Infrastructure Lease (the Narrow Gauge Agreement) with WestNet Narrow Gauge Pty Ltd as Network Lessee, AWR Lease Co Pty Ltd as Substitute Sublessee, Australian Western Railroad Pty Ltd as Purchaser and Australian Railroad Group Pty Ltd as Guarantor; and • a Rail Freight Corridor Land Use Agreement (Standard Gauge) and Railway Infrastructure Lease (the Standard Gauge Agreement) with WestNet Standard Gauge Pty Ltd as Network Lessee, AWR Lease Co Pty Ltd as Substitute Lessee, Australian Western Railroad Pty Ltd as (Page 15)
Purchaser and Australian Railroad Group Pty Ltd as Guarantor; (together the Land Use Agreements). 46 By the Business Sale Agreement the Minister and the Commission agreed to sell, and sold, certain goodwill, plant and equipment, inventory, housing, freight terminals, intellectual property rights, shares, leased assets and rights, statutory licences, contracts, records, work in progress, design licences and similar rights, but did not agree to sell, or sell, relevantly: 47 By each of the Land Use Agreements the Minister granted the respective Network Lessee: 48 Leased Railway Infrastructure included, amongst other things, railway track, ballast and sleepers (Track Infrastructure). 49 The Track Infrastructure is substantially located on the Corridor Land. 50 The parties agreed that neither Land Use Agreement confers on the Network Lessee or any other person a right to exclusive possession of the Corridor Land or any part of it, and does not create a lease at common law of the Corridor Land.
The Land Use Agreements 51 Clause 2 of the Land Use Agreements granted the Network Lessees certain rights in relation to Corridor Land, and a lease of what was referred to as the 'Leased Railway Infrastructure'. Clause 2 read: 2.1 The Minister grants the Network Lessee, and the Network Lessee accepts, a right to use and occupy the corridor Land for the Term on the terms and conditions of this agreement. (Page 16)
52 Leased Railway Infrastructure was defined to mean all of the railway infrastructure on Corridor Land, and all 'Non-Corridor Land Railway Infrastructure' (being railway infrastructure referred to in Schedule 6 to the Land Use Agreement). 53 The parties agreed that the Tribunal should proceed on the assumption that rights conferred under the Land Use Agreements in relation to Corridor Land were granted under cl 2.1 and not cl 2.2 on the basis that the existence of any native title could not be ascertained at the date of the Acquisition. I accept that that approach is appropriate. 54 Clause 4 of the Land Use Agreements dealt with the nature of the Network Lessees' interest. Clause 4.1 provided: 4.1 This agreement confers on the Network Lessee: a) subject to the Country Passenger Access Agreement and clauses 8.5, 9, 10, 12, 14.2 and 23 and any other access agreement for passenger trains, the right to the exclusion of the State, the Commission and any other person to use the Corridor Land and Leased Railway Infrastructure for Permitted Uses and any Approved Additional Uses; and … 55 'Permitted Use' is defined as follows: Permitted Use means any use of the Corridor Land or Leased Railway Infrastructure for or incidental to the operation of a railway including, without limitation: (a) the operation of locomotives and rolling stock; (b) the movement of livestock, goods or people; (c) the provision of facilities and services reasonably required in connection with the operation of a railway; and (Page 17)
56 Clause 4.3 was headed 'No Propriety Interest', and provided: 4.3 Except the extent that clause 2.2 applies, this agreement is not intended to create any propriety interest in favour of the Network Lessee in the Corridor Land and the rights of the Network Lessee in respect of the Corridor Land are intended to be contractual only. 57 The Network Lessees' rights in respect to Corridor Land are subject to Existing Third Party Interests - clause 4.10. There are various leases and other access rights listed in Schedule 3 to the Land Use Agreements. Under cl 4.10, the Network Lessee must also permit access by the Commission and its customers and staff to Country Passenger Stations and Stopping Places (as those expressions are defined). 58 Clause 8.1 contains a covenant by the Network Lessee to use the Corridor Land and Leased Railway Infrastructure only for a Permitted Use or any Approved Additional Use. 59 Clause 8.11 permits the Minister to create any interest in land or right to use Corridor Land for a use other than a Permitted Use provided that such interest or right is not inconsistent with the rights of the Network Lessees to use the Corridor Land for a Permitted Use. Clause 9.1 permits the Minister to do other things on the Corridor Land including building structures under or over Corridor Land and installing and maintaining services along or across or through the Corridor Land, again providing that those activities do not unreasonably interfere with the Network Lessees' use of the Corridor Land. There is provision in cl 10 for the Minister to do such works where it may interfere with the Network Lessees' use of the land, subject to a regime which provides for compensation to be paid to the Network Lessees.
Corridor Land 60 As already noted, the overall issue is whether, at the time of the Acquisition, WestNet was a land-holder within the meaning of s 76AP(2) of the Stamp Act. The parties were agreed that a resolution of that issue involved resolution of a number of sub-issues which were found in section 5.2 of the statement of agreed facts. The subissues which arise (Page 18)
in relation to Corridor Land are found in clause 5.2(a)(1) - 5.2(a)(5) which read as follows: Subissue 5.2(a)(1) Minister's power under the RFS Act 61 It was not in issue that, in order to determine the nature of the rights of the Corridor Land, regard must be had to the extent of powers by which the Minister acted in entering the Land Use Agreements. There is nothing (Page 19)
in the Land Use Agreements that expressly identifies the powers under which the Minister purported to act in entering those agreements and in particular cl 2.1. 62 Clause 2.1 of the Land Use Agreements describes what is granted as 'a right to use and occupy the Corridor Land'. Clause 2.2 permits the grant of a lease of Corridor Land in circumstances where the Minister does not have the power by reason of Native Title to provide the right to use contemplated by cl 2.1. Clause 4.3 expressly provides that, except to the extent to which a lease is granted pursuant to cl 2.2 (which has not relevantly occurred in this case) the agreement is not intended to create any propriety interests in favour of a Network Lessee in the Corridor Land. Clause 2.1, read with cl 4.3, strongly suggests that something less than an interest in land was intended to be conveyed by cl 2.1. A grant of rights to use and occupy land, without any grant of a right of exclusive possession, creates a mere licence which does not constitute an interest in land at common law - Radaich v Smith (1959) 101 CLR 209 (Radaich v Smith) at 218 - 219 and 222. 63 Clause 4.1 of the Land Use Agreements makes the rights conferred on the Network Lessee exclusive in relation to the use of the Corridor Land for the permitted uses. In Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1 at 14, McTiernan J referred with apparent approval to Heap v Hartley (1889) 42 Ch D 461 at 470 where Fry LJ said 'an exclusive licence is only a licence in one sense; that is to say, the true nature of an exclusive licence is this. It is a licence to do a thing, and a contract not to give leave to anybody else to do the same thing.' The exclusivity conferred by cl 4.1 does not, therefore, render the nature of the right proprietary as distinct from merely contractual. 64 The respondent contends, however, that s 42(1)(a) of the RFS Act only authorised the Minister to dispose of an interest in Corridor Land, that the Minister could only have been acting under s 42(1)(a), and therefore the rights conferred by cl 2.1 of the Land Use Agreements must necessarily constitute an interest in land. Further, or alternatively, he contends that the rights conferred by the exercise of the power in s 42(1)(a) are, having regard to the terms of the Land Use Agreements, proprietary in nature and therefore constitute an 'estate or interest in land'. 65 The applicants contend that the Minister had power to grant the rights referred to in either under s 42(1)(a), s 42(1)(c)(i) or s 42(4). As to s 42(1)(a), the applicants submit that it authorised the conferral or disposal (Page 20)
of contractual rights or interests (that is, nonproprietary interests in Corridor Land), and that is what was conferred. 66 Section 42(1)(a) authorises the Minister to 'dispose of an interest in Corridor Land that is no greater than a leasehold interest'. 67 The applicants argue that s 42(1)(a) empowers the Minister to dispose of rights which fall short of a propriety interest. They argue that the word 'interest' is capable of a broad meaning, and refer to Commissioner of Stamp Duties (Q.) v Livingston (1964) 112 CLR 12 at 22 and Gartside v Inland Revenue Commissioners (1968) AC 553 at 617, both of which were referred to in the joint judgment in CPT Custodian Pty Ltd v Commissioner of State Revenue(Vic) (2005) 224 CLR 98 at [31]. In my view, however, those cases do not assist in properly construing s 42(1)(a) of the RFS Act. In my view, s 42(1)(a) is concerned with the disposal of interests in land in the sense that that expression is usually understood; that is, the disposal of propriety interests - see for example Mullane v Mullane (1983) 158 CLR 436 at 445. 68 The applicants contend that a broader construction of s 42(1)(a) better serves attainment of the main purpose of the RFS Act, namely the disposal of the State's rail freight business. They submit that achievement of that purpose does not necessarily require the disposal of a propriety interest in Corridor Land. Furthermore, they note that s 8(1) of the RFS Act contemplates disposal of things which are part of a government railway, thus necessarily including things which are not land. Therefore, they argue, the use of the word 'dispose' in s 42(1)(a) should not be limited to disposal of an interest in land in the normal sense of that expression. 69 I accept that the purpose of the RFS Act does not necessarily require the disposal of interests in land. In my view, however, the necessary flexibility is achieved through s 42(1)(c), and in particular it is open to the Minister, utilising the power conferred by that paragraph, to grant rights in respect of Corridor Land falling short of interests in Corridor Land. 70 The respondent submits that the reference to 'anything else' found in s 42(1)(c)(i) means anything other than that which can be done under s 42(1)(a) or s 42(1)(b). He argues that, in circumstances where s 42(1)(a) confers a specific power to dispose of an interest in Corridor Land subject to specific limitations (i.e. the interest must be no greater than a leasehold interest and for no longer than 50 years), and s 42(1)(b) confers a specific power to dispose of an interest in things on Corridor Land, the (Page 21)
general power in s 42(1)(c)(i) must by necessary implication be read down so as not to circumvent or deal with the same subject matter as s 42(1)(a) or s 42(1)(b). In support of that argument, the respondent refers to Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 678 where Mason J (with whom Barwick CJ and Aickin J agreed) observed that, when a statute confers both a general power, not subject to limitations and qualifications, and a special power, subject to limitations and qualifications, the general power cannot be exercised to do that which is the subject of the special power. 71 The limitation to which the respondent refers is a limitation that prevents the grant of an interest in land greater than a leasehold interest for up to 50 years. In other words, s 42(1)(a) prescribes the maximum interest that might be granted in Corridor Land. There is no reason to read s 42(1)(a) as imposing a minimum limit on the grant of rights in relation to Corridor Land, namely that the rights must, at a minimum, constitute a proprietary interest. I accept that, in 'generally managing and doing anything else in relation to Corridor Land' it would not be open to the Minister to grant an interest in land which exceeded the limitation contained in s 42(1)(a). To 'do anything else in relation to Corridor Land' by granting purely contractual rights in respect to Corridor Land is, in my view, clearly within the power conferred by s 42(1)(c)(i). To do so in no way conflicts with the limitation on the extent of the interest in land which might be disposed of under s 42(1)(a). 72 Nor is there any basis to read s 42(1)(a), or indeed any of the other provisions of the RFS Act which deal with or touch upon disposal of interests in land, as creating a requirement that, in disposing of the rail freight business, the Minister must dispose of interests in land. 73 The applicants also contend that the power to grant contractual rights over Corridor Land is found in s 42(4) of the RFS Act. The respondent argued that s 42(4) is subject to the same limitation as s 42(1)(c)(i). For the same reason that the limitation against a maximum interest in Corridor Land does not limit the capacity to grant contractual rights pursuant to s 42(1)(c)(i), it does not limit the power of the Minister to grant contractual rights pursuant to s 42(4). 74 The grant of contractual rights in relation to the Corridor Land, which do not amount to an interest in that land, is open to the Minister pursuant to either s 42(1)(c)(i) or s 42(4). Accordingly, the answer to subissue 5.2(a)(1) is yes. (Page 22)
Sub-Issue 5.2(a)(2) - Did cl 2.1 of the Land Use Agreements confer an estate or interest in Corridor Land? 75 Having concluded that it was within the power of the Minister to grant contractual rights, short of an interest in land, in relation to Corridor Land, the question arises as to whether that was what was done by cl 2.1 of the Land Use Agreements, or whether, properly construed, cl 2.1 disposed of an interest in land. 76 In this context it is worth reiterating that cl 4.3 of the Land Use Agreements expressly provided that the agreement is 'not intended to create any proprietary interest in favour of the Network Lessee in the Corridor Land and the rights of the Network Lessee in respect of the Corridor Land are intended to be contractual only'. The exception to that stipulation is, the parties were agreed, not relevant for present purposes. It is also worth reiterating that the respondent accepts that neither land use agreement confers a right of exclusive possession over the Corridor Land. 77 Thus, it is clear that the parties to the Land Use Agreements expressed, in clear terms, their intention that the rights conveyed by cl 2.1 were not to amount to an interest in land. It may be accepted that the label the parties attached to an instrument is not determinative. It is the substance of the agreement as determined by the law, and not by the label attached to it, that determines the proper construction of an instrument - see Radaichv Smith at 214. That is not to say that the intention of the parties is to be disregarded. As was explained in Lewis v Bell (1985) 1 NSWLR 731 at 736 - 737, it is necessary to consider the significance of the parties' intentions at two stages in the reasoning process. The first stage is deciding what is the nature of the rights which are granted by the transaction. The second is, having determined the nature of the rights, to then determine whether the relationship is to be classified as a grant of proprietary rights or contractual rights. Mahoney JA, with whom the other members of the Court agreed, continued: At the first stage, that of construction of the document, intention has the functions which ordinarily it has in accordance with the accepted rules of interpretation and construction. In the process of construction, the court's purpose is to determine, from the words used in their context, what was the intention of the parties as to what should be the rights granted. That intention is, of course, to be taken from the words used. But, once the intention has been ascertained, words which, eg, would in isolation convey a more limited right may be construed as granting exclusive possession, and vice versa. And, in the process of construction, an express statement of the parties' intentions as to, eg, the nature of the relationship to be created, will be of substantial, though not necessarily conclusive, (Page 23)
importance: it will, in accordance with the rules of construction, yield to the intention to be derived from the document as a whole. Similarly, intention will be relevant in the construction of the document for the purpose of deciding what terms are to be implied. Thus, if the grant of the right to exclusive possession depends, in the instant case, upon whether, eg, the business efficacy test requires its implication, an express statement by the parties of their intention may, in accordance with the established rules governing the implication of terms, operate to prevent such an implication. At the second stage, that of classification, the significance of intention will, in Australia, be less. Once the nature of the rights granted is finally determined, the classification of the transaction, as lease or licence, willdepend upon whether the rights are or are not those of exclusive possession. It is in this sense that, as it has been said, expressions of intention are irrelevant: the parties cannot 'escape the legal consequences of one relationship by professing that it is another': Radaich v Smith (at 222) per Windeyer J. 78 The grant of rights under cl 2.1 of the Land Use Agreements makes no reference to exclusive possession, or even possession. It refers to a right to use and occupy the Corridor Land 'on the terms and conditions of this agreement'. Clause 4.1 confers on the Network Lessee the exclusive right to use Corridor Land for 'Permitted Uses' and 'any Approved Additional Uses'. The definition of 'Permitted Use' is set out above. 'Approved Additional Uses' are those referred to in cl 8.6, namely, purposes other than a 'Permitted Use' to which the Minister gives prior written consent. 79 The use of the Corridor Land by the Network Lessee is subject to a number of other provisions of the Land Use Agreements. In particular, it is subject to cl 8.5, cl 9, cl 10, cl 12, cl 14.2 and cl 23 'and any other access agreement for passenger trains'. 80 Clause 8.5 enables the Minister to grant a right to a third party to use and occupy a part of Corridor Land for a 'Permitted Use' or any 'Approved Additional Use'. 81 Clause 9 enables the Minister to build structures over or under Corridor Land, and to install and maintain services along or across Corridor Land, and to upgrade, replace or construct railway infrastructure. 82 Clause 12 permits the Minister to relocate railway lines and to designate the land on which the new line is situated as Corridor Land. In that event, the terms of the Land Use Agreement apply to the land on (Page 24)
which the new line is constructed, and cease to apply to the land on which the old line was constructed. 83 Clause 14.2 enables the Minister to enter upon Corridor Land to exercise certain rights and powers without notice in an emergency or otherwise upon five days prior written notice. 84 It can thus be seen that the rights conferred by cl 2.1 are subject to qualifications which enable others to do significant things in relation to the Corridor Land. 85 I note in passing that cl 8.10 and cl 8.11 deal with 'rights and interests in Corridor Land'. Clause 8.10 provides that the rights granted by the Minister under cl 8.11 'include not only rights in contract but also proprietary interests in the land such as leases, easements and restrictive covenants'. 86 Clause 8.11 enables the Minister to 'create any interest in land or right to use Corridor Land for a use other than a 'Permitted Use' provided that such interest or right is not inconsistent with, and does not extinguish, defeat or remove, the rights of the Network Lessee to use the Corridor Land' and does not unreasonably interfere with the Network Lessee's use of the Corridor Land. 87 The terms of cl 8.10 and cl 8.11 are drawn in a way which expressly distinguishes between rights in contract and proprietary interests in land. Clause 8.11 refers to the Network Lessee's rights to use the land, rather than any 'proprietary interest in the land'. 88 In my view, having regard to the terms of the Land Use Agreements referred to above, cl 2.1 amounted to a grant of contractual rights and not to an interest in the Corridor Land. 89 The respondent raised a number of arguments in support of its contention that, in substance, the rights conveyed by cl 2.1 of the Land Use Agreements amounted to an interest in the Corridor Land. 90 One argument is that the fact that cl 2.1 and cl 2.2 both contemplate the grant of rights on the same terms and conditions (i.e. those set out in the Land Use Agreements) is a reason why cl 4.3 cannot be determinative as to the nature of rights being conferred. The respondent observes that the only difference between cl 2.1 and cl 2.2 is that one refers to a lease and the other does not. Since a lease confers a proprietary interest, and the rights conferred by cl 2.1 and cl 2.2 are to be on the same terms, the (Page 25)
rights conferred by cl 2.1 must necessarily, the respondent argues, be proprietary in nature. The problem with that submission is that it equates the grant of rights under either cl 2.1 or cl 2.2 as being exactly the same thing. It ignores the fact that cl 2.2 only comes into effect if 'the Minister does not have power by reason of Native Title to provide the right to use contemplated by cl 2.1'. In that event, something different is able to happen, namely, the grant of a lease. In my view, the juxtaposition of the two clauses reinforces the conclusion that there is a difference between 'a right to use and occupy the Corridor Land' and a lease of the Corridor Land. 91 The respondent argued that disposal of a proprietary interest in the Corridor Land is entirely consistent with the objective, expressed in paragraph (e) of the recitals of the Land Use Agreements, of 'disposing of the freight business on a vertically integrated basis'. Counsel explained the expression 'vertically integrated basis' is an economic term meaning that all levels of the business, including the operation of the Railway Corridor, the operation of the railway track, and all other aspects of the business, would be part of the one transaction. 92 The respondent argued that that intention is entirely consistent with the disposal of a proprietary interest in the Corridor Land, and that the intention is evident from the terms of the RFS Act, in particular, the correlation between s 11, s 12, s 15, s 42(1)(a), s 49 and s 58. He submitted that the consistent concept running through those sections is the disposal of an interest in land that forms part of the Commission's rail freight business by way of the designation of the land as Corridor Land. He also contended that the intention is evident from the Second Reading Speech by the Deputy Premier, Mr Cowan in relation to the Rail Freight System Bill 1999 (Western Australia, Parliamentary Debates; Legislative Assembly, 3 June 1999) at 8771 - 8775 and also from the Land Use Agreements themselves. 93 Section 11 of the RFS Act enables the Minister to prepare and submit to the Treasurer a proposal to dispose of the Commission's rail freight business. There is nothing in s 11 which suggests that disposal of the freight business involves the disposal of land or an interest in land. 94 Section 12 of the RFS Act requires the publication of a Corridor Land order prior to disposal of land and limits any proposal to dispose of land to the disposal of an interest no greater than a leasehold interest. (Page 26)
95 Section 15 removes any requirement for approval under s 18 of the Land Administration Act 1997 (WA) (LA Act) in respect of anything done in, or necessary to give effect to, an agreement under the RFS Act. Section 18 of the LA Act requires an authorisation of the relevant Minister for dealings with interests in Crown Land. 96 Section 42(1)(a) of the RFS Act, as has been discussed above, permits the disposal of an in interest in Corridor Land no greater than a 50 year leasehold interest. Section 49 of the RFS Act permits the Minister to delegate certain powers of approval to a person having an interest in Corridor Land. Section 58 enables '[a]n agreement under s 13 or an instrument under which a person holds an interest in corridor land' to provide for the imposition of a civil penalty for breach of the agreement or instrument. 97 There can be no doubt that the terms of the RFS Act, and in particular the sections referred to above, contemplate the possibility that agreements entered into by the Minister pursuant to s 13 might involve the disposal of an interest in Corridor Land. I do not accept, however, that the scheme of the Act necessarily requires the disposal of an interest in the Corridor Land. Section 13 enables the Minister to enter into an agreement 'to give effect to a proposal under section 11'. A proposal under s 11 is a 'proposal to dispose of the Commission's rail freight business'. As already noted, I do not accept that the disposal of the rail freight business (including 'on a vertically integrated basis'), necessarily requires the disposal of an interest in land. 98 I note that, in the Second Reading Speech (at 8771), Mr Cowan made reference to 'a vertically integrated operation' in contradistinction to 'vertical separation … into a track owner and a train operator'. The expression 'vertically integrated' carries with it no necessary connotation of disposal of an interest in land. The purpose of designation of land as Corridor Land is not limited to the possible disposal of an interest in that land. It is equally necessary for the purpose of designating the area of land in respect of which contractual rights will be granted. Both mechanisms for disposal of the rail freight business are open under the RFS Act. 99 In the Second Reading Speech, Mr Cowan referred to Division 3, Part 3 and observed that the Division provides for the functions of the Rail Corridor Minister in dealing with Corridor Land and things on it. He noted that Part 3 allowed the Rail Corridor Minister to grant a lease of land, or any lesser interest, to give the purchaser a right to use land and (Page 27)
railway infrastructure for railway purposes. That is undoubtedly an accurate summary of at least part of Part 3, Division 3. To the extent that the Deputy Premier spoke of disposal of an interest in Corridor Land, he was undoubtedly referring to s 42(1)(a) of the RFS Act. The question for the Tribunal, however, is not about the Minister's powers, but what has, in fact and law, been done. The Second Reading Speech is of no assistance to the proper construction of the Land Use Agreements. 100 Much of the respondent's submissions ultimately fell back on the proposition that the power to grant the rights under cl 2.1 of the Land Use Agreements was based upon s 42(1)(a) of the RFS Act, and that that provision dealt only with the disposal of interests in Corridor Land. Once it is accepted that the power to grant the rights referred to in cl 2.1 is found in s 42(1)(c)(i) or s 42(4) of the RFS Act, the foundation of many of the respondent's submissions fall away. 101 The answer to sub-issue 5.2(a)(2) is, therefore, yes. That is, the rights under cl 2.1 of the Land Use Agreements constituted a licence to use, and not an estate or interest in, Corridor Land.
Sub-issue 5.2(a)(3) - Was the conferral of the rights under cl 2.1 an exercise of the power in s 41(1)(a) of the RFS Act? 102 Having concluded that the answer to the first two subissues is 'yes', this issue does not require resolution. 103 For the reasons dealt with above, had it been necessary to answer the question, the answer to it would have been 'no'.
Sub-issues 5.2(a)(4) and 5.2(a)(5) 104 Sub-issue 5.2(a)(4) falls away by reason of the answers given to the earlier sub-issues. Similarly, subissue 5.2(a)(5) falls away.
Track Infrastructure 105 By cl 2.3 of the Land Use Agreements, the Commission and the Minister granted to the Network Lessee a lease of the Leased Railway Infrastructure. Railway Infrastructure is defined in the Land Use Agreements to include a number of components. Those components included railway track, ballast, and sleepers. It is those components that the parties both referred to as 'Track Infrastructure' (para 2.4(e) of the statement of agreed facts). The question arises as to whether the Track Infrastructure was land for the purposes of s 76(1) of (Page 28)
the Stamp Act. The parties identified the issues to be determined in relation to that question as follows: (Page 29)
(4) If the answer to sub-issue 5.2(c)(2) is ‘yes’ and the answer to sub-issue 5.2(c)(3) is ‘no’, whether Track Infrastructure could only constitute 'land' of WestNet under paragraph (b) of the definition in s.76(1) of the Stamp Act if it had a beneficial entitlement in the Track Infrastructure which was derived from or conferred by beneficial ownership of an estate or interest in the Corridor Land. (5) If the answer to sub-issue 5.2(c)(4) is ‘yes’, whether WestNet had a beneficial entitlement in the Track Infrastructure which was derived from or conferred by beneficial ownership of an estate or interest in the Corridor Land. (6) If the answer to sub-issue 5.2(c)(4) is ‘no’, whether WestNet was, or was deemed to be, beneficially entitled to the Track Infrastructure for the purposes of Part IIIBA of the Stamp Act. (d) Further or alternatively to sub-issues 5.2(b) and 5.2(c), if (and only if) the answer to sub-issues 5.2(e) below is ‘yes’, whether that part of the ‘Railway Infrastructure’ (as defined in the Narrow Gauge Agreement and the Standard Gauge Agreement) comprising Track Infrastructure was ‘land’ to which WestNet was or was deemed to be beneficially entitled at the time of the Acquisition by reason that it was fixed to other Leased Railway Infrastructure within the meaning of paragraph (b) of the definition of “land” in s.76(1) of the Stamp Act. This in turn raises the following sub-issues: (1) The meaning of the term 'fixed' where used in the definition of 'land' in s.76(1) of the Stamp Act. (2) Whether the Track Infrastructure was (apart from s.7 of the RFSA) 'fixed' to other Leased Railway Infrastructure. (3) Whether s.7 of the RFSA precludes the Track Infrastructure from being fixed to other Leased Railway Infrastructure within the definition of 'land' in paragraph (b) of s.76(1) of the Stamp Act. (4) If the answer to sub-issue 5.2(d)(2) is ‘yes’ and the answer to sub-issue 5.2(d)(3) is ‘no’, whether Track Infrastructure could only constitute 'land' of WestNet under paragraph (b) of the definition in s.76(1) of the Stamp Act if it had a beneficial entitlement in the Track Infrastructure which was derived from or conferred by beneficial ownership of an estate or interest in the other Leased Railway Infrastructure. (Page 30)
(5) If the answer to sub-issue 5.2(d)(4) is ‘yes’, whether WestNet had a beneficial entitlement in the Track Infrastructure which was derived from or conferred by beneficial ownership of an estate or interest in the other Leased Railway Infrastructure. (6) If the answer to sub-issue 5.2(d)(4) is ‘no’, whether WestNet was, or was deemed to be, beneficially entitled to the Track Infrastructure for the purposes of Part IIIBA of the Stamp Act.
Issue 5.2(b) Is the track infrastructure 'land'? 106 Land, entitlement to which has the potential to render a corporation a land-holder for the purposes of s 76AP of the Stamp Act, is defined in s 76 of the Stamp Act as follows: 'Land' includes a mining tenement, and also includes (a) any estate or interest in land; and (b) anything fixed to the land including anything that is, or purports to be, the subject of ownership separate from the ownership of the land. 107 The Interpretation Act 1984 (WA) (Interpretation Act), s 5, defines 'Land' to include 'buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land'. 108 In Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 (Epic Energy), the Court considered whether the definition of 'Land' in s 5 of the Interpretation Act applied to the word 'Land' in Pt IIIBA of the Stamp Act. The majority, Buss and Murphy JJA (at [149] and [227]) considered that the Interpretation Act definition applied, although with significant overlap, to the definition contained in s 76(1) of the Stamp Act, except to the extent that the two definitions are inconsistent. McLure P dissented on the point (at [47]). It is therefore necessary to consider whether the Track Infrastructure is 'land' as defined in s 76 of the Stamp Act or s 5 of the Interpretation Act. 109 Of critical importance to the resolution of this issue is s 7 of the RFS Act. 110 Mr Martin Baggott, an engineer with extensive experience in relation to railway networks in Western Australia and elsewhere, provided a witness statement which was received in evidence by the Tribunal. His evidence was not challenged. In that statement, Mr Baggott described the (Page 31)
nature of the construction of the railway network. A brief summary of the network is set out above (at [17] and [18]) and it is not necessary to repeat that summary. 111 Mr Baggott explained that, following identification of a route of a railway line, the land over which the track is to pass is cleared. In more modern construction, the material cleared is stockpiled and used as topsoil or for vegetation of the earthworks to prevent erosion. Prior to the 1970s, the material removed was not stockpiled, and tracks were built directly on top of the bare ground after trees and vegetation were removed from the path. Cuttings and embankments are then constructed in preparation for the laying of the track. A capping of subballast is placed on top of embankments or cuttings. The capping is typically 200 millimetres deep and comprises specially selected materials sourced from areas as close as possible to the area of construction. Most of the narrow gauge network has no capping, having been constructed at a time when there were limitations on earthwork construction capacity and transportation of materials. 112 A superstructure is then constructed on top of the capping. There are various ways of placing the ballast, sleepers and rails. In some cases the ballast is laid out and the sleepers are placed on top, but more commonly, the sleepers are laid with the rails on top of the formation and the ballast is spread by train and vibrated into position. The method of placing dirt or ballast around sleepers has changed over time. 113 On the original narrow gauge railway, laterite gravel was used, but most of those tracks have been upgraded with the placement of crushed rock ballast on top of the gravel. Mr Baggott said that, while earthworks placed in the 19th century may still be present, other components have either been removed and replaced with new materials or 'have received cascaded material'. Timber sleepers, with a life of about 25 years, will have been replaced at least four times while most of the rail will have been replaced at least once. 114 The ballast lies between the sleepers and capping to spread the load and provide drainage. The rails lie on top of the sleeper, and the rails are held in place by fastenings to the sleeper. In the 19th century and early 20th century tracks were built with rails lying directly onto wooden sleepers and a 'dog spike' was rammed into a hole drilled into the sleeper adjacent to the foot of the rail. The rails are joined with welds, or (less often now) with joint bars and bolts, called fissure plates. (Page 32)
115 In the latter part of the 20th century, and more recently, steel and concrete sleepers were used in place of timber when the timber degraded and needed replacing, or for initial construction. 116 The fastenings, and other components, used for the interface between the sleeper and the rail are collectively called 'jewellery'. Those components include bolts, joint bars, clips and other devices to keep the rails secure. 117 The sleepers are held in place by the ballast through friction applied due to their own weight, the rails' weight and the weight of the train on the bottom of the sleepers, and due to the ballast friction on the sides and ends of the sleeper. The ballast sits on top of the capping which in turn sits on top of the earthworks. The sharp edges of the crushed rock ballast penetrate the surface of the sleeper and stop it moving. For steel sleepers, the shape of the sleeper, and an inverted 'U', with ballast in the void, stops the sleeper from moving. 118 Construction of the track requires bridges and culverts to allow the passage of water between the track. Bridges take many forms and are made of various materials such as timber, steel or concrete. 119 Section 6 of the RFS Act specifies that anything placed in, on, or over, or is buried in, land is taken to be 'on that land' for the purposes of the RFS Act. The description of the method of construction of the railway track demonstrates quite clearly that the track, and the associated ballast and sleepers, is 'on' the land over which it passes, namely Corridor Land. 120 Section 7 of the RFS Act specifies that anything that is on land is not part of the land 'regardless of whether it is of the nature of a fixture'. That section leads inevitably to the conclusion that the track infrastructure is not part of the Corridor Land. 121 The respondent argues that the effect of s 7 of the RFS Act is to provide for the separate ownership of, on the one hand, Corridor Land itself, and on the other hand, things which are in the nature of fixtures to, or are part and parcel of, the Corridor Land. He contends, however, that it does not follow from the fact of such separate ownership that s 7 results in things on Corridor Land ceasing to be a fixture or otherwise ceasing to be in the nature of land. The respondent cites in support of that contention Chief Commissioner of State Revenue v Pacific National (ACT) Ltd [2007] 70 NSWCA 325 (Pacific National) at [76] per Basten JA. In that case, the Court was called upon to decide whether a nonexclusive right of access to rail network and infrastructure facilities on land owned by a (Page 33)
third party, the State Rail Authority, was a lease as relevantly defined. The definition of lease under the legislation under consideration was, relevantly, 'an agreement (such as a licence) by which a right to use land in New South Wales at any time and for any purpose is conferred on or acquired by a person …'. Section 2 of the Transport Administration Act 1988 (NSW) declared that the Rail Access Corporation was the owner of all rail infrastructure facilities installed in or on land, including land owned by the State Rail Authority. That section gave the Rail Access Corporation the power to sell or otherwise deal with rail infrastructure facilities that it owned. Rail Access Corporation entered into an agreement which granted certain access rights to National Rail Corporation Ltd. The question arose as to whether the rights conferred were rights to use 'land'. 122 Basten JA noted that there had been, pursuant to statutory authority, a division of ownership between parts of the land and objects which would normally constitute parts of the land, such as fixtures and structures which become part and parcel of the land. He observed that land may be divided both vertically and horizontally, and said that there was no reason why a structure could not be separated from the land above, below or beside it. His Honour concluded 'in the general meaning of "land'' the identity of the owner is rarely if ever a relevant criterion for determining whether or not the thing owned is land or not.' 123 There is an important distinction between the legislation being considered in Pacific National and the present case. In the former, the relevant provision simply conferred ownership of rail infrastructure facilities on the Rail Access Corporation. It said nothing of the character of components of those facilities. That is to be contrasted with s 7 of the RFS Act which specifically provides that anything on the land is not part of the land, regardless of whether it is of the nature of a fixture. 124 Things which are in the nature of fixtures, at common law, are land because they are part of the land to which they are fixed. For example, a concrete culvert being stored following manufacture prior to its transport to an installation in land where it is to be used as a culvert, is not land. Once transported to and installed in situ for use as a culvert on land, it becomes land because it is part of the land on which it is installed (assuming the necessary attributes of a fixture are satisfied). The effect of s 7 of the RFS Act is that items of track infrastructure are not, as a matter of law, part of the land upon which they are placed, regardless of whether they have the character as a fixture. In Pacific National, the rail (Page 34)
infrastructure facilities remained part of the land, notwithstanding the separate ownership regime introduced by the legislation. 125 Accordingly, I find that whether or not the track infrastructure was a fixture at common law, by reason of s 7 of the RFS Act, it is not land. 126 Having reached that conclusion, it is not necessary that I resolve subissues 5.2(b)(1) or 5.2(b)(2). Since the matter was fully argued, however, and, in case my conclusion as to the effect of s 7 of the RFS Act should be found to be incorrect, I will deal with those issues. 127 The first is subissue 5.2(b)(1), that is whether, putting s 7 of the RFS Act to one side, the track infrastructure was a fixture at common law. 128 In Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22 ATR 601 (Eon Metals) at [606], Ipp J noted that the question as to whether something is a fixture requires regard to be had to all relevant circumstances, and that no particular factor necessarily has primacy. He noted that there appears to be a trend towards attaching particular significance to the objective intention with which the item is placed on the land. 129 It is well accepted that the question of whether an item is a fixture or a chattel is a question of fact to be determined having regard to all relevant circumstances National Dairies WA Ltd v Commissioner of State Revenue (WA) (2001) 24 WAR 70 (National Dairies) at [38]. Reference was made in that case (at [39]) to the observation of Mahoney JA in NH Dunn Pty Ltd v LM Ericsson Pty Ltd [1980] ANZ ConvR 300 at 303 304 who identified the period of time for which the item was to be in position, the degree of its annexation to the land, what was to be done with it, and the function to be served by its annexation, were all matters relevant to the inquiry. 130 In Anthony v The Commonwealth of Australia (1973) 47 ALJR 83 Walsh J considered whether telephone lines and power lines crossing land, and attached to the land by poles, constituted part of the land. At [89], His Honour concluded that poles, and equipment attached to them, did not become fixtures, notwithstanding that it was contemplated that the line would continue to exist permanently or for an indefinite period as a means of communication. His Honour observed that the siting of the poles on the particular piece of land was not concerned with adding to the enjoyment of the parcel of land, but with providing a line of communications which would be maintained just as effectively if, for (Page 35)
some reason, it became desirable to alter its course and bypass the particular land. 131 It seems to me that those observations are apposite to a consideration of the Track Infrastructure. The evidence of Mr Baggott discloses that, historically, the alignment of the railway typically followed the line and level of the country proceeding around, rather than through or across, hills and valleys. The more recently constructed standard gauge network, built when large machinery was available, provides for flatter grades and large radius curves, conducive to more efficient train operation. The line between Kalgoorlie and Perth was substantially deviated to obtain better grades when it was converted to standard gauge. 132 Just as powerlines are installed to enable the distribution of power, rather than the better use of particular land, railway infrastructure is placed on land so as to provide a system of transport. Whilst it can be accepted that that system was intended to endure over a long period, its installation was not directed to the better use of the land through which the tracks pass. To the extent that earthworks occurred, and ballast was applied to hold the tracks and prevent movement, that degree of fixing was designed simply to enable the tracks to safely allow trains to pass over them. 133 Mr Baggott's evidence establishes that the tracks and sleepers are replaced from time to time as maintenance requires. The track infrastructure is attached to the land by its own weight, albeit that the ballast and fixing of rails to sleepers provides a firm connection between the infrastructure and the land. 134 The respondent points to previous cases where railways have been found to be fixtures. In Pacific National, Basten JA suggested (at [58]) that rail infrastructure, including railway track and associated track structures would normally constitute fixtures and would therefore fall within the general law definition of land. 135 In Turner v Cameron(1870) 5 LR QB 306 and Moore v Robinson(1880) 14 Ch D 379 railways or tramways were found to be fixtures by reason of their annexation to the land. In each case, the railway or tramway formed part of the operation of the coal mine or quarry respectively. Although the purpose of the fixing was not the subject of specific consideration in the decisions, it is apparent that, in those cases, the placement of the tracks on the land facilitated the use of the land as a mine or quarry. In the Canadian case of West Canadian Collieries Ltd v (Page 36)
Rinaldi[1936] 2 D.L.R. 601, it was held that a railway line became part of the land to which it was affixed. That decision was based on acceptance of a proposition 'as settled law' that 'articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to show they were intended to continue as chattels' and that 'the circumstances necessary to be shown to alter the prima facie character of the articles are circumstances which show the degree of annexation and object of such annexation, which are patent for all to see'. I do not consider that, having regard to the development of the law in this area as explained in Eon Metalsand National Dairies, that the Canadian decision should be taken as a reliable guide to the law in Western Australia. Similarly, the two old English decisions are of limited assistance for the same reason and can be distinguished on the basis of the relationship of the railway track to the better use of the land on which it was placed. 136 Notwithstanding the observation in the passage from Pacific National referred to above, I have reached the conclusion that, were it necessary to decide the point, I would have concluded that the track infrastructure is not a fixture to the land over which it passes. |