Lend Lease Development Pty Ltd v Commissioner of State Revenue [2013] VSCA 207

Lend Lease Development Pty Ltd v Commissioner of State Revenue [2013] VSCA 207 - VSCA 2013 case summary — Zoe

[77]

(a) functions of the Authority include those set out in section 10 of the [Docklands] Act;

(b) general purpose of the Act is to facilitate the development of the Docklands Area and to establish the Authority for the purposes of encouraging that development;

(c) Authority and the Developer will participate in the Developer's Project for the purpose of implementing the Developer's Project and achieving the Objectives set out in this Agreement;

(d) objectives for the development of the Precinct include:

(i) the intended purpose and objectives set out in the Bid Proposal;

(ii) the development of the Docklands Area as a place of character and quality in which to live and work, creating both a tourism asset and a boost to Melbourne's prosperity;

(iii) development responsive to the characteristics of the Land and complementary with the characteristics of Melbourne;

(iv) the development of the Docklands Area as a waterfront place focussed on and utilising the Victoria Harbour and Yarra River;

(v) the development of waterfront areas in the Docklands Area as an authentic working harbour with natural, complementary waterfront, marine and working harbour activities;

(vi) development allowing a diversity of public uses and recreational and business activities;

(vii) development accessible to a diverse range of locals and visitors; and

(viii) development which is creative, innovative and consistent with good ecological sustainability principles;

(e) Authority and the Developer must act, co-operate and negotiate in good faith to agree such further terms and specifications requested by the Authority for the development of the Land in accordance with the Objectives, including, without limitation:

(i) attending meetings requested by the Authority; and

(ii) entering into any further agreements negotiated in good faith; and

(f) the Developer must develop by planning, designing, constructing and commissioning each Stage[16] in accordance with the terms and conditions of this Agreement.

[98]

(a) evidence that the Developer has, or has obtained from the Financiers, sufficient funding to finance the Works on the Stage, the Developer's Infrastructure, the Minimum External Infrastructure Contribution, the Gasworks Site Remediation Contribution and any other financial obligations under this Agreement;

(b) the Stage Feasibility Report[23] together with an amended Schedule C if the projected gross revenue on sale for the Stage differs from the Projected Gross Revenue on Sale for the Stage as specified in Column E of clause 1.2 of Schedule C as amended from time to time in accordance with this Agreement;

(c) evidence of any relevant Precommitments;

(d) the Security;

(e) copies of Planning Approval for the Stage;

(f) details of the Stage Development Cost;

(g) evidence of Approval of the Site Based Environmental Management Plan for the relevant Stage by the relevant Government Agencies in accordance with clauses 7.1 and 7.2;

(h) evidence that the Developer is a party to a binding contract for construction of the Works relating to the Land or the Stage (as the case may be) under which the construction contractor's obligations are consistent with the obligations of the Developer under this Agreement;

(i) notification of a Date for Stage Practical Completion; [24]

(j) the following documents executed by all parties to the document other than the Authority;

(a) Building Certifier Deed;

(b) Independent Assessor Deed; and

(c) any Registrable Agreement referred to in Schedule Q;

(k) confirmation that the Stage is in accordance with the Staging Plan;

(l) confirmation of the Works Programme for the Stage;

(m) confirmation that, if there is a subsisting Default Event in respect of which notice has been served under clause 20.1, the Developer is using its best endeavours to cure the Default Event as required in clauses 20.2 and 20.3;

(n) confirmation that the Developer has set aside sufficient Human Services Land to meet the requirements of clause 11.8;

(o) confirmation that the Developer has entered into a section 173 agreement having substantially the same effect as the agreement annexed as Schedule E or as otherwise Approved by the Authority which Approval must not be unreasonably withheld; and

(p) confirmation of the detailed indicative plan for expenditure in respect of;

(a) Integrated Public Art in public spaces relating to individual buildings (as referred to in clause 10.1(a)(ii)); and

(b) Integrated Public Art in public spaces within the Victoria Harbour Precinct (as referred to in clause 10.1(b)(ii)).

[300]

Ground 1: The primary judge erred in holding that each of the following payments made pursuant to the Development Agreement entered into between LLD and VicUrban constituted consideration for the dutiable transaction within the meaning of s 20(1)(a) of the Act**,** being the transfer of the land comprising the relevant Stage. The payments in question were:

a payment on account of the Project External Infrastructure Contribution;[193]

a payment on account of the Project Gasworks Site Remediation Contribution;[194]

a Stage Integrated Public Art Contribution;[195]

a payment made pursuant to clause 4.7(a)(ii)(A), (b), (c), and (e) of the Development Agreement ('Final Land Payment');[196]

a Grand Plaza Additional Payment;[197]

an Estimated Land Payment;[198]

an Estimated External Infrastructure Contribution;[199]

an Estimated Gasworks Site Remediation Contribution;[200]

a payment on account of the Base External Infrastructure Contribution;[201]

a payment on account of the Base Gasworks Site Remediation Contribution;[202]

a payment on account of the Grand Plaza Contribution;[203]

an amount by way of non-monetary consideration;[204]

a Grand Plaza Retention Amount;[205]

an Additional Authority Payment in respect of the Additional Build Out;[206]

an amount by way of an Estimate of Outstanding Amounts;[207]

and

a payment made pursuant to cl 4.7(b)(i),(c)(i),(d)(i) and (f) ('Additional Land Payment').[208]

Ground 2: The primary judge should have held that:[209]

(a) the consideration for the transfer of the Land was the Stage Land Payment, being the Price specified in the land sale contract; and

(b) each of the Contribution Payments was not consideration for the transfer of the Land.

Ground 3: In determining whether the Contribution Payments were part of the consideration for the transfer of the Land, the primary judge erred by conflating the development of the Precinct with the transfer of the Land (paragraphs [16], [24], [26], [30], [38], [45]).

Ground 4: The primary judge erred in finding that, although the subject-matter of each of the Contribution Payments was capable of being conceived as something distinct and different from the Land, the payments were not distinct or separate matters but were 'part of, or ancillary to, the land acquired' (paragraph [14]).

Ground 5: The primary judge erred by finding that each of the Contribution Payments was part of the consideration for the transfer of the Land on the basis that:

(a) the amount was payable on or before the Actual Stage Release Date and the transfer of title to the Land (paragraphs [17], [19]);

(b) the amount was paid for infrastructure, remediation, public art or other works that were 'beneficial' to the land in the Precinct (including but not limited to the Land) or that were essential or necessary for the development of that land (paragraphs [16], [26], [45]);

(c) the obligations to pay the Contribution Payments were 'wholly integrated with one composite development project undertaken by [VicUrban] and the Developer' (paragraph [26]); and/or

(d) the amounts 'were all "for" the land in the form and state intended to be secured through the development' (paragraph [38]).

(e) in respect of the Grand Plaza Retention Amount and the Grand Plaza Additional Payment, the provision of a Grand Plaza 'enhanced the amenity of the area and the precinct generally' (paragraphs [34], [36]).[210]

Even if the above bases were correct (which is not conceded), they do not support the finding that the relevant Contribution Payments were part of the consideration for the transfer of the land.

With respect to Dock 5, LLD identified an additional ground of appeal:

Ground 6: Further or alternatively, the primary judge erred:

(a) by finding that the Final Land Payment was a 'top up [payment] specifically provided for and made payable before completion of the contact and taking title to the Dock 5 land' (paragraph [21]);[211] and/or

(b) by finding that the operative provision determining the payments to be made by LLD was Special Condition 19 of the Dock 5 Land Sale Contract (paragraph [22]-[23], [25]).[212]

With respect to the C9 (Myer) Stage:

Ground 6: Further or alternatively, the primary judge erred:

(a) by finding that 'non-monetary consideration' comprising works on 'Area 2' carried out by LLD under a construction licence between LLD and VicUrban was part of the consideration for the transfer of the land to LLD (paragraph [37]), or alternatively by failing to find such 'non-monetary consideration' was not consideration for the transfer of the Land to LLD; and/or

(b) by finding that Special Conditions 11 and 12 of the C9 (Myer) Land Sale Contract secured receipt of the Contribution Payments as part of the consideration for the transfer of the Land and 'formed part of the promises given to obtain the land in the context of the overall development' (paragraphs [37]-[38]).

With respect to the C10 (Montage) Stage:

Ground 6: Further or alternatively, the primary judge erred by finding that 'non-monetary consideration' comprising works on 'Area 1' carried out by LLD under a construction licence between LLD and VicUrban was part of the consideration for the transfer of the land to LLD (paragraph [35]).

With respect to the C3/C4 Stage:

Ground 6: Further or alternatively, the primary judge erred in finding that each of the Additional Land Payment, Additional Authority Payment and Estimate of Outstanding Amounts were consideration for the transfer of the Land (paragraph [31]).

Ground 7: The primary judge should have found that:[213]

(a) the Development Agreement was a composite transaction comprising obligations in relation to the sale, use, and development of land in the Precinct;

(b) the consideration 'for' the dutiable transaction was the consideration that moved the part of the composite whole comprising the transfer of the Land; and

(c) each of the Contribution Payments was 'for' something other than the transfer of the Land, and therefore was not consideration for the dutiable transaction.

[311]

179 Fifthly, with respect to the Final Land Payment to be made in the context of Dock 5, it was submitted that the judge's failure to refer to the post-transfer reconciliation dates for the making of the Final Land Payment (as described above,[221] a payment to ensure that VicUrban received 2.74 per cent of the Actual Gross Proceeds of Sale where that amount exceeded the Stage Land Payment that had been based upon anticipated or projected revenue from sales) indicated that he had erroneously regarded the Final Land Payment as being payable, as he said, 'before completion of the contract and taking title to the Dock 5 land'.[222] This was mistaken. The error was aggravated by the weight he placed upon the timing of the payments although he again approached the issue inconsistently, so it was submitted, by regarding the Additional Land Payment, in respect of the C3/C4 Stage, as being consideration for the transfer despite its being payable after the transfer of the land as an adjustment of the earlier amount. Rather, LLD contended, the Final Land Payment and the Additional Land Payment could not constitute consideration for the transfer of the land before its development by LLD because the payments were not only due after the transfer but were calculated on the actual proceeds of the sale of the land following completion of the development of the land. It was submitted the payments, far from constituting consideration for the transfer of undeveloped land to LLD, were the result of transfers of developed land to third parties and represented an aspect of the profit-sharing arrangement between LLD and VicUrban. Moreover, the transfers to third parties would be separately assessable for duty. While this would not give rise to double duty, given that the transfers would be separate transactions between different parties, LLD contended that a contrast ought be drawn with respect to the nature of the dutiable property transferred, from the undeveloped land purchased by LLD to the developed land which it sold, and the curiosity that emerges of the Commissioner seeking to assess the consideration for the transfer of the land to LLD as including works that would contribute to the ultimate gross proceeds of sale and yet those proceeds being assessable to duty at another time and in another way.

[324]

191 This submission encapsulated the approach adopted by the Commissioner, namely, that the several promises could not be disentangled one from the other, or at least not in a manner that could give rise to separate and distinct consideration. I pause to observe that the emphasis upon the Development Agreement and the totality of the payments made under it also betrayed, however, a tendency for the Commissioner to blur the distinction between the Development Agreement and the Land Sale Contracts in a critical respect, namely, to mistakenly regard the Development Agreement as itself the instrument which effected the transfer of the land. So much is clear from the erroneous statement above in relation to the dutiable transaction, 'being the Development Agreement' when the dutiable transaction is the transfer of the land and the instrument which effects this is the Land Sale Contract. It is also clear from the submission made with respect to the failure to tie any individual liability assumed by LLD to any specific promise to transfer any particular land. This is proffered as evidence of the inextricably intertwined nature of the obligations. The problem for the Commissioner, however, is that he is looking for specific promises to transfer particular parcels of land in the wrong instrument. There are properly particularised promises tied to the transfer of particular parcels of land but they are to be found in the Land Sale Contracts, not in the Development Agreement. It is the Land Sale Contracts that are the instruments that effect the dutiable transaction. This is not to say that it is only the express promises made in those instruments that necessarily provide the consideration for the land, although this ought to be the starting point,[242] but, rather, that proper attention must be paid to the specificity they provide in the context of the totality of obligations assumed under the Development Agreement. It would be wrong to lose sight of the fact that it is not the Development Agreement that brings about the transfer of the land. I discuss this further below.[243]

[332]

(2) The price identified for the land sold in each Land Sale Contract was not an exhaustive statement of the promises that VicUrban required in order for the land to move. It was of the essence of the contractual arrangement between the parties that VicUrban would not sell land unless all of the promises that involved the making of a payment by LLD to VicUrban were performed. It was only a matter of convenience that the payments were broken down into amounts payable in respect of the various Stages. Under the 2001 Development Agreement the payment to be made before the transfer of title was a payment identified by a formula, LLD being obliged to pay 'an amount equal to the sum of'[252] various amounts including the Stage Land Payment and various contribution payments.[253] It would be wrong, it was submitted, to confine oneself, in identifying the relevant consideration, to the first element of the formula. That amount, although specified by the parties as being the contractual consideration for the land, was neither the beginning nor the end of the inquiry. The Stage Land Payments were thus only one component of a larger amount that formed the consideration for the land sales, including a payment to be made on or before each Actual Stage Release Date;[254] a payment made on or before the Initial Reconciliation Date[255] and certain payments made thereafter.[256] This series of promises was consistent with VicUrban's statutory obligations and functions, namely, that it was not selling land that was totally undeveloped - it was selling land in which some development had been undertaken by VicUrban around the land. It was argued to be much like a developer subdividing an estate, in relation to which he has built roads and connected gas and electricity, and who sells each lot for a sum reflecting the costs of providing the basic infrastructure. The sum paid will be the consideration for the transfer of the land albeit that it was calculated by reference to the costs incurred in creating the basic infrastructure. This second key proposition was associated with the claim that the Stage Land Payment, in some instances, did not correspond to the valuations obtained for the land. For example, the C10 (Montage) land was valued at $3,900,000 but the purchase price in the Land Sale Contract was only $1,485,222. The Commissioner did not deny that LLD had paid duty on the unencumbered value of C10 (Montage), and on the unencumbered value of the Mosaic and V4 (MKWH) Stages, where that value was greater than the Stage Land Payment, but rather used the disparity apparent in the C10 (Montage) stage to submit that it was most unlikely that in an arms-length contract between a major corporation and a statutory body the payment of considerably less than half the assessed market value was all the consideration that moved the transfer of the land, and that, rather, it was much more likely that the contribution payments made up part of the consideration for the transfer of the land.

At a glance

Court

Decision date

Before

Source

Judgment (739 paragraphs)

Lend Lease Development Pty Ltd v Commissioner of State Revenue [2013] VSCA 207 (15 August 2013)

Parties

Legislation Cited (9)

Cases Cited (12)