Commissioner of State Revenue v Australand Investments Pty Ltd [2012] VSCA 152

WORDS AND PHRASES - 'Arrangement' - 'in response to'.

1 I have had the considerable advantage of reading in draft the joint reasons for judgment of Hansen JA and Almond AJA. Their Honours' comprehensive account of the issues, the arguments and the relevant evidence relieves me of the need to set out any of those matters.

2 So far as concerns the trustee's application for leave to appeal from the judge's decision regarding the AWPT5 assessment, I respectfully agree that the application should be refused, for the reasons which their Honours give.

3 I have, however, come to a different conclusion in relation to the Commissioner's application for leave to appeal from the decision of the judge in relation to the AWPT4 assessment. I would grant leave to appeal, set aside his Honour's order and order that the appeal from the Tribunal in relation to that assessment be dismissed. My reasons are as follows.

4 As the joint judgment explains,[1] the first question was whether AWPT4 was a 'widely held trust'. Both the Tribunal and Mandie J held that it was. For the reasons given in the joint judgment, I too would reject the Commissioner's challenge to that holding.[2]

5 The next question, raised by the trustee's notice of contention, was whether the exemption in Item 20(6) was applicable. Both the Tribunal and Mandie J held that it was not. For the reasons given in the joint judgment,[3] their Honours have found it unnecessary to decide this question. Had it been necessary for them to decide it, they would have upheld the decision of Mandie J. I respectfully agree. His Honour's conclusion was clearly correct.

6 The question on which I differ from my colleagues, however, concerns the applicability of the exemption in Item 20(7)(b)(ii). The issue is whether, as Mandie J found, the Tribunal's reasoning on that question was attended by error of law. For reasons which follow, I do not consider that there was any error of law.

7 As set out in the joint judgment, the exemption is in these terms:

(7) Without limiting sub-clause (6) -

...

(b) section 89E does not apply to or in relation to an acquisition referred to in that section -

(i) made before the commencement day; or

(ii) made in response to an offer or invitation made or arrangement entered into before that day.

8 The relevant part of the Tribunal's reasons was as follows:

Australand sought to avoid the operation of Section 89E by reliance on transitional provision Clause 20(7) of Schedule 2 to the Duties Act. This entails obtaining a finding that the acquisition constituted by the stapling transaction was 'made in response to an ... arrangement entered into before [13 May 2004].' [Counsel for Australand] relied upon a decision of the Australian Industrial Court in Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 5 ALR 465 where the Court adopted as the appropriate meaning for the word 'arrangement' in the Trade Practices Act 1974 the analysis of that term by their Lordships of the Judicial Committee of the Privy Council in Newton v Federal Commissioner of Taxation [1957] UKPCHCA 2; (1958) 96 CLR 1, 7 where Lord Denning speaking for the Board said:

Their Lordships are of opinion that the word 'arrangement' is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons - a plan arranged between them which may not be enforceable at law.

This dictum was quoted by Smithers J in Ira Berk at (1975) 5 ALR 465, 469. His Honour also quoted from Diplock LJ in Re British Basic Slag [Ltd's] Agreements [1963] 2 All ER 807, 819 where His Lordship said:

Arrangement is not a term [of art]; and in s 6(3) of the Act I agree with my Lords that it bears the meaning that an ordinary educated man would ascribe to it. It involves a meeting of minds because under s 6(1) it has to be an arrangement 'between two or more persons' and, since it must be an arrangement 'under which restrictions are accepted by two or more parties', it involves mutuality in that each party, assuming he is a reasonable and conscientious man, would regard himself as being in some degree under a duty whether moral or legal to conduct himself in a particular way or not to conduct himself in a particular way as the case may be, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement.

I accept the submission by [counsel for the Commissioner] that the exit strategies described in the information memorandum for Wholesale Trust No. 4 are too vague even to fall within the concept of 'arrangement' as described by Lords Denning and Diplock in the passages quoted above. As [counsel] observed the scenario described at page 18 of the information memorandum expressly contemplates the possibility that Australand would not have postulated any of the exit strategies leaving it to the unit holders to arrange their own exit. There are a number of express options canvassed at page 18 and the third of those options viz. 'an alternative proposal that converts the Units into cash or another liquid security' is so vague and allows for so many possibilities that not even an 'arrangement' could be regarded as being established between the parties.

[Counsel for Australand] submitted that the exit strategy section imposed some form of 'best endeavours' obligation on Australand. They cited no authority in support of that proposition and gave no further explanation as to these words or their effects. I prefer the submission by [counsel for the Commissioner] on this point that these are no more than statements of intention which ultimately might or might not be implemented in one way or another. It follows therefore that Section 81E operates and for that reason the Commissioner's assessment with regard to Wholesale Trust No. 4 should be confirmed.[4]

9 As noted in the joint judgment,[5] Mandie J held that the Tribunal here fell into error of law, in two respects. His Honour's reasons on this issue are fully set out in the joint judgment.[6] The relevant passage is as follows:

In my opinion, the Tribunal erred in its construction or application of the word 'arrangement.' The Tribunal's approach was, at least by inference, that the 'arrangement' had to have a sufficient degree of specificity as not to be too vague or uncertain as to constitute an arrangement at all. It is no doubt correct that a particular set of representations or proposals advanced by one side and adopted by the other might be so vague or uncertain as to not constitute an 'arrangement.' So it might be said that the Tribunal's approach in that respect involved a correct construction of the word 'arrangement' and there was no error of law within the meaning of proposition (1) above. However I think that, for reasons that follow the Tribunal's conclusion that the exit strategies in the Information Memorandum were too vague to amount to an 'arrangement' constitutes an error of law in that the Tribunal either misconstrued the word 'arrangement' or reached a conclusion that was not open to it on the facts.[7]

Mandie J went on to hold that, for reasons which his Honour gave,[8] what was contained in the Information Memorandum about exit strategies did fall within the concept of 'arrangement' as described by Diplock LJ in Re British Basic Slag Limited's Agreements (No 1).[9]

10 With great respect to Mandie J and to the majority, I do not consider that the Tribunal's reasoning disclosed error of law of either of the kinds which his Honour identified. It was common ground before the Tribunal, and before Mandie J, that the question whether the exit strategies did constitute an 'arrangement' was to be determined by reference to the analysis by Diplock LJ in Re British Basic Slag Limited's Agreements (No 1), an extract of which was set out both in the Tribunal's reasons and in the reasons of Mandie J. As appears from the extract of the Tribunal's reasons set out above, the Tribunal arrived at its conclusion in express reliance on that analysis.

11 That being so, I see no error of law in the Tribunal's interpretation of the exemption provision. The Tribunal adopted the orthodox interpretation of 'arrangement', applying established authority.

12 The question for the Tribunal, then, was whether the facts as found fell within the statutory phrase as properly construed. That was a question of fact, as Mandie J held.[10] The relevant part of his Honour's reasons was in these terms:

The question whether particular circumstances fall within the relevant statutory description is essentially a question of fact and if the matter is simply a question of degree or evaluation and one on which minds can legitimately differ, it remains a question of fact. However, in the present case, I do not think that an analysis of the 'circumstances' constituted by the material in the Information Memorandum gives rise to such a question of degree or evaluation or one in which minds can legitimately differ. On the contrary, I think that the conclusion reached by the Tribunal was not open to it upon a proper analysis of the material in the Information Memorandum. Or, to put it another way, the Tribunal erred in law upon the facts as fully found.[11]

13 As appears, his Honour here concluded that the question of whether the exit strategies in the Information Memorandum did amount to an 'arrangement' was a question to which only one answer was reasonably open, namely, that the exit strategies did amount to an arrangement. With respect, I do not consider that this factual question allowed of only one answer. On the contrary, I consider that it was a question on which reasonable minds might well have come to different conclusions and, moreover, that it was open to the Tribunal to come to the conclusion that it did. I refer to, without repeating, the various considerations advanced by the Commissioner as bearing on this issue, which are fully set out in the joint reasons.[12]

14 On this view, the Commissioner's application for leave must succeed. For, if it was open to the Tribunal to conclude that there was no 'arrangement' within the meaning of the exemption provision, no question arose as to whether the relevant acquisition was made 'in response' to any such arrangement.

15 For completeness, however, I should deal with that second factual question. The Tribunal did not deal with it expressly, having found that there was no relevant 'arrangement'. Mandie J dealt with the issue as follows:

The next question is whether the Tribunal erred in law in its conclusion that, if there was an arrangement, the acquisition involved in the 'stapling transaction' in October 2005 was not 'made in response to' the arrangement. I accept that the words 'made in response to' require at least a loose causal relationship. I do not think that this question is one of degree or evaluation despite the various differences identified by the Commissioner between the exit strategies outlined in the Information Memorandum and the transaction ultimately concluded. That is because an essential feature of the acquisition was the redemption of the existing units in AWPT4 for cash at the premium and within the time frame contemplated by the Information Memorandum, and the purchase of the units for cash was one of the exit strategies plainly foreshadowed in the Information Memorandum. In my opinion, therefore, it was not open to the Tribunal to conclude that the acquisition was not 'made in response to' the arrangement and the Tribunal therefore erred in law.[13]

16 Here, as in relation to the question of 'arrangement', his Honour concluded that the question of fact allowed of only one answer, namely, that the acquisition was made 'in response to' what his Honour had concluded was an 'arrangement'. Again, with respect, I disagree. Even if the exit strategies in the Information Memorandum

of 2003 did constitute an 'arrangement', it seems to me to be far from clear that the acquisition in October 2005 was 'made in response to' that arrangement.

17 Whether the APG security holders, in acquiring the new units in 2005, could be said to have been doing so 'in response to' an arrangement made in 2003 to which they had not been party, seems to me to be the very kind of question on which minds might reasonably differ. I refer again to the matters relied on by the Commissioner in this regard.[14]

18 In my respectful opinion, it was open to the Tribunal to conclude that, on the facts as found, the exemption was not attracted. Accordingly, there was no error of law.

19 The Commissioner of State Revenue and Australand Investments Ltd ('AIL') each seek leave to appeal from the judgment and orders of a judge in the Commercial and Equity Division[15] on appeal from orders of the Victorian Civil and Administrative Tribunal ('the Tribunal') constituted by Deputy President Mr M F Macnamara that confirmed assessments of duty under the 'land rich' provisions in Part 2 of Chapter 3 of the Duties Act 2000 (Vic) ('the Act'). The event which gave rise to the alleged liability to duty occurred on 12 October 2005 when units of the Australand Wholesale Property Trust No 4 ('AWPT4') and the Australand Wholesale Property Trust No 5 ('AWPT5') became 'stapled' to shares in Australand Holdings Limited ('AHL'), a company whose securities were (since June 1997) listed on the Australian and Singapore Stock Exchanges. AIL was the trustee of each trust, and assessed to duty as such. It may be noted that in

November 2003 units in another trust, the Australand Property Trust ('APT') were stapled to shares in AHL.

20 The 'land rich' provisions are based on the concept of a 'landholder' who is 'land rich', and the acquisition of an 'interest' in a land rich landholder. Section 71(1) of the Act relevantly defines a landholder to include 'a private unit trust scheme'. Section 71(2) provides that a landholder is 'land rich' if it holds land in Victoria with an unencumbered value of $1M or more and its land holdings in all places comprise 60% or more of the unencumbered value of all its property. It was not in dispute that AWPT4 and AWPT5 were 'land rich'.

21 Liability for duty arises when a relevant acquisition is made (s 78). A relevant acquisition is the acquisition of a beneficial interest in a land rich landholder, which may occur by, inter alia, the allotment or issue of a unit or share and the cancellation, redemption or surrender of a unit or share (s 77(1) and (2)).

22 Section 79(1) prescribes when a person makes a relevant acquisition in a land rich landholder. It is sufficient to note that these provisions allow the aggregation of the interest acquired by that person with interests acquired by other persons in an associated transaction. It is accepted that the aggregation of interests on the transaction completed by the stapling satisfied those provisions.

23 That leaves the question, however, whether AWPT4 and AWPT5 were 'landholders'. For this purpose it is necessary to refer to provisions of the Act which identify who is a 'landholder'.

24 The expression 'private unit trust' is defined in s 3(1) of the Act to mean, inter alia, a unit trust scheme that is not a public unit trust scheme. In turn, 'public unit trust scheme' is defined to mean, inter alia, a 'listed trust' or a 'widely held trust'. A 'listed trust' means, inter alia, a unit trust scheme all the units of which are listed for quotation on the Australian Stock Exchange ('ASX'). The expression 'widely held trust' is defined as a unit trust scheme:

(a) that is a managed investment scheme registered under Part 5C.1 of the Corporations Act; and

(b) in which units have been issued to the public; and

(c) that has not less than 300 public unit holders -

(i) each of whom is beneficially entitled to the units and holds at least the minimum subscription under the prospectus or product disclosure statement; and

(ii) none of whom, individually or together with any associated person, is beneficially entitled to more than 20% of the units in the scheme.

25 The effect of these provisions was that if at the time of the acquisition AWPT4 and AWPT5 were a 'widely held trust' or a 'listed trust' they would not have been a 'landholder'.

26 It is then necessary to refer to certain amendments to the Act made by the State Taxation Acts (Tax Reform) Act 2004; these provisions commenced on 13 May 2004. First is s 89E(1) which defines when a public unit trust scheme becomes a private unit trust scheme. Section 89E provides that:

(1) Subject to sub-section (2), if, as a result of the acquisition of one or more units in a unit trust scheme that, immediately before the acquisition, was a public unit trust scheme, the scheme becomes a private unit trust scheme, the scheme is taken to have become a private unit trust scheme immediately before that acquisition.

27 Secondly, Items 20(6) and (7) of Schedule 2 to the Act provide that:

(6) This Act, as in force immediately before the commencement day, continues to apply in respect of any transactions occurring on or after that day that resulted from a written agreement made before that day.

(7) Without limiting sub-clause (6) -

...

(b) section 89E does not apply to or in relation to an acquisition referred to in that section -

(i) made before the commencement day; or

(ii) made in response to an offer or invitation made or arrangement entered into before that day.

28 In their respective cases AWPT4 relied on the exemption in Items 20(6) and (7)(b)(ii) while AWPT5 relied on Item 20(6).

29 Thirdly, under s 85(2) the Commissioner of State Revenue has a discretion to determine that an acquisition is an exempt acquisition. Section 85(2) provides:

(2) An acquisition by a person of an interest in a landholder is an exempt acquisition if the Commissioner so determines, being satisfied that the application of this Part to the acquisition in the particular case would not be just and reasonable.

30 As mentioned, the Tribunal confirmed each assessment. Mandie J succinctly recorded the Tribunal's conclusions as follows:

The Tribunal determined that both AWPT4 and AWPT5 were liable for duty under Chapter 3. It found that AWPT4 was a widely held trust before the stapling transaction, but that AWPT5 was not. AWPT5 was therefore liable for duty under s 79 of the Duties Act, on the basis that it was a private unit trust scheme and that under the stapling transaction the acquisitions of its units by the individual holders of the stapled securities could be aggregated and treated as though they constituted a single acquisition. Although AWPT4 was a public unit trust scheme when the stapling transaction occurred the Tribunal decided that it was liable for duty under s 89E of the Duties Act, which applies if as a result of an acquisition of units a public unit trust scheme becomes a private unit trust scheme.[16]

For completeness it should be noted that the Tribunal rejected the application of Items 20(6) and (7)(b)(ii) in the case of AWPT4 and Item 20(6) in the case of AWPT5. The Tribunal also refused to exercise the discretion under s 85(2) in favour of AWPT4.

31 The trustee of AWPT4 and AWPT5 then applied for leave to appeal pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 which allows a party to a proceeding, with leave of the Court, to appeal on a question of law from an order of the Tribunal.

32 In relation to AWPT4 the trustee raised the following questions of law:

(a) For the purpose of applying the transitional provision in Item 20(7)(b) of Schedule 2 of the Act did the Tribunal err in concluding that having regard to the terms of the Information Memorandum pursuant to which the units in AWPT4 were originally issued ... and the Trust Deed constituting AWPT4 ... the acquisition was not made in response to an arrangement entered into before 13 May 2004?

(b) If the Tribunal was correct in concluding that s 89E of the Act did apply to the acquisition did the Tribunal properly consider whether or not to exercise the power under s 85(2) of the Act to treat the acquisition by the appellant as an exempt acquisition on the basis that it would not be just and reasonable to apply Part 1 of Chapter 3 of the Act to the acquisition?

(c) For the purpose of applying the transitional provision in Item 20(6) of Schedule 2 of the Act did the Tribunal err in concluding that the acquisition did not result from a written agreement made before 13 May 2004 because the exit strategies set out in the Information Memorandum and clause 28.3 of the Trust Deed were 'mere statements of intentions' not giving rise to an obligation to implement an exit strategy?

33 The Commissioner filed a notice of contention in AWPT4's appeal which raised as questions of law whether the Tribunal erred in deciding that before the acquisition AWPT4 was a widely held trust, and in its findings as to 'prospectus' and 'issued to the public'.

34 On 27 February 2009, Mandie J granted leave to appeal on the question of law (b) above. The application for leave to appeal on questions (a) and (c) above was adjourned to the hearing of the appeal to be heard together with the appeal itself as if leave had been granted on those questions.

35 In relation to AWPT5, the trustee raised the following question of law:

For the purpose of applying the transitional provision in Item 20(6) of Schedule 2 of the Act did the Tribunal err in concluding that the acquisition did not result from a written agreement made before 13 May 2004 because the exit strategies set out in the Information Memorandum were 'mere statements of intentions' not giving rise to an obligation to implement an exit strategy?

This question also was adjourned to the hearing of the appeal.

36 Following the hearing Mandie J gave judgment in which, in relation to AWPT4, he refused leave on question (c) but granted leave on question (a), allowed the appeal, set aside the Tribunal's orders and ordered that the assessment be reduced to nil. His Honour refused AWPT5's application for leave to appeal.

37 Mandie J dealt with the questions of law as follows. Dealing first with the questions concerning AWPT4, he commenced with question (c) and concluded that the acquisition did not 'result from' any written agreement made prior to 13 May 2004 (being the date when s 89E(1) of the Act commenced operation). Further, the same conclusion applied to AWPT5.

38 Mandie J then considered question (a) - which related only to AWPT4 - and concluded that the acquisition was 'made in response to' an arrangement entered into before 13 May 2004. Hence the exemption in Item 20(7)(b)(ii) of Schedule 2 to the Act applied and excluded the application of s 89E. In light of this conclusion it was unnecessary for Mandie J to consider question (b), and he did not do so.

39 That left for consideration the issue of whether AWPT4 was a widely held trust, as raised by the Commissioner's notice of contention. Mandie J rejected the Commissioner's contention that units had not been 'issued to the public' within the meaning of paragraph (b) of the definition of 'widely held trust' in s 3 of the Act. He also rejected a contention that the trustee had not proved there were not less than, and that the Tribunal had failed to determine whether there were, 300 'public' unit holders within the meaning of paragraph (c) of the definition. He further rejected a submission that the Tribunal had erred in finding that the units were issued under a prospectus within the meaning of paragraph (c)(i) of the definition.

40 In summary, the Tribunal and Mandie J decided the issues as follows:

(a) Whether it was a 'widely held trust' depended on satisfaction of paragraphs (b) and (c)(i) of the definition, the Commissioner conceding satisfaction of paragraphs (a) and (c)(ii).

(i) As to (b), the Tribunal and Mandie J held that the issue of units in 2003 had been to 'the public'; hence paragraph (b) was satisfied.

(ii) As to the requirement that the unit trust scheme has not less than 300 public unit holders, the Tribunal did not make an express finding, but Mandie J accepted that there was evidence before the Tribunal that this element was satisfied. He also accepted that the Tribunal had so decided, at least implicitly.

(iii) As to the requirement of a prospectus in paragraph (c)(i), the Tribunal and Mandie J held that this requirement was satisfied by the Information Memorandum.

(b) Next, it being agreed that s 89E was applicable, how was the trustee able to avoid duty? That was only by way of the exemption provisions, Items 20(6) and 20(7)(b)(ii), or the discretion under s 85(2).

(c) Item 20(6) turned on the finding of a written agreement: the Tribunal held there was no such agreement and Mandie J agreed. Therefore, Item 20(6) was not applicable.

(d) Item 20(7)(b)(ii) turned on the finding of an arrangement: the Tribunal held there was no such arrangement but Mandie J held that the Tribunal erred in law and there was an arrangement. Accordingly the exemption applied and saved the trustee from duty.

(e) Section 85(2) arose for consideration in the Tribunal, as the Tribunal had held the exemptions did not apply. But, having found that Item 20(7)(b)(ii) applied, Mandie J did not consider it.

The only issue here was whether the exemption in Item 20(6) applied. Both the Tribunal and Mandie J held that it did not because, as with AWPT4, the 'transactions' did not result from a written agreement made before 13 May 2004.

The reason why Item 20(6) was the only issue was because AWPT5 had less than 300 public unit holders and thus was not a 'widely held trust'. It further followed that AWPT5 was not a 'public unit trust scheme' and, therefore, that s 89E and Item 20(7)(b) (which is a qualification upon s 89E) were not applicable. Hence, Item 20(6) was the only possible basis for exemption from duty.

41 The Commissioner seeks leave to appeal from the decision that the AWPT4 assessment be reduced to nil. The trustee of AWPT5 seeks leave to appeal from the decision to refuse its application for leave to appeal from the AWPT5 assessment. The applications were heard together with the appeal.

42 The questions of law raised for determination before Mandie J, and the issues raised by the Commissioner's notice of contention in AWPT4's appeal have been set out above. It is now appropriate to refer to the respective notices of appeal in this Court to identify the issues raised within the scope of the questions of law and notices of contention.

43 In AWPT4 the Commissioner's notice of appeal contends that Mandie J erred in holding (contrary to the Tribunal) that the exemption in Item 20(7)(b)(ii) was applicable. He is further alleged to have erred in holding:

(b) that there was evidence that satisfied the requirement of 300 public unit holders

and, in consequence, that AWPT4 was a widely held trust.

44 By a notice of contention AWPT4 sought to affirm the orders of Mandie J on two bases. First, the judge should have held that the exemption in Item 20(6) was applicable.

45 Secondly, in relation to the s 85(2) discretion - which arose for consideration if neither ground of exemption applied - his Honour erred in failing to determine whether to allow AWPT4's appeal on the ground that the Tribunal had failed to consider whether or not to exercise the discretion. AWPT4 had sought the exercise of the discretion on the basis that AWPT4 failed to satisfy the definition of 'listed trust' in s 3 of the Act due to 'relatively minor' cross-holdings in AWPT4 being held by parties related to the trustee. It was contended, in the event the trustee failed on all other issues, that the judge should have remitted the proceeding to the Tribunal to consider whether to exercise the power on the basis contended for by the trustee.

46 There is a further point concerning the s 85(2) discretion. It is clear, with the benefit of the transcript before the Tribunal, that the Tribunal misapprehended AWPT4's submission on this aspect and, as a result, failed to properly consider the submission. Simply put, it was not the 5th but the 12th of October 2005 that was the critical date, and by wrongly focussing on the former the Tribunal did not deal with the issue. Before Mandie J, AWPT4 pointed out the Tribunal's error, and on the same grounds as before the Tribunal sought a favourable exercise of the s 85(2) discretion. However, as he had otherwise allowed AWPT4's appeal Mandie J did not consider the matter.

47 If the resolution of the appeal concerning AWPT4 turned ultimately on an exercise of the discretion favourable to AWPT4, the matter would have to be remitted to the Tribunal for consideration. Nothing more need be said on this matter.

48 In AWPT5 the trustee's notice of appeal contends that his Honour should have concluded to the contrary on the exemption in Item 20(6). That is, he should have held that the acquisition resulted from a written agreement made before 13 May 2004.

49 By a notice of contention the Commissioner raised a question of law whether his Honour erred in law in considering whether units in AWPT5 had been offered to the public. It was contended that the judge erred in law when he failed to hold that should the former land rich provisions apply, AWPT5 was not a public unit trust scheme because the units were not offered to the public.

50 As mentioned, AHL is a company listed on the ASX and Singapore Stock Exchange. As a result of the transactions that occurred in November 2003 and October 2005, shares in AHL were 'stapled' to units in APT and in AWPT4 and AWPT5 and traded on the ASX and Singapore Stock Exchange as one stapled security. AHL, its associated entities and subsidiaries, can conveniently be referred to as the Australand group.

51 The Australand group engaged in a range of commercial activities in property throughout Australia. In about 2000 the Australand group decided to diversify its operations so as to increase the income from properties held for investment. For this purpose a series of managed property trusts was established, holding properties developed or under development by AHL. In each trust AHL (or a related entity) retained a minority unit holding and managed the trust. There was evidence that when the Australand group first issued units in these trusts to investors it intended that either the various trust portfolios would be merged into unlisted property trusts or the trusts would be stapled to shares in AHL to form an ASX stapled entity. To that end, in the case of each offering, the offer document outlined 'Exit Strategies' regarding the reacquisition or stapling of the units in the relevant trusts.[18] These were set out in an Information Memorandum issued by AWPT4 and AWPT5 respectively.

1. The Information Memorandum for AWPT4 [issued in June 2003] related to the offer of 117 million units at a price of $1 per unit. The memorandum stated that the fundraising (product disclosure statement) requirements of the Corporations Act 2001 (Cth) ('the Corporations Act') did not apply to the offer of units under the memorandum and that the offer under the memorandum could only be made to Australian residents who qualified as 'Wholesale' investors under s 761G(7) of the Corporations Act. The covering letter to investors from the Managing Director of AHL, contained in the memorandum, stated that investors in AWPT4 would have a clearly defined Exit Strategy, namely acquisition by the Australand group or the listing of the trust on the ASX. The letter said that AHL would participate as an investor and would subscribe to a maximum of 20% of the units (in fact it subscribed to some 6.6% thereof).
2. Under the heading 'Offer at a glance', the Information Memorandum described the 'preferred exit strategy' as 'acquisition of the Trust by the Australand Group to form part of a stapled entity listed on ASX' and the 'alternate exit strategy' as 'listing of the Trust, or Sale of the Properties[19] by December 2008.'
3. In the executive summary contained in the Information Memorandum it was stated that 'it is intended that an Exit Strategy will be implemented within 5 years: See Section 5 (Exit Strategies)'. Later in the Executive Summary under the heading 'Trust Objectives' it was stated that the trust would be managed with a view to achieving certain objectives for investors including 'providing an exit strategy that could enable investors to realise a higher capital return than that typically associated with the sale of a property portfolio'.
4. In section 5 of the Information Memorandum headed 'Exit Strategies' the following appeared:

In the event that an Exit Strategy has not been implemented before December 2008, then [the Trustee] intends to propose that the Trustee seeks Investor approval to implement one of the following exit strategies:

1. Acquisition of the Units by the Australand Group in exchange for cash and/or Australand Group stapled securities (the Acquisition Proposal). If the Acquisition Proposal is implemented on or after 1 January 2006, Units will be acquired by the Australand Group at the then NTA per Unit plus a premium of 5%. If the Acquisition Proposal is implemented prior to 1 January 2006, the premium will be 4%; or

2. Listing the Trust on the ASX, either alone or merged with similar trusts (the Listing Proposal); or

3. An alternative proposal that converts the Units into cash or another liquid security (an Alternative Proposal),

each being an Exit Strategy.

Australand will evaluate the timing of the implementation of an Exit Strategy on an annual basis during a pre-set annual Review Period. The first Review Period will commence on 15 July 2005 and end on 15 August 2005, with subsequent reviews being undertaken annually at the same time until the earlier of, the successful implementation of an exit strategy and 1 June 2008. Australand may call a Special Review Period in the event of a Takeover Proposal occurring.

During a Review Period or Special Review Period, Australand may request that the Trustee seeks Investor approval to implement an Exit Strategy during the following 12 months. If Australand so requests, it must provide the Trustee with adequate information supporting the proposal and the Trustee must call a meeting of Investors to vote on the proposal. In order for an Exit Strategy to be implemented, it must be approved by an ordinary Resolution of Investors.

If an Exit Strategy has not been implemented by the end of December 2008, the Trustee will hold a meeting of Investors to decide whether to continue or to wind up the Trust. If a Special Majority of Investors vote to continue the Trust, the Trust will continue for a further term of 5 years, at which point a further meeting will be held for the same purpose (and so on). If the resolution to continue the Trust is not approved by a Special Majority, the Trustee will terminate the Trust, realise the assets as soon as reasonably practicable and distribute the proceeds to Investors pro rata to their investments.

Australand Option Over Investors' Units

Each Unit will be issued with an Australand Option attaching to it. The Australand Option is an option granted by each Investor, under the terms of the application for Units, to Australand or its nominee to acquire the Investor's Units on the occurrence of certain events. By signing an application for Units, an Investor will be agreeing to the grant of the Australand Option. The application form also contains a power of attorney that Investors must sign, appointing Australand as his or her or its attorney for the purpose of executing a transfer of his or her or its Units pursuant to the exercise of the Australand Option.

The Australand Option will be exercisable by Australand or a nominee in the Australand Group to give effect to the proposed Exit Strategy. Australand or its nominee can only exercise the Australand Option to give effect to an Exit Strategy, following the approval of the relevant proposal by an Ordinary Resolution of Investors.

In the event the Australand Option is exercised on or after 1 January 2006, Units will be acquired at the then NTA per Unit plus a premium of 5%. In the event the Australand Option is exercised prior to 1 January 2006, the premium will be reduced to 4%.

The terms of the Australand Option are set out in Section 14 (How to Invest).

To implement any Exit Strategy, Australand may either:

• exercise the Australand Option to acquire the Units of those Investors who either voted against or do not otherwise participate in the exit proposal (Dissenting Investors), to give effect to the exit strategy; or
• exercise the Call Option to acquire the units in the sub-trusts from AWIL4.

1. The memorandum further explained that each investor was required to grant a call option to the Australand group to acquire the investor's units on the occurrence of certain events. By signing an application form an investor granted the option and a power of attorney to enable the option to be exercised. The Australand group was required to obtain the approval of a majority of unit holders before it exercised the call option.
2. On 24 June 2003 the Australand group publicly announced the launch of AWPT4 through an Australian Stock Exchange announcement. Units in AWPT4 were offered to investors by the Information Memorandum to which reference is made above and which was issued in June 2003.
3. Units in the trusts were offered to investors subject to the limited disclosure requirements relating, inter alia, to 'sophisticated investors' permitted by s 708 of the Corporations Act.[20] In that regard, the Information Memorandum for AWPT4 included an application form, which required an applicant for units to tick one of a number of alternative boxes about his or its status. An applicant had to declare that the applicant fell into one of the following categories:
   • I/we are not acquiring Units in AWPT4 for use in connection with a business and have net assets of at least $2.5 million or have a gross income for each of the last 2 financial years of at least $250,000 and we attach a qualified accountants certificate which confirms this; or
   • I/we control at least $10 million in net assets ... for the purpose of investment in securities; or
   • I/we are a regulated superannuation fund, an approved deposit fund, a pooled superannuation trust, a public sector superannuation scheme within the meaning of the Superannuation Industry (Supervision) Act 1993 which has net assets of at least $10m; or
   • I/we are a RSA provider within the meaning of the Retirement Savings Accounts Act 1997; or
   • I/we am/are a professional investor as defined by section 9 of the Corporations Act 2001; or
   • I/we am/are applying for at least $500,000 worth, in price or value, of Units in AWPT4.
4. The Australand group marketed the units in AWPT4 by forwarding letters to the previous investors in earlier Australand property trusts, appointing Computershare Investor Services Pty Ltd as the registry for AWPT4 to manage the receipt of applications and application moneys, printing and distributing 5,000 copies of the Information Memorandum to potential investors, engaging Property Investment Research to prepare an investment report to potential investors, and distributing Information Memoranda and promoting the units through JB Were Limited.
5. As a result, the Australand group sold or issued 109,235,000 (or approximately 93.4%) of the 117 million units available to 585 investors.
6. As part of the application for units in AWPT4, the applicants agreed to be bound by the terms of the constitution thereof. A supplemental deed dated 23 June 2003 made amendments to the AWPT4 constitution at this time. These amendments included provisions dealing with 'stapling' which was defined to mean 'the process that results in Units and Attached Securities being and remaining Stapled to each other'. 'Attached Securities' were defined to include 'a Stapled Share' and 'Stapled Share' was defined to mean an ordinary share in AHL. 'Stapling Commencement Date' was defined to mean 'the date upon which Stapling of the Units to Stapled Shares is to commence as determined by the Manager'.

19. Clause 28.3, as inserted by the supplemental deed, provided that:

The Units are intended to be stapled to the Stapled Shares in the ratio of one Unit to one Stapled Share as from the Stapling Commencement Date. The intention is that, so far as the law permits, a Unit and a Stapled Share which are Stapled together shall be treated as one security. If further Attached Securities are from time to time Stapled to the Units the intention is that, so far as the law permits, a Unit and one of each of the Attached Securities which are Stapled together shall be treated as one Security.

20. Clause 27.9, as inserted by the supplemental deed, provided that:

While Stapling applies, no redemption or sale under this clause 27 may occur unless, at the same time as Units are redeemed or sold, an identical number of Attached Securities are also redeemed or sold.

1. Units in AWPT5 were offered to investors by an Information Memorandum issued in December 2003. The Information Memorandum insofar as it related to exit strategies was in similar terms to the memorandum covering AWPT4. The Information Memorandum for AWPT5 also explained that each investor was required to grant an option, but it did not require the approval of investors before the option could be exercised. A similar offer and marketing process was adopted for the sale of units in AWPT5. As it was seeking to raise only $50 million, two thousand Information Memoranda were printed for distribution to potential investors. Goldman Sachs JB Were Limited was appointed to co-ordinate the sale process. Computershare Investor Services Pty Ltd was again appointed as AWPT5's Registry and was also engaged to receive the applications and application moneys and applications were received from 214 applicants.

53 The transactions that gave rise to the present dispute with the Commissioner are described in Explanatory Memoranda issued respectively for AWPT4 and AWPT5 on 18 August 2005. The Memoranda set out the proposal for unit holders to receive cash in consideration for their units. The covering letter to unit holders in AWPT4 summarised the proposal as follows:

Australand Property Group has announced a proposal to merge Australand Wholesale Property Trust No. 4 with Australian Property Group. The AWPT4 Merger Proposal will be achieved by issuing new Units to existing APG Security Holders and redeeming existing Units (other than those held by Australand Property Group entities) for a cash consideration. The AWPT4 Merger Proposal requires approval of Unitholders, APG Security Holders and the Court.

The AWPT4 Offering Document contemplated a number of potential exit strategies whereby Unitholders could realise their investment in AWPT4. The AWPT4 Merger Proposal provides Unitholders with an opportunity to exit from AWPT4 for cash.

Under the AWPT4 Merger Proposal, Unitholders will be paid $1.1710 in cash per Unit. This amount has been determined as follows:

• the audited net tangible asset value per Unit as at 30 June 2005; plus
• an implied 3% per annum increase in the gross value of the property assets of AWPT4 from 30 June 2005 to 30 September 2005; plus
• a 4% premium to the above two amounts. A 4% premium is the premium applicable under certain exit strategies contemplated by the AWPT4 Offering Document; plus
• an amount representing the forecast distribution being foregone by existing Unitholders for the period from 1 July 2005 to 30 September 2005; less
• an amount calculated as if the Responsible Entity received 50% of the Performance Management Fee to which it would be entitled under the AWPT4 Constitution.

The redemption consideration also includes an additional amount of $0.00045 per Unit per day calculated on the basis of the continued asset growth at the rate of 3% per annum and forecast distributions foregone by Unitholders being redeemed on a daily basis for the period on and from 1 October 2005 to but excluding the date on which the redemption cheque is dispatched to Unitholders ...[21]

54 In clauses which set out the details and an evaluation of the proposal the Explanatory Memorandum for AWPT4 relevantly stated:

1.2 REDEMPTION CONSIDERATION

Under the AWPT4 Merger Proposal, Unitholders will be paid $1.1710 in cash per Unit. This amount has been determined as follows (calculated on a per Unit basis):

• $1.119 being the audited net tangible asset value per Unit as at 30 June 2005; plus
• $0.017 being a 0.75% increase in the gross value of the property assets as at 30 June 2005 to reflect the expected asset value growth (an implied increase of 3% per annum) from 1 July 2005 to 30 September 2005; plus
• $0.045 being a 4% premium to the above amounts. This 4% premium is the premium applicable under the exit strategies contemplated by the AWPT4 Offering Document; plus
• $0.023 being an amount representing the forecast distribution being foregone by existing Unitholders for the period from 1 July 2005 to 30 September 2005; less
• $0.033 being an amount calculated as if the Responsible Entity received 50% of the Performance Management Fee to which it would be entitled under the AWPT4 Constitution.

The Redemption Constitution also includes an additional amount of $0.00045 per Unit per day on and from 1 October 2005 to but excluding the date on which the redemption cheques are dispatched to Unitholders which is calculated at the rate of 3% per annum continuing asset growth and forecast distributions foregone by Unitholders being redeemed.

...

1.5 EXIT STRATEGY ALTERNATIVES

The AWPT4 Offering Document contemplated that Unitholders would realise their investment in AWPT4 through the implementation of an exit strategy or upon the winding up of AWPT4. The various exit strategies outlined in the AWPT4 Offering Documents were:

• an acquisition proposal involving the acquisition of the Units by Australand Property Group in exchange for cash and/or APG Stapled Securities; or
• a listing proposal involving the listing AWPT4 on ASX, either alone or merged with similar trusts; or
• an alternative proposal involving the conversion of Units into cash or another liquid security.

Under the terms of the exit strategies in the AWPT4 Offering Document, if an acquisition proposal was to be implemented before 1 January 2006, the applicable premium to NTA per Unit to be provided to Unitholders was 4%. If such an exit strategy was implemented after 1 January 2006 a 5% premium applied.

Australand could evaluate the timing of the implementation of an exit strategy during a pre-set annual review period. The first review period was from 15 July 2005 to 15 August 2005. On 27 July 2005, Australand requested that the Responsible Entity seek Unitholder approval to the AWPT4 Merger Proposal.

The Responsible Entity has provided an evaluation of the advantages and disadvantages of the AWPT4 Merger Proposal in section 2 and commissioned an Independent Expert's Report that is included in section 6.

The Responsible Entity has not pursued other exit strategies because it believes that these would have limited success. The Responsible Entity has reached this conclusion having regard to Australand Property Group's unit holding in AWPT4, the Options, the Performance Management Fee, Exit Fee, and Property Management Rights disclosed in the AWPT4 Offering Document and Australand's indication to the Responsible Entity that it will not support any alternative exit strategies at this time. The Independent Expert's report states at section 13.2.2 that 'it would appear unlikely that an alternative offer will emerge'. Currently, the only exit proposal for Unitholders is the AWPT4 Merger Proposal.

...

In the present circumstances, the Responsible Entity considers that the AWPT4 Merger Proposal is the preferred option for Unitholders as it provides them with the opportunity to realise their investment in AWPT4 at a premium to NTA, with Australand Property Limited agreeing to bear all costs associated with the AWPT4 Merger Proposal.

...

2.2 ADVANTAGES TO UNITHOLDERS

...

2.2.2 Premium to NTA

The AWPT4 Offering Document stated that Unitholders would be entitled to a 4% premium to the AWPT4 net tangible asset value on a per Unit basis if one of certain exit strategies outlined in the AWPT4 Offering Document was implemented prior to 2006.

The 4% premium has been used in the AWPT4 Merger Proposal and applied to the aggregate of the net tangible asset value of AWPT4 based on valuation of the property portfolio as at 30 June 2005 plus an additional amount for the expected gross property asset value growth of 3% per annum until implementation of the AWPT4 Merger Proposal is a benefit that will accrue to Unitholders upon the implementation of the AWPT4 Merger Proposal.[22]

55 With necessary adaptations, the Explanatory Memorandum for AWPT5 contained statements to the same effect.

1. ... In September 2005, the stapling transactions were implemented by way of scheme of arrangement - 'security holder' approval was obtained and court approval of the scheme was granted on 29 September 2005. The stapling transactions were completed on 12 October 2005, when units in AWPT4 and AWPT5 were stapled to form an expanded Australand Property Group.
2. According to the appellant, it constituted an implementation of the 'Exit Strategies' for both AWPT4 and AWPT5 when the approval was obtained of a majority of unit holders at meetings convened for that purpose to the redemption of the units in the trusts from the investors for cash and the issuance of new units that were stapled to the shares in AHL and the units in the Australand Property Trust.
3. The stapling of the units in AWPT4 required the approval of the external investors. Although Australand could have exercised its call option in relation to AWPT5 without investor approval, the Australand group elected to follow the same procedure in respect of both trusts, including the seeking of majority investor approval which was subsequently obtained.
4. The steps by which the stapling transactions were implemented were as follows:
   • the security holders in AHL and Australand Property Trust received by way of special dividend and capital return a 'Merger Distribution' in the amount of approximately $0.21 per security held;
   • the Merger Distribution was compulsorily used to fund the subscription by security holders in AHL and Australand Property Trust for units in each of AWPT4 and AWPT5 equivalent to the number of securities held by the relevant security holder in AHL and Australand Property Trust;
   • the money paid for the subscription of units in AWPT4 and AWPT5 was used to fund the redemption of units in those trusts held by the previous external investors; and
   • prior to subscription and redemption of units in AWPT4 and AWPT5, each trust was listed on the ASX in order to allow for the trading of units as part of the expanded Australand Property Group stapled security; and
   • the stapling transactions were completed on 12 October 2005.

57 The Australand entities retained a minority unit holding in each of AWPT4 and AWPT5. These, referred to as 'cross-holding' units, were not part of the stapling transaction. This was to avoid a related entity owning shares in itself.[23]

58 As mentioned, both before the Tribunal and Mandie J the Commissioner contended that AWPT4 was not a widely held trust because three elements of the definition were not satisfied, namely:

The Commissioner addressed points (a) and (b) together, and (c) separately.

59 The Commissioner's submission commenced with some overall observations about the definition. The definition should be read as a whole, and not - as the judge was said to have done - as though it contained separate disjunctive elements. It was submitted that the requirement inherent in the reference to 'the prospectus or product disclosure statement' informed the meaning of the requirements of 'issued to the public' and '300 public unit holders'. It confirmed that those requirements would not be satisfied by a restricted issue of units not requiring the preparation of a prospectus or product disclosure statement, and that the issue to the public will be an issue pursuant to a prospectus or product disclosure statement. Support for this was to be found in the reference to 'the prospectus or product disclosure statement' in s 89M(2)(a) of the Act. Thus understood, a 'widely held trust', as defined, did not extend to a managed investment scheme in which units were issued only to 'wholesale' clients as defined in s 761G of the Corporations Act and thus not pursuant to a prospectus or product disclosure statement lodged under that Act. In that case the units will not have been 'issued to the public' and there will be no 'public unit holders' holding the minimum subscription under a 'prospectus or product disclosure statement'.

60 With that overview it was more particularly submitted as follows in relation to points (a) and (b). First, reference was made to the Information Memorandum which stated that the product disclosure statement requirements of the Corporations Act did not apply to the offer of units, and that an offer of units in the trust can only be made to Australian residents who qualify as 'Wholesale' Investors under s 761G of that Act.[24] It was then noted that Mandie J had regarded as decisive that 'the offer was open to any member of the public choosing and able to apply for at least $500,000 worth of units'.[25] But for that, his Honour may have ruled that the units were not 'issued to the public'. However, for the following four reasons his Honour's reasoning and conclusion was not correct.

61 First, the definition requires not that there be an 'offer to the public', but that units be 'issued to the public' and that there be at least 300 public unit holders.

62 Secondly, AWPT4 did not establish that units had been issued to 300, or any, persons subscribing for at least $500,000 worth of units.

63 Thirdly, if the question was approached by characterising the offer, it should be characterised in this way. The 'common characteristics'[26] of those eligible to take up the offer was that they fell within the category of 'wholesale' investors to which a product disclosure statement was not required. Any persons (other than a 'wholesale' investor to whom the offer was restricted) who invested were in the same category because they were seen as not being in need of the protection given the general public in relation to the issue of securities and investment products. Hence, the offer was not to 'the public'.

64 Fourthly, Mandie J treated the phrase 'issued to the public' in isolation from paragraph (c)(i) of the definition.

65 Turning then to point (c) and the matter of a prospectus, the Commissioner submitted that in its use in paragraph (c)(i) - and reading the definition as a whole - the word 'prospectus' incorporated the concept of 'prospectus' as found in the context of managed investment schemes in Part 5C.1 of the Corporations Act. This was consistent with the requirement of 'issued to the public' and the notion of public subscription under 'the prospectus or product disclosure statement'. The use of the definite article in the expression 'the prospectus' was also consistent with this interpretation. Further, if, as the trustee submitted and the Tribunal and Mandie J had held, the word 'prospectus' bore its ordinary dictionary meaning it would have comprehended a product disclosure statement, which would render that reference otiose. It would be surprising if Parliament had intended to legislate in that way. Moreover, it was inconsistent for 'product disclosure statement' to bear its Corporations Act meaning when 'prospectus' did not.

66 The submissions were succinctly and efficiently put. Like submissions had been made below, and were stated and considered by Mandie J, and the Tribunal. Of course the contrary submissions of the trustee were also referred to, and those submissions were developed in this Court.

67 A particular aspect that was argued below concerned the concept of 'the public' and the question whether the units were 'issued to the public'. This was dealt with at some length by Mandie J[27] and the trustee's submissions in this Court significantly concentrated on this aspect. It is unnecessary to set out the trustee's submission; it appears in the written outline. The trustee's analysis is sound and supports, or produces, the decision reached by Mandie J and the Tribunal.

68 We consider too that the Commissioner's attack on Mandie J's reasons based on the difference between the 'offer' and the 'issue' of units is a difference without substance. Of course the word in the definition was 'issued' but the issue of units did not occur out of the air, it followed acceptance of the offer. With respect, his Honour's reference to the 'offer of units' did not reflect a failure on his part to direct his mind to the relevant issues. Indeed, his Honour's judgment reflects to a high degree the closest attention to the submissions and the issues concerning satisfaction or otherwise of the disputed aspects of the definition.

69 The trustee also addressed a submission on the 'prospectus' issue. That is, what was to be understood by the word 'prospectus' in terms of a document required to be lodged or registered under the Corporations Act prior to the offer of units. This submission included reference to legislative history in support of a submission that seen in the context thus provided it was understandable that the word 'prospectus' in paragraph (c)(i) of the definition bore its ordinary dictionary meaning of 'a circular or advertisement inviting applications from the public to subscribe for securities for a corporation or proposed corporation.'[28] It was submitted that the Information Memorandum was a prospectus within the meaning of the definition. In its full terms in the written outline the submission had some elaboration, but it is unnecessary to set it all out.

70 In rejecting the Commissioner's submission, and finding satisfaction of the disputed aspects of the definition, Mandie J stated:

1. In the light of those authorities, it seems to me that the Tribunal was correct in its conclusion, or it was open to the Tribunal to conclude, that the units in AWPT4 were issued to the public because the offer of the units was available to the public at large and capable of being acted upon by any member of the public with the means to do so. The result may perhaps have been different if the offer had been restricted to those categories of persons listed in the application form that were delimited, for example, by a requirement as to ownership of assets to a specified value or as to income of a specified amount. However the offer was open to any member of the public choosing and able to apply for at least $500,000 worth of units (as the Tribunal pointed out) and I do not think that that limitation has the consequence that the offer was not capable of being acted upon by any member of the public except in the sense, as would apply in every case (as noted in the authorities), that the member of the public must be able to afford the investment.
2. In relation to the other matters of contention raised by the Commissioner, I accept that there was evidence before the Tribunal that there was not less than 300 'public' unit holders and that the Tribunal so decided, at least implicitly. Finally, I consider that the Tribunal was correct in its interpretation of the word 'prospectus' contained in sub-para (c)(i) of the definition of 'widely held trust' for the reasons that it gave and I accept the submissions of the appellant in that regard. I would add that the emphasis in sub-para (c)(i) of the definition of 'widely held trust' is upon each of the unit holders referred to holding the 'minimum subscription' under the relevant offer document. The emphasis is not upon any particular requirement as to the offer document itself. The reference to 'product disclosure statement' suggests that the legislature envisaged that such a document would be likely to be lodged with ASIC but that conclusion does not entail the further conclusion that lodging of a prospectus or product disclosure statement with ASIC is an essential requirement to satisfy the definition of a 'widely held trust.' In that regard, it is to be noted that the legislature did not cover all classes of documents that might be lodged with ASIC under the relevant provisions of the Corporations Act.[29] The better view, I think, is that the reference to 'prospectus or product disclosure statement' was intended to cover all varieties of relevant offer documents whether lodged with ASIC or not.

71 In our view no error is demonstrated in those reasons. His Honour's conclusions were both open on the evidence and correct. It follows that the Commissioner has failed to establish that AWPT4 was not a widely held trust. To put it another way, AWPT4 was a widely held trust.

72 It is useful to recall how this issue arises. As noted earlier, after the stapling transaction was completed, cross-holdings of related parties remained which could not be quoted on the ASX. In that situation, s 89E(1) provided that the public unit trust scheme was 'taken to have become a private unit trust scheme immediately before' the acquisition effected by the stapling transaction. The consequence was that the acquisition was a dutiable acquisition of units in a land rich landholder. But s 89E does not apply to or in relation to an acquisition made in response to an offer or invitation made or arrangement entered into before 13 May 2004, being the date of commencement of s 89E.

73 The question was whether the exemption in Item 20(7)(b)(ii) applied.

74 The Tribunal found that the exit strategies specified in the Information Memorandum were too vague to amount to an 'arrangement'. Accordingly, Item 20(7)(b)(ii) did not apply to exempt AWPT4 from duty.

75 On appeal Mandie J held that the Tribunal had erred in two respects, each being an error of law. The first error was one of construction, and application, of the word 'arrangement'. The second error was that the finding of no arrangement was not open on the facts. His Honour explained his conclusions on these matters, and why he considered that the Item applied, as follows:

1. In my opinion, the Tribunal erred in its construction or application of the word 'arrangement.' The Tribunal's approach was, at least by inference, that the 'arrangement' had to have a sufficient degree of specificity as not to be too vague or uncertain as to constitute an arrangement at all. It is no doubt correct that a particular set of representations or proposals advanced by one side and adopted by the other might be so vague or uncertain as to not constitute an 'arrangement.' So it might be said that the Tribunal's approach in that respect involved a correct construction of the word 'arrangement' and there was no error of law within the meaning of proposition (1) above. However I think that, for reasons that follow, the Tribunal's conclusion that the exit strategies in the Information Memorandum were too vague to amount to an 'arrangement' constitutes an error of law in that the Tribunal either misconstrued the word 'arrangement'[30] or reached a conclusion that was not open to it on the facts.[31]
2. The Tribunal, in its Reasons, referred to a passage in Re British Basic Slag Ltd's Agreements. After that passage in the judgment of Diplock LJ (as he then was) the following further statement is made:[32]

No necessary or useful purpose would be served by attempting an expanded and comprehensive definition of the word 'arrangement' in s 6(3) of the Act. Cross, J, said:

'...all that is required to constitute an arrangement not enforceable in law is that the parties to it shall have communicated with one another in some way and that as a result of the communication each has intentionally aroused in the other an expectation that he will act in a certain way.'

I think that I am only expressing the same concept in slightly different terms if I say without attempting an exhaustive definition, for there are many ways in which arrangements may be made, that it is sufficient to constitute an 'arrangement' between A and B, if (i) A makes a representation as to his future conduct with the expectation and intention that such conduct on his part will operate as an inducement to B to act in a particular way; (ii) such representation is communicated to B, who has knowledge that A so expected and intended, and (iii) such representation or A's conduct in fulfilment of it operates as an inducement, whether among other inducements or not to B to act in that particular way.

On the evidence in the present case it is plain beyond a peradventure that the knowledge of each member acquired at the board meetings of Basic from statements made by the nominees on that board of his fellow members that each of his fellow members was going to enter into a contract with Basic in the terms of the vertical contract, operated as an inducement to each member himself to enter into a contract with Basic in the same terms as those of the vertical contract. If this is not an 'arrangement' I do not know what is.'

1. In my view what is contained in the Information Memorandum about exit strategies falls within the concept of 'arrangement' so described by Diplock LJ. A number of representations were made and communicated in the Information Memorandum as to future conduct in relation to the units to be issued with the expectation and intention that investors would be induced to apply for units in reliance thereon and it is to be assumed that they did so. I do not think that the statements in the Information Memorandum concerning exit strategies were so vague or uncertain as to be incapable of forming part of an 'arrangement.' The principal exit strategies identified in the Information Memorandum were the acquisition of the Trust by the Australand group to form part of a stapled entity listed on the ASX, or the listing of the Trust or sale of the properties by a given date, or the acquisition of the units by the Australand group in exchange for cash or stapled securities, or some other proposal that converted the units into cash or another liquid security. I do not think that any of these proposals were too vague to form part of an 'arrangement' or that the fact that there were a number of alternatives detracts from the conclusion that they formed part of an 'arrangement.' Further, it does not detract from that conclusion that the trustee or the Australand group was not legally bound to do anything or that the Information Memorandum contemplated that exit strategies might not occur and provided for that eventuality. I think that the exit strategies are sufficiently and coherently described so as to form the basis of an 'arrangement.'
2. The question whether particular circumstances fall within the relevant statutory description is essentially a question of fact[33] and if the matter is simply a question of degree or evaluation and one on which minds can legitimately differ,[34] it remains a question of fact. However, in the present case, I do not think that an analysis of the 'circumstances' constituted by the material in the Information Memorandum gives rise to such a question of degree or evaluation or one in which minds can legitimately differ. On the contrary, I think that the conclusion reached by the Tribunal was not open to it upon a proper analysis of the material in the Information Memorandum. Or, to put it another way, the Tribunal erred in law upon the facts as fully found.
3. The next question is whether the Tribunal erred in law in its conclusion that, if there was an arrangement, the acquisition involved in the 'stapling transaction' in October 2005 was not 'made in response to' the arrangement. I accept that the words 'made in response to' require at least a loose causal relationship. I do not think that this question is one of degree or evaluation despite the various differences identified by the Commissioner between the exit strategies outlined in the Information Memorandum and the transaction ultimately concluded. That is because an essential feature of the acquisition was the redemption of the existing units in AWPT4 for cash at the premium and within the time frame contemplated by the Information Memorandum, and the purchase of the units for cash was one of the exit strategies plainly foreshadowed in the Information Memorandum. In my opinion, therefore, it was not open to the Tribunal to conclude that the acquisition was not 'made in response to' the arrangement and the Tribunal therefore erred in law.
4. Accordingly, leave to appeal should be granted in relation to this question. The Tribunal should have concluded that the application of s 89E of the Duties Act was excluded by Item 20(7)(b)(ii) of Schedule 2 to the Duties Act.

76 The Commissioner challenged these conclusions. He submitted that the transitional relief provided by Item 20(7)(b)(ii) occurs where the offer, invitation or arrangement leading to the acquisition occurs before 13 May 2004 but the acquisition occurs thereafter. Then, noting that s 89E(1) is subject to sub-s (2) which refers to transitional acquisitions, and then to the definition of 'transitional acquisition' which refers to an acquisition made 'in response to or in accordance with an offer or arrangement', he submitted that the expression 'in response to' in Item 20(7)(b)(ii) was to be understood as carrying the meaning of 'in accordance with'. Further, there was nothing to suggest that Parliament intended by the perhaps broader expression of 'in response to' to have expanded the scope of transitional relief, beyond the possibly narrowing effect of 'in accordance with' in the definition in s 89D incorporated by reference in s 89E(2).

77 The Commissioner, noting that there was a 'transitional acquisition' which resulted in AWPT4 becoming a private unit trust scheme, and stating that that acquisition was 'made in response to or in accordance with an offer or arrangement', submitted that the relevant offer, invitation or arrangement 'in response to or in accordance with' which the acquisition was made was the arrangement entered into between the Australian Property Group ('APG') security holders and the initial unit holders in AWPT4 in 2005, as detailed in the Explanatory Memorandum. It was the acquisition under that arrangement that was the subject of duty. Accordingly, the Commissioner submitted, both the arrangement and acquisition occurred in 2005.

78 The Commissioner submitted that the trustee could not avoid this conclusion. The trustee sought to do so by relying on the exit strategies in the 2003 Information Memorandum and cl 28.3 of the Trust Deed. The trustee submitted, and Mandie J accepted, that the exit strategies constituted an arrangement and that the acquisition occurred 'in response to' that arrangement. But that approach was erroneous. The correct approach was to construe and apply the words of Item 20(7)(b)(ii) as a whole, informed by the provisions of ss 89D and 89E.

79 The Commissioner then addressed submissions as to why the trustee's analysis could not be accepted. This part of the submissions drew close attention to differences between the exit strategies and the 2005 arrangement. Submissions to this effect had been made to Mandie J. It was said that the 2005 acquisition was made by the APG security holders who were not privy to the 2003 Information Memorandum, and there was no evidence that they had any expectation of becoming involved. Their participation began in 2005 in response to the Explanatory Memorandum. Hence, to the extent that the exit strategies in the Information Memorandum were capable of being described as an 'arrangement entered into' they constituted an arrangement entered into between AHL and the AWPT4 investors.

80 The Commissioner then identified and relied upon a raft of further differentiating factors which constituted reason why Item 20(7)(b)(ii) could not apply. While not overlooking any of the points, the following indicates their tenor. The 2003 units were not stapled or listed; only the new units issued in 2005 were stapled and listed. The total value allowed to unit holders on acquisition in 2005 was greater than the consideration which the Exit Strategies prescribed. Further, the Exit Strategies did not mention redemption. The Australand option enabling compulsory acquisition was not utilised; nor were the pre-emption rights exercised. The original units were redeemed as part of a wider acquisition out of the proceeds of subscriptions for units by persons who were not privy to the 2003 exit strategy. The Information Memorandum recognised that an exit strategy may never occur, and provided for meetings of unit holders to periodically consider continuing or winding up the trust. As to cl 28.3, the 2003 units were not stapled but were cancelled on redemption. In these circumstances, the Commissioner submitted, his Honour was wrong to conclude that no other view than his was open to the Tribunal (and Commissioner) acting reasonably on the written and oral evidence before it. The case was not so strong as to preclude other views. Reasonable minds might differ on matters of fact including questions of causation such as whether an event was to be adjudged as having occurred 'in response to' another.

81 Finally, the Commissioner submitted that his Honour's conclusion was inconsistent with the conclusion in relation to Item 20(6) in that, for the purpose of Item 20(6) his Honour had no reasonable doubt that the acquisition did not 'result from' the exit strategies in the Information Memorandum yet for the purpose of Item 20(7)(b)(ii) there was no reasonable doubt that the acquisition did occur 'in response to' the exit strategies. We immediately interpolate as to this that the seeming inconsistency is explained by the fact that the critical element in the finding in relation to Item 20(6) was that there was no 'agreement' in contrast to the finding of 'an arrangement', a different conception.

82 We turn then to the submissions of counsel for the trustee. Referring to the passage in Re British Basic Slag Ltd's Agreements quoted above, counsel submitted that the word 'arrangement' was sufficiently broad to denote a mutual non-binding, expectation that parties will behave in a certain way. He submitted that the exit strategies contained in the Information Memorandum constituted an 'arrangement' within the ordinary meaning of that word. The exit strategies shared a common goal of giving the investors an opportunity to realise their investment. That was essential because investors in AWPT4 were not otherwise able to realise their investment. There was no active secondary market for the units and AWPT4 did not offer to redeem them.

83 Then, Australand implemented the exit strategies by obtaining the approval of the majority of unit holders at a meeting convened for that purpose, redeeming the units in the trust from the investors for cash and issuing new units that were stapled to the two entities that then formed Australand, AHL and APT.

84 Responding to the submission of the Commissioner that the stapling transaction was between AWPT4 and the APG Stapled Security Holders who were not privy to the Information Memorandum, the trustee's counsel submitted that that was not correct. It was essential that the unit holders in AWPT4 approve the redemption of their units before the acquisition by the APG Stapled Security Holders could occur. The three parties - AWPT4, the unit holders in AWPT4 and the APG Security Holders - were necessary parties to a stapling transaction. We interpolate that that is so but the Commissioner's point was rather as to the identity of those in the Information Memorandum. The trustee's submission looks to the ultimate implementation. In any event, the trustee submitted, Item 20(7)(b)(ii) did not require the acquirer of the units to have entered into an arrangement before the relevant date. It merely required the acquirer to acquire their units 'in response to' an 'arrangement entered into before that day'. Counsel submitted that if it be accepted that AWPT4 entered into the stapling transaction in order to fulfil the exit strategies, it followed that the APG Stapled Security Holders acquired their units 'in response to' the arrangement, because the purchase of the units for cash was one of the exit strategies foreshadowed in the Information Memorandum.

85 Then, as to the various distinguishing features in the transaction to which the Commissioner pointed, the trustee submitted that the stapling transaction implemented the third exit strategy. None of the distinguishing features the Commissioner pointed to was inconsistent with that strategy. That the implementation was by redemption of units rather than by purchasing them was immaterial to the investors. Moreover, as counsel emphasised, the 4 per cent premium referred to in the first exit strategy had been carried into the ultimate transaction. Then, as to cl 28.3 of the Trust Deed, it was submitted that the Commissioner's contention that the stapling transaction fell outside the clause because the units were redeemed and cancelled, rather than themselves being stapled, required an unduly narrow reading of the clause. The choice of one mechanism (redemption, cancellation and issue of new units) to achieve the outcome promised in cl 28.3, rather than another, should be immaterial.

86 Finally, the Commissioner's argument that s 89E applied on the basis that there was a 'transitional acquisition within the meaning of s 89D' begged the question whether the acquisitions that occurred as part of the stapling transaction were in response to the exit strategies or cl 28.3 of the Trust Deed. The Commissioner's argument therefore did not advance his case.

87 Returning then to Mandie J's reasons, we agree that the statements in the Information Memorandum were not so vague or uncertain as to be incapable of forming part of an 'arrangement'. We agree also that the Tribunal's approach to this question had the effect of narrowing the scope of that which might be comprehended by the word 'arrangement' and thus unduly and erroneously limiting the area of operation of the exemption. Clearly, 'arrangement' may comprehend a wide variety of matters and satisfaction will rest on the relevant facts and circumstances considered in the relevant context and informed by the understanding provided by Diplock LJ in Re British Slag Ltd's Agreements.[35] Further, in the consideration of whether that stated constituted an 'arrangement' it was relevant to take into account the reason for and importance of the exit strategies: the absence of a secondary market for units, that the representations as to strategies that would enable recovery of capital invested were designed to and are to be understood as having induced persons to invest, and that the exit strategies were addressing the future as to which certainty in the form of the ultimate exit strategy and precision as to its precise terms would clearly be difficult to produce in advance.

88 Then, in considering whether the acquisition was made 'in response to' the arrangement, it is important to retain in mind the central purpose of the above matters as constituting the inducement to invest and that investors relied on the inducement in determining to invest, the inducement of the exit strategies offsetting the lack of a ready ability to sell units and thus recover capital. This is what lay at the core of the arrangement. That is, a scheme, not surprisingly stated with some imprecision and uncertainty as to the manner of implementation, but which ultimately crystallised in a scheme under which the investors' units were redeemed for cash and at the stipulated 4 per cent premium. In other words, what happened was within the essential parameters of that indicated, even if the precise manner of execution was not specified in the arrangement.

89 We reject the Commissioner's submissions that the arrangement occurred after, and not before, 13 May 2004. In particular, we reject the Commissioner's argument - based on a totting up of differences between the arrangement and the implementation scheme - that the implementation scheme or acquisition was not made in response to the earlier arrangement. In truth, in our view, the differences went to detail of the manner of implementation as distinct from denying or altering the fundamental arrangement between AWPT4 and its investors.

90 At one point the Commissioner submitted that Mandie J had in effect disregarded, or found contrary to, a finding of fact by the Tribunal on causation, that is that there was no causal relationship between the arrangement and the implementation scheme or acquisition. This submission must meet the difficulty of the errors of law that underlay the Tribunal's decision. Those errors critically affected the decision. Moreover, the essence of the Tribunal's decision was that there was no arrangement, from which it followed that there could not have been a causal relationship. But, in fact, as Mandie J concluded and we agree, there was an arrangement and, in terms of Item 20(7)(b)(ii), the acquisition was made in response to it.

91 This is sufficient to indicate our view that Mandie J was correct in holding that Item 20(7)(b)(ii) applied to exempt the trustee from duty.

AWPT4: the trustee's contention that Item 20(6) applied

92 The trustee raised this question by notice of contention, lest it be held that Item 20(7)(b)(ii) did not apply to exempt the trustee from duty. As Item 20(7)(b)(ii) does apply, it is not necessary to consider whether Item 20(6) also applies. We add only that, if it be necessary to conclude on the matter, we are of the view that the Tribunal and Mandie J were correct in holding that Item 20(6) was not applicable.

93 For the same reasons stated in relation to AWPT4, the Tribunal and Mandie J held, without further reasoning, that Item 20(6) did not apply in the case of AWPT5. The reason was the absence of a written agreement that the stapling transaction resulted from. We agree and respectfully adopt their reasons for so concluding.

94 Finally, the Commissioner's notice of contention need not be considered.

95 For these reasons we would dismiss each application for leave to appeal with costs.

[4] Australand Investments Limited v Commissioner of State Revenue [2008] VCAT 2267, [122]-[125].

[7] Australand Investments Ltd v Commissioner of State Revenue [2009] VSC 453 (Mandie J), [75] ('Reasons').

[9] [1963] 2 All ER 807, 819.

[10] S v Crimes Compensation Tribunal [1998] 1 VR 83, 89.

[15] [2009] VSC 453 ('Reasons').

[17] The following summary sets out or substantially reproduces the summary of facts in the reasons for judgment of Mandie J ('Reasons').

[19] These properties were a 50 per cent interest in a commercial office tower being developed by Australand, a commercial property being developed in suburban Sydney by Australand, and two existing industrial warehouse and office facilities in suburban Sydney.

[20] See ss 708(8) and (10) of the Corporations Act.

[26] Corporate Affairs Commission (SA) v Australian Central Credit Union [1985] HCA 64; (1985) 157 CLR 201, 208.

[29] For example, the Corporations Act also refers to an 'offer information statement.'

[30] This footnote referred to proposition (1) of the three propositions stated by J D Phillips JA in S v Crimes Compensation Tribunal [1998] 1 VR 83, 88-93, which Mandie J set out at [74] as follows:

(1) What is the proper meaning, as a matter of construction, of the statutory description which is relevant to the taxpayer's success or failure is a question of law.

(2) Once the task of construction is over, the question whether the taxpayer's particular circumstances fall within the relevant statutory description is essentially a question of fact.

(3) Nevertheless if, in determining whether the particular circumstances of the taxpayer are such as to fall within the relevant statutory description, the fact- finding tribunal arrives at a conclusion which was simply not open to it, that is an error of law.

[31] This footnote referred to proposition (3) above.

[32] [1963] 2 All ER 807, 819.

[34] See S v Crimes Compensation Tribunal [1998] 1 VR 83, 89 per J D Phillips JA.

[35] [1963] 2 All ER 807.