Pacific National v Chief Commissioner of State Revenue

Background 4 Pacific National was incorporated to conduct rail freight operations on a commercial basis within and between the States of New South Wales, Victoria and South Australia. 5 The Transport Administration Act 1988 was, relevantly, amended in 1996 and in 2000. Rail Access Corporation was constituted as a State owned corporation by the 1996 amendments. By the 2000 amendments it and Rail Services Authority were amalgamated under the name Rail Infrastructure Corporation. For ease of reference I will refer to both manifestations of the corporation as RIC. 6 "NSW rail network" was defined in the Transport Administration Act 1988, s 3(1) to mean the railway lines vested in or owned by or managed or controlled by a rail infrastructure owner, including passing loops and turnouts from those lines and loops and associated rail infrastructure facilities that were so vested or owned or managed or controlled. 7 "Rail infrastructure facilities" were defined in the Transport Administration Act 1988, s 3(1) to include: "railway track, associated track structures, over track structures, cuttings, drainage works, track support earthworks and fences, tunnels, bridges, level crossings, service roads, signalling systems, train control systems, communication systems, overhead power supply systems, power and communication cables, and associated works, buildings, plant, machinery and equipment."

But rail infrastructure facilities did not include stations, platforms, rolling stock, rolling stock maintenance facilities, office buildings or housing, freight centres or depots, private sidings or spur lines connected to premises not vested in or owned by or managed or controlled by a rail infrastructure owner. 8 The Transport Administration Act 1988, Sch 6A, cl 2(2) declared that all rail infrastructure facilities were owned by RIC. It provided: "RIC is the owner of all rail infrastructure facilities installed in or on land, in or on rivers and other waterways and in or on the beds of rivers and waterways by RIC and of all rail infrastructure facilities vested in or transferred to RIC (whether or not the place on which the facilities are situated is owned by RIC)." 9 The Transport Administration Act 1988, Sch 6A, cl 5(1) authorised access to rail infrastructure facilities. It provided that: "A person who is a party to an access agreement is authorised to have access to the rail infrastructure facilities to which the access agreement relates, even if the facilities are situated in or on railway land, or to a railway building or rail infrastructure facility that is not vested in, owned by or managed or controlled by the person, if access is exercised in accordance with and as permitted by the access agreement." 10 The access agreement in cl 2.4(b) granted non-exclusive contractual rights set out in a Train Specification and train movements running early or late relative to the Train Path. Schedule D contained the Train Specification. Clause D2.3 provided that the schedule defined the route, stopping points and entry and exit points of the operator's trains using RIC's railway network. The term "Train Path" was defined in the dictionary in Sch 1 as the series of track segments over a particular time interval through which a train could travel and might include stopping points and intervals and fuelling stations and other set down or changeover points. Agreed facts 11 The parties agreed that at all relevant times the NSW rail network was owned by or vested in RIC, that the NSW rail network was attached to, rested upon or was supported by the surface of the land and at all material times the owner of the fee simple in that supporting land was not RIC. With respect to this last concession, the Chief Commissioner reserved the right to argue that the effect of the Transport Administration Act 1988, Sch 6A, cl 2 was to vest an interest in a stratum of the supporting land in RIC. The submissions 12 It was submitted on behalf of Pacific National that all RIC had power to do, and all it did under the access agreement, was to confer on Pacific National the right to use the physical items that comprised the NSW rail network and the items of the NSW rail network were not land. It was argued that the use of land to which reference is made in the Duties Act 1997, s 164A(b) is a physical use and RIC could not, and did not, grant physical use of the space occupied by the NSW rail network or the space occupied by a passing train. In so far as it might have been argued that the use of the physical items comprising the NSW rail network necessarily involved use of the space occupied by those items, such a right was not conferred or acquired under the access agreement, it was conferred or acquired under the Transport Administration Act 1988, Sch 6A, cl 5(1). 13 For the Chief Commissioner it was argued that the term "land" in the Duties Act 1997, s 164A(b) was the legal conception of land the ownership of which extends usque ad coelum et ad inferos and is measurable and divisible both laterally and vertically. With this proposition, Pacific National did not disagree. The dictionary to the Duties Act 1997 defines "land" to include a stratum. The definition in the Interpretation Act 1987 includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate and interest therein. It was argued on behalf of the Chief Commissioner that, to the extent to which the railway track comprised the surface of the land on which the ballast, sleepers and rails were laid and the cuttings, drainage works, track support earthworks, tunnels, bridges, level crossings, service roads and buildings were land and Pacific National was granted rights to use that land by the access agreement. It was argued that to give effect to its rights under the access agreement, Pacific National had to travel over the surface of, and thus through and the ambient land on which the infrastructure facilities were constructed and, again, it was entitled to do so by reason of its being party to the access agreement. The infrastructure facilities existed in a stratum within the ambient land and this stratum was vested in RIC. It was argued that the Duties Act 1997, s 164A(b) did not require the right of a user to arise solely from the agreement because the word "by" invokes some causal connection, is a word of wide import not requiring all rights acquired to emanate from the access agreement, but merely a right. It was argued that a right of user of land was acquired under the access agreement in respect of both infrastructure facilities that are land, the land occupied by the physical substance of any non-land infrastructure facilities and the ambient land. It was conceded that the access agreement did not, by itself, vest the right to use the ambient land in Pacific National because the owner of the ambient land was not party to the agreement. But without the access agreement, Pacific National would have no right of access to the ambient land under the Transport Administration Act 1988, Sch 6A, cl 5(1). It is not appropriate to read "by" as "solely by." Resolution 14 Pacific National places emphasis on those items of rail infrastructure facilities that are physically separate from land, such as the railway track and submits that the vesting of the NSW rail network in it did not create in it an interest in land. The Chief Commissioner points to those items of rail infrastructure facilities that are physically incorporated in land such as cuttings, tunnels, level crossings and service roads and submits that the vesting of those items in RIC carried with it an interest in land. 15 Special statutory powers for the provision of utilities have been treated as not giving rise to an interest in land notwithstanding that the utilities are affixed to or embedded in land. In Newcastle-Under-Lyme Corporation v Wolstanton Ld [1947] Ch 92, Evershed J considered a statutory provision granting power to break up streets, to lay pipes, to repair and remove them, to remove the earth displaced and to do all other acts necessary for the execution of the powers of the gas undertakers. At 103 his Lordship said: "In these circumstances and bearing in mind the general rule that no greater rights or interests should be treated as conferred on the undertakers than are necessary for the fulfilment of the object of the statute, it seems to me reasonably clear as a matter of the construction s 6 of the Act of 1847, that the terms of the section are not intended to confer and are not apt to confer on the undertakers any right of ownership or proprietorship of the land affected." 16 In Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118 it was held that the respondent's rights in mains and service pipes by which it supplied gas to its customers were neither land nor an interest in land for purposes of a compulsory acquisition Act. At 127-128 the court referred to the proposition that whatever is affixed to the freehold becomes part of it and is subjected to the same rights of property as the land itself. But the presumption was rebuttable and the court took the view that it must be rebutted when a statute empowered someone other than the owner of the land to affix to or embed things in the soil and yet retain ownership of the things so affixed or embedded. That right was a very special one that was not intended to make, and did not make, for the better and fuller enjoyment of the land. The right when exercised conferred a right to occupy some part of the land in a very limited and special way. Their Honours referred to the above passage from Wolstanton and said: "To our minds it represents the view which we should adopt in the present case with the result, of course, that the contention of the respondent that it had an interest in the land in which the mains and pipes, the subject of the second head of the claim, were embedded, must be rejected." 17 In so far as rail infrastructure facilities were installed on land by parties other than RIC this case is one step removed from North Shore Gas. Ownership in RIC does not arise from its affixing to or embedding rail infrastructure facilities in someone else's land but, rather, the vesting in it of facilities affixed to or embedded in land by others. 18 But I see no difference in principle because of this factor. The purpose of the Transport Administration Act 1988, Sch 6A, cl 2(2) was to vest in RIC all rail infrastructure facilities either installed by it or others whether or not the land to which they were affixed or in which they were embedded was owned by RIC. If that were not the case and, as the Chief Commissioner submits, the intention was to pass to RIC an interest in the land to which or in which the facilities were affixed or embedded, there would have been little need for cl 5(1). If RIC had an interest in the land to which or in which the facilities were attached or embedded, it had the power to grant access to the land and cl 5(1) would be superfluous. 19 While the rail infrastructure facilities upon which the Chief Commissioner places emphasis are clearly associated with land they may yet be owned by a person other than the owner of the land. In Anthony v The Commonwealth (1973) 47 ALJR 83 in a compulsory acquisition of land that had on it, amongst other things, portion of the Stuart Highway, Walsh J concluded that the road was vested in the Commonwealth under an ordinance notwithstanding that the land upon which the highway was formed was owned by a third party. The ordinance provided that all roads and appurtenant structures in the Northern Territory were the property of and vested in the Commonwealth. 20 If legislation can vest a road in a person other than the owner of the land upon which it is formed, there is no reason why legislation cannot vest a tunnel, or a bridge, or a cutting, or a level crossing in a person other than the owner of the land to which or in which they are affixed or embedded. 21 In my view, the effect of the Transport Administration Act 1988, Sch 6A, cl 2(2) was to vest ownership of all rail infrastructure facilities in RIC, whether or not RIC owned the land to which or in which they were affixed or embedded as items other than land or an interest in land. Clause 5(1) empowered RIC to grant access to those facilities under an access agreement, even if they were situated in land owned by another rail authority, or to grant access to a person, a party to an access agreement, to a facility not owned, managed or controlled by that person. I therefore reject the argument of the Chief Commissioner that RIC held an interest in the land to which or in which rail infrastructure facilities were attached or embedded and a right to use that land was given to Pacific National under the access agreement. 22 Land can be divided horizontally or vertically into strata. The Chief Commissioner's alternative argument was based on the notion that RIC gained a stratum in the ambient land in the space in which the rail infrastructure facilities were affixed or embedded and in the space through which Pacific National's rolling stock passed as it journeyed along the rail tracks. 23 I reject that submission. In North Shore Gas it was not only contended that the mains and pipes constituted an interest in land, it was also argued that the space occupied by them constituted an interest land. Both arguments were rejected. I see no reason to depart from that view in this case. 24 It follows that I take the view that the vesting of the rail infrastructure facilities in RIC carried with it no interest in land and RIC had no legal right to grant a right to use land for the purposes of the definition of the term "lease" in the Duties Act 1997, s 164A(b). 25 The Chief Commissioner submitted that the access agreement in conjunction with the Transport Administration Act 1988, Sch 6A, cl 5(1) must have given a right to pass over the ambient land in order to enjoy the use of the rail infrastructure facilities and that was a right to use land for the purposes of the Duties Act 1997, s 164A(b). For Pacific National it was submitted that this right was granted by cl 5(1) alone. 26 This submission was based on the proposition that the word "by" that appears in the Duties Act 1997, s 164A(b) is one of wide import and should not be interpreted as "solely by." The Chief Commissioner cited Fagan v Crimes Compensation Tribunal (1982) 150 CLR 666, a decision that nervous shock occasioned by learning of the death of the appellant's mother was a compensable injury because it occurred by or as a result of the criminal act and Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, a decision on the interpretation of the Trade Practices Act 1974 (Cth), s 82(1) that a person who suffers loss or damage by conduct of another person that was done in contravention of portions of the Act might recover the amount of the loss or damage. 27 In my view, the Duties Act 1997, s 164A(b) looks to the legal source of the right to use land. If the right arises under an agreement, the instrument constitutes a lease. If the right arises otherwise, any instrument relating to the right is not a lease. In this case the access agreement provided no more than the right to use RIC's railway network that included rail infrastructure facilities. For the reasons set out above the vesting of the NSW railway network in RIC did not create in it any interest in land. The legal source of Pacific National's right to use land in New South Wales is to be found elsewhere than in the access agreement. 28 In my view, the grant of access in the Transport Administration Act 1988, Sch 6A, cl 5(1) was the legal source of a right to use land in New South Wales. That denies the access agreement as the source of that right. Orders 29 The assessment of the defendant, notice of which was dated 3 September 2004 is revoked. The defendant is ordered to pay the plaintiff's costs.