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[2016] WASAT 140
General information, not legal advice.
State Administrative Tribunal (WA)
2016-12-12
Original judgment source is linked above.
The applicant, a company owned by both of them, was the entity which was to make those acquisitions.
Contracts of sale and purchase were subsequently entered into with all of the owners other than Pullington and Cobalt. Some of the contracts came about through the exercise by the applicant of options to purchase granted by some of the owners, other contracts were separately negotiated.
The Commissioner of State Revenue considered that each of these transactions together gave effect to or arose from what she regarded as substantially one arrangement, namely a decision of Pullington and Cobalt to acquire the other shares in the property. Accordingly, the Commissioner aggregated the transactions under the (WA) and applied duty as if they were a single transaction.
The applicant, 705707 Hay Street Pty Ltd, objected to the Commissioner's assessment. It argued that the various transactions were all separately negotiated, that there was no interdependence between the contracts and that there was no suggestion of 'contract splitting' for tax purposes or any falsity or deception on the part of the purchaser.
The Commissioner disallowed the objection and the applicant applied to the Tribunal for a review of that decision.
The Tribunal considered the facts and circumstances of the several transactions. The Tribunal concluded that the applicant had not satisfied the Tribunal that the transactions together did not form, evidence, give effect to or arise from what is, substantially one arrangement.
The Tribunal accordingly affirmed the Commissioner's decision.
AttorneyGeneral v Cohen (1937) 1 All ER 27
Baldey v Parker [1823] EngR 567; (1823) 2 B & C 37
Casamajor v Strode [1834] EngR 559; (1834) 2 My & K 706
Charles Lloyd Property Group Pty Ltd v Commissioner of State Revenue (2011) 84 ATR 775
Chief Commissioner of State Revenue and Pacific General Securities Ltd [2004] NSWADTAP 51; (2004) 58 ATR 17
Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211
Commissioner of State Revenue v Landrow Properties Pty Ltd (2010) 79 ATR 800
Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 2] [2014] WASC 55
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 293 ALR 257
Federal Commissioner of Taxation v Newton [1957] HCA 99; (1957) 96 CLR 577
Holliday v Lockwood [1917] 2 Ch 47
Jeffrey v Commissioner of Stamps (1980) 23 SASR 398
Old Reynella Village Pty Ltd v Commissioner of Stamps (SA) [1989] SASC 1724; (1989) 51 SASR 378
Re Brianco Nominees Pty Ltd and Commissioner of State Revenue [2008] VCAT 999; (2008) 73 ATR 67
Re Chief Commissioner of State Revenue and Pacific General Securities Ltd (No 2) [2005] NSWADTAP 54; (2005) 63 ATR 127
Re Grafton and Commissioner of State Revenue (2011) 85 ATR 526
Re Khoury and Chief Commissioner of State Revenue (2010) 78 ATR 81
1 This matter concerns the assessment of duty in relation to various transactions relating to the acquisition of Lot 5 on Diagram 3435, together with the building known as and situated at 705 to 707 Hay Street, Perth (the property). In May 2015, immediately prior to any of the transactions the property was owned by a number of parties as tenants in common. Each of those parties owned a specified number of undivided 720th shares.
2 I will set out in table form later in these reasons the names of the then owners and their respective shares in the ownership of the property.
3 Of the total number of owners, two are companies associated with the applicant, being respectively Pullington Investments Pty Ltd (Pullington) and Cobalt Nominees Pty Ltd (Cobalt).
4 Through a number of transactions which settled between 15 May 2015 and 10 July 2015, the applicant purchased all of the undivided shares in the property other than those belonging to Pullington and Cobalt. In all cases, each owner was invited to grant an option in favour of the applicant to purchase that owner's relevant share. In the majority of cases, the purchase of undivided shares was completed by the exercise of the relevant option. In other cases, however, where the relevant owner declined to grant an option, the purchase of undivided shares was achieved by negotiating the purchase terms through a contract of sale.
5 The relevant option deeds and contracts for sale were lodged with the respondent (Commissioner) for assessment of duty. The documents were lodged with the Commissioner's office in four groups on four separate days. On receipt of the first set of documents, the Commissioner made assessments of duty on those documents. However, when the further documents were lodged, the Commissioner then conducted certain investigations and issued reassessments of duty, aggregating all the relevant transactions pursuant to s 37 of the Duties Act 2008 (WA) (Duties Act).
6 In September 2015, the applicant's solicitor lodged an objection to the reassessments. The ground for the objection was that 'all of the transactions, save for three groups which need special attention, were single dutiable transactions and not "substantially one transaction", and that in the circumstances of the case, s 37 of the Duties Act had no application ...'.
7 The Commissioner disallowed the objection and the applicant applied to the Tribunal under s 40(1) of the Taxation Administration Act 2003 (WA) (TA Act) seeking review of the Commissioner's decision on the objection.
8 The matter proceeded to a final hearing before me on 20 September 2016, at the close of which I reserved my decision in this matter. This is my decision and the reasons for it.
9 The applicant filed its application on 17 February 2016.
10 The Commissioner's statement of issues, facts and contentions and the Commissioner's bundle of documents, the latter accepted and relied upon by the applicant, were filed on 1 July 2016 (respectively, Commissioner's statement and Commissioner's bundle).
11 The applicant's statement of issues, facts and contentions was filed on 2 September 2016 (respectively, applicant's statement).
12 The Commissioner also filed a reply to the applicant's statement, dated 16 September 2016 (Commissioner's reply).
13 The facts of this matter as set out in the Commissioner's statement are agreed by the applicant, save for one exception, which I will note below.
14 The building included in the property is a three level older style circular 1930 building of brick and iron construction, comprising a basement, ground and first floor situated in the Hay Street Mall in Perth.
15 As at 22 January 2015, the ground floor and first floor were tenanted by Dymocks Bookstore and the basement was tenanted by a retailer trading as 'Off Ya Tree'.
16 As at 22 January 2015, the market value of the property was reported to be $12,500,000.
17 Prior to the relevant transactions, the ownership of the property was as follows:
Colin Arnold Marshall T/F The Marshall Family Super Fund
John Wesley Butler and David Ventress Wedderburn As Executors of the estate of Hazel Elizabeth Kenny
18 The vendors in this matter were all of the registered proprietors listed above, other than Pullington and Cobalt.
19 The purchaser is the applicant. The applicant was registered as a company on 21 April 2015. The directors of the applicant are Mr Wade Stewart Routledge and Mr Geoffrey Lionel Holman. The applicant is wholly owned by Pullington and Cobalt, each holding 50% of the issued shares in the applicant.
20 Prior to the relevant transactions, Pullington and Cobalt held 39 undivided 720th shares and 87 undivided 720th shares respectively in the property.
21 At all material times, Cobalt's directors were Ms Gay Edwina Routledge and Mr Wade Stewart Routledge, each holding 50% of the issued shares in Cobalt. Pullington's directors were Mr Geoffrey Lionel Holman and Ms Frances Mary Holman, each holding 60% and 40% respectively of the issued shares in Pullington.
22 During 2014, there was some consideration given by owners to the possible sale of the property to a separate and independent third party not connected with the eventual purchaser or any of the then existing owners, and the price which such a third party might pay for the property. However, no agreement was reached as several people had different views about the appropriate price.
23 Subsequently, one of the directors of Pullington and one of the directors of Cobalt decided to set up a company to try to purchase the property.
24 According to the applicant in a letter from the applicant's solicitor to the Commissioner dated 3 July 2015, the reasons for the desire by Pullington and Cobalt to purchase the other interests in the property from all the other owners were as follows:
The building was owned by an [incongruous] group of owners, who could not agree from time to time on the proper management of the property and how it was to be operated. Each of the owners were (sic) independent. There was no partnership agreement. There was no mechanism to resolve disputes. So any one owner could block a decision to be taken on the building. There were a lot of factors that influenced my clients in attempting to buy out the other owners in the building. They include the age of the parties, all except vendors Guida CJ, Budge RK, and Boyle JK (who are in their 40s). All of the other owners are elderly and all in their late 60s, some in their 70s, and some in their 80s. The leases on the building are coming to an end, and effective commercial decisions needed to be made on the proper rationalisation of the management of the building as a whole; and thus a decision to formulate the company and acquire those other shares. (Commissioner's bundle at page 388)
The applicant also said in an email dated 8 July 2015 to the Commissioner:
The problem with the property, from [the applicant's] perspective was that the ownership had spread far too wide, and it was an impractical model for conducting a business of this size. The ownership was far flung (several of the owners are in other States). They were often on holiday and out of reach. There was no partnership agreement in place to allow any majority of partners to make a decision. The smallest shareholders could block a deal. The situation had become untenable. (Commissioner's bundle at page 435)
25 Mr Holman, a director of Pullington, then had discussions with some of the other owners about various prices.
26 The Commissioner's statement refers to the relevant option agreements in this matter as 'put options'. The applicant notes in the applicant's statement that 'the offer was not of a put option but an offer to take an option by the purchasers'. The Commissioner does not take issue with this clarification: T:3; 20.09.16.
27 The Commissioner's description of the documents which were created is otherwise accepted by the applicant and is set out by the Commissioner in the following way.
28 On 9 March 2015, a letter (Commissioner's bundle at pages 10 11) and a proposed option agreement (Proposed Option B) (Commissioner's bundle at pages 12 - 18) was sent by the solicitor for Pullington on behalf of 'a company, not yet formed, in respect of which [Pullington] is the promoter' to an owner of 45 undivided 720th shares in the property, Mr John William Caldow, in relation to the possible sale of his interest in the property. A response was required by 18 March 2015.
29 Under the terms of Proposed Option B, Mr Caldow grants to Pullington 'as agent for and on behalf of a company yet to be formed' an option to purchase Mr Caldow's interest in the property for $890,625 (being 45/720 x $14,250,000).
30 Consideration provided for the grant of the option was to be $8,906.25 (that is, 1% of the purchase price), to be applied towards the purchase price if the option was exercised.
31 The letter sent with Proposed Option B went on to state:
You will note that the purchase price for your share is a proportion of $14.25M, as you requested.
Mr Holman has asked me to thank you for the trust that you have shown, and the confidentiality that you have applied to the discussions that have taken place. (Commissioner's bundle at pages 10 - 11)
32 As will be seen, proposed Option B is different from the options to purchase to be sought from the other owners. Mr Caldow had made clear in earlier discussions the terms upon which he would be willing to sell his interest, and those terms (including a higher price) were more favourable than those that were to be proposed to the other owners.
33 Pullington (as agent for and on behalf of the eventual purchaser) was prepared to pay the higher price sought by Mr Caldow for his share because his interest would assist the eventual purchaser in 'gaining control of the property'; Commissioner's bundle at page 387.
34 Annexed to Proposed Option B was an unexecuted contract for the sale of land, prepared on the basis that Mr Caldow agreed to the sale of his share in accordance with the option agreement.
35 On 13 March 2015, a letter (Commissioner's bundle at pages 19 20) and a proposed multiparty option agreement (Proposed Option A) (Commissioner's bundle at pages 21 35) was sent by the solicitor for Pullington on behalf of 'a company, not yet formed, in respect of which [Pullinger] is the promoter' to the remaining 13 owners (that is, all owners excluding Mr Caldow, Cobalt and Pullington) in relation to their relevant interests in the property. A response was required by 20 March 2015.
36 Proposed Option A was prepared to enable each of the owners to grant Pullington (as agent for and on behalf of the eventual purchaser) an option to purchase the owners' interests in the property for $9,760,000 (representing 549/720 x $12,800,000) to be divided between all the owners in proportion to their respective interests in the property.
37 Annexed to Proposed Option A was an unexecuted contract for the sale of land, prepared on the basis that all these other owners had agreed to the sale of their respective interests in accordance with the option agreement.
Please note that yourself, and all other parties listed in Schedule A to the Option will receive an Option in identical terms.
If you and all other parties to the Option, listed in Schedule A, grant this option then you will be paid immediately a fee that is equal to 1% of the intended purchase price.
You will note the purchase price for your share is a proportion of $9.76M. This proportionate offer of $9.76M for the total of the interest comprised in the first schedule to the Deed (which totals 549/720th of the shares in the property), is based on an overall value of the property at $12.8M. Your share would therefore be a proportionate amount based on the said value of $12.8M.
39 Pullington's objective was 'to 'test the water', see the reactions obtained, and then proceed cautiously on a case by case basis'; Commissioner's bundle at page 534.
40 Consideration provided for the grant of the option was to be $97,600 (that is, 1% of the purchase price) divided between the owners in proportion to their respective interest in the property, to be applied towards the purchase price if the option was exercised.
41 Pullington, as agent for and on behalf of the eventual purchaser, considered that a premium was being paid by it even under the lower priced Proposed Option A terms, but it was happy to do so 'in order to obtain control of the building'; Commissioner's bundle at page 387.
42 On 25 March 2015, Mr Caldow (through his representative) granted an option in the form of Proposed Option B (Option B) to Pullington to acquire his 45 undivided 720th shares in the property.
43 On 27 March 2015, some of the other owners granted an option in the form of Proposed Option A (Option A) to Pullington to acquire a total of 383 undivided 720th shares in the property. Those owners were:
44 The majority of these owners had the same legal representative.
45 Following the grant of these options, the total number of undivided 720th shares in the property either owned by Cobalt and Pullington or the subject of options to purchase held by the yet to be incorporated purchaser company was 554.
46 Not all the owners from whom the option was sought granted an option, but because of the number of owners that did grant the option, it was then decided that those options would be exercised.
47 On 6 May 2015, Pullington, as agents for and on behalf of the eventual purchaser, exercised its rights pursuant to Option A and Option B to purchase the respective interests in the property pursuant to the options granted.
48 During the period 15 May to 29 May 2015, contracts of sale were executed in accordance with the terms of the option agreements.
Acquisitions from owners who did not grant an option
49 Three owners, whose interests collectively represented 166 undivided 720th shares in the property, did not grant Pullington an option in the form of Proposed Option A to acquire their interests in the property. Those owners were:
50 Further negotiations continued with those three owners.
51 On 15 May 2015, a contract of sale was executed between the applicant and Mr John Wesley Butler and Mr David Ventress Wedderburn as executors of the estate of Ms Hazel Elizabeth Kenny for the purchase by the applicant of 40 undivided 720th shares in the property; Commissioner's bundle at pages 193 198.
52 Also, on 15 May 2015, a contract of sale was executed between Mr David Ventress Wedderburn and the applicant for the purchase by the applicant of 42 undivided 720th shares in the property; Commissioner's bundle at pages 199 204.
53 The consideration provided for these two transactions was commensurate with the consideration provided to the owners who had granted Option A (that is, a portion of $12,800,000 in accordance with the vendor's interest in the property).
54 On 25 June 2015, a contract of sale was executed between Ms Sandra Marjory Gatti and the applicant for the purchase by the applicant of her 36 undivided 720th shares in the property; Commissioner's bundle at pages 262 268.
55 On 14 July 2015, a contract of sale was executed between Ms Sandra Marjory Gatti and the applicant for the purchase by the applicant of Ms Gatti's remaining 48 undivided 720th shares in the property; Commissioner's bundle at pages 255 261.
56 The consideration paid to Ms Gatti was arrived at on a different basis to the others. Consideration for her total interest in the property was $1,550,000, which is based on the relevant portion of a total value of the property of $13,285,714.
57 On 22 May 2015, settlement of the contract naming Mr David Ventress Wedderburn as vendor took place.
58 Also on 22 May 2015, settlement of the contract naming Mr John Wesley Butler and Mr David Ventress Wedderburn as executors of the estate of Ms Hazel Elizabeth Kenny as vendor took place.
59 On 26 June 2015, settlement of the contract naming Ms Sandra Marjory Gatti as vendor of 36 undivided 720th shares in the property took place.
60 On 14 July 2015, settlement of the contract naming Ms Sandra Marjory Gatti as vendor of 48 undivided 720th shares in the property took place.
61 On 10 July 2015, settlement of all other contracts took place.
62 On 21 May 2015, the contracts for the sale of Mr John Wesley Butler and Mr David Ventress Wedderburn's 40 undivided 720th shares in the property, and Mr David Ventress Wedderburn's 42 undivided 720th shares in the property were lodged with the Office of State Revenue under cover of bundle ID 3319377 (first lodgement).
63 On 21 May 2015, the first lodgement transactions were assessed for duty. This assessment was later cancelled on 13 July 2015 and reassessed on 17 July 2015.
64 On 16 June 2015, the option deeds and contracts for sale of the remaining owners' interests in the property (except for the interests of Ms Sandra Marjory Gatti), together with a covering letter of the same date, were lodged with the Commissioner under cover of bundle IDs 3339401, 3339403, 3339404, 3339405, 3339406, 3339407, 3339410, 3339411, 3339412 (second lodgement).
65 On 26 June 2015, the contract for the sale of Ms Sandra Marjory Gatti's 48 undivided 720th shares in the property was lodged with the Commissioner under cover of bundle ID 3339607 (third lodgement).
66 On 1 July 2015, a requisition was issued by the Commissioner seeking further information, amongst other things, to determine whether the aggregation provisions contained within the Duties Act ought to apply.
67 On 3 July 2015, the lodging party responded to the requisition.
68 On 8 July 2015, a further requisition was issued by the Commissioner.
69 Also on 8 July 2015, by two emails the lodging party responded to those requisitions.
70 On 9 July 2015, a copy of a valuation report prepared by Australian Property Consultants dated 10 February 2015 prepared for Mr Caldow was provided to the Commissioner. This report valued the property at 22 January 2015 as $12,500,000.
71 On 10 July 2015, the Valuer General, after reviewing the valuation report provided by Australian Property Consultants, recommended adopting a market value for the property of $12,500,000 (as a going concern).
72 On 13 July 2015, the second lodgement and third lodgement transactions were assessed for duty. These transactions were aggregated pursuant to s 37 of the Duties Act.
73 On 14 July 2015, the contract for sale of Ms Sandra Marjory Gatti's 36 undivided 720th shares in the property, together with a covering letter, was lodged with the Commissioner under cover of bundle ID 3353858 (fourth lodgement). The covering letter disclosed that the transactions lodged and assessed on 21 May 2015 under cover of bundle ID 3319377 (first lodgement) had been assessed separately.
74 On 17 July 2015, the transactions lodged under the first lodgement, second lodgement (except bundle ID 339401) and third lodgement were reassessed and the transactions lodged under the fourth lodgement were assessed for duty. These assessments aggregated all transactions relating to this matter under s 37 of the Duties Act.
75 On 22 July 2015, a statement of grounds was issued setting out the grounds for aggregating the transactions.
76 On 23 July 2015, the transaction lodged under cover of bundle ID 3339401 was reassessed for duty. In reassessing the transaction it was aggregated pursuant to s 37 of the Duties Act with the other transactions relating to this matter.
77 On 14 September 2015, the applicant through its solicitor lodged an objection to the assessments of 17 July 2015 and 23 July 2015.
78 On 21 December 2015, the Commissioner disallowed the objection and on 17 February 2016 the applicant applied to the Tribunal for review of that decision.
79 The relevant legislative provisions are set out below.
(1) If the matter that an enabling Act gives the Tribunal jurisdiction to deal with is a matter that expressly or necessarily involves a review of a decision, the matter comes within the Tribunal's review jurisdiction.
(2) A matter referred to the Tribunal under section 44(3) comes within the Tribunal's review jurisdiction.
(3) Where subsection (1) or (2) applies the decision is a reviewable decision for the purposes of this Act.
(1) The review of a reviewable decision is to be by way of a hearing de novo, and it is not confined to matters that were before the decision-maker but may involve the consideration of new material whether or not it existed at the time the decision was made.
(2) The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review.
(3) The reasons for decision provided by the decision-maker, or any grounds for review set out in the application, do not limit the Tribunal in conducting a proceeding for the review of a decision.
(1) The Tribunal has, when dealing with a matter in the exercise of its review jurisdiction, functions and discretions corresponding to those exercisable by the decision-maker in making the reviewable decision.
(2) Subsection (1) does not limit the powers given by this Act or the enabling Act to the Tribunal.
(c) set aside the decision that is being reviewed and
(ii) send the matter back to the decision-maker for reconsideration in accordance with any directions or recommendations that the Tribunal considers appropriate,
and, in any case, may make any order the Tribunal considers appropriate.
Duties Act 2008 (WA)
(1) Subject to subsection (2), any of the following is a dutiable transaction
(b) an agreement for the transfer of dutiable property, whether conditional or not;
(1) Dutiable transactions relating to separate items of dutiable property that together form, evidence, give effect to or arise from what is, substantially one arrangement are to be aggregated and treated as a single dutiable transaction.
(2) Without limiting subsection (1), unless the Commissioner is satisfied to the contrary, dutiable transactions relating to separate items of dutiable property together form, evidence, give effect to or arise from what is, substantially one arrangement if
(a) the transactions have taken place within 12 months; and
(b) in respect of each of the transactions, the person liable to pay duty is the same person (whether that person is the only person liable to pay duty or is liable to pay duty with the same or different persons).
(3) Dutiable transactions relating to separate items of dutiable property are not to be aggregated under this section unless the transactions to be aggregated
(a) are all chargeable at the same rate of duty; or
(4) If dutiable transactions are aggregated, then they are to be treated as a single dutiable transaction that took place at the time that the last of the aggregated transactions took place.
(5) This section does not apply to a dutiable transaction to the extent that it relates to the grant of an option to acquire dutiable property, other than as required under section 34.
(6) Duty chargeable on the dutiable transaction aggregated under this section is to be
(a) assessed on the total of the dutiable values for each of the transactions (calculated as if each transaction was a dutiable transaction) at the time when liability for duty on each transaction arose; and
(b) apportioned between the transactions as decided by the Commissioner.
(7) The amount of duty payable in accordance with this section is to be reduced by the amount of any duty paid on a previous dutiable transaction that is, or previous dutiable transactions that are, aggregated under this section.
(8) Transactions aggregated and treated as a single dutiable transaction under this section may include a transaction that would not otherwise be a dutiable transaction, and where such a transaction is included, that transaction is taken to be a dutiable transaction and is liable to duty accordingly.
(1) A person dissatisfied with the Commissioner's decision on an objection or on an application for an extension of time for lodging an objection may apply to the State Administrative Tribunal for a review of the decision.
80 The issues in this matter, as formulated by the Commissioner, are as follows.
81 The Commissioner says that the primary issue before the Tribunal is whether the Commissioner ought to have been satisfied that the 16 contracts executed within 12 months of each other where the property conveyed under each contract was to the same person should not together form, evidence, give effect to or arise from what is substantially one arrangement for the purposes of s 37 of the Duties Act.
82 The Commissioner then says that this issue gives rise to the following subissues:
83 The applicant accepts this formulation of the relevant issues, but says (applicant's statement para 2) that the Tribunal should also consider the following:
Can it be suggested that there was 'substantially one arrangement' when the Commissioner accepts that there was no underlying agreement, arrangement or understanding between the parties, namely the purchaser and various vendors; and further the Commissioner accepts there was no suggestion of 'contract splitting' in the matter and finally, that the Commissioner accepts that the vendors acted independently in each case in dealing with the purchasers?
84 The applicant says that the 'one arrangement' specified in s 37 of the Duties Act must precede the 'single dutiable transaction'. However, as the applicant sees it, the Commissioner has taken the opposite approach, namely to look at the result of the transaction as it came together. The Commissioner then, the applicant says, saw that the property ended in the hands of the applicant and concluded that there was an 'arrangement'. The applicant submits that it is not the timing of when the purchaser enters into two or more sales that is essential to determining whether an arrangement occurs; Baldey v Parker [1823] EngR 567; (1823) 2 B & C 37 (Baldey) at [39]; or the motive of the parties entering into the transactions; Holliday at page 55. Rather, the applicant says that the relevant assessment is as to the 'interdependence' of the contracts, and not on coincidences as to time, place and parties; AttorneyGeneral v Cohen (1937) 1 All ER 27 (Cohen) at 27_._ The applicant considers that the critical questions to be asked are found in Casamajor v Strode (1834) Ch 2 MYL & K 706 (Casamajor), which, in the applicant's words, are:
85 The applicant says that the answer to both those questions is in the negative, because:
87 Counsel for the applicant then concludes as follows (applicant's statement at page 10):
88 I have read and considered the cases upon which the applicant relies (Baldey, Casamajor, Holliday and Cohen).
89 Baldey concerns the sale of goods and whether a series of purchases of items of drapery transacted on the same day between the same parties might together be regarded as one transaction. I do not believe that Baldey is relevant to the matter before me, and it is not, as the applicant suggests, authority for the proposition that the timing of the several purchases is irrelevant.
90 Casamajor concerns an assertion by a purchaser that, having bought two lots of land and the vendor being unable to 'make title' to one of them, the purchaser should be released from his contract to buy both lots. Relevantly, it was considered that to reach a conclusion on this question 'the whole circumstances may be examined in order to prove that the two contracts are one, by shewing that the two parcels are complicated together, and that upon the whole transaction the Court will determine as a jury would, the question, did or did not the party purchase the one with reference to the other; would he or would he not have taken the one, had he not reckoned upon also having the other'; Casamajor at [730].
91 Holliday is also a case where a purchaser bought two lots of land (lot 2 and lot 3) at auction and was then released from his contract for lot 3 because of an 'innocent misrepresentation' by the vendor. The purchaser argued that the purchase of lot 2 and the purchase of lot 3 were dependant on each other and that he should therefore be released from the purchase of lot 2 also. The issue for determination was 'whether the two lots were within the knowledge of both parties so complicated as to justify the purchaser in rescinding the contract as to lot 2 on the ground of the misrepresentation as to lot 3'; Holliday at 55 56. After considering various authorities, including Casamajor, it was held, on the facts of the case, that there was not 'sufficient interdependence and complication in the two lots to justify [the purchaser] in rescinding his contract as to lot 2 because of the misrepresentation under which the contract as to lot 3 has been rescinded'; Holliday at 56.
92 Cohen concerned an assessment of stamp duty and whether, in terms of the relevant legislation, a transaction effected by a conveyance 'does not form part of a larger transaction or of a series of transactions'. It was observed that 'there cannot be a series unless there be some interdependence between the separate transactions, and that whether there is interdependence depends upon the facts of each case'; Cohen at 28.
93 The only assistance which might be derived from the decisions in respectively Casamajor and Holliday is that the question of whether several transactions form part of a larger, single, transaction will depend on the particular facts and circumstances, including the existence of some interdependence between the transactions. I note though that both of those cases relate to liability for specific performance under contracts for the sale and purchase of land, and, as will be seen, I do not consider that some interdependence between the transactions is the only test to be applied.
94 Cohen, on the other hand, is a case more on point in that it relates to stamp duty and aggregation of transactions. However, the statutory test there was whether or not a transaction formed part of a larger transaction or a series of transactions. In the present case, the issue is whether or not the transactions in question 'together form, evidence, give effect to or arise from what is, substantially one arrangement' under s 37 of the Duties Act.
95 I do not agree that the matter can be determined merely by asking and answering in the negative the two 'Casamajor questions', as pressed for by the applicant. The matter instead requires a consideration of the statutory construction of s 37 of the Duties Act.
96 As Buss JA said in Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211 (Abbotts) at [160]:
The modern approach to statutory construction is purposive. The statutory text is the surest guide to Parliament's intention. A decision as to the meaning of the text must begin by considering the context, in its widest sense. This will include the general purpose and policy of the provision. (Citations omitted)
97 The same approach to statutory interpretation in Western Australia was taken by Edelman J in Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 2] [2014] WASC 55 where his Honour said at [14]:
The key integers in the exercise of determining the effect of Parliament's intention in s 64(2) are statutory text, context, and purpose. The starting point, and the end point, is the text. But, although the statutory text is the 'surest guide' to Parliament's intention, the text must be read in the widest sense of context, including the general purpose and policy of the provision.
98 I may also have regard to extrinsic material without necessarily invoking the provisions of s 19 of the Interpretation Act 1984 (WA). As Buss JA also said in Abbotts at [91]:
At common law (that is, independently of s 19 of the Interpretation Act), this court is permitted, in construing a statutory provision, to have regard to the words used by Parliament in their legal and historical context and, if appropriate, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. The context includes reference to the legislative history of the provision and any relevant reports of law reform bodies which describe the matters requiring legislative reform. (Citations omitted)
99 Accordingly, the starting point of the statutory construction of s 37 of the Duties Act is a consideration of the text itself, in its proper statutory context.
100 The proper statutory context of a provision includes:
101 However, legislative history and extrinsic materials cannot be relied upon to displace the clear meaning of the text; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 293 ALR 257 at [39]. Furthermore, taxation statutes, including the Duties Act, are to be interpreted in a technical manner; Charles Lloyd Property Group Pty Ltd v Commissioner of State Revenue (2011) 84 ATR 775 at 781; Commissioner of State Revenue v Landrow Properties Pty Ltd (2010) 79 ATR 800 at 816.
Statutory construction of s 37 the underlying purpose
102 The general purpose and policy of s 37 of the Duties Act is not apparent from the explanatory memorandum to the Duties Bill 2007 (WA), or from any of the Parliamentary debates. Clause 37 of the explanatory memorandum states as follows:
This clause allows certain dutiable transactions to be aggregated and treated as a single dutiable transaction for the purposes of charging duty.
Subclause (1) provides that dutiable transactions relating to separate items of dutiable property are treated as a single dutiable transaction if they together form, evidence, give effect to or arise from what is substantially one arrangement.
Subclause (2) provides that dutiable transactions that occur within 12 months and for which the person liable to pay duty is the same (whether alone or with another person) are taken to form substantially one arrangement as referred to in subclause (1), unless the Commissioner is satisfied to the contrary. The onus is, therefore, on the person liable to pay duty to prove that the transactions are not part of one arrangement. It should be noted that transactions may still be aggregated where they take place more than 12 months from each other. However, the onus of proof would be on the Commissioner rather than the person liable to pay duty.
Subclause (3) provides that transactions cannot be aggregated under this provision unless they are all chargeable with the same rate of duty, are all chargeable with nominal duty, or are all exempt from duty.
Subclause (4) specifies that when dutiable transactions are aggregated, they are taken to be a single dutiable transaction that took place on the date that the last of the aggregated transactions took place. This has the effect of duty being charged at the rate that applies at the date of the last of the aggregated transactions.
Subclause (5) prevents this clause from aggregating a dutiable transaction that is the grant of an option with another dutiable transaction, other than as required in clause 34 which relates to the granting and renewal of options. This is necessary to prevent duty being charged in respect of both the option fee and the consideration for the exercise of the option in all cases.
Subclause (6) specifies that when transactions have been aggregated under this clause, duty is to be charged on the total of the dutiable values of each of the dutiable transactions that form the aggregated transaction. The applicable dutiable value for each transaction is determined at the time liability to duty arose on each transaction. The duty charged is apportioned between the transactions as determined by the Commissioner.
Subclause (7) provides that where a dutiable transaction has been duty endorsed and then becomes part of an aggregated transaction in accordance with this clause, the duty paid on the dutiable transaction is to be credited against the duty assessed on the aggregated transaction.
Subclause (8) provides that a transaction that may not be a dutiable transaction on its own can be aggregated with another dutiable transaction and consequently be part of an aggregated transaction that is liable to duty.
For example, a transfer of chattels on its own would not be a dutiable transaction. However, if that transfer is part of a series of transactions that include a transfer of land, it would become a dutiable transaction as a result of the aggregation and would be liable to duty.
103 An examination of the Parliamentary debates and explanatory memoranda in respect of the predecessor to s 37, s 75AF of the Stamp Act 1921 (WA) is also of no assistance.
104 However, I think that it is reasonable to infer that at least part of the purpose of the section was as an antiavoidance measure.
105 This inference is supported by the now archived Commissioner's Practice DA 4.0 which provides under the heading 'Background' that s 37 'is an antiavoidance measure designed to counter the practice known as "agreement splitting" whereby a single arrangement is effected or evidenced by separate transaction records, in order to take advantage of the lower rates of transfer duty applying to lower valued transactions.'
106 I note that in the current Revenue Ruling DA14.0 (Commissioner's bundle at pages 591 597) that wording or anything similar does not appear.
Statutory construction of s 37 the text and the Duties Act as a whole
107 It is not in dispute that the text of s 37(2) of the Duties Act gives rise to a rebuttable presumption that, where paragraphs (a) and (b) of s 37(2) are satisfied, the dutiable transactions in question together form, evidence, give effect to or arise from substantially one arrangement. The onus of rebutting this presumption rests with the person liable to pay duty; Re Khoury and Chief Commissioner of State Revenue (2010) 78 ATR 81 (Khoury) at [27]; Re Grafton and Commissioner of State Revenue (2011) 85 ATR 526 (Grafton) at [25] [26].
108 Neither the phrase 'form, evidence, give effect to or arise from', nor the word 'arrangement', is defined in the Duties Act. There is nothing in the Duties Act, viewed as a whole, or in any of the extrinsic materials brought to my attention, which would lead me to conclude anything other than that those words should therefore bear their ordinary and grammatical meaning.
109 The words or phrases 'form, evidence, give effect to or arise from' are separated by the disjunctive 'or'.
110 The verb 'form' ordinarily means 'to shape; to fashion; to make up or constitute ... '; Macquarie Online Dictionary.
111 The verb 'evidence' ordinarily means 'to make evident or clear; show clearly; manifest'; Macquarie Online Dictionary.
112 The idiom 'give effect to' ordinarily means 'put into force'; Shorter Oxford English Dictionary 6th ed.
113 The phrase 'arise from' ordinarily means 'to result or proceed from'; Macquarie Online Dictionary.
114 The adverb 'substantially' ordinarily means '[i]n substance', '[i]n essence; essentially, intrinsically'; 'to a great extent or degree; considerably, significantly'; Oxford English Online Dictionary.
115 The adjective 'one' ordinarily means 'a single'; Macquarie Online Dictionary.
116 The Encyclopaedic Australian Legal Dictionary defines an 'arrangement' to mean '[a]n agreement, plan, or compact, the legal effect of which depends on the context in which it is used'. In the same publication, in the context of 'Taxation and revenue' an arrangement is 'any express or implied agreement, understanding, promise or undertaking, whether it is legally enforceable or not'.
117 According to the Macquarie Online Dictionary, the word 'arrangement' ordinarily means 'the act of arranging ... a final settlement; adjustment by agreement ... preparatory measure; previous plan; preparation ...'.
Statutory construction of s 37 the existing state of the law
118 As I previously said in Grafton at [41], the decisions in Khoury, Jeffrey v Commissioner of Stamps (1980) 23 SASR 398 (Jeffrey) and Old Reynella Village Pty Ltd v Commissioner of Stamps (SA) [1989] SASC 1724; (1989) 51 SASR 378 (Old Reynella Village) illustrate the proper approach to the application of s 37 of the Duties Act.
119 Where paragraphs (a) and (b) of s 37(2) of the Duties Act are satisfied, the dutiable transactions are presumed to form, evidence, give effect to or arise from substantially one arrangement unless the Commissioner is satisfied to the contrary; Grafton at [25]. There is no dispute and it is clearly the case that paragraphs (a) and (b) of s 37(2) of the Duties Act are satisfied.
120 If the presumption under s 37(2) of the Duties Act arises, the taxpayer bears the onus of establishing that the dutiable transactions do not form, evidence, give effect to or arise from substantially one arrangement; Khoury at [27]; Grafton at [26].
121 The word 'substantially' is an important qualification to the words 'one arrangement'. Something may not be one arrangement in fact but may, nonetheless, be 'substantially' one arrangement; Khoury at [26]; Grafton at [42]; Re Brianco Nominees Pty Ltd and Commissioner of State Revenue [2008] VCAT 999; (2008) 73 ATR 67 (Brianco) at [29].
122 Brianco considered s 24 of the Duties Act 2000 (Vic) which refers to 'form, evidence, give effect to or arise from what is, substantially, one arrangement' in a similar aggregation context. There, the Victorian Civil and Administration Tribunal found (at [29]) that it is not just 'one arrangement' in reality that the provision is directed to but 'substantially, one arrangement'. Something may not be one arrangement in fact but it may, nonetheless, be 'substantially' one arrangement.
123 As Jacobs J said in Jeffrey at 406 (while considering whether separate conveyances together form or arise from substantially one transaction or one series of transactions under the Stamp Duties Act 1923 (SA)):
'[T]he word "substantially' must be given some meaning. It can only mean, in my judgement, that the Commissioner is required to look at 'the substance' of the several transactions, and determine whether they are, 'in substance', one transaction, although masquerading as several.
124 His Honour, after considering the decision in Cohen, concluded that the word 'one' points to some essential unity, some 'oneness', some unifying factor that brings the several transactions within the section; Jeffrey at 405. He said that it is therefore necessary to find, not just some interdependence between the contracts, but a relationship or connection or interdependence between the contracts (my emphasis) that gives to them the essential unity at which the relevant legislation is directed.
125 The word 'arrangement' has a broader interpretation than the word 'contract'; Grafton at [27], citing Williams J in Federal Commissioner of Taxation v Newton [1957] HCA 99; (1957) 96 CLR 577 at 630:
"Contract" is a technical word and implies an agreement enforceable by law but the words "agreement" and "arrangement" ... are apt to describe bargains of a looser kind.
126 The term 'arrangement' is wide enough to include a bilateral or a unilateral arrangement and need not be legally enforceable. It includes all kinds of action or conduct. The arrangement does not have to be in writing and in some cases it can be inferred by taking into consideration all the relevant circumstances; Khoury at [25], citing Chief Commissioner of State Revenue and Pacific General Securities Ltd [2004] NSWADTAP 51; (2004) 58 ATR 17 (Pacific General Securities 2004) at [34].
127 In Pacific General Securities Ltd 2004, the New South Wales Administrative Decisions Tribunal Appeal Panel considered s 25(1) of the Duties Act 1997 (NSW) which similarly refers to the phrase 'form, evidence, give effect to or arise from what is, substantially, one arrangement' in a similar aggregation context. The Panel in that case was clear that:
128 In Re Chief Commissioner of State Revenue and Pacific General Securities Ltd (No 2) [2005] NSWADTAP 54; (2005) 63 ATR 127 (Pacific General Securities 2005) the same Panel held that an 'arrangement' can involve a number of different vendors to the same purchaser (Pacific General Securities 2005 at [30]) and that for the aggregation provisions to apply it does not have to be shown that the purchaser has engaged in 'transactionsplitting' (Pacific General Securities 2005 at [25]). I respectfully agree.
129 In considering aggregation, it is necessary to undertake a wideranging factual inquiry to determine the true nature of the relevant transaction; Khoury at [23].
130 Mohr J in Old Reynella Village discussed the importance of an integral relationship between the transactions in question as opposed to a fortuitous relationship and said such a relationship could be established through contiguity of time or place factors. The facts in Old Reynella Village are analogous to the facts in the present case:
131 His Honour found that the aggregation provision in question in that case should be applied.
132 As I have already found, paragraphs (a) and (b) of s 37(2) of the Duties Act are satisfied in this case. Consequently, a presumption arises that all the contracts in question together form, evidence, give effect to or arise from substantially one arrangement.
133 It is then for the applicant to satisfy the Commissioner (and now the Tribunal) that the contracts in question do not form, evidence, give effect to or arise from substantially one arrangement.
134 It is my conclusion that the applicant has not done so. The Tribunal considers that the contracts in question do arise from substantially one arrangement (that is, a plan drawn up by Pullington and Cobalt, to be implemented by the applicant).
135 It is helpful at this stage to revisit the relevant agreed facts:
136 The facts and circumstances surrounding the contracts demonstrate an essential unity or 'oneness' between the contracts. The clear 'relationship' or 'connection' between the transactions in the sense spoken of in Jeffrey, is evident from those facts and circumstances:
137 The Tribunal considers that the applicant has not established that the dutiable transactions do not together form, evidence, give effect to or arise from what is substantially one arrangement. Accordingly, the Tribunal considers that the Commissioner's decision upon the applicant's objection is the correct and preferable decision.
I certify that this and the preceding [137] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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(2012) 293 ALR 257
(1957) 96 CLR 577
(1980) 23 SASR 398
(1989) 51 SASR 378
(1997) 187 CLR 384