TEC Desert Pty Ltd v Commissioner of State Revenue

TEC Desert Pty Ltd v Commissioner of State Revenue - [2010] HCA 49 - HCA 2010 case summary — Zoe

[28]

The Northern System supplied power for the conduct by WMC of its operations at Leinster, Mount Keith and Agnew, and the Southern System for its operations at Kambalda and Kalgoorlie. There were power stations at four of those locations, Agnew being the exception.
The Kalgoorlie power station was situated on freehold land of which WMC was the registered proprietor under the provisions of the Transfer of Land Act 1893 (WA) ("the Transfer of Land Act"). In respect of an emergency supply line to the Kambalda nickel smelter, WMC had statutory rights under the Energy Corporations (Powers) Act 1979 (WA)[14] over land part of which was held under freehold title. It will be sufficient hereafter to deal specifically with the position of the Kalgoorlie power station.
The Leinster and Kambalda power stations were situated on land the subject of mineral leases held by WMC under the Mining Act 1904 (WA) ("the 1904 Act"). The Mt Keith power station was on land the subject of a mining lease held by WMC under the Mining Act 1978 (WA) ("the 1978 Act")[15]. Mineral leases granted under the 1904 Act are deemed by the 1978 Act[16] to be mining leases granted under the 1978 Act but subject generally to the terms and conditions of the grant under the 1904 Act that are not inconsistent with the 1978 Act. These WMC mining tenements were in respect of land otherwise largely the subject of pastoral leases. Pastoral leases are a creature of statute or regulation and confer a limited entitlement to use Crown land; the relevant legislation in Western Australia received detailed consideration in Ward[17].
The case before the primary judge and the Court of Appeal had been run on the footing that if the Commissioner could not succeed in respect of the power generation facilities, the Commissioner could not succeed in respect of the transmission facilities. Accordingly, in this Court, the primary focus of argument was upon the stamp duty assessment with respect to the power stations, and, in particular, to those items attached to the land the subject of the WMC mining tenements.
In the Court of Appeal, McLure JA recorded that the case had been conducted "on the basis that a mining tenement gives rise to an interest in the land the subject of the tenement"; a corollary appears to have been that WMC was in a position analogous to a tenant of freehold land, so that the items classed in the Sale Agreement as "Fixtures" were to be treated as if they were a tenant's fixtures at common law. These were assumptions or concessions of law, not fact, upon matters of legal principle which are of general public importance. In their written submissions in this Court, TEC and AGL appeared to depart from these assumptions or concessions and to focus upon the provisions of the 1978 Act rather than the general law. That became further apparent as oral argument proceeded.
The general proposition respecting the conduct of appeals is that the substantial issues between the parties are to be settled at trial[18]. Nevertheless, save for any special provision for costs of the litigation, TEC and AGL should not be held to concessions or assumptions upon legal issues of general public importance concerning the operation of the Stamp Act and the mining legislation of Western Australia[19]. The position taken by the Commissioner in oral argument was to seek to uphold the decision of the Court of Appeal by all legitimate means. No special costs order protective of the Commissioner should be made.
It is appropriate to turn immediately to consideration of the false basis on which the case has been conducted in the courts below, beginning with the law respecting fixtures.

[45]

Section 273 of the 1904 Act fortified the conclusion reached in Adamson by requiring all mining tenements and shares and interests therein to be taken in law to be "chattel interests". In Adamson this Court held[35] that this expression identified the mining tenements as personal property and not as chattels real. Section 273 had a forerunner in s 18 of the Mining Act 1874 (NSW), which had stated that any right, title or interest acquired or created under that statute was to be deemed and taken in law to be "a chattel interest"; that term was held to render the mining tenements personalty[36]. These provisions reflected the treatment at general law, as noted above, of a mining lease as a sale of the minerals extracted rather than as a demise of the land from which they were taken[37].
Section 108(3) of the 1904 Act empowered the Minister to direct the removal and sale of plant, machinery, engines and tools found on or within the land the subject of a forfeited or void lease; in respect of leases surrendered or abandoned, or leases expiring by effluxion of time, provision for removal appears to have been left to the requirements of regulations made under s 306.
The provisions of the 1978 Act with respect to mining leases received detailed consideration in the joint reasons in Ward[38]. The grant thereunder of exclusive possession for mining purposes is directed at preventing others from carrying out mining and related activities on the relevant land[39].
Section 85 of the 1978 Act describes the authorities conferred by a mining lease as exclusive rights for mining purposes in relation to the land in respect of which the mining lease was granted, and confers ownership of all minerals lawfully mined from that land, subject to the Act and any conditions to which the mining lease is subject. Mining leases under the 1978 Act commonly contain conditions requiring removal of all buildings and structures from the site at the completion of operations under the mining lease[40]. Further, s 114 makes detailed provision where a mining tenement expires or is surrendered or forfeited for the removal by the holder of the mining tenement, or in default thereof at the direction of the Minister, of "mining plant". This term is defined as "any building, plant, machinery, equipment, tools or any other property of any kind whether affixed to land or not so affixed" (s 114(1)) (emphasis added). Section 114 thus operates upon the statutory assumption that what is "mining plant" is not determined by the general law respecting the affixture of chattels to the freehold, of which they then became part and to which the general law respecting removal of tenant's fixtures applies.
Section 119 of the 1978 Act provides that mining tenements may be sold or disposed of and be the subject of legal and equitable interests, but requires that dispositions thereof be effected by a signed written instrument. The 1904 Act (s 306(14)) authorised the making of regulations providing for the transfer, assignment and sub‑leasing of mining tenements under that statute. In Ward[41] reference was made to the many examples of the exercise by courts of equity of their jurisdiction to protect the enjoyment by the plaintiff of rights which were conferred by or under statute, but were not necessarily proprietary in character, whether as personalty or realty. Thus, the exercise of equitable jurisdiction with respect to mining tenements is not necessarily indicative of the character of those tenements as interests in realty rather than as personalty.

[56]

To that end, in sub‑par (i) of cl 8.1(c), WMC warranted to TEC and AGL that it had "title as the owner" of those Fixtures on freehold land owned by WMC, "notwithstanding the affixation".
With respect to the Kalgoorlie power station, the licence provided (cl 3.1) for the grant by WMC to TEC and AGL of a licence of the area the subject of the power station site and of the Power System Assets which were Fixtures, for 15 years from the date of completion of the Sale Agreement. The position of TEC and AGL during the term of the licence was protected by a negative covenant given by WMC in cl 8.2. This obliged WMC not to assign its interest in any of the licence area until such time as the assignee covenanted with TEC and AGL to be bound from the date of the assignment by all the terms and conditions of the licence.
Upon expiration of the term of the licence or earlier termination of the licence, TEC and AGL were obliged by cl 10 to cease using the licensed area and to rehabilitate it.
The effect of cl 16.4 of the licence agreement for the Kalgoorlie power station (numbered cl 17.5 in Sched 8), when read with the definitions in cl 1.1, was that, with some exceptions, on termination of the licence for any reason, TEC and AGL were obliged to acquire the right, title and interest of WMC in (i) the Fixtures on freehold land owned by WMC and (ii) such rights as were conferred by the 1904 Act and the 1978 Act in the case of Fixtures on land not owned by WMC.
With respect to (ii), the rights, titles and interests of WMC, as explained above, were dependent upon and derivative of the mining tenements held by WMC, which were of the nature of personalty, not realty. An agreement to acquire them could not attract stamp duty as an agreement for the sale of an estate or interest in land. What of (i)?
If there had been prepayment of the licence fees, WMC was obliged by cl 16.4(a)(i) to repay that portion attributable to the post‑termination period, and TEC and AGL were obliged to pay, as consideration for the acquisition from WMC, the amount otherwise repayable by WMC. Where no prepayment had been made, TEC and AGL were obliged to pay the then present value of the licence fees for the balance of the term (cl 16.4(a)(ii)).
The title which TEC and AGL were obliged by cl 16.4 to acquire on termination of the Kalgoorlie power station licence was that identified in the warranty by WMC in sub‑par (i) of cl 8.1(c) of the Sale Agreement. The warranty was that WMC had title to the Fixtures "as the owner thereof notwithstanding the affixation" to the freehold. The warranty provided an agreed hypothesis or convention upon which WMC and TEC and AGL conducted their reciprocal affairs, in particular, for the operation of the pro forma licence in Sched 8[45]. The agreed assumption that WMC had a distinct title to the relevant Fixtures as chattels, notwithstanding their affixation to the WMC freehold, provided consideration for the payments by TEC and AGL which were identified in cl 16.4 (cl 17.5 in the form of licence in Sched 8). This in turn was reflected in the structure of the purchase price in cl 3.2 of the Sale Agreement.
The Commissioner submitted that the Kalgoorlie licence obligations flowing from the Sale Agreement with respect to WMC freehold Fixtures rendered the Sale Agreement an agreement for sale of an estate or interest in land. Reference has been made above to the negative covenant given by WMC in cl 8.2 with respect to covenants by any assignee and to the obligation to rehabilitate the site imposed upon TEC and AGL by cl 10. The obligation of rehabilitation imposed upon TEC and AGL might attract a mandatory injunction at the suit of WMC. The negative covenant by WMC in cl 8.2 might in an appropriate case be enforced by injunction at the suit of TEC and AGL. But these remedies would be in aid of contractual stipulations, not any estate or interest in land. Those stipulations did not qualify the registered title of WMC under the Transfer of Land Act, being, at best, nothing more than personal equities of the kind recognised in the authorities upon the operation of the Torrens System[46].
Accordingly, the Sale Agreement did not include an agreement by WMC to vest in TEC and AGL an estate or interest in the freehold land the site of the Kalgoorlie power station, within the meaning of s 70(2) of the Stamp Act. There is thus no footing for the application of s 70(2) to any estates or interests in chattels so as to deny the exemption otherwise attracted by Item 2(7c) of the Third Schedule to the Stamp Act.
These conclusions make it unnecessary to consider the efficacy at law and in equity of a sale by the owner of the freehold of land, but with retention of title to unsevered fixtures, or a sale of the unsevered fixtures with retention of the rest of the land[47].

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