Appellant v Respondent

Appellant v Respondent - [2012] VSC 108 - VSC 2012 case summary — Zoe

[10]

7 It may be convenient to commence with the assessments made by the Commissioner in relation to the Dock 5 transfer in proceeding 2663 of 2011. Many of the facts and issues in that assessment are materially the same in the other appeals. Clause 4.7 of the 2001 Development Agreement provided for the payment to the Authority of various amounts including the Stage Land Payment (as defined). The Commissioner has also assessed to LLD the other amounts payable to VicUrban under the Development Agreement which the Commissioner contended to be referable to the land transferred in respect of the Dock 5 stage. One amount included was that arising from LLD's obligation to contribute to the infrastructure costs on land outside of the stage land released to LLD under the land sale contract transferring the Dock 5 land. The external infrastructure essentially involved road works and other infrastructure linking the precinct and the Docklands area to the central business district of Melbourne and to adjoining suburbs. Those works included the extension of Collins Street from Spencer Street to Docklands, a pedestrian and cycle bridge and a pedestrian bridge to Etihad Stadium. Another amount assessed by the Commissioner was that payable for the remediation of the former eight hectare West Melbourne Gasworks Site once occupied to the east of the precinct. Waste products from gas production had been deposited into ponds and wells on the site during the life of the site. The site had only been demolished to ground level when it had been decommissioned and remediation works were commenced in August 1999 which were completed in 2002 pursuant to a clean up notice on the site given by the Environment Protection Authority under s 62A of the Environment Protection Act 1970 (Vic). A third amount assessed for duty in respect of the Dock 5 land was a percentage of the cost of public art placed in public spaces. Clause 10 of the 2001 Development Agreement required LLD to allocate a percentage of the Stage Development Cost (as defined) on Integrated Public Art (as defined) in public spaces relating to individual buildings, public spaces within the precinct, and public spaces generally within the Docklands area. The Development Agreement also required LLD to pay VicUrban an amount referred to as the Final Land Payment. This, in effect, was an amount of profits agreed to be paid to the Authority being the amount by which 2.74% of the Actual Gross Process Sale (as defined) exceeded the Stage Land Payment (as defined).

[20]

12 The fundamental enquiry in each case was what had been received as consideration "for" the dutiable transaction. That inquiry required an evaluation of the nexus between the consideration and the transfer. It will not be sufficient that there be some connection between consideration and transfer to conclude that one is "for" the other.[8] The legislative policy evident in s 20(1) is to require a particular connection between transfer and consideration for duty to be imposed. It has not adopted as the required connection that the consideration be "in respect of", "in connection with" or "in relation to"[9] the transfer which may be thought to require something less than when the connection required by providing that the consideration must be "for" the transfer.[10] Even when the connection required may be that something be "in respect of" (or like expression) something else, the nexus between the two would need to be material and based upon rational and discernible links.[11] Dutiable transactions may occur in a broader context of transactions which do not attract duty. The legislature intended duty to be imposed upon the consideration for the dutiable transaction and not for other consideration for other connected transactions which are not otherwise dutiable. That may be seen by the legislature's use of the words "consideration" (carrying the concept of that which "moves" the transaction) and "for" (requiring a nexus between consideration and transfer). It may also be seen in s 25(1) which requires that duty be imposed only upon that portion of consideration that relates to dutiable property where that section operates. Interdependence of mutual promises are not sufficient to determine whether a payment was "for" the dutiable transaction, as can be seen from the decision in Bambro. In Dick Smith it was significant that the vendors were intended to receive the amount of approximately $114m notwithstanding that the vendor, as shareholder, may have been able before the sale (independently of the agreement) to have a dividend declared for that part of the total amount received but which was financed by the purchaser.[12] In that case the purchaser had promised to fund the company's payment of the dividend to its shareholder and in fact received the dividend amount together with the stipulated purchase price. In contrast, in Bambro, it was said to be "crucial" to the outcome in that case that the conveyance was "to precede building".[13] The two matters in Bambro were interlocked and legally interdependent but the dutiable conveyance of the land was to precede the building upon the land.

[31]

21 The successive versions of the Development Agreement did not alter for duty purposes the fundamental nature of the payments and obligations of the Developer and Authority. The 2001 Development Agreement contained a table in Schedule C of the base amounts on stage release for each stage for the project. The Stage Land Payment in the table was approximately 2.74% of the Projected Gross Revenue on Sale as at each stage of the development. In other words, the amount payable as the Stage Land Payment for each stage on Stage Release was determined by the parties as approximately 2.74% of the Projected Gross Revenue referable to the stage being released. Clause 1.2 to Schedule C set out the base amounts for each stage on stage release of the Stage Land Payment, the Minimum External Infrastructure Contribution, the Minimum Gasworks Site Remediation Contribution and the Projected Gross Revenue on capitalist sales. Clause 4.7 of the 2001 Development Agreement had made payable the scheduled amounts on or before each Actual Stage Release Date, in addition to the Integrated Public Art Contribution and any other amounts due and payable by the Developer to the Authority under the Development Agreement. The Minimal External Infrastructure Contribution and the Minimum Gasworks Site Remediation Contribution were each made payable under cl 4.7 as "on account" of the Project External Infrastructure Contribution and the Project Gasworks Site Remuneration Contribution (as defined) respectively. The scheduled Stage Land Payment was not fixed by market value but as a percentage share of the revenue from sales. Clause 4.7(a)(ii) ensured that the Authority received from the Developer the amount of the Actual Gross Proceeds Sale received by the Developer in an order taking account of any excess received as against the percentages stipulated in Schedule C. The Final Land Payment was simply a "top up payment", to ensure that LLD receive 2.74% of the actual Gross Proceeds Sales where that amount exceeded the projected realisations upon which the figure in the Dock 5 Land Sale Contract was calculated. The 2006 Development Agreement did not materially alter the nature of the payment made as the Final Land Payment in respect of the Dock 5 land. Clause 4 in the 2006 Development Agreement was affected by cl 4.7A but its terms did not alter the nature of the Final Land Payment as being a top up specifically provided for and made payable before completion of the contract and taking title to the Dock 5 land.

[54]

38 In the case of the C9 (Myer) land, VicUrban had promised its transfer, along with all other stages comprising the land, to LLD under the Development Agreement. In the case of that land, however, LLD entered into a development agreement ("LLREI Development Agreement") with Lend Lease Real Estate Investments Pty Ltd ("LLREI") (being the appellant in proceeding 2665 of 2011 in relation to the C9 (Myer) land) and that company entered into the C9 (Myer) Land Sale Contract with VicUrban. The agreement between LLREI and LLD required the former to pay the "VicUrban development agreement contribution" of $5,852,480. The C9 (Myer) Land Sale Contract required that LLREI pay amounts including the Stage Land Payment as fixed by that contract, the Additional Authority Payment, the Stage Integrated Public Art Contribution, the Base External Infrastructure Contribution and the Base Gasworks Site Remediation Contribution. Each of these payments were required to be made "to complete settlement" and formed part of the promises given to obtain the land in the context of the overall development. Special Condition 7 of the C9 (Myer) Land Sale Contract provided that it 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 but its terms incorporated and included the 2006 Development Agreement. As with the other transactions the amounts paid by the purchaser were all "for" the land in the form and state intended to be secured through the development. The infrastructure and gasworks remediation were to turn the precinct from a disused industrial site cut off from the Melbourne central business district and lacking the infrastructure necessary for its development, into an area for commercial and residential construction, sale and lease. Amounts paid in respect of the Grand Plaza and the public art, contributed to the amenity of the precinct by making it a place suitable for people to live, work and find recreation.

[71]

These comments make worse the position created by the correspondence from the parties rather than help in resolution of the matter. If the Commissioner relied upon a matter which the statute prevents the Commissioner from relying upon, then it is incumbent upon him (as a party and as a model litigant) to seek leave. The court cannot have jurisdiction over a matter which the statute excludes from the court's jurisdiction in the informal way proposed by the Commissioner's solicitor. It is no answer to say that the parties presented full argument to the court upon a mistaken assumption if the assumption was mistaken and if a consequence of the mistaken assumption is that the court lacks jurisdiction to deal with what the parties may have wished the court to consider. No attempt was made on behalf of the Commissioner to justify how the court might be permitted to take into account a ground in the face of s 109 of the Taxation and Administration Act 1997 (Vic). No explanation was given for the Commissioner's apparent reliance upon a ground not previously relied upon. No explanation was given about a failure by the Commissioner in respect of an enactment for which the Commissioner has responsibility to administer. In these circumstances it seems to me that not dealing with the issue at all is to be preferred amongst the unsatisfactory courses available. It might have been otherwise if the issue sought to be relied upon was not excluded from an appeal unless leave were given. The Commissioner has not sought leave other than in the conditional way in the passage I have quoted above. Whether leave is to be sought is a matter upon which the Commissioner ought to have formed a view and made formal application for leave if he were of the view that leave was required. The Commissioner as public official and model litigant, and his legal advisers as officers of the court, should not engage with the Court by making submissions conditional upon the Court's view about matters in dispute before the parties.

[72]

50 The final issue to consider is the Commissioner's application of interest and penalties. Little was said in argument for or against the interest and penalty in each case. In some instances the taxpayer's notice of objection did not raise a ground of appeal against the interest and penalty beyond such arguments as were raised against the primary tax. Thus, for example, in the Mosaic Notice of Objection the relevant taxpayer objected to penalties and interest "on the basis that the primary Assessment is incorrect for the reasons set out" in the grounds objecting to the primary tax and "are therefore inapplicable". In some instances the objection, like that in the V4 Notice of Objection, went a little further by contending that, in addition to the ground just mentioned, objection to the imposition of penalty or interest was made on the basis that the taxpayer had already raised submissions similar to those in question and the Commissioner had taken no action for many months. In one of the Dock 5 objections (2663 of 2011) no ground of objection against a penalty or interest appeared in the Notice of Objection. In some instances the written submissions for the appellants went a little further than may have been open on the Notice of Objection. In the C3/C4 proceeding, for instance, the notice of objection contained at best two grounds: namely, that no penalty and interest was assessable because no primary tax was assessable, and no penalty or interest was payable because the issues raised were similar to those raised by related taxpayers already referred to this court and "upon which no action [had] been taken for many months". The written submissions in the C3/C4 proceeding, however, appeared to raise additional grounds, namely, that the Commissioner had wrongly imposed penalty tax and interest at the premium rate, that the taxpayer had taken reasonable care to comply with the Act having regard to the nature and complexity of the matters, and that the status of the contribution payments was unresolved in the absence of any judicial decision.

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Judgment (94 paragraphs)

Legislation Cited (40)

Cases Cited (11)