Assessment No A142091 of the respondent is affirmed.

Mr C Sievers of counsel, instructed by Coulter Roache, Lawyers

Mr R Boaden of counsel, instructed by the State Revenue Office

1 This matter was referred to the Tribunal by the delegate of the respondent pursuant to s 106 of the Taxation Administration Act 1997, upon request by the applicant dated 7 April 2004. The applicant sought a variation of the Assessment No A142091 dated 1 August 2003 which assessed for duty real estate at 68-72 Fyans Street, Geelong, 17-21 Little Fyans Street, Geelong and fixed plant and equipment assets, which plant and equipment assets were largely present on the real estate which was assessed for duty. The dispute between the parties is as to whether the fixed plant and equipment assets should be included in the assessment.

2 Prior to 29 July 2002, Geelong City Motor Holdings Pty Ltd carried on business in the name of Geelong City Toyota, Geelong City Daihatsu and Geelong City Daewoo. The business involved the sale and servicing of new and used Toyota, Daihatsu and Daewoo passenger and commercial vehicles. The business was carried on at :

a

68-72 Fyans Street, Geelong

b

17-21 Little Fyans Street, Geelong

c

13/313 Bellarine Street, Geelong

d

49 Fyans Street, Geelong; and

e

472 Moorabool Street, Geelong

3 The premises at 68-72 Fyans Street, and 17-21 Little Fyans Street (both of which premises are hereinafter referred to as the properties) were prior to 29 July 2002 owned by Timar Properties Pty Ltd. The premises in Bellarine Street and 49 Fyans Street were owned by unrelated persons and leased by Geelong City Motor Holdings Pty Ltd. The premises at 472 Moorabool Street, Geelong, were owned by Geelong City Motor Holdings Pty Ltd.

4 In December 2001, negotiations commenced on behalf of Geetoy Management Pty Ltd (a company still to be formed) through its director Sean Blood, to purchase the business of Geelong City Motor Holdings Pty Ltd.

5 By March 2002, the terms for the sale of the business had been informally agreed, however, there was no formal agreement between the parties.

6 Subsequent to the informal agreement referred to in the last paragraph hereof, it became clear that Toyota required improvement to the properties if they were to extend the franchise for selling their motor vehicles. As a result, they suggested to Sean Blood that he should attempt to purchase the properties. As a result, negotiations to purchase the property commenced in late May or early June 2002 by which stage the negotiations for the purchase of the business were essentially complete. On 29 July 2002, the applicant (by this stage it had become incorporated) entered into a contract to purchase from Timar Properties Pty Ltd the land and improvements of the two properties for the sum of $4,275,000, no chattels were included as part of the properties forming the subject matter of the contract.

7 On the same date, ie 29 July 2002, Geetoy Management Pty Ltd (which also had become incorporated by this stage) entered into a contract to purchase from Geelong City Motor Holdings Pty Ltd the business carried on in Geelong in the name of Geelong City Toyota, Geelong City Daihatsu and Geelong City Daewoo. The business involved the servicing of new and used Toyota, Daihatsu and Daewoo passenger vehicles and commercial vehicles and was carried on at the properties and at the other premises hereinbefore referred to.

8 The property forming the subject matter of the contract for the sale of business fell into three categories, and the purchase price was allocated to those three categories, namely :

a fixed plant and equipment assets

b vehicles, spare parts, petroleum products and other consumables, and work in progress; and

9 It is the fixed plant and equipment assets which are relevant to this proceeding.

10 At all relevant times :

a Timothy Farley was the sole director and shareholder of :

(i) Timar Properties Pty Ltd (the vendor of the properties); and

(ii) Geelong City Motor Holdings Pty Ltd (the vendor of the business); and

b Sean Blood was the sole director and shareholder of :

(i) the applicant (the purchaser of the properties); and

(ii) Geetoy Management Pty Ltd (the purchaser of the business).

11 The respondent in the assessment hereinbefore referred to, found that the fixed plant and equipment assets came within s 10(1)(d) of the Duties Act 2000 (the Act) in that they were part of the subject of an arrangement that included a dutiable transaction over an estate in land and that the fixed plant and equipment assets should be aggregated with the properties, pursuant to s 24(2) of the Act and, as a result, the assessment was made for the applicant to pay $392,425.

12 Both the sale of business agreement and the contract for the sale of the purchase of the freehold were made conditional upon the due completion of each contract. Mr Blood stated that the reason for this condition was to protect his commercial interests. He emphasized that it was not to relate to the contracts to each other in any other way.

13 The issues to be determined in this matter are as follows :

a Whether the fixed plant and equipment assets are dutiable property pursuant to s 10(1)(d) of the Act; and

b If the answer to (a) is yes, whether the fixed plant and equipment assets and freehold property are to be aggregated pursuant to s 24 of the Act.

14 The relevant parts of the Act read as follows :

(1) "Dutiable property" is any of the following -

(d) goods in Victoria, if the subject of an arrangement that includes a dutiable transaction over an estate or interest in land elsewhere referred to in this section, including goods used in connection with a business carried on or in connection with the land .....

24. Aggregation of certain dutiable transactions

(1) Dutiable transactions relating to separate items of dutiable property referred to in section 10(1)(a) or (d) or section 10(1)(e) as it relates to dutiable property referred to in section 10(1)(a) or (d), or separate parts of such property are to be aggregated and treated as a single dutiable transaction if -

(i) in the case of dutiable transactions that are transfers on a sale of an item or part of dutiable property - the contracts of sale are entered into within 12 months; or

(ii) in any other case - the dutiable transactions occur within 12 months; and

(c) the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, one arrangement relating to all of the items or parts of the dutiable property.

(2) Dutiable transactions are not to be aggregated under this section if the Commissioner is satisfied that it would not be just and reasonable to do so in the circumstances.

15 Mr Boaden, counsel for the respondent, stated the basis upon which the Commissioner assessed duty on the fixed plant and equipment assets in the following terms :

(a) they are, within s. 10(1)(d) of the Act, the subject of 'an arrangement that includes a dutiable transaction over an estate in land elsewhere referred to in this section, including goods used in connection with the business carried on or in connection with the land'; and

(b) there are transactions relating to two separate items of dutiable property, being :

(i) the transfer on sale of the properties (which is dutiable property referred to in s.10(1)(a) of the Act); and

(ii) the transfer on sale of the goods the subject of the arrangement (the 'Fixed Plant and Equipment Assets'), which are dutiable property referred to in s.10(1)(d) of the Act); and

(c) the transactions in paragraph 10(b) above are to be aggregated pursuant to :

(i) s.24(1)(a)(i) of the Act, because they are transfers on a sale of dutiable property pursuant to contracts of sale entered into within 12 months (in fact on the same day); or, alternatively

(ii) s.24(1)(a)(ii) of the Act, because they are transactions which both occurred within 12 months; and

(iii) s.24(1)(c) of the Act, because the transfer on sale of the properties and the transfer on sale of the business, together form, give effect to, or arise from what is, substantially one arrangement relating to all of the items of the dutiable property.

SECTION 10(1)(d)

16 It is clear, that the goods referred to as "fixed plant and equipment assets", are not dutiable save and except for s 10 of the Act. It is equally clear that most of the goods comprising "fixed plant and equipment assets" were at all relevant time present on the properties.

17 Mr Sievers, on behalf of the applicant, submitted that the goods sold pursuant to the sale of business agreement were goods used in a business that was carried on pursuant to a lease. He therefore submitted that the goods have their "'proximate legal and commercially factual derivation' from the leasehold interest protecting the business, as opposed to where there is no lease in place where that connection flows from ownership of the land".

18 In support of this proposition, he referred to the fact that there was a transfer of lease executed in respect of both properties pursuant to the sale of business agreement to Geetoy Management Pty Ltd. He therefore concluded that the relevant words in s 10(1)(d) did not have the required proximate, legal and commercially factual connection between the goods and the land or the business carried out on the land. He said to interpret the words otherwise would be ignoring the fact that there was a lease over the property.

19 Mr Sievers also referred to the fact that s 10(1)(d) and its predecessor in the Stamps Act 1958 s 63(3)(a) were "introduced to deal with the traditional stamp duty avoidance structure of 'contract splitting', which involved entering into a contract for the sale of freehold land and a separate agreement for the sale of the business operated on the land". He then referred to Nicholas Paspaley Properties Pty Ltd v Commr of Taxes (NT) [1991] NTSC 7; (1991) 103 FLR 305, where the court implied a test as to whether or not the business could be carried on independently of the land.

20 Mr Sievers stated that the situation is here that the business can be carried on independently of the land because it was being carried on as a result of the leasehold.

21 However, I note here that the transactions were inter-dependent on each other, which has been conceded by Mr Sievers. Further, there is :

(a) a clear connection between the subject matter of the contract for the sale of the business and the contract for the sale of the properties from which the business is carried on;

(b) there is an underlying oneness of the two companies who purchased the business and the properties; and

(c) the fact that the two contracts were entered into and completed on the same day.

22 It is clear that the fixed plant and equipment are goods used in connection with the business carried on on the properties. In my view, to say that the goods only relate to the leasehold interest in the property and ignore the freehold, is to ignore the reality of the situation in this case. The reality being, that each transaction was inter-dependent upon the other. The fact that there could have been two transactions with different people, in my view, makes no difference because that was not in fact the case.

23 The cases make it clear that where there are two purchases made together the two purchases should be looked at as one transaction. In Jeffrey v CS (SA) (1980) 23 SASR 398, a mother and son contemporaneously purchased two lots of adjoining land from the one vendor, the two lots having always been dealt with together as one parcel in the past. Jacobs J held that the two purchases were together 'substantially one transaction'. His Honour said at p 405 :

Upon a consideration of the Act itself, and of the arguments addressed to me, it appears to me that the use that is made in the statute of the word 'one' - one contract, substantially one transaction, one series - gives a critical clue to the application of the section. It points to some essential unity, some 'oneness', some unifying factor that bring the several transactions within the section.

24 In my view, it is clear that the sale of the fixed plant equipment and assets, were part of the arrangement in relation to the sale of the freehold, which is a dutiable transaction. It is clear from the terms of the contract, that if either contract had not gone ahead, the other would not have gone ahead by itself. In my view, it is not relevant to say, as Mr Sievers submitted, that it was legally possible for each contract to go ahead individually. The fact is in this case it was specifically written into the contract that the contracts were inter-dependent upon each other. Therefore, in my view, the only correct conclusion I can come to, is that there was one arrangement in relation to both contracts.

25 Therefore, in my view, this transaction is caught by the provisions of s 10(1)(d).

26 Mr Sievers submitted that the fixed plant and equipment assets and the freehold property should not be aggregated pursuant to s 24. He stated that the transaction should be viewed "as two separate 'arrangements' , one for the sale of the land and one for the sale of the business conducted pursuant to a lease of the land".

27 While conceding that the purchaser of the fixed plant and equipment assets and the purchaser of the freehold property are related entities and the respective contracts were inter-dependent, Mr Sievers stated that did not automatically mean that s 24 applied. He relied on the test outlined by the South Australian Supreme Court in Jeffrey's case at p 406 where it was stated :

... the Commissioner is required to look at 'the substance' of the several transactions, and determine whether they are, 'in substance', one transaction although masquerading as several.

28 He then concluded that I should view the transactions here as two separate transactions, one for the sale of land and one for the sale of business conducted pursuant to a lease of the land.

29 In order to support this proposition, Mr Sievers referred to the evidence that the negotiations for the business were well in train and in fact almost complete prior to negotiations for the land commencing and that the discussions relating to purchase of the business were essentially agreed upon prior to Mr Blood deciding to negotiate for the land. Further, the negotiations for the land and the business were conducted independently at arms length.

30 While the evidence referred to by Mr Sievers is in fact correct, the fact is that in the end the two contracts were made inter-dependent upon each other. One transaction was not going to be completed without the other.

31 It is clear from the authorities that one must look at the whole facts of the situation. In Chief Commissioner of State Revenue and Pacific General Securities Ltd [2004] NSW ADTAP 51, two joint venturers acquired options to purchase five neighbouring properties with a view to redeveloping the land. They dealt individually with the owners of the five pieces of land and (although two of the owners were related), there was no relevant connection between the owners who gave the options. The two joint venturers were successful in putting together the parcel of properties. The question in this case was whether there was an 'arrangement', and at the first instance the Tribunal held that the acquisitions in the circumstances did not amount substantially to 'one arrangement'. An appeal panel, consisting of two judicial members and one non-judicial member, reversed this finding, holding at paragraph 39 that the Tribunal had erred in "restricting its consideration in effect to the circumstances immediately surrounding the five transfers; and excluding from consideration such matters as the nature of the antecedent options, the context in which they were given, the nature of the development application and other matters such as the terms of the joint venture agreement".

32 In this matter I agree with Mr Boaden that :

The sale of the goods forms part (not the whole, but a part) of the overall arrangement which comprised :

(a) the sale of the business (including the goods);

(b) the sale of the properties upon which the business is primarily conducted; and

(c) the procurement of a lease to Geetoy Management Pty Ltd of 472 Moorabool Street, Geelong, and the transfer of leases to Geetoy Management Pty Ltd of the other premises upon which the business is also conducted.

33 Further, I note that in Perpetual Trustee Co Ltd v CSR [2000] VSC 177; (2000) 44 ATR 273, Hansen J at paragraph 59 made it clear that it is appropriate to "consider also some sort of reality check". In this situation, in my view, if one takes a step back from the transactions that were taking place, it is clear, that although it may not have started off as one arrangement, it in fact finished as one arrangement. It is the time that the parties enter into the contract that I must be concerned with, not what might have gone on prior to that.

34 For the reasons I have stated above, it would appear to me that the conditions referred to in s 24(1) of the Act have been met and it is appropriate that the transaction in relation to the land and in relation to the fixed plant and equipment assets should be aggregated.

35 I note that the applicant has not advanced any argument as to why it would not be just and reasonable in the circumstances to aggregate the two transactions pursuant to s 24(2).

36 I have found that both sections 10(1)(d) and 24(1) of the Act apply to the transactions between the parties and, as such, the Assessment No A142091 of the respondent should be affirmed.