Australian Rice Holdings Pty Ltd v Commissioner of State Revenue [2004] VSCA 17

Court of Appeal (Vic)|2004-03-03|Before: ORMISTON, PHILLIPS and CALLAWAY, JJ.A.

Revenue Law - Stamp duty - Conveyance on sale of land - Water rights sold with land - Whether value of water rights to be taken into account in assessing duty - Stamps Act 1958, s.63(3) and (4).

Subject to the minor qualifications which follow, I agree with Callaway, J.A., for the reasons contained in the judgment he is about to give, that the appeals should be allowed and orders made in the manner proposed by him. I would add only these matters.

As to paragraph [14] of his judgment I have never understood the assumption by courts that a word bears the same meaning where it appears more than once in a document, especially in a part of a document such as a section in a statute, as being other than the result of a common-sense approach to interpretation. I believe it to have been an assumption, frequently made correctly, that those responsible for drafting a document, especially a formal document such as a statute, will have intended a word to bear the same meaning wherever it appears, but that that approach is easily enough rebutted when the plain meaning indicates that a different interpretation should be given to the word where it later appears. It is not a means of dictating consistency but of considering what is likely in the circumstances. The likelihood may be thought to be greater where those responsible for the document are trained in the art of drafting and when it has been considered thereafter by the legislature. But errors can occur and the complexity of modern statutes arguably makes consistency less likely, however keenly it may be sought, and the extent of legislative supervision may be thought less where statutes are so detailed and complex and the time set aside for consideration in committee is reduced. In the present case the word chattels appeared in the very same section inserted by the very same Act and one may very fairly assume that Parliament intended the word to have the same meaning, especially as sub-s.(4)(a) was always expressed as an exception to the provisions in sub-s.(3) of s.63 as introduced in the Stamps (Further Amendment) Act of 1983. It would be remarkable if the later addition of qualifying words to the word "chattels" where it first appears in sub-s.(3)(a) could result in any change of meaning and I do not think it did so here.

3 Secondly, in describing the nature of the exception contained in sub-s.(4)(a) in paragraph [17] of Callaway, J.A.'s judgment, his Honour contrasts physical chattels and "intangibles, like water rights for irrigation". Having regard to what his Honour says later in paragraph [19] as to the undesirability of saying anything about the second contention relied upon in the present case, I do not understand his Honour to be deciding whether "chattels" would or would not include intangibles such as irrigation rights. Rather he is merely giving an example of how the section might have operated. The correct meaning of the word "chattels" has arisen but has not yet been decided in the appeal brought in Commissioner of State Revenue v. Uniqema, referred to by his Honour.

Subject to the qualifications expressed by Ormiston, J.A., I, too, agree with Callaway, J.A. that the appeals should be allowed for the reasons given by him.

On 24th May 1999 a deed was executed by Ebek Pty. Ltd., Trefoil Australia Partners L.P., John Dorman Elliott and the appellant. The deed contained an agreement for the acquisition of a property known as Madowla Park and related assets. Mr Elliott was the vendor and the appellant was the purchaser. Madowla Park comprised 57 parcels of land on separate titles, including parcels which abutted the Goulburn River and Deep Creek.

Mr Elliott held a diversion licence that had been granted to him on 6th October 1994 by the Goulburn-Murray Rural Water Authority pursuant to the Water Act 1969 and an annual permit that had been granted to him on 13th August 1987 by the Rural Water Commission of Victoria pursuant to the Water Act 1958. The licence authorized him to draw water from the Goulburn River for the purpose of growing

rice on the property and the permit authorized him to divert a much smaller quantity of water from Deep Creek for stock use. As part of the sale and purchase agreed by the deed, Mr Elliott agreed to assign the licence and the permit ("the water rights") to the appellant and the appellant agreed to accept that assignment.[1]

On 26th May 1999 57 transfers of land under the Transfer of Land Act 1958 were executed by Mr Elliott as transferor and the appellant as transferee. The appellant's solicitors lodged them with the respondent for stamping. On 1st June 2000 the respondent issued assessments in respect of the transfers pursuant to the Stamps Act 1958. (That Act has since been repealed by the Duties Act 2000.) The total stamp duty assessed was $274,000, because some of the assessments took into account the value of the water rights. The appellant contended that the water rights should not have been taken into account. On 27th July 2000 objections were lodged to all the assessments. They were later withdrawn in relation to the assessments that did not take water rights into account. The respondent decided to disallow the remaining objections and the appellant, being dissatisfied with that decision, requested him to treat each such objection as an appeal and cause it to be set down for hearing by the Supreme Court.

On 15th May 2001 it was agreed that two of the assessments, A99266 and A99275, would be treated as representative assessments. The appeals in respect of those assessments were heard together by Harper, J. On 13th December 2001 his Honour ordered that each appeal be dismissed with costs. On 10th May 2002 Pagone, J., in an unrelated proceeding[2], refused to follow Harper. J.'s decision. Encouraged by that difference of opinion, the appellant sought and obtained an extension of time within which to appeal, which was granted by the Court of Appeal on 26th July 2002. The sole question in the appeals to this Court is whether the Commissioner was correct in taking the water rights into account in making the assessments.

Section 17(1) of the Stamps Act provided that, subject to certain exceptions, there should be charged for the use of Her Majesty upon the several instruments specified in the Third Schedule to the Act the several duties and additional duties therein specified. Heading VI in the Third Schedule brought to duty a conveyance of real property or land transfer under the Transfer of Land Act. In the case of a conveyance[3] on sale, duty was to be assessed on the consideration for the sale or the amount for which "the real property or property"[4] might reasonably have been sold if it had been sold, free from encumbrances, in the open market on the date of the sale, whichever was the greater.

The question with which we are concerned arises under s.63 of the Stamps Act, sub-ss.(3) and (4) of which provided at the relevant time:

"(3) Except as otherwise provided in this Act- (a) a reference in this subdivision or in the provisions of the Third Schedule under Heading VI to real property or property includes a reference to chattels not being stock-in-trade held or used in connexion with a business carried on or in connexion with the real property - (i) that, by reason of the sale of or agreement to transfer the real property or property to the transferee, are sold or transferred to the transferee or a person who is related to the transferee (within the meaning of section 75(3)); or (ii) the sale or transfer of which to the transferee or any other person forms, in the opinion of the Comptroller of Stamps, substantially one transaction with the conveyance of the real property or property; (b) a reference in this subdivision or in the provisions of the Third Schedule under Heading VI to the value of real property or property is a reference- (i) in relation to a conveyance on sale of the real property or property - (A) to the sum of the consideration for the sale and the consideration for the transfer of chattels included in the real property or property by reason of paragraph (a); or (B) to the sum of the amount for which the real property or property and the amount for which such chattels might reasonably have been sold if they had been sold, free from encumbrances, in the open market on the date of the sale- whichever is the greater; and (ii) in any other case, to the sum of the amount for which the real property or property and the amount for which such chattels might reasonably have been sold if they had been sold, free from encumbrances, in the open market on the date of the conveyance, direction, consent or application; and (c) where the consideration for the sale of real property or property includes an amount in respect of the construction of a building to be constructed on the real property or property, a reference to the consideration for that sale does not include a reference to that amount.

...

(4) Notwithstanding sub-section (3) where- (a) in connexion with a conveyance of real property used for primary production, there is a sale or transfer of stock, implements or other chattels held or used in connexion with the use of the real property for primary production; (b) the conveyance is lodged with the Comptroller of Stamps for stamping together with the prescribed form signed by or on behalf of the transferor; and (c) the Comptroller of Stamps is satisfied that the real property is used for primary production- the value of the stock, implements and other chattels shall be disregarded in ascertaining the value of the real property within the meaning of this subdivision." (Emphasis added.)

The respondent took the water rights into account on the basis that they were "chattels" within the meaning of sub-s.(3)(a) but not sub-s.(4)(a). This was a conveyance of land used for primary production, the water rights were held or used in connexion with the use of the land for primary production and sub-s.(4)(b) and (c) were satisfied, but the Commissioner took the view that "chattels" in sub-s.(4)(a) had a narrower meaning than in sub-s.(3)(a). It was confined to chattels such as stock and implements and did not include licences or permits of the kind comprised in the water rights. As Harper, J. explained[5], the respondent could succeed only if that view was correct. If the water rights were not "chattels" within the meaning of sub-s.(3)(a), that would be the end of the matter_._ If the water rights were "chattels" within the meaning of sub-s.(4)(a), sub-s.(4) required their value to be disregarded in ascertaining the value of the land for the purpose of making the assessments.

Mr Shaw advanced three principal contentions in support of the appeal. The first was that the water rights were not even property, let alone chattels. That was said to follow from an examination of the Water Acts 1958 and 1969 and an application of the decision and reasoning of the High Court in R. v. Toohey; ex parte Meneling Station Pty. Ltd.[6]. The second contention was that, in sub-s.(3)(a), "chattels" did not mean all personal property or all personal property other than chattels real, the two meanings for which the Commissioner contended, but meant movables, in a sense of that word that would not include the water rights. The third contention was that, in any event, "chattels" should be given the same meaning in both sub-ss.(3)(a) and (4)(a) and, accordingly, for the reasons given in [11] above, the appeal must inevitably succeed: the water rights were either not caught by sub-s.3(a) or were excepted by sub-s.(4)(a).

The Court determined to hear argument only on the second and third contentions, on the understanding that argument on the first contention would be heard if that proved to be necessary. Should the other members of the Court agree in my conclusion, such further argument will not be necessary. In my opinion the third contention should be accepted.

Most of the provisions of sub-ss.(3) and (4) were enacted by s.8 of the Stamps (Further Amendment) Act 1983. The words "not being stock-in-trade held or used in connexion with a business carried on or in connexion with the real property" in sub-s.(3)(a) were added by s.5 of the Stamps Act 1984.[7] Section 63(3)(c) was inserted later in 1984 and sub-s.(3)(a)(i) and (ii) were amended in immaterial respects in 1997. Importantly, sub-s.(4)(a) was always an exception from sub-s.(3)(a), so it would be remarkable if "chattels" were used in one sense in the former provision and a different sense in the latter provision. To say so is common sense. It is not an application of a supposed rule that a word always bears the same meaning throughout a statute or even in a particular section.

Mr Maxwell submitted that the policy behind sub-s.(3)(a) was explicit and clear. It could be seen from the words that the legislature had used and from the Budget Speech in 1983 and the Second Reading Speech and Explanatory Memorandum for the Stamps (Further Amendment) Bill 1983 that the purpose of sub-s.(3)(a) was to prevent evasion of duty. The policy behind sub-s.(4) was, by contrast, he submitted, neither explicit nor clear. The provision was described, but its purpose was not explained, in the extrinsic materials. He invited us to infer that the exception was essentially a response to political exigencies and that it should be confined to "tools of trade", in a broad sense of that expression, like the stock and implements specifically mentioned in sub-s.(4)(a).

I have derived no assistance from the extrinsic materials in relation to Mr Shaw's third contention and I do not propose to refer to them. Perhaps they would be relevant to the second contention. That need not be considered.[8] Let it be granted that the exception in sub-s.(4)(a) is described but not explained in them and let it be assumed that the exception was politically motivated. Our task is to construe the words that Parliament has used. Political exigencies are neutral and I discern no reason in the language of the statute to limit the exception to "tools of trade" or chattels similar to stock and implements. On the contrary, I think there is reason not to do so.

The purpose of sub-s.(4)(a) or, in old-fashioned language, the intention of Parliament was to make special provision for chattels held or used in connexion with the use of land for primary production. For reasons about which we should not speculate, the legislature considered that the value of such chattels should be disregarded. They should be excluded from the anti-evasion provision in sub-s.(3)(a). Stock and implements were mentioned, in my opinion, because they were prominent examples of the kind of chattels that had engaged the legislature's attention. The words "other chattels held or used in connexion with the use of the real property for primary production" limit "stock" and "implements", not vice versa. They are not restricted to "tools of trade". Moreover, a concession for primary production is readily intelligible. A concession in relation only to physical chattels, or some even narrower class, held or used in connexion with the use of land for primary production is not. There are intangibles, like water rights for irrigation, that are just as much held or used in that way as stock and implements.[9]

Harper, J. took a different view. He considered that there was a clear distinction between the stock-in-trade referred to in sub-s.(3)(a) and the stock and implements referred to in sub-s.(4)(a) on the one hand and household chattels such as detached wardrobes or unfixed floor coverings and intangible assets like the water rights on the other. It was entirely understandable, in his Honour's view, that Parliament should include the latter with the land but except the former.[10] In my respectful opinion, the distinction between the two classes of assets is not so clear, but that is a matter on which reasonable minds may differ. The decisive consideration, to my mind, is the unlikelihood of the same word bearing a different meaning in two consecutive sub-sections, enacted at the same time, one imposing a burden and the other providing an exception from that burden. The position would be different if uniformity of meaning produced absurdity or manifest inconvenience, but I do not think that it does.

It is undesirable to say anything about the second contention that Mr Shaw advanced. In the first place, my conclusion on the third contention disposes of the appeals. Secondly, as I have already mentioned, the Stamps Act has been repealed. The Duties Act uses the words "goods", not "chattels"[11]. Thirdly, the Court, identically constituted, is hearing the appeal from Pagone, J.'s decision. That appeal, which has been adjourned part heard, raises the question whether "chattels" in sub-s.(3)(a) includes goodwill. Mr Shaw's second contention was, mutatis mutandis, advanced in that case too. It is better that it should be considered in a context where it matters. Even there, it may be sufficient to decide that "chattels" either does, or does not, include goodwill, rather than to essay a comprehensive definition.

For these reasons, in each appeal, I would order that the appeal be allowed, set aside the order made below and, in lieu thereof, make orders reflecting my conclusion that the value of the water rights should not have been taken into account. The notices of appeal ask for orders that the assessments be set aside and that the respondent refund all stamp duty, penalties and interest paid in respect of the value of the water rights, pay interest on the amount refunded as provided in the Taxation (Interest on Overpayments) Act 1986 and pay the appellant's costs here and in the Trial Division. I would hear counsel on the question whether they are the appropriate orders to be made.

[1] The assignment was effected by the re-issue of the licence and the permit to the appellant on 8th October and 27th July 1999 respectively. It was not suggested that that affected the question we have to decide.

[2] Uniqema v. Commissioner of State Revenue [2002] ATC 4449, [2002] VSC 157.

[3] Section 63(1) provided that "conveyance" included "transfer".

[4] This expression was used throughout the relevant provisions. Nothing turns on it for the purpose of these appeals. Except when I am quoting the provisions, I shall refer simply to "the land".

[5] Australian Rice Holdings Pty. Ltd. v. Commissioner of State Revenue [2002] ATC 4052, [2001] VSC 486 at [15].

[7] They would appear to contain an error: the word "on" needs to be inserted after "carried on".

[8] Generally speaking, I think that there is too much recourse to extrinsic materials. It is the words used by Parliament that are of primary importance. An ounce of clarity in those words is worth a ton of extrinsic material. Too much recourse to the latter wastes resources and increases costs.

[9] To put the matter more simply, a farmer, a fortiori a rice farmer, would be astonished to learn that stock and implements were to be exempted but water rights, necessary to irrigate the land, were not.

[10] See especially paras. [42]-[45] of his Honour's reasons.

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