Appellant v Respondent

PRACTICE & PROCEDURE - Discretion to allow taxpayer to add grounds of objection.

1 Six companies in the MAB Corporation Pty Ltd ("MAB") group of companies challenge in eight separate proceedings their respective assessments to duty under the Duties Act 2000 (Vic). The proceeding by Conder Tower Pty Ltd ("Conder Tower") numbered 04170 of 2011 raises most of the issues between the parties and the proceedings were conducted on the basis that the determination of the issues in that proceeding would determine the same issues in the other proceedings. Two other issues arose in some of the proceedings that were not raised in the Conder Tower appeal but which arose in the proceeding by Yarranova Pty Ltd ("Yarranova") numbered 04165 of 2011. The parties similarly conducted that proceeding on the basis that the issues raised in the Yarranova proceeding would also determine the same issues in the other proceedings in which they arose.

2 The primary question in each of the eight proceedings concerns the Commissioner's inclusion for assessment to duty of various payments arising in relation to the transfer of land involved in the redevelopment of the Docklands Precinct near the central business district of Melbourne. The issues in dispute, and the proceedings in which they arise, may be summarised for convenience in the following table:

Types of Payment included in the Commissioner's assessment

1. Section 9(3) of the TAA.

1. Section 21(3).

1. Additional residential payments: no agreement to pay any amount.

1. The consideration did not include the trunk infrastructure or the artwork contribution.

1. The consideration did not include the trunk infrastructure or artwork contributions.

1. The consideration did not include the trunk infrastructure or the artwork contributions.

1. The consideration did not include the trunk infrastructure.

1. The consideration did not include the trunk infrastructure.

1. Section 21(3).

1. The consideration did not include the trunk infrastructure or the artwork contribution.

1. Section 21(3).

1. The consideration did not include the trunk infrastructure.

1. Section 21(3).

1. The consideration did not include the trunk infrastructure.

3 Conder Tower purchased land in respect of which it was assessed for duty. The transfer was executed on 28 April 2004 upon the stated consideration for the transfer of $152,098.85. The transfer gave effect to two contracts made on 30 April 1999 between the Docklands Authority ("Docklands") as vendor and Yarranova as purchaser. The contracts and transfer occurred in the context of a Precinct Development Agreement ("the PDA") entered into on 16 March 1998 by Yarranova and Docklands (subsequently the Victorian Urban Development Authority "VicUrban") and was amended from time to time. The relevant agreements required other payments to be made in addition to the amount specified for the land under the contracts for the sale of the land. Relevantly the agreements required the payment of amounts described as "trunk infrastructure", "revenue sharing", "additional residential payments", "artwork contribution" and "other payments". The Commissioner has included these payments in the assessment for the transfer to Conder Tower of the land transferred by instrument dated 28 April 2004. Conder Tower contended that none of the payments may be assessed for duty apart from the purchase price stipulated in the instrument of transfer totalling the two amounts in the contracts of sale for the land. The Commissioner contended that each of the additional amounts formed part of the consideration assessable to duty under the Duties Act 2000 (Vic).

4 Section 11 of the Duties Act 2000 (Vic) creates a liability for duty when a dutiable transaction occurs. The transfer of land to Conder Tower by instrument dated 28 April 2004 was a dutiable transaction which created a liability in the transferee to pay duty on the dutiable value. Section 12 provides that the duty is payable by the transferee, unless Chapter 2 of the Duties Act 2000 (Vic) otherwise requires another person to pay the duty.

5 The dutiable value is determined primarily by s 20(1) of the Duties Act 2000 (Vic) which provides:

The dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of -

(a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration); and

(b) the unencumbered value of the dutiable property.

Other provisions are relevant to determine the dutiable value of transfers but the primary basis of duty depends upon identifying the "consideration (if any) for" the dutiable transaction. To a consideration of that requirement must be added the terms of s 25(1) which restricts the charge of any duty "only to the extent that it relates to [the] dutiable property" if a dutiable transaction relates both to dutiable property and to property that is not dutiable property. The Act therefore makes duty depend upon the existence of a nexus and, where s 25(1) applies, the requirement of apportionment. In that context it may be worth noting that the criteria for the identification of the dutiable value in s 20(1) is governed by the words "consideration ... for" whilst the apportionment provision in s 25(1) operates by reference to circumstances where a dutiable transaction "relates to" both dutiable and non dutiable property. The nexus required between consideration and a transaction may differ depending upon whether the test to be applied is whether one was either "for" or "related to" the other.[1]

6 It is significant that s 20(1)(a) operates upon the combined effect of the words "consideration" and "for". That which is chargeable with duty under the provision must be both "consideration" and it must be consideration "for" the dutiable transaction. These words call for an enquiry into both the nature of what is said to be dutiable and the nexus between it and the transaction. The nature of the consideration for duty purposes is not to be understood in terms of the law of simple contract but of the money or value "passing which moves the conveyance or transfer".[2] To that extent an enquiry into the nature of the consideration also calls for an enquiry into its nexus with the transfer. In Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW)[3] a company returned capital to holders of paid-up shares to the extent 19s.16d. per ₤1 share by distributing paid-up shares in other companies in specie at the book value of those shares in the company's accounts. The actual value of the shares was greater than their book value. In determining which provision of the Stamp Duties Act 1920 (NSW) applied, it was held that the transfers had been made for a consideration in money or money's worth with Dixon J explaining that consideration in that context was to be understood as "the money or value passing which moves the conveyance or transfer".[4]

7 Archibald Howie was not strictly a case about the nexus required between the consideration and the dutiable transaction. The relevant section considered in Archibald Howie, unlike s 20(1), did not use the words "consideration ... for". The issue in that case was, rather, whether transfers of property in specie pursuant to a resolution reducing capital had been made with "consideration". The case was, therefore, not directly concerned with the nexus required between a transfer and what moved the transfer but with whether the word "consideration" was broad enough to include the circumstances of a transfer in specie by a company to its shareholders where the transfer was not made for consideration as that concept was understood under ordinary principles of contract. A majority of the Full Court of the New South Wales Supreme Court had treated the absence of contractual consideration as leading to the result that the transfers had been made without consideration for the purposes of duty:[5]

The Chief Justice [had] said that in essence the company was simply giving property to its shareholders who gave nothing in the nature of consideration [in] exchange. Street J said that no consideration moved from the shareholders to the company.[6]

It was that view which the High Court rejected on appeal when holding that "consideration" for the purposes of duty had a wider meaning than it had in contract.[7] The enquiry thus called for to determine whether there was consideration for duty purposes was an enquiry into what had moved the conveyance. Implicit in that enquiry is a need to find a nexus between the taxable event and that which is said to be its consideration. The need to determine the existence of such a nexus is made explicit in s 20(1) by the express provision that the consideration be "for" the dutiable event. In that regard it is to be noted that the legislature has expressed the requisite nexus to be one that satisfies the description of a thing being "for" another, rather than a nexus that might be satisfied by more general words such as "in respect of", [8] "in relation to" or some such other more general words of connection than the word "for."

8 The Commissioner contended that the other amounts which were included in the assessments were all "for" the transfer of the land. The contention relied substantially upon the decision of the majority in Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd,[9] which the Commissioner submitted was authority for the proposition that every promise given in a contract connected with the transfer of land was necessarily part of the consideration for the transfer. The appellant contended that the decision was either distinguishable or alternatively (and put as a formal submission)[10] was incorrect.

9 Dick Smith concerned the duty payable on the sale of shares under an agreement which provided that the price for the shares was to be approximately $114 million minus a "dividend amount" equivalent to the company's retained earnings to a maximum of $27 million. In that case the majority held that the consideration for the sale of the shares was the whole of the approximate $114 million to be received by the vendor, and not the lesser amount which excluded the "dividend amount" the vendor was to receive as shareholder upon its shares before completion of the contract for sale. Gummow, Kirby and Hayne JJ said:

The consideration which moved the transfer by the Vendors to the Purchaser of the Shares which they owned in the Company was the performance by the Purchaser of the several promises recorded in the Agreement in consequence of which the Vendors received the sum of $114,139,649. It was only in return for that total sum (paid by the various steps and in the various forms required by the Agreement) that the Vendors were willing to transfer to the Purchaser the bundle of rights which their shareholding in the Company represented.

Noticing the several steps which the Agreement required to be undertaken in order to achieve that result must not be permitted to obscure that the amount of monetary consideration for the transaction of the sale and transfer of the Shares was the sum identified. That part of the amount was to come as a dividend from the Company, the Vendors' shares in which were being sold, rather than immediately from the Purchaser, does not deny that proposition.

That which passed to the Vendors "for" the transfers of the Shares was "consideration" which was "monetary" rather than "non-monetary" within the meaning of s 21(1) of the Act. The transaction was to be assessed to duty on the footing that it was performed on its terms and, completion having taken place before the Agreement was furnished by the Purchaser to the Commissioner, both sides addressed their arguments by reference to the implementation of the transaction. The Commissioner correctly took the stance that the intended result of the transaction, seen as a whole, was the receipt by the Vendors of $114,139,649.[11]

Their Honours concluded that the consideration "for" the transfer in that case had been the "performance of all of the various stipulations in the Agreement, not merely the promises which the Purchaser made"[12] and, therefore, that the vendors had transferred the shares in return "for receiving some $114 million, of which part was received from the Company [as a dividend and not from the purchaser] because the parties had agreed that this should be so".[13]

10 The fundamental enquiry in that case was what had been paid "for" the dutiable transaction. As their Honours explained:

The criterion in the Act of consideration "for" the transaction, being the Agreement for the sale and transfer of the Shares to the Purchaser, upon whom s 13 imposes the liability to pay the duty, looks to what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement.[14]

What the vendors in that case had secured was a total payment of $114,139,649 for their shares. It was that which "was to be received by the Vendors, and was received by them".[15] The payment of a portion of that amount, as a dividend from the company, was in that case to be funded by the vendor. Critically, the payment to the vendors of the dividend was supported by "the Purchaser's promise to "fund" the Company's payment of the dividend."[16] The circumstances in that case were unlike those of a shareholder able to procure the payment of a dividend from its company from cash and assets of the company independently of the sale to the vendor. The identification of "the consideration "for" the transfers" in those circumstances was not limited to what the purchaser gave up[17] but was held to include the vendor "receiving [the whole of] some $114 million, of which part was received from the Company because the parties had agreed that this should be so".[18]

11 In this case the Commissioner contended that any promise made as part of a contract to secure the transfer of land must necessarily be part of the consideration for the transfer of the relevant land to Conder Tower. The submission in those terms overstates the reasoning of the majority in Dick Smith, gives no effect to s 25(1) of the Duties Act 2000 (Vic), and seeks to make a broader argument than necessary to secure the outcome in this case. The majority in Dick Smith did not conclude that any promise in a contract "connected with" or "relating to" the transfer of dutiable property would necessarily be consideration "for" the dutiable transfer. Rather, what their Honours held in that case was that the payment by a third party (namely, by the company whose shares were transferred) of a dividend which was to be funded by the purchaser was intended to be, and was received as, part of the consideration for the transfer.

12 The majority in Dick Smith made clear that the enquiry occasioned by a provision like s 20(1) is an enquiry that "looks to what was received by the Vendors so as to move the transfers to the Purchaser".[19] That enquiry is not answered by concluding that every promise in a contract leading to or effecting a transfer will be part of the exigible consideration "for" the dutiable transfer. A contract may contain interdependent promises, some, but not all, of which may bear the characterisation of being "consideration for" that part of the composite whole which moved the transfer. However, a promise may be collateral to the promise moving the transfer.[20] A purchaser buying land may also be buying stock on the land as a separate, albeit conditional, acquisition. The promise to buy the stock may be a condition for the purchase of the land but will usually not be what "moves" that part of the transaction acquiring the land. The need to identify that which moves that part of a composite transaction will require consideration of the notions of causation and attribution[21] and the determination of what the consideration "really paid for".[22] The analysis called for by s 20(1) is not satisfied merely by finding promises in one place or by finding that the promises (whether in one place or in more than one place) are interdependent. The analysis called for by s 20(1), and confirmed through s 25(1), requires an evaluation of the promises and of their connection with the transfer. However, as the decision in Dick Smith makes clear, the fact that a contract contains a promise which is capable of identification individually or separately from the promise for the dutiable transaction will not necessarily exclude it from duty. No question of apportionment as required by s 25(1) was raised on the facts in Dick Smith and did not arise in the proceeding.

13 In this case the land acquired by Conder Tower was subject to a development project which contemplated and required VicUrban to perform and develop the land, directly or indirectly, in a variety of specified ways. The additional payments under the PDA were for works that were anticipated by the development of the land which was acquired and were, directly and indirectly, for its benefit and value. The promises given to pay the amounts in addition to the amounts specified for the land were not promises that the purchaser should pay separately for such items as public art, but that in return for VicUrban improving the land as agreed (including that land transferred to Conder Tower) the amounts to be paid by the purchaser would include amounts of the various kinds in the Agreements. The arrangements were not like, or to the effect of, Conder Tower agreeing to contribute to the land certain things otherwise acquired at a specified price. Conder Tower was not to contribute to the land, nor was it to pay for additional things to be added to the land, but to pay the vendor for the land as it was to be developed by paying amounts necessarily forming part of the development or in consequence of the development. The amounts were paid for what Conder Tower contracted to secure for the land and were not in addition to the land it secured.

14 The transfer to Conder Tower on 28 April 2004 was made pursuant to two earlier contracts of sale between Yarranova and the Docklands Authority made 30 April 1999. Both contracts permitted Yarranova to nominate a purchaser. Conder Tower was nominated by Yarranova and became the transferee as the Trustee and nominee for MAB Docklands. The two contracts with Yarranova were for two separate parcels of land but they had entitled Yarranova to subdivide the lands. Yarranova prepared and registered plans of subdivision pursuant to the land sale contracts and then called for a transfer of the Conder Tower development land transferred to Conder Tower on 28 April 2004.

15 The two land contracts, and the transfer which followed, were each entered into as part of the PDA entered into on 16 March 1998, as subsequently amended, between Yarranova (as Developer) and the Docklands Authority (subsequently VicUrban). The contracts of sale for the land expressly incorporated the Development Agreement by various provisions. Clause 6 of each contract for the sale of the land was headed "Entire Agreement" and provided that each contract "and the Development Agreement" (as defined) constituted the entire agreement between the parties for the sale and purchase of the property superseding all previous negotiations and agreements in relation to the transaction. The settlement date in each contract of sale was that provided for, as extended, under the Development Agreement. In each case the settlement date in the contracts of sale was made subject to special condition 7 which, amongst other things, provided that any unremedied default by the Purchaser under the Development Agreement was to constitute a default under the contract for the sale of the land.

16 The PDA was entered into on 16 March 1998. Docklands had been established by the Docklands Act 1991 (Vic) for the purpose of facilitating the development of the land in the Docklands area. The PDA recited, amongst other things, that the Authority had "agreed to sell [to] the Developer the Land on the terms and conditions contained in the Land Sale Contract and this Agreement". It also recited that the Agreement was one made under sub-s 24(2) and (3) of the Act which provided that Docklands was entitled to enter into an agreement with another person "concerning the use or development of land in the docklands area". The functions and responsibilities of the Docklands Authority were subsequently transferred to VicUrban pursuant to the Victorian Urban Development Authority Act 2003 (Vic).

17 The objectives of the agreement were stated in the PDA to include "to facilitate the development of the Docklands Area". They also included the development of the Docklands Area "as a place of character and quality in which to live and work, creating both a tourism asset and a boost to Melbourne's prosperity" and that the development be "responsive to the characteristics of the Land and be complementary with the characteristics of Melbourne".

18 The terms of the PDA provided for the parties to enter into separate land sale contracts for each stage. The land sale contracts were to be in the form found in Schedule H and those in question in these proceedings each complied with that requirement. Those contracts, as I have indicated above, contained an acknowledgement by the Purchaser that a default under the PDA was a default under the land sale contract. Clause 4.2 of the PDA prohibited VicUrban to settle the sale of a stage unless reasonably satisfied, amongst other matters, that the Developer was not then in breach of the PDA.

19 The land sale contracts required the Purchaser to pay specified amounts for the land. The PDA, however, required the additional payments to be made which the Commissioner has included as part of the assessment to duty in respect of the land transferred. Each of those obligations were necessarily part of the obligations that needed to be complied with if the Authority (subsequently VicUrban) was to transfer land at any stage.

20 The first of the additional payments for present purposes was the trunk infrastructure contribution. Clause 13.3 of the PDA required the Developer to pay the trunk infrastructure contribution (as defined) in accordance with the Trunk Infrastructure Development Agreement. That agreement was a schedule to the PDA. The trunk infrastructure contribution was defined by cl 1.1 of the PDA to be Yarranova's contribution to the cost of providing the trunk infrastructure as set out in a schedule and found in the third deed of variation as $7,807,038. The definition of trunk infrastructure in cl 1.1 of the PDA described the nature of the works required from the Developer as follows:

Trunk Infrastructure means the physical infrastructure necessary to deliver the Services to the Land boundaries, as detailed in the Maunsell Report (document entitled Melbourne Docklands Trunk Infrastructure Plan and Costings - November 1996) and as provided for and modified by the Trunk Infrastructure Development Agreement but including any variations or additions or deletions as identified or approved from time to time by the Authority...

The "services" referred to in this definition were those identified in the definition of "services" in cl 1.1 to mean "electricity, gas, telecommunications, water, drainage, waste water, waste, sewerage, signalling, pedestrian and bicycle access, road water and public transport access, public spaces and urban art ...".

21 Clause 4.7(c) of the PDA required the Developer to demonstrate on the "Stage Settlement Date for a Stage" (as defined), namely the date on which Yarranova completed the purchase of a particular stage, its ability to pay or deliver the trunk infrastructure contribution. Mr James Ogilvie was the Finance Manager - Residential, of the main operating entity of the MAB group of entities. Conder Tower is an entity in the MAB group and authorised Mr Ogilvie to make several affidavits on its behalf in the proceedings. Mr Ogilvie gave evidence to the effect that Conder Tower paid its portion of the trunk infrastructure contribution of $390,859 plus GST, which had previously been paid to VicUrban on 30 April 1999 by Yarranova. His evidence on this point was to the effect that various sums had been paid by MAB over a period of time and that Conder Tower reimbursed MAB on behalf of Yarranova the latter's portion of the trunk infrastructure contribution which had previously been paid.

22 The contribution thus paid to VicUrban for trunk infrastructure contribution was part of the consideration received by VicUrban for the dutiable transaction by transfer of the land. The land was acquired in the expectation, amongst other matters, of the development of infrastructure to benefit the land acquired. It was a requirement of the development that there be infrastructure of the kind for which the payment was to be made. Amongst the promises given to the Vendor was that there would be a contribution for those costs. The expenditure on trunk infrastructure added value and amenity to the land and Conder Tower acquired land which was to benefit from that expenditure. Its contribution on that account was part of its consideration for the land which was acquired and which benefited from works paid by the expenditure.

23 The second payment in issue was the revenue sharing component. Clause 4.6(b) of the PDA required Yarranova to pay to VicUrban the revenue sharing component (as defined) calculated in accordance with Schedule C. The revenue sharing component was defined in cl 1.1 as "the amount to be paid by the Developer calculated from revenue generated from Dealings with the Developer's interest in each Stage". "Dealings" was defined to be construed by reference to the definition of "Deal" which, in relation to a stage or portion of a stage, was defined to mean "the sale, leasing, licensing or disposal by the Developer of any interest in the Stage". Schedule C provided for the calculation of the revenue sharing component as 0.5% of the gross revenue from dealings in the land for any quarter.

24 The amount in issue for this item was $388,027.62. These payments are different in character from the trunk infrastructure contributions. The revenue sharing component paid in respect of the Conder Tower land is not part of the costs in the development of the land which may be seen to add value to the land but, rather, an amount paid by way of sharing of the profits from the development. Counsel's written submissions for Conder Tower submitted that the arrangement "may, on one view, be more accurately described as a tax law partnership (being an arrangement where two parties are in receipt of income jointly)" rather than as a profit sharing arrangement. However, under either characterisation of the legal obligation, the question to be asked is whether it was relevantly "consideration for" the transfer. In my view it was. A clear term of the bargain was that the proceeds from the subsequent dealing with the land was in part to be shared pursuant to an agreed formula. Many factors may have contributed to the proceeds and profits from the dealing but one factor was the land transferred to Conder Tower and subsequently dealt with. The obligation to pay the revenue sharing component was assumed before the sale and transfer to Conder Tower as agreed in the PDA. Part of what was given for the land was a promise to share the profits from its subsequent sale.

25 The third of the additional payments included in the assessment was the artwork contribution in the amount of $194,943.73. Yarranova had submitted a bid proposal on which it had succeeded in obtaining the PDA. Clause 4.7(d) of the PDA required the Developer to demonstrate on the stage settlement date for a stage that it could pay or deliver when required "the Developer's Public Space and Art Contribution for that Stage". Clause 11.1(b) of the PDA required the Developer to contribute 1% of the Total Development Cost to public art and to the development of public areas in accordance with the Bid Proposal (as the various expressions were defined). Clause 11.1(b)(iii) required the Developer to pay to VicUrban an amount equivalent to 0.2% of Total Development Cost allocated to each stage. Total Development Cost was defined in respect of a stage to mean the total construction and design costs estimated by the Developer to bring that stage to practical completion. Included in those costs was a contribution for public space and art.

26 Counsel for Conder Tower submitted that this contribution was not dutiable and that it was distinguishable from the consideration in Dick Smith. The difference was submitted to be that in Dick Smith the dividend was received beneficially by the vendor whereas the artwork contributions were not. The basis of the submission would appear to be not that any amount received by VicUrban was impressed with a trust in favour of another but, rather, that any amount it received was a reimbursement of its own costs and expenditure. However, I do not consider this amount sufficiently distinguishable from the payment in Dick Smith to take it outside the net of exigibility created by the words "consideration ... for" in s 20(1) of the Duties Act 2000 (Vic). Part of the development of the precinct required the provision of public space and art. The art contributed to the development was not something separately owned by Yarranova or Conder Tower and added to the development. It was, rather, something which Conder Tower was acquiring and paying for as part of the land it acquired. The requirement for public spaces and art was not severable from the overall project for which Yarranova successfully placed a bid and in respect of which Conder Tower secured dutiable property through a dutiable transaction. The development of public space and art was a wholly integrated part of the overall proposal in respect of which there was a promise to pay a contribution referrable to the land acquired. It was part of the consideration for the dutiable property because Conder Tower was acquiring land as developed and payment for the land included the development costs intended to benefit the land. Conder Tower was not acquiring a separate entitlement to art or a separate entitlement to public space.

27 The fourth of the additional payments included in the assessment were the additional residential payments as defined by cl 1.1 of the PDA (as amended by the third deed of variation). These payments were in issue only in the Conder Tower proceeding and by reference to the third deed of variation dated 30 April 1999 which, by cl 4.6(g), amended the PDA to provide:

Where the Authority agrees to allow the Developer Additional Residential Development of the Land, the Developer must pay to the Authority the applicable Additional Residential Payments at the times and in the manner and otherwise in accordance with the regime set out in Part D of Schedule C.

A definition of "Additional Residential Payments" was added to the definitions in cl 1.1 to mean the amounts to be paid in respect of any additional residential development of the land in accordance with cl 4.6(g). A definition of "Additional Residential Development" was also added and provided that it was to mean the residential development of the land which the Authority approved in its absolute discretion adding to the gross floor area previously permitted within the project for residential development of the land.

28 Mr Ogilvie deposed to $972,000 having been paid by way of additional residential payments. Counsel for Conder Tower contended that on no view could these amounts have moved the transfer because at the time of transfer no amount had been paid by Conder Tower to VicUrban by way of revenue sharing component. The amount was contended to have been paid over a period of time after the parties had entered into the PDA, after entering into the two land sale contracts and after the transfer on 28 April 2004. As Mr Ogilvie explained, the revenue sharing component amount included by the Commissioner in the assessment was an estimate of what was expected to become payable but that none was paid at or before the actual transfer.

29 The third deed of variation was entered into on the same date as the two land contracts of sale for the Conder Tower land. It amended the PDA (defined in the two land sale contracts as the "Development Agreement", namely, the agreement dated 16 March 1998 as amended). The fact that no payment had been made at the time of the assessments pursuant to the obligation to make additional residential payments under the Agreements is not determinative of whether such obligations were consideration for the transfer. Plainly there was a promise to make such payments and, equally plainly, that promise had value. Section 11(2) of the Taxation Administration Act 1997 (Vic) permits the Commissioner to make an assessment by way of estimate where the Commissioner has insufficient information to make an exact assessment of tax liability. Section 30(1) of the Duties Act 2000 (Vic) permits the Commissioner to make an assessment by way of an estimate under s 11(2) of the Taxation Administration Act 1997 (Vic) if the full dutiable value of dutiable property which is the subject of a dutiable transaction cannot be immediately ascertained.

30 The additional residential payments of $972,000 were made pursuant to the formula set out in Part D of Schedule C to the PDA and the Stage Development Agreement referred to in cl 4.6. The component paid may have been an estimate of the amount ultimately payable under the clause and, if so, any amount assessed must, pursuant to s 30(3) of the Duties Act 2000 (Vic), be reassessed when the full dutiable value may finally correctly be ascertained. However, in proceedings on appeal it is for the taxpayer to discharge the burden of proof by establishing what the true assessment should be[23] and that burden is not discharged by establishing errors in the assessment[24] nor can it be discharged by establishing that the Commissioner has assessed an amount as an estimate in reliance upon a statutory provision[25] which authorises the very thing complained about. In these proceedings the amount has not been shown to have been incorrectly included as the estimated amount of a valuable promise given to the vendor as part of the consideration for the dutiable transaction.

31 The fifth amount included in the Commissioner's assessment was the other payments which in the case of Conder Tower amounted to $38,241.95. The principal submission made for Conder Tower in this respect was that these payments were not made at the time of the transfer and, for that reason, that it could not be said to have "moved" the transfer. That submission falls with that made in respect of the additional residential payments. The PDA was varied by the addition of "other payments" which were payable "in addition to the Total Land Price". The amounts provided for in Part E of Schedule C was for a total of $900,000 payable on the ninth, tenth and eleventh anniversary of the Conditions Precedent Date (as defined). The amounts may not have been paid as at the date of the land sale contracts, or as at the date of the transfer, but they were obligations to be paid and, on any view, were for and in addition to the amounts paid for the land as such. They were promises given in consideration for the land and there was no evidence tendered by Conder Tower to discharge its burden of proof such as to require the substitution of some other amount as the value for that promise for the amounts found in the agreements as apportioned to Conder Tower.

32 Conder Tower also sought to rely upon s 21(3) of the Duties Act 2000 (Vic) in opposition to the assessments, contending that part of the amounts included by the Commissioner in the assessments were excluded from duty as being in respect of the consideration of a building to be constructed on land. Section 21(3) provides:

The consideration for the transfer of land on the sale of that land does not include any amount paid or payable in respect of the construction of a building to be constructed on that land on or after the date on which the contract of sale was entered into.

The ground of appeal in reliance upon the section was not included in the taxpayer's grounds of objection and, therefore, leave was needed, sought, and granted, to rely upon it in the proceeding.

33 The discretion to allow a taxpayer to add to the grounds of objection is large and expressed in unfettered terms.[26] Section 109 of the Taxation Administration Act 1997 (Vic) provides:

1. the taxpayer's case is limited to the grounds of the objection; and
2. the Commissioner's case is limited to the grounds on which the objection was disallowed -

It was said in Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation:[27]

The decision whether to allow an amendment ought to be made on the same considerations of justice upon which such decisions are regularly made in litigation.[28]

In this case I granted leave for the additional ground to be relied upon. It had been notified to the Commissioner several months before the hearing of the case and no prejudice was caused by permitting the taxpayer to rely upon the additional ground. Such evidence as the taxpayer sought to rely upon in support of the ground had been filed before the hearing and none was sought to be tendered by the Commissioner in opposition. The point was discrete, confined and added little time to the hearing of the proceeding. The proceeding otherwise raised important questions of principle of general application and was conducted upon that basis. It was desirable in those circumstances that all issues reasonably to be relied upon be raised for determination in the proceeding.

34 The ground in reliance upon s 21(3), however, cannot succeed because there is no evidence of any payment that might fall within the terms of the provision. The section excises from duty amounts in respect of "the construction of a building to be constructed on" land on or after the Contract of Sale was entered into. None of the payments have been shown to be in respect of the construction of a building and, therefore, none satisfy the necessary condition for the application of the section.

35 Conder Tower also challenged the assessment on the ground that it was invalid because s 9(3) of the Taxation Administration Act 1997 (Vic) prevented the Commissioner from making a reassessment more than three years after the initial assessment. Fundamental to that submission was that there had been full and true disclosure.

36 The terms of s 9(3) of the Taxation Administration Act 1997 (Vic) relevant at the time of the assessment prevented the Commissioner from making a reassessment of tax liability more than three years after the initial assessment unless:

at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the tax liability under the relevant taxation law of the person in respect of whom the assessment or reassessment was made were not fully and truly disclosed to the Commissioner.[29]

The dutiable transfer was lodged on 28 April 2004 and the assessment issued upon the transfer as lodged. On 24 October 2006 the Commissioner wrote to Conder Tower saying that it has been selected for an investigation under s 73 of the Taxation Administration Act 1997 (Vic) to assess compliance with the Duties Act 2000 (Vic) for the transfer of the Conder Tower development land. It was not until 31 August 2007 that the Commissioner reassessed Conder Tower.

37 It was contended for Conder Tower that there had been full and true disclosure because at the time of lodgement of the instrument of transfer, namely on 28 April 2004, the High Court had not decided Dick Smith.[30] The articulation of the relevant principles in that case had stood, as at 28 April 2004, as enunciated by the New South Wales Court of Appeal published on 10 October 2003.[31] In that decision the Court of Appeal had dismissed the Chief Commissioner's appeal and had affirmed the decision of Gzell J that the agreement to make the loan, and to fund the payment of the dividend, did not form part of the consideration for the sale of the shares. Those circumstances, however, do not necessarily establish that there had been full and true disclosure. They may explain why a taxpayer may have confidently adopted a position about liability and, in addition, they may be relevant to any favourable exercise of a discretion on questions involving penalty, but they do not establish that there had been full and true disclosure.

38 The decision by the High Court in Dick Smith did not alter, but rather declared, [32] the law applicable to provisions such as s 20(1). Furthermore, if it were permissible for the taxpayer to have regards to the state of the articulation of the law in the Dick Smith litigation as it had stood before the decision in the High Court, it would have been apparent to the taxpayer that the issue contended for in these proceedings had been engaged in those proceedings as a matter of continuing dispute and contest. In those circumstances the taxpayer may, perhaps, have been confident that disclosure of the PDA would not have altered the assessment for which it contended (on the basis that it would have been in line with the Court of Appeal decision in Dick Smith) but the taxpayer could not have formed the view the issue had clearly ceased to be in contention. In other words, the awareness of the Dick Smith proceedings should have caused the taxpayer to disclose the PDA rather than caused the taxpayer to conclude that it need not have done so, however confident it might have felt of a favourable outcome.

39 Mr Ogilvie's evidence on the question of disclosure was that, at the time of lodging the transfer of the relevant land sale contracts, the Commissioner had been given the nominee statutory declaration and the goods statutory declaration. The instrument of transfer itself did not refer to the Precinct Development Agreement. The land sale contracts did refer to the Development Agreement but it did not refer specifically to any of the obligations which have since come into contention between the parties. The land sale contracts did refer to the fact that other amounts were payable but did not refer to them in a way that would indicate whether they might be payable as part of the consideration for the land. Clause 6 in each of the land sale contracts provided that the contract and the Development Agreement constituted the entire agreement between the parties. Clause 7.2 provided that an unremedied default under the Development Agreement was a default under the land sale contract but the latter did not identify the terms or the nature or the details of the obligations of or under the former.

40 The requirement to make full and true disclosure in an analogous context was described by Menzies J in Austin Distributors Pty Ltd v Federal Commissioner of Taxation[33] as follows:

The requirement ... is not met by anything less than full disclosure of all the material facts, and a disclosure which leaves the Commissioner to speculate as to some of the material facts is not sufficient ... The matter can be tested in this way. If advice were to have been sought by the taxpayer whether or not the sum in question was a taxable premium, would the person from whom that advice was sought have required more information than this return disclosed to the Commissioner?[34]

These observations have been said to have been qualified in two respects[35] but the underlying principle has frequently been followed. It is, as I have said, no answer to the question of whether there had been full and true disclosure for it to be contended that no disclosure was necessary on the basis of the law as it was thought to be by the taxpayer. Without the PDA the Commissioner did not have the information needed to form a view about the extent to which the contractual terms between the parties gave rise to the duty subsequently assessed. The documents provided to the Commissioner before audit were not full and were misleading.[36] Accordingly the restriction upon the Commissioner's ability to reassess more than three years after the initial assessment does not apply and the reassessments are otherwise within the Commissioner's statutory power.[37]

41 Conder Tower also contended that the Commissioner erred when addressing the question of whether or not to exercise the discretion to remit the interest payable under s 28 of the Taxation Administration Act 1997 (Vic). The section provides:

The Commissioner, in such circumstances as the Commissioner considers appropriate, may remit interest payable by a taxpayer under this Division by any amount.

The discretion is expressed in broad terms without qualification or restriction. The Commissioner has laid down guidelines on the exercise of the discretion in Revenue Ruling TAA.006. The publication of such rulings is lawful, desirable and helpful[38] but is not un-examinable when applied.[39]

42 In this case the Commissioner's delegate explained in the reasons for decision why the market rate component of interest would not be remitted under s 28 in reliance upon paragraphs 8 and 9 of the Ruling. Paragraphs 8 and 9 of the Revenue Ruling indicated that the power under s 28 would "only" be used to remit the market rate component of interest in "exceptional circumstances". The delegate's reasons relevantly stated:

Under section 28 of the [Taxation Administration Act 1997 (Vic)], the Commissioner may in such circumstances as considered appropriate, remit penalty tax and interest by any amount. Guidelines on the exercise of the discretion are set out in Revenue Ruling TAA.006 ('the Ruling'). Under paragraphs 8-9 of the Ruling, the Commissioner would only remit the market rate component of interest in exceptional circumstances. Paragraph 10 of the Ruling gives examples of circumstances where the Commissioner might remit some or all of the premium rate components of interest, including that a tax payer (or a person acting on behalf of a tax payer) took reasonable care to comply with the Act.

That paragraph is essentially descriptive of the provisions and Ruling relevant to a consideration of whether to exercise the discretion in s 28. The delegate's application of those matters appeared in the next paragraph as follows:

In this matter, penalty and premium interest rates have been correctly remitted because of the complicated arrangement of this transaction and the fact that the Development Agreement was prepared by the Authority and not by Conder with a view to minimise stamp duty. However, interest totalling $19,366.74 was correctly imposed from three months after the transfer of land instrument date until 30 August 2007, being the last date of provision of information relating to the completion of the investigation by the Commissioner. The rate of interest was calculated in accordance with section 25 of the [Taxation Administration Act 1997 (Vic)] at market rate.

It appears from these paragraphs that the Commissioner's delegate felt constrained to apply that part of the Ruling that prevented remission of the market rate other than in "exceptional circumstances". Section 28 is not confined in that way. It is a broad and general discretion given to the Commissioner to be applied when the Commissioner considers it appropriate that it be applied in each case. Each case in which the question of remission under the section arises must be considered on its own facts and circumstances without the imposition of an unenacted threshold hurdle of a need for there to be "exceptional circumstances". That is not to say that the Commissioner was bound in this case to remit interest beyond the amount remitted. It does mean, however, that the Commissioner should consider the matter afresh without a fetter that is not found in the section.

43 The examples given by the Commissioner in the Revenue Ruling of circumstances where the Commissioner might remit some or all of the premium rate components of interest may be helpful and, on their facts, may be appropriate. In this case the taxpayer had urged consideration of matters for remission which were not taken into account. The taxpayer had stated in its grounds of objection that it had believed the contract price to be equal to the dutiable value of the land and had lodged the transfer on that basis. Conder Tower in particular contended in its notice of objection that it could not reasonably have known that there was any basis for another reassessment to be issued and therefore, as a matter of fairness, the interest should be remitted in full. It is for the Commissioner and not for the Court to decide whether this ground should result in remitting penalty under s 28. It does not appear to have been taken into account and it appears that the reason for that failure lay in the way in which the Ruling had stated that the section was to be administered by a need for there to be "exceptional circumstances". In the circumstances that part of the appeals dealing with remission will be allowed and referred back to the Commissioner for re-consideration .

44 Two substantive issues were raised in the other proceedings that did not arise in the Conder Tower assessment. They both arose in the Yarranova proceeding numbered 04165 of 2011 and one also arose in the Harbour One Tower Pty Ltd proceeding numbered 04166 of 2011. The parties conducted the proceeding on the basis that the issues considered in the Yarranova proceeding would also determine the common issue in the Harbour One Tower Pty Ltd proceeding. One of the issues was a challenge to the assessment on the basis that there were calculation errors. The other was referred to as the sub-sale issue.

45 The ground of objection based upon calculation errors in the Yarranova proceeding is essentially the same as the challenge in the Conder Tower proceeding of the inclusion by the Commissioner of the revenue sharing payment. The complaint was that no amounts had been paid to VicUrban in respect of the Yarranova and Harbour One land and, therefore, that as estimates the amounts have been incorrectly included. The amounts included in the Yarranova and Harbour One proceedings which were challenged as miscalculations were included by the Commissioner in reliance upon s 11(2) of the Taxation Administration Act 1997 (Vic) as an assessment of an estimated amount. On 27 July 2010 the solicitors for Yarranova wrote to the Commissioner disputing that the amounts should be included in the assessments but gave figures, without admission, which were said to be in conformity with the Commissioner's position but which the taxpayer otherwise challenged.

46 It is for the taxpayer to discharge the burden of proof by establishing what the correct amount of an assessment should be. The Commissioner included amounts by way of estimates, as permitted by the Duties Act 2000 (Vic),[40] of the value of the consideration for the transfers in the contractual promises which at the time of contract and transfer had not yet been paid. There is no other evidence to displace the amounts assessed from those which the Commissioner relied upon and, accordingly, the challenge to the assessment on the basis of calculation error is not established.

47 The sub-sale issue challenge is more complicated and depends upon the contention that there is a gap in the legislative sequence substituting statutory liability under the regime imposed by the Stamps Act 1958 (Vic) to that imposed by the Duties Act 2000 (Vic). This ground of objection had not been raised in the grounds of objection and, therefore, Yarranova sought leave to rely upon it as an additional ground.

48 The discretion to allow a taxpayer to add to the grounds of objection is large and unfettered.[41] In this case I granted leave for the following reasons. The additional ground sought to be relied upon was of narrow compass and occupied little additional time in the proceedings. It was fully notified to the Commissioner in submissions filed in November 2011 for proceedings which came on for hearing on 23 January 2012. The ground involved only a question of law and, if successful, would reveal the assessment to have been made without lawful authority. No additional evidentiary material was needed to determine the issue and, despite an unsubstantiated assertion to the contrary, no prejudice of any kind was shown to flow to the Commissioner. The Commissioner did not apply to adjourn the proceeding or to file any additional material, and his counsel conceded that he was prepared and able to argue the point and did so.

49 The sub-sale issue arises from the nomination by Yarranova of Harbour One Tower Pty Ltd as the transferee for a parcel of land. An assessment was raised under s 31 of the Duties Act 2000 (Vic) for an amount of $2,355 which included the original purchase price and the additional payments. The purchase price agreed by VicUrban and Yarranova for the relevant land was $11,468.42. Yarranova contended that s 31 of the Duties Act 2000 (Vic) could not have applied to the nomination because the land sale contract was entered into on 30 April 1999. Section 31(1) relevantly provided:

(a) a person ("the vendor") agrees to transfer any dutiable property referred to in section 10(1)(a) or (d) ("the agreement") to another person ("the first purchaser") (whether or not the agreement provides for that other person to nominate another person as purchaser); and

(b) the transfer executed by the vendor transfers the whole or any part of the property not to the first purchaser but to another person ("the transferee") who has acquired, whether directly or indirectly, the whole or any part of the rights and interests under the agreement of the first purchaser in the property -

the transfer is not chargeable with duty in respect of the transfer from the vendor to the transferee but is separately and distinctly chargeable with duty in respect of -

(c) the value of the property in the agreement (whether or not the agreement has been discharged by performance, novation or agreement or has otherwise ceased to exist); and

(d) the value of the property transferred to the transferee; and

(e) if the transferee did not acquire those rights and interest directly from the first purchaser, the value of the property in each other transaction or agreement as a result of which the rights and interest of the first purchaser in the property were acquired.

The first point for Yarranova, put shortly, was that the condition for the operation of the section did not exist because the agreement in this case was entered into on 30 April 1999 and, as was contended, there was no agreement within the meaning of s 31(1)(a).

50 Section 31(1) was introduced into the Duties Act 2000 (Vic) to operate prospectively. It was part of the substitution of the regime for duty payable upon instruments under the Stamps Act 1958 (Vic) with the regime established under the Duties Act 2000 (Vic). In this case the dutiable transaction was not a transfer made after the Duties Act 2000 (Vic) had come into force but, rather, was the land sale contract entered into on 30 April 1999. As at that date s 31(1) could not have applied. There is nothing in s 31 to suggest that it was intended to have a retrospective effect and there is nothing in the transitional provisions that might have made applicable the former s 67A of the Stamps Act 1958 (Vic).

51 Section 31 of the Duties Act 2000 (Vic) was subsequently repealed and in 2005 was replaced by Part 4A with effect from 29 June 2005. The Commissioner sought to rely upon an election made by the taxpayer that Part 4A of the Duties Act 2000 (Vic) apply. Schedule 2 cl 21(2) was inserted into the Duties Act 2000 (Vic) in 2005 and contemplates a person electing that the regime under Part 4A might apply in preference to s 31 as in force immediately before the commencement day. It appears that the taxpayer erroneously elected for Part 4A to apply instead of s 31 but that election could not have applied for the reasons set out above and therefore was of no effect. Part 4A did not apply because the agreement was not entered into after 29 June 2005 as required by cl 21(1)(a) of Schedule 2 to the Duties Act 2000 (Vic). Accordingly the assessment based upon s 31 must be set aside.

(a) to uphold the assessments on the primary duty as assessed in each proceeding except in respect of the sub-sale issue in the Yarranova proceeding numbered 04165 of 2011 in which case the appeal will be allowed.

(b) to set aside the assessments in those appeals in which the appellants raised as a ground that the Commissioner had failed to exercise the discretion in s 28 to remit interest payable.

[1] Federal Commissioner of Taxation v Scully [2000] HCA 6; (2000) 201 CLR 148, 182 [68] (Kirby J, but in dissent in the outcome).

[2] Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) [1948] HCA 28; (1948) 77 CLR 143, 152 (Dixon J); see also Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) [1958] HCA 22; (1958) 100 CLR 392, 415 (Kitto J); Stocks v Commissioner of Probate Duties [1976] VicRp 9; [1976] VR 106.

[3] [1948] HCA 28; (1948) 77 CLR 143.

[5] Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 48 S.R. (NSW) 318.

[6] As explained by Williams J on appeal at [1948] HCA 28; (1948) 77 CLR 143, 154.

[7] Ibid 152 (Dixon J, Williams J agreeing).

[8] State Government Insurance Office (Qld) v Rees [1979] HCA 52; (1979) 144 CLR 549; Federal Commissioner of Taxation v Scully [2000] HCA 6; (2000) 201 CLR 148, 182 [68] (Kirby J, but in dissent in the outcome); J & G Knowles and Associates Pty Ltd v Federal Commissioner of Taxation [2000] FCA 196; (2000) 96 FCR 402, 410 (Heerey, Merkel and Finkelstein JJ); Slade Bloodstock Pty Ltd v Federal Commissioner of Taxation [2007] 68 ATR 911.

[9] [2005] HCA 3; (2005) 221 CLR 496.

[10] The appellant acknowledged that the decision was binding upon a trial court: Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45, [3] (Gummow, Heydon and Bell JJ).

[11] Chief Commissioner of State Revenue (New South Wales) v Dick Smith Electronics Holdings Pty Ltd [2005] HCA 3; (2005) 221 CLR 496, 519 [75]-[77].

[14] Ibid 518 [72] (Gummow, Kirby and Hayne JJ).

[15] Ibid 518 [73] (Gummow, Kirby and Hayne JJ) .

[16] Ibid 519 [78] (Gummow, Kirby and Hayne JJ).

[17] Ibid 520 [79] (Gummow, Kirby and Hayne JJ).

[19] Ibid 518 [72] (Gummow, Kirby and Hayne JJ).

[20] Oakland Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2009) 77 ATR 824, 827 [20] - [22] (Gzell J).

[21] See also Federal Commissioner of Taxation v Sun Alliance Investments Pty Ltd (in liq) [2005] HCA 70; 225 CLR 488 esp [80] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).

[22] The Colonial Mutual Life Assurance Society Limited v Federal Commissioner of Taxation [1953] HCA 68; (1953) 89 CLR 428, 454 (Fullagar J); See also The Commissioner of Taxation of the Commonwealth of Australia v Rowe [1997] HCA 16; (1997) 187 CLR 266, 292 (Gaudron, Gummow and Kirby JJ); and Federal Coke Co. Pty Ltd v Federal Commissioner of Taxation [1977] FCA 3; (1977) 34 FLR 375, 402 (Brennan J).

[23] The Commissioner of Taxation (Cth) v Dalco [1990] HCA 3; (1990) 168 CLR 614.

[25] Duties Act 2000 (Vic) s 30(1); Taxation Administration Act 1997 (Vic) s 11(2).

[26] Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148, 156 (Lockhart, Burchett and Hill JJ); Gilder v Federal Commissioner of Taxation (1991) 22 ATR 872, 873 (Davies J).

[27] (1991) 32 FCR 148.

[28] Ibid 156 (Lockhart, Burchett and Hill JJ).

[29] Taxation Administration Act 1997 (Vic) s 9(3)(b).

[30] Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd [2005] HCA 3; (2005) 221 CLR 496.

[31] Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd [2003] NSWCA 265; (2003) 58 NSWLR 567.

[32] Ha v State of New South Wales [1997] HCA 34; (1997) 189 CLR 465, 503-4 (Brennan CJ, McHugh, Gummow and Kirby JJ); cf Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49, 105 [164] (Callinan J); R v P, GA [2010] SASCFC 81 [87] - [89] (Doyle CJ).

[33] (1964) 13 ATD 429.

[35] Federal Commissioner of Taxation v Broken Hill Pty Co Ltd [2000] FCA 1431; (2000) 179 ALR 593, 607 [54] (Hill J); Stapleton v Federal Commissioner of Taxation (1989) 88 ALR 606; Foster v Federal Commissioner of Taxation (1951) 82 CLR 606; Federal Commissioner of Taxation v Levy [1961] HCA 92; (1961) 106 CLR 448.

[36] Federal Commissioner of Taxation v Broken Hill Pty Co Ltd [2000] FCA 1431; (2000) 179 ALR 593, 612 [77], 616 [95] - [96] (Heerey and Merkel JJ).

[37] Taxation Administration Act 1997 (Vic) s 9.

[38] Drake v Minister for Immigration and Ethnic Affairs (No. 2) [1979] AATA 179; (1979) 2 ALD 634, 642-643 (Brennan J); KC Davis, Administrative Law Treatise (2nd ed 1979) vol 2 para 8.8.

[39] Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; (1949) 78 CLR 353, 360 (Dixon J).

[40] Duties Act 2000 (Vic) s 30(1); Taxation Administration Act 1997 (Vic) s 11(2).

[41] Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148, 156 (Lockhart, Burchett and Hill JJ); Gilder v Federal Commissioner of Taxation (1991) 22 ATR 872, 873 (Davies J).