Urban Consolidation and Development Pty Ltd and Ors v Commissioner of State Revenue (Taxation) [2011] VCAT 593

1. The Notice of Assessment dated 1 October 2007 issued to the Applicants by the Respondent be set aside and the assessment is reduced to nil.[1]
   1. The Notice of Determination of the Respondent dated 22 June 2009 disallowing the Applicants objection to assessment be set aside.[2]
   2. The duty paid by the Applicants shall be refunded within 28 days of the date of the Tribunal's order, together with interest.[3]
   3. In relation to the alternative grounds for objection under the Duties Act 2000;

1. The ground relying upon section 79(9) is dismissed; 2. The ground relying upon section 85(1)(a) and section 34 is dismissed;

1. The ground relying upon section 85(1)(d) is dismissed;

1. The ground relying upon section 85(2) is allowed; and 2. The ground seeking remission of market interest in full is allowed.

1. On 1 October 2007 the Commissioner of State Revenue issued an assessment to the Applicants under the Taxation Administration Act 1997 ("Administration Act") in respect of liability to duty under the Duties Act 2000 ("Duties Act"). The assessment relates to a liability under Part 2 of Chapter 3 of the Duties Act.
2. Part 10 of the Administration Act sets out the procedures for taxpayers to lodge objections to assessments - to be determined by the Commissioner; and seek review - to be determined by the Tribunal.
3. On 27 November 2007 the Applicants lodged a Notice of Objection to the assessment; and by letter date 25 November 2008 the Applicants amended the Notice by the addition of a further ground.
4. By Notice of Determination dated 22 June 2009, the Commissioner disallowed the Applicants' objections. The Commissioner was requested to refer the matter to the Tribunal for review and did so on 11 November 2009. This proceeding constitutes that review.
5. The Court of Appeal has since decided Commissioner of State Revenue v Landrow Properties Pty Ltd[4] [the "Landrow case"] which the parties agree is binding upon me and requires me to determine the appeal in favour of the Applicants. However, the Commissioner contended that the decision in the Landrow case is incorrect and intends to seek leave to appeal from the order of the Tribunal under section 148(1)(a) of the Victorian Civil and Administrative Tribunal Act 1998 ("VCAT Act").
6. The case before me was, therefore, conducted on the basis that the decision in Landrow applied to dispose of the proceeding in favour of the Applicants but that I should deal with other grounds of objection in the event that the Commissioner is ultimately successful in having the decision in the Landrow case overturned..
7. The Commissioner applied to the Tribunal on 2 December 2010 for an order under section 96 of the VCAT Act to refer a question of law to the Trial Division of the Supreme Court. Deputy President Macnamara denied the Commissioner's application on the basis that it was preferable to avoid fragmentation of proceedings and for the matter to go to a substantive hearing on all issues before a judicial member, to enable an appeal by the Commissioner direct to the Court of Appeal.[5]
8. The Deputy President's orders made on 2 December 2010 included an order that either party may rely on the documents filed with the Tribunal on 11 November 2009 as evidence in the proceeding.[6] He also directed that witness statements be filed and served for any witnesses to be called at the hearing.
9. The Applicants have filed an affidavit of Alan Parish sworn on 25 January 2011 which sets out the basic facts concerning the acquisition of 100 units in the Unit Trust by each of the Applicants on or about 27 March 2007.
10. The Commissioner does not dispute the contents of the affidavit. However, the Commissioner relies upon the documents filed with the Tribunal.
11. Under section 110 of the Administration Act, the Applicants have the onus of proving their case.

1. Each Counsel prepared extensive written submissions upon which I now draw to set out the background to the current application; the relevant legislative provisions; the effect of the intervening decision of the Court of Appeal; and the respective submissions of each party.

1. The purpose of the land rich provisions in Chapter 3 of the Duties Act is to prevent the use of private companies and unit trusts to reduce the rate at which stamp duty would otherwise be payable on transfers of land. In broad terms the legislation seeks to treat transfers of shares in "land rich" private companies and transfers of units in "land rich" unit trusts as equivalent to transfers of land for duty purposes.[7]
2. The provisions under Part 2 of Chapter 3 of the Duties Act referred to below are those prevailing within the relevant period from 13 May 2004 to 24 July 2007.
3. The land rich provisions will be attracted and a liability for duty arises... when a relevant acquisition is made: section 78.
4. Under section 79(1)

(a) the person acquires an interest in a land rich landholder ...

(iii) that, when aggregated with ... interests acquired by any person in an associated transaction ...on the same day ... results in an aggregation that amounts to a significant interest in the landholder...

1. "Interest" was defined in section 76(1) as follows:

A person has an 'interest' in a landholder if the person has a beneficial entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or indirectly, to a distribution of property from the landholder on a winding up of the landholder.

1. Section 76(2) provides:

A person who, by virtue of sub-section (1), has an interest in a landholder, has a "significant interest" in the landholder if the person, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, would be entitled to

(a)in the case of a private unit trust scheme- 20% or more of the property distributed ...

1. "Entitled" was defined in section 3(1) to mean "beneficially entitled".
2. Apart from the requirement that an "interest" be obtained, the land rich provisions will only be attracted where a person "acquires" that interest: section 79(1). Section 77(1) provided at the time as follows:

A person acquires an interest in a land rich landholder if the person obtains the interest beneficially, including if the person's interest increases, in the landholder regardless of how it is obtained or increased.

1. Section 79(9) provides:

"associated transaction" in relation to the acquisition of an interest in a landholder by a person, means an acquisition of an interest in the landholder by another person in circumstances in which:

1. the persons are acting in concert; or
2. the acquisitions form, evidence, give effect to or arise from substantially one arrangement, one transaction or one series of transactions;

1. Section 82(1) provides that duty is payable by...

(a) the person who makes the relevant acquisition; and ...

(c ) if the relevant acquisition results from an aggregation of the interests of the person referred to in paragraph (a) and other persons - each of those other persons.

1. Section 83(1) provides that:

Duty is chargeable, at the rate specified under this Act for a transfer of dutiable property, on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in Victoria (calculated at the date of the acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.

1. It is common ground in this proceeding that the Peninsula Holdings Unit Trust ("Unit Trust") is a private unit trust scheme that was a land rich landholder from 28 July 2004 when the trustee of the Unit Trust signed a contract to purchase property at 435-437 Nepean Highway, Frankston described in Certificate of Title Volume 9377 Folio 046 ("Land"). The Land was transferred to the trustee of the Unit Trust on 18 December 2006 and the trustee became the registered proprietor of the Land on 12 February 2007.
2. It is also common ground that:

(a) as at 27 March 2007, 300 units in the Unit Trust were held by each of Urban Consolidation and Development Pty Ltd ("Urban"), Gee Dee Nominees Pty Ltd ("Gee Dee"), Webster-York Pty Ltd ("Webster") and 2 Sand Holdings Pty Ltd ("2 Sand");

(b) on or about 27 March 2007, pursuant to three agreements in identical form, 2 Sand sold 100 units in the Unit Trust to each of Urban, Gee Dee and Webster, taking their respective unit holdings to 400 each;

(c) Gee Dee held all its units in its capacity as trustee of the G&D Petsinis Family Trust.

1. In Landrow Properties Pty Ltd v Commissioner of State Revenue,[8] His Honour Justice Mandie held inter alia that for the purpose of section 77(1) of the Duties Act ...if the interest was obtained by a trustee, it was not obtained for the benefit of the trustee but for the benefit of others. It was therefore not obtained "beneficially" and the trustee had not "acquired" an interest within the meaning of s. 77(1)...
2. This interpretation of the land rich provisions was upheld by the Court of Appeal in the Landrow case[9] when the Court held, inter alia, as follows:

"53. ... When the sections [sections 76 and 77] are read together we consider that they support the conclusion that ss 78 and 79 only apply to an interest in a land rich landholder if that interest is obtained beneficially. In other words, we would accept the submission of counsel for the respondents as to the inter-relationship between the sections. We therefore consider that the trial judge correctly found that:

'ss 76 and 77 appear to impose a double requirement. An 'interest' is defined by s 76(1) in terms of a notional beneficial entitlement but the interest, as so defined, is required to be obtained 'beneficially' by s 77(1). So that even if the Commissioner's submissions about the meaning of s 76(1) are correct, the provisions of s 77(1) must also be satisfied."

54. Our second reason for rejecting the Commissioner's submissions is that their acceptance would deprive the amendments made to ss 76 and 77(1) of the Act by the State Taxation Act (Tax Reform) Act 2004 of any meaning.

55. Counsel for the Commissioner submitted that the amendments were intended to clarify, rather than alter, the operation of the legislation. According to that analysis neither the amendments made to the Act in 2004, nor the later amendments made in 2007, achieved any change in the operation of the legislation.

... 58. Thirdly, whilst the words 'beneficial entitlement' in s 76(1) refer to an entitlement to 'a distribution of property from the landholder, on the winding up of the landholder or otherwise, there is nothing in this section or in other sections of Chapter 3 to suggest that the 'beneficial entitlement' to a distribution means something different from the normal meaning of a beneficial entitlement to such a distribution.

59. In that context we note that s 7(1)(vi) of the Act provides that a dutiable transaction includes 'a change in beneficial ownership of dutiable property'. Although that is a different expression from the words 'beneficial entitlement' in s 76(1), it again indicates a distinction between a personal entitlement and an entitlement as trustee ...

60. ... As the trial judge said, it is trite law that a person who takes property on trust does not acquire a 'beneficial entitlement' to the trust property or 'obtain an interest beneficially'".

1. The Commissioner maintains its view that the Court of Appeal's construction of sections 76 and 77 of the Duties Act was incorrect. However, the Commissioner did not seek special leave from the High Court because the case was considered an inappropriate vehicle for special leave. The Commissioner based this view upon comments made by Court of Appeal.[10] In particular, although not argued by the parties, the Court of Appeal suggested that there was an alternative basis for deciding against the Commissioner on the particular facts of that case. Accordingly, the Commissioner proposed to find another vehicle to have the questions of statutory construction that arose in he Landrow case reconsidered by the Court of Appeal constituted by a bench of five judges. The Commissioner published a summary of his position in Bulletin D3/10 dated September 2010. A factor in arriving at this position was that there were many other matters that were affected by the issue on which the Landrow case was decided, with substantial revenue at risk.
2. In Challenger Listed Investments Ltd v Commissioner of State Revenue.[11] the Commissioner also conceded at the outset that the decision in the Landrow case applied to dispose of the proceeding in favour of the taxpayer. In that case His Honour Justice Pagone accepted that it was neither necessary nor appropriate for him to consider the substance of the Landrow case, since the Court of Appeal's decision was binding upon him. Clearly the Landrow case is similarly binding upon the Tribunal in this proceeding. Nevertheless, His Honour was prepared to deal with the other issues raised in the Challenger case, in the event that the Commissioner is ultimately successful in having the decision in Landrow case overturned.[12] Similarly there are further grounds also raised in this proceeding for determination.
3. The application of the Landrow case to the facts of this proceeding has the following effect:

(a) the acquisition of 100 units by Gee Dee on 27 March 2007 did not involve the acquisition of an interest, because Gee Dee acquired the units as trustee of the G&D Petsinis Family Trust;

(b) on 27 March 2007, Urban and Webster each acquired an 8.33% interest in the Unit Trust;

(c) if those acquisitions together constituted an associated transaction and could be aggregated, they resulted in an aggregation of 16.67% that did not amount to a significant interest in the Unit Trust;

1. If on appeal, the Commissioner is ultimately successful in overturning the Landrow case to the effect that the trustee of a trust can could hold an "interest" in a landholder or "acquire" an interest in a land rich landholder under the relevant form of the provisions, then, assuming the Applicants are not successful on any other grounds raised:

(a) the acquisition of 100 units by Gee Dee on 27 March 2007 did involve the acquisition of an interest;

(b) on 27 March 2007, Urban, Gee Dee and Webster each acquired an 8.33% interest in the Unit Trust;

(c) if those acquisitions together constituted an associated transaction and could be aggregated, they resulted in an aggregation of 25% that did amount to a significant interest in the Unit Trust;

(d) accordingly, duty would be chargeable at the rate specified for a transfer of dutiable property on the amount calculated by multiplying the unencumbered value of the Land calculated at 27 March 2007 by the proportion of that value represented by the interest acquired in the relevant acquisition.

1. In addition to the grounds notified by the Applicants in their Notice of Objection to Assessment dated 27 November 2007;[13] and letter dated 25 November 2008,[14] leave is granted to the Applicants[15] to rely upon a further ground pursuant to section 85(1)(d) of the Duties Act.
2. A ground relating to a change in beneficial ownership of the Unit Trust has not been addressed in the Applicants' statement of legal contentions dated 23 December 2010[16] and Counsel for the Applicants otherwise confirmed that they do not press this ground.
3. A ground concerning the unencumbered value of the Land as at 27 March 2007 was withdrawn following agreement between the Applicants and the Commissioner that the value should be taken to be $11.0 million.[17]

1. On 27 March 2007 Gee Dee entered into the relevant unit trust transaction, whereby 100 units in the Unit Trust were transferred to it, as trustee for the G & D Petsinis Family Trust.
2. The units which were purchased by Gee Dee were purchased, and subsequently held, by Gee Dee in its capacity as trustee and pursuant to the trusts and trust obligations set forth in the G&D P Trust Deed. [19]
3. Having regard to the land rich provisions, the Applicants rely upon the following construction of Gee Dee's unit holding:

1. Gee Dee did not hold, or have, any "beneficial entitlement" to a distribution of property on any notional vesting of the Unit Trust; 2. In purchasing the units as trustee, Gee Dee was not, and did not become, "beneficially entitled", together with the other two Applicants, to a distribution of more than 20% of the property of the Unit Trust; and

1. As Gee Dee purchased the shares as trustee pursuant to the trusts and trust obligations set forth in the Trust Deed, it did not "obtain the interest beneficially". Accordingly, Gee Dee did not "acquire" any interest in the Unit Trust, as required by the land rich provisions.
2. In their supplementary letter of objection, dated 25 November 2008 the Applicants contended that the assessment was incorrect because:

1. the 100 units in the Unit Trust which were transferred to Gee Dee on 27 March 2007 did not give rise to any "interest" in the Unit Trust within the meaning of section 76(1) of the Duties Act 2000; 2. Gee Dee and the other two Applicants, did not hold a "significant interest" (under section 76(2)) in the Unit Trust as a result of the three transactions on 27 March 2007; and

1. As a result of its purchase of the 100 units in the Unit Trust, Gee Dee did not "acquire" any interest in the Unit Trust within the meaning of section 77(1).
2. This ground of objection raised points which the Applicants contend and the Commissioner concedes, were later upheld by Mandie J in Landrow Properties Pty Ltd v Commissioner of State Revenue[20], and by the Court of Appeal in the Landrow case.
3. The Applicants contend that the trust deed of the "purchasing" trust in the Landrow case was drafted in relevantly similar terms to the trust deed of the purchasing trust in this case. Furthermore, the trust deed for the landholding unit trust in Landrow case was drafted in relevantly similar terms to the trust deed for the Unit Trust in this case.
4. Counsel for the Applicants submitted that in light of the authority of the Landrow decision at first instance, which was subsequently confirmed by the Court of Appeal, the assessment was clearly shown to be incorrect by the time the Commissioner determined the Applicants objection and must be set aside.
5. The Commissioner accepts that the Tribunal is bound by the Court of Appeal's decision in the Landrow case and that the Tribunal's order in this proceeding must be in the Applicants' favour.
6. However, Counsel for the Applicants makes the further submission that the decision of the Commissioner to disallow the objection must be criticised by reason that it was made in the context of binding authority prevailing at the time,[21] which was subsequently confirmed by the Court of Appeal. In the Commissioner's Notice of Determination dated 22 June 2009[22] the Commissioner merely notes that the Landrow decision at first instance was then being appealed.
7. In Challenger's case His Honour Justice Pagone noted that:

In seeking to find a suitable vehicle for the Courts to consider the legal issues raised in Landrow, there is no suggestion of the Commissioner "ignoring the views of the judicial branch of government"[23] or in the Commissioner acting other than dutifully to facilitate the correct judicial declaration of the law.

1. In my view His Honour's comments acknowledge that the Commissioner was in fact observing the rule of law in promptly seeking to challenge important legal principles, in a manner consistent with advice obtained from senior Counsel. However, I do not accept, as submitted by Counsel for the Commissioner, that these comments amount to an endorsement of the manner in which the Commissioner dealt with the Applicants' Notice of Objection. The Commissioner has chosen a course of action which, through no fault of the Applicants in this case, seeks to use this proceeding as a vehicle for testing the Landrow case and other cases which have or may seek to rely upon it. Taxpayers are entitled to expect and rely upon the Commissioner to observe and enforce the law as interpreted from time to time by appellate courts. It is difficult to see any justification for the Commissioner in effect enforcing an interpretation of the law which is contrary to binding authority, while at the same time refusing to treat this proceeding as a true test case and offering to meet the Applicants costs. I will return to behaviour of the Commissioner in the contest of costs.
2. The Tribunal will determine all remaining alternative objections raised by the Applicants, so that if the Commissioner is ultimately successful in having the Landrow case overturned it will not be necessary to hold a further trial in this proceeding. In doing so, the Tribunal proceeds upon the premise that the acquisition of 100 units by Gee Dee on or about 27 March 2007 did amount to the acquisition of an interest in the Unit Trust.

The Three Transactions were Not "Associated transactions"[24]

1. One type of relevant acquisition for the purpose of the land rich provisions is where interests are acquired in an associated transaction and the aggregation amounts to a significant interest.
2. In the notice of objection the Applicants claimed that the they did not engage in an "associated transaction" by reason that:
   1. The acquisitions by Urban, Gee Dee and Webster pursuant to the Unit Sale Agreements were independent transactions because completion of one agreement was not dependent upon completion of the others;[25] and
   2. The three Applicants were neither acting in concert when they purchased the units in the Unit Trust; nor did the three acquisitions by the three Applicants form... substantially one arrangement, one transaction or one series of transactions.
3. Counsel for the Commissioner responded that in relation to paragraph (a) of the definition, persons may be acting in concert if there is at least an understanding between them as to a common purpose or object.[26] The understanding can be informal as well as unenforceable, and may be inferred from the circumstances surrounding the acquisitions under consideration.[27]
4. In relation to paragraph (b) of the definition, an arrangement can be inferred from the circumstances or the conduct of the parties.[28] It can be informal, non-binding or unenforceable and may include bilateral, multilateral and unilateral arrangements. In asking whether acquisitions constitute substantially one arrangement, one transaction or one series of transactions, it is appropriate to look at the substance of the circumstances and determine whether, in substance, there is an essential unity, "oneness" or unifying factor between the acquisitions.[29]
5. Counsel for the Commissioner submitted that the information provided by the Applicants in fact compels the conclusion that Urban, Gee Dee and Webster were acting in concert in respect of their acquisitions of 2 Sand's units, and that the acquisitions by Urban, Gee Dee and Webster formed, evidenced, gave effect to or arose from substantially one arrangement, one transaction or one series of transactions. It was further submitted that these conclusions are to be reached by inference from the following circumstances, amongst others:

(a) the transferor of all the transferred units was 2 Sand;

(b) the transferees of all the transferred units were the remaining unit holders in the Unit Trust, who took in proportion to their existing unit holdings;

(c) the Unit Sale Agreements were identical in form, were entered into on the same day and each involved the same consideration;[30] and

(d) the acquisitions were the result of the common circumstances involving alleged default by 2 Sand.[31]

1. Counsel for the Commissioner also submitted that there is no evidence of independent negotiation by Urban, Gee Dee and Webster. In substance, in their dealings with 2 Sand, they acted as one.
2. For all of the reasons advanced on behalf of the Commissioner, I agree that the only reasonable inference to be drawn from the circumstances of the transfer of units is that the purchase of units by each of the Applicants was an associated transaction' under both heads of the definition. I am satisfied that there is no compelling evidence to the contrary.

Real and apparent purchaser:[32] The exemption under section 85(1)(a) and section 34 applied

1. The Applicants contend that the transfers of the units should be exempt under section 85(1)(a) on the basis that the "apparent purchaser" exemption would have applied had there been a notional direct transfer of land from 2 Sand to the three Applicants.
2. Exemptions from transaction duty under Chapter 2 of the Duties Act are imported into Part 2 of Chapter 3 by section 85(1)(a), which provides:

_(1) An acquisition by a person of an interest in a landholder is an exempt acquisition - _

(a) if the means by which the person acquired the interest would have resulted in no ad valorem duty being payable under Chapter 2 had the subject of the acquisition been a transfer of the land of the landholder to the person;...

1. Section 34 relevantly provides:

_(1) No duty is chargeable under this Chapter in respect of - _

(b) a transfer of dutiable property or marketable securities referred to in section 10(2) from an apparent purchaser to the real purchaser in a case where dutiable property or marketable securities are vested in an apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property or marketable securities.

(2) In this section, purchase includes an allotment.

(2A) In this section, a reference to a real purchaser who provided the money for the purchase of the dutiable property includes a person on whose behalf the money for the purchase of the dutiable property was provided.

"Dutiable property" is defined in section 10(1) to include an estate in fee-simple.

1. In relation to the transfer of land, the question under section 85(1)(a) is whether or not ad valorem duty would be payable on the transfer to the person under Chapter 2. If no ad valorem duty would be payable, then the acquisition by the person of the interest in the landholder is an exempt acquisition.
2. The Applicants contend that the acquisitions of interests in the Unit Trust by Urban, Gee Dee and Webster were exempt by operation of section 85(1)(a) and the exemption from transaction duty in section 34(1)(b) by reason that the Land was vested in 2 Sand (as "apparent purchaser") upon trust for Urban, Gee Dee and Webster (as "real purchasers") who provided the money for the purchase of the Land.
3. The Applicants stated in their Notice of Objection that 2 Sands refused to make any contribution to the purchase of the Land, other than $50,000. The remainder of the purchase price was paid by or on behalf of the Applicants. The Applicants relied upon the decision of Hansen J in Commissioner of State Revenue v Pattison[33] where His Honour found that an equivalent exemption under the Stamps Act 1958 (now repealed) required all the purchase moneys to be paid by the transferees. In that case reference was also made to Triantafilis v Commissioner of Stamp Duties (NSW) which supported the view that the payment of small amounts by some other party could be disregarded as immaterial. The Applicants contend that the payment made by 2 Sands, representing only 0.7% of the purchase price should properly be disregarded.
4. Counsel for the Commissioner submitted that the Applicants have addressed the wrong question. In order to properly make the comparison postulated by section 85(1)(a) in respect of a Chapter 2 exemption such as section 34(1)(b), all the necessary changes to the terms of the exemption provision must be made and references in the exemption provision to "land" or "dutiable property" must be taken to be references to the subject matter of the actual acquisition. The question would therefore be whether the 300 units in the Unit Trust were vested in 2 Sand (as "apparent purchaser") upon trust for Urban, Gee Dee and Webster (as "real purchasers") who provided the money for the purchase of those 300 units.
5. Whichever question is posed, the Commissioner's Counsel submitted that sections 85(1)(a) and 34(1)(b) do not have the effect of exempting the acquisitions of units by Urban, Gee Dee and Webster from duty. In support of this submission, Counsel referred to the following facts and authorities.
6. In relation to the Land, the purchase price under the contract of sale was $7.0 million, with a deposit of $350,000.[34] The purchase price was increased to $7.015 million and that amount was the consideration shown on the transfer instrument.[35] The source of the purchase money was:[36]

(a) for the deposit - money from the Unit Trust's trust fund (sourced from loans from Urban, Gee Dee, Webster and 2 Sand);

(b) for the balance - a bank loan obtained on behalf of the Unit Trust and money from the Unit Trust's trust fund (including money sourced from loans from Urban, Gee Dee, Webster and 2 Sand).

1. In relation to the 300 units issued to 2 Sand on or about 23 July 2004 there is no direct evidence as to the source of the issue price. The Unit Trust's financial statements do show that $1,200 was held in the trust fund in respect of the 1,200 units on issue.[37] Counsel submitted that it could be inferred that each of the unit holders paid $300 for the units issued to them.
2. Counsel referred to authorities on section 34 and equivalent provisions which it was submitted make clear that the exemption does not allow apportionment and that the "real purchaser" must have provided all of the purchase money.[38] Further, the exemption focuses on who provided the money at the time of the purchase, not subsequent conduct.[39]
3. In response to the submissions made on behalf of the Applicants, Counsel for the Commissioner submitted that sections 85(1)(a) and 34(1)(b) do not have the effect of exempting the acquisitions of units by Urban, Gee Dee and Webster from duty for at least the following reasons.
   1. The money for the purchase of the Land was provided on account of the Unit Trust. It was not provided on behalf of Urban, Gee Dee or Webster. As a consequence:
      • there was no real purchaser and apparent purchaser, such that section 34(1)(b) has no application; or
      • the Unit Trust (or its trustee) was the real purchaser of the Land for the purposes of section 34(1)(b).
   2. If any of the money for the purchase of the Land can be said to have been paid by Urban, Gee Dee and Webster, it was not the whole of the purchase money for the Land. There is nothing to suggest that the approximately $147,000 contributed to the trust fund by 2 Sand was paid on behalf of Urban, Gee Dee or Webster rather than on 2 Sand's own account.[40]
4. In relation to the question posed by the Commissioner, Counsel submitted that the acquisitions of units by Urban, Gee Dee and Webster are not exempt from duty for at least the following reasons.

(a) There is no evidence that Urban, Gee Dee or Webster provided the purchase money for the acquisition of 2 Sand's 300 units in the Unit Trust;

(b) There is no evidence that 2 Sand held its units on trust for Urban, Gee Dee or Webster; and

(c) The fact that 2 Sand entered into contracts to sell 100 units to each of Urban, Gee Dee and Webster is not consistent with them being entitled to the units as real purchasers.

1. For all of the reasons advanced on behalf of the Commissioner I agree that there is no objective evidence of any trust relationship between 2 Sand and the Applicants with regard to the acquisition of the Land by the Unit Trust initially or the subsequent transfer of units. Accordingly, there is no basis upon which 2 Sands can be characterized as an "apparent purchaser" for the purpose of section 34(1)(b); and the acquisition of units cannot qualify as an exempt acquisition within section 85(1)(a).

Not "just and reasonable"[41]: The Commissioner ought to have exercised his discretion under section 85(2) to exempt the acquisition

1. Section 85(2) of the Duties Act provides an exemption from duty imposed under Part 2 of Chapter 3 where it would not be "just and reasonable" for the provisions to apply. In particular:

(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.

1. The Duties Act does not provide any criteria according to which the Commissioner is to make his determination.
2. The Applicants contend that the acquisition should not be treated as a "relevant acquisition" on the basis that the Commissioner should have been satisfied that it would not be just and reasonable to apply the land rich provisions to these unit trust transactions.
3. In their Notice of Objection[42] the Applicants submitted that the following circumstances were relevant to the application of section 85(2)[43]:

(a) Urban, Gee Dee and Webster made substantial contributions towards the purchase of the Land and procured guarantees for finance purposes, while 2 Sand made a small contribution[44] and did not procure guarantees;

(b) the consideration for Urban, Gee Dee and Webster to acquire 2 Sand's units was only $1 per unit in recognition of the fact that the value of 2 Sand's interest in the Unit Trust was nominal;

(c) it was disproportionate to impose duty corresponding to a 25% interest in the Land when in fact the acquisition corresponded to a negligible interest in the Land or a transfer of the bare legal estate;

(d) ad valorem duty was paid by the Unit Trust on the transfer of the Land and imposition of duty on the acquisition would amount to a second lot of duty in respect of 25% of the Land; and

(e) the Applicants had no intention of evading duty and provided all material information requested by the Commissioner.

1. By reason of these circumstances the Applicants contend that the imposition of duty upon the acquisition by the three Applicants of 25% of the issued units effectively amounts to a double imposition of stamp duty already paid at the time of the acquisition of the whole property acquired by the Unit Trust.
2. Counsel for the Applicants relied upon the following additional grounds:

1. the Commissioner's exercise of discretion miscarried by reason of a failure to take account of the Landrow decision at first instance; 2. the exercise of discretion was flawed by reason that the Commissioner effectively substituted the statutory formula "just and reasonable" with a test of "not anomalous or abnormal";[45] and

1. in view of the subsequent confirmation of the Landrow decision by the Court of Appeal, it would not be just and reasonable to apply the land rich provisions on the basis that the decision of the Court of Appeal was necessarily wrong or never happened.
2. In the Notice of Determination,[46] the Commissioner's delegate reviewed the cases cited by the Applicants and other cases concerning dispensing powers in taxing legislation.[47] In summary, the Notice states the Commissioner's views that:

(a) the dispensing power in section 85(2) is incidental and ancillary and must not defeat the primary object of the taxing legislation;

(b) it is appropriate to exercise the discretion in section 85(2) where there would be an exceptional, anomalous, unexpected or unforeseen outcome in charging duty; and

(c) the scope for the exercise of the discretion is limited given that Part 2 of Chapter 3 already makes detailed provision for what is and is not chargeable with duty.

1. Counsel for the Commissioner submitted that the stated views on the scope of the discretion in the Notice of Determination reflect an attempt to identify whether the application of Part 2 of Chapter 3 to the Applicants' case would be in accordance with the policy of the provisions. The policy of Part 2 of Chapter 3 is to prevent avoidance of duty imposed by Chapter 2 by treating certain transactions in shares and units - which, following application of a number of criteria, are considered as amounting in substance to a transaction in the landholder's land holdings - as transfers of land. In the Applicants' case, a transfer of units relating to a 25% interest in the Land were treated under Part 2 of Chapter 3 in the same way as a direct transfer of a 25% interest in the Land under Chapter 2. The amount of duty is the same. Counsel submitted that this is the factor that is most significant in the exercise of the discretion in section 85(2) and which should be given the most weight.
2. Counsel for the Commissioner responded as follows to the circumstances said by the Applicants to be relevant to the exercise of the discretion:

(a) The type of factual elements described in paragraphs (a)-(c) above help to establish that a direct transfer of a 25% interest in the Land would have been liable to ad valorem duty in the same amount as imposed by the assessment to the Applicants, as there is no reduction in duty or exemption under Chapter 2 in those circumstances. If those factual elements had led to an acquisition of interests by Urban, Gee Dee and Webster in the Unit Trust before they acquired 2 Sand's 300 units, that situation should be dealt with by assessing the liability to duty at that time rather than completely exempting the Applicants from liability. Accordingly, those factors bear little weight in favour of an exercise of the discretion.

(b) The payment of ad valorem duty on the transfer of the Land (paragraph (d) above) is not a factor that weighs in favour of an exercise of the discretion. The transfer of the Land resulting from the contract for (the trustee of) the Unit Trust to purchase the Land is an entirely different transaction from the acquisition by Urban, Gee Dee and Webster of 2 Sand's units in the Unit Trust. The imposition of duty on that acquisition under Part 2 of Chapter 3 is not a further imposition of duty on what was the same dutiable event. The imposition of duty on one dutiable event would rarely if ever be a factor that would bear on an entirely separate dutiable event.

(c) The Applicants' intentions and the manner in which they communicated with the Commissioner (paragraph (e) above) are factors that have little weight in favour of an exercise of the discretion. In lodging acquisition statements, the Applicants were merely complying with an obligation to do so (section 80(1) of the Duties Act). The policy of the Duties Act is that factors such as intention to evade duty and manner of dealing with the Commission are taken into account in the imposition of penalty tax and interest in accordance with Part 5 of the Administration Act and should not have any significant weight in favour of a complete exemption.[48]

1. In relation to the additional grounds raised, Counsel for the Commissioner responded, in summary, as follows:

1. In this application for administrative review the Tribunal stands in the shoes of the Commissioner. Therefore what the Commissioner did or did not take into account in the past is irrelevant to the Tribunal's function. This is not judicial review.[49] 2. The Commissioner rejects the assertion that the statutory test was substituted. The Commissioner has formulated principles to guide the proper exercise of the power, as explained in his Submissions. They assist the Commissioner to discharge his statutory duty, and do not act as a substitute.

1. The Commissioner contends that in giving effect to the policy of Chapter 3 of the Act, the dispensing power has been exercised in a manner consistent with the views expressed in Challenger by Pagone J.

1. The Landrow decision at first instance and on appeal are not relevant to the exercise of the dispensing discretion which operates to exempt duty that is otherwise payable. Therefore it only arises for consideration once it is clear that duty is, in fact, payable.
2. I propose to set out in some detail pertinent observations made in two recent authorities which have led me to the conclusion that the Commissioner has applied the wrong test in purporting to make a determination under section 82(2).
3. First, in Challenger,[50] Pagone J also had to consider an argument by the taxpayer that the exercise of the section 85(2) discretion had miscarried in that case. His Honour referred to the reasons given by the Commissioner in that case for refusing to exempt the relevant transaction. Those reasons include the same grounds for refusal relied upon by the Commissioner in this case. His Honour commented upon such grounds as follows:[51]

It is clear from the Commissioner's reasons that he applied the view that the statutory criteria of whether something is just and reasonable is to be satisfied by asking whether the application of the section to particular facts is not 'anomalous or abnormal'. In my view there is no warrant for the substitution of 'not anomalous or abnormal' for the statutory formula 'just and reasonable' ...

27. ... The statutory test is not whether the application of the provision to the facts of a case is anomalous or abnormal but rather ... whether application of the provisions to the acquisition 'in the particular case' would 'not be just and reasonable' ...

28. Taxpayers able to rely upon s 85(2) have a statutory right to have considered whether their facts and circumstances come within the statutory criterion by reference to which a discretion might be exercised in their favour. The taxpayer in this case is entitled to have the Commissioner consider whether its facts come within the application of the section to its particular circumstances would not be just and reasonable. It is not appropriate for the Commissioner to substitute some other test for that which the legislature has chosen as the basis upon which the taxpayer may be treated favourably or to narrow the breadth of the statutory inquiry which is called for. It is clear from the Commissioner's reasons ... that application of section 89C to the facts in question on the basis that it was 'not anomalous or abnormal' was seen by him as a limitation on what would otherwise have been a broader inquiry for a consideration of whether to exercise the discretion conferred by s 85(2).

29. I would, if I had been required to do so, remit the matter back to the Commissioner for a re-consideration of whether s 85(2) should be applied to the particular circumstances by reference to all matters which bear relevantly and probatively on the exercise of the discretion. It is a feature of modern taxing legislation that the basis of tax is at times expressed more broadly than the policy underlying the tax requires and that the language used to impose the tax is expressed less precisely than may be desirable in every case. The discretion in the Commissioner to relieve a taxpayer from the burden of tax is a means by which the legislature has entrusted to the Commissioner the duty to administer the tax legislation by reference to its terms to the extent that they are consistent with the policy they express. The exercise of the discretion is a matter for the Commissioner but a matter that may be relevant to its exercise is the extent to which the assessment brings to tax "changes in beneficial ownership in land"...[52]

1. Secondly and more recently, in Commissioner of State Revenue v STIC Australia Pty Ltd and RE Funds Management Ltd,[53] the Commissioner had assessed the taxpayers to duty on a "relevant acquisition" under the "land rich" provisions contained in Chapter 3 of the Duties Act. The taxpayers made a submission to the Commissioner that the acquisition should be exempted from duty under the "just and reasonable exemption" contained in s. 82(2). The Commissioner declined to exercise discretion on that basis, raised the assessment and subsequently disallowed the taxpayers' objection. The taxpayers sought review of the Commissioner's disallowance by the Tribunal.[54] In a carefully reasoned judgement Deputy President Macnamara determined that the dispensing power should be exercised in favour of the taxpayers.
2. On appeal to the Supreme Court under section 148 of the VCAT Act leave to appeal was refused by Davies J on the basis that the Commissioner had failed to show that there was any legal error on the part of the Tribunal in reaching its conclusion. The Commissioner sought to challenge "errors" in the Tribunal's reasoning. The question of law on which leave to appeal was sought was:[55]

Whether, on a proper construction of the Act, it is to be implied from its subject matter, scope and purpose that in exercising the power under s 85(2) of the Act, the Tribunal was bound not to take into account:

(a) that the beneficiaries of the Lorimer Street Trust, which was the sole unit holder in the Trust before the acquisition was made, were the same as the beneficiaries of STIC trust which made the acquisition ("the first matter");

(b) that the "relevant entities were seeking to avow themselves of exemptions deliberately created by the Duties Act in a manner consistent with what appears to have been in the contemplation of Parliament" ("the second matter");

(c) that the STIC and related entities kept the Commissioner advised of events as they unfolded such that there was no "pretence or concealment" on the part of the respondents ("the third matter");

(d) that the Commissioner initially "missed" the duty consequences of the acquisition ("the fourth matter"); and

(e) that the respondents did not know of the duty consequences of the acquisition ("the fifth matter")

1. Davies J did not consider that any of the second to fifth matters inclusive raised questions of law and were

... legitimate considerations for the exercise of the dispensing power... [Such matters] ...are plainly matters for consideration by the Commissioner in the exercise of his duty to administer the Act. The proposition can be tested in this way. The specific provisions of the Act disclose an evident policy to impose duty on a transaction which would have been chargeable but for a tax avoidance scheme (the second matter);[56] to promote full disclosure by a taxpayer to the Commissioner (third matter);[57] and to impose obligations on taxpayers in relation to compliance with the Act.[58] In my view it was plainly permissible for the Tribunal to take into consideration whether the taxpayers had acted in accordance with the spirit of the Act and in accordance with their obligations under that Act.[59]

1. In the course of her judgement Her Honour Justice Davies endorsed the comments made by Pagone J in the Challenger case and made further observations concerning the proper exercise of the discretion conferred by section 85(2):[60]

18 Section 85(2) does not express any limit on the exercise of power other than that the decision maker must be satisfied that the charging of duty on the relevant acquisition "in the particular case would not be just and reasonable". The power is circumscribed only by the terms of the section itself and the scope, purpose and subject matter of the Act.

19 The specific language of s 85(2) does not confine the exercise of discretion other than by reference to the content of the requirement that it would not be "just and reasonable" for duty to be charged on the relevant acquisition. They are relative terms which import the requirement to consider the circumstances of the case as a whole.[16] That is made clear by the requirement that the exercise of the dispensing power be directed to the "particular case", importing the requirement that the individual merits of the particular case are to be considered. Both the conferring of the discretion on the Commissioner and the width of the discretion is deliberate. These kinds of dispensing powers have been considered in many cases and should not be narrowly construed. [Davies J then refers to the Challenger case]...

It is clear that Parliament provided a dispensing power that is capable of exercise by reference to the widest range of factors, leaving it to the decision-maker to weigh all the circumstances, guided and controlled by the object and purpose of the Act.__[61]

20 Next, the legislative context of the section[62] does not limit the matters that the Commissioner (or Tribunal) may take into consideration in determining whether a relevant acquisition should be exempt from duty under the "just and reasonable" provision. The discretion in s 85(2) is not fettered by s 85(1). In s 85(1), Parliament has prescribed specific circumstances where a relevant acquisition shall be an exempt acquisition, without regard to any exercise of discretion on the part of the Commissioner. The clear legislative purpose of the dispensing power in s 85(2) is otherwise to leave to the Commissioner, in the administration of the Act, the function of determining whether a taxpayer should be exempted.

23 I am also of the view that the first matter was a lawful consideration...

25 I reject the argument that Chapter 2 exhaustively prescribes those transactions where no duty is chargeable where there has not been a change in the beneficial ownership so that the Commissioner is bound not to take that factor into consideration in the exercise of his dispensing power under s 85(2). That submission fails to give due regard to the evident policy of Chapter 3 itself, which is to bring to tax the acquisition by a person of shares or units in a land holding entity where that transaction would have been chargeable with duty had there been a transfer of land instead. It therefore makes sense that there is a specific exemption in s 85(1)(a) to ensure that Chapter 3 does not bring to tax transactions that would not otherwise have been taxable under Chapter 2 had the subject of the acquisition been a transfer of the land, not an acquisition of shares or units.

26 In my view, the evident purpose of s 85(2) is to enable the Commissioner to relieve a taxpayer from duty consequences attaching to a relevant acquisition in circumstances where Chapter 3 operates on its terms to bring within its operation transactions that Chapter 3 was not intended to capture. In my view, it is entirely consistent with the scope, purpose and object of the Act that the Commissioner take into consideration, in exercising the dispensing power under s 85(2), that the underlying beneficial ownership of the units in SOPT continued to be held by the same persons before and after the relevant acquisition was made by STIC. The primary purpose of the Act is to tax transactions that result in a change of beneficial ownership of dutiable property, by providing for duty to be charged on transfers of dutiable property and on other transactions that result in a change of beneficial ownership of property. There are exceptions, such as may be found in ss 35, 41 and 77A(2), but the fundamental basis for taxation under the Act is a change of beneficial ownership and the dispensing power is in aid of furthering that primary purpose. Whether there has been a change of beneficial ownership is an entirely relevant consideration in the exercise of the dispensing power, in my view. That is not to say that the discretion ought to be exercised in a particular way, but it is not an irrelevant consideration in the judicial review sense. The submission that the Tribunal was bound not to take into account that there had been no change in beneficial ownership must be rejected.

1. I agree with Counsel for the Commissioner that the Landrow judgments have no application to s 85(2). The exercise of discretion under this provision would only arise in the event that the decision of the Court of Appeal is overturned on appeal. The Applicants' invitation to the Tribunal to re-exercise the dispensing power because of the Landrow judgments is misconceived.
2. However, I am otherwise persuaded that this was an appropriate circumstance for the Commissioner to determine that the relevant acquisition is an exempt acquisition on the basis that it is not just and equitable to impose the subject duty.
3. In its Notice of Determination[63] the Commissioner determined not to exercise discretion in favour of the Applicants because he considers that there is nothing exceptional, anomalous, unexpected or unforseen in charging duty on the acquisition...and if the acquisition of 300 units were a transfer of 25% of the Property in the Trust to [the Applicants] the transfer would be liable to duty under Chapter 2 of the Act... for the same amount now being levied.
4. In my view, the Commissioner has committed precisely the same error which was criticised by Pagone J. in Challenger's case. In the context in which this objection is being considered [that is assuming the Landrow decision does not apply] there is no question that the transfer of units is a relevant acquisition for the purpose of imposing duty under the land rich provisions. Equally there is no question that duty would have been levied upon a transfer between the parties of a direct interest in the Land. The only relevant question for consideration by the Commissioner in making a determination under section 85(2) is whether the resultant imposition of duty ... to the acquisition in the particular case would not be just and reasonable. Accordingly, it is incumbent upon the Commissioner to consider the wider circumstances and in that context determine whether an exercise of discretion is otherwise consistent with the policy underlying Chapter 3. This is the point clearly enunciated by His Honour Justice Pagone which in my view was not followed by the Commissioner.
5. The cases of Challenger and STIC both provide an insightful commentary upon the proper application of section 85(2) and identify a number of bases upon which the Commissioner's discretion miscarried in this case. In particular:
   1. The dispensing power should not be narrowly construed and in particular is not fettered by the exemptions specifically provided for under section 85(1);
   2. It was not appropriate for the Commissioner to effectively read down the operation of the dispensing power by reference to another contrived superimposed test. In particular, it is not appropriate for the Commissioner to interpret whether something is just and reasonable by asking whether the application of the section to particular facts is not 'anomalous or abnormal';
   3. The Commissioner must consider all the circumstances of the particular case and then determine, consistent with the underlying policy objectives of the land rich provisions, whether it was not just and reasonable to apply the provisions to the relevant acquisition;
   4. The purpose of s 85(2) is to enable the Commissioner to relieve a taxpayer from duty consequences attaching to a relevant acquisition in circumstances where Chapter 3 operates on its terms to bring within its operation transactions that Chapter 3 was not intended to capture; and
   5. The fundamental basis for taxation under the Act is a change of beneficial ownership and the dispensing power is in aid of furthering that primary purpose. Accordingly, whether there has been a change of beneficial ownership is an entirely relevant consideration in the exercise of the dispensing power.
6. In its Notice of Determination the Commissioner acknowledges that the dispensing power is intended to deal with unforseen or unexpected consequences arising from the facts of a particular case. In my view that is precisely what happened in this case.
7. In my view the Commissioner did apply the wrong test; did not have regard to or had insufficient regard to the particular facts of this case; and failed to apply the correct and only test [being whether the application of Part 2 would not be just and reasonable] consistent with the underlying policy of Chapter 3.
8. In my view the following circumstances together are sufficient to lead to the view that it is not just and reasonable that the duty under Part 2 of Chapter 3 of the Duties Act should apply to the relevant acquisition:

1. 2 Sands in fact contributed a nominal amount to the purchase price of the Land;[64] 2. The refusal of 2 Sands to contribute any further amounts was the precipitating factor to the transfer of its units to the Applicants;

1. The consideration paid to 2 Sands was a nominal $1 per unit and did not reflect a one quarter interest in the underlying value of the Land;

1. The transfer of units took place within a short time frame after settlement of the purchase of the Land by the Unit Trust, when ad valorem duty was paid by the Unit Trust; and 2. There is no question that the transfer of units was effected for the purpose of avoiding duty.

Exempt Acquisition under section 85(1)(d) Duties Act 2000[65]

1. The Applicants contend that s 85(1)(d) operates to make the subject acquisition an exempt acquisition. It relevantly provides:

_(1) An acquisition by a person of an interest in a landholder is an exempt acquisition - _

(d) if the interest concerned is acquired solely from a pro rata increase in the interests of all unit holders or shareholders.

1. The relevant facts are not disputed:[66]

1. The Peninsula Holdings Unit Trust (the Unit Trust) was a "land rich holder"; 2. As at 27 March 2007 and prior to the transactions said to give rise to the liability to land rich duty, four persons - the three Applicants and 2 Sand - each held 300 units in the Unit Trust; and

1. On 27 March 2007, 2 Sand sold its 300 units by selling 100 units to each of the three Applicants for consideration. Thus each Applicant increased its unit holding from 300 to 400 units, and 2 Sand decreased its unit holding from 300 to zero.
2. The Applicants contend that the acquisition of 100 units by each of them from 2 Sand is, within the terms of section 85(1)(d) an interest... acquired solely from a pro rata increase in the interests of all unit holders. The reasoning relied upon by the Applicants can be summarized as follows:[67]

1. The transactions said by the Commissioner to create the liability to land rich duty were the acquisitions by each of the three Applicants of an additional 100 units;[68] 2. Accordingly, immediately prior to the subject transactions, the three Applicants each held 300 units in the Unit Trust and immediately after the subject transactions, the three Applicants each held 400 units. The unit holdings of each of the three Applicants were therefore increased in proportion to their existing unit holdings;

1. The transferees of all the transferred units were the remaining unit holders of the Unit Trust, who took in proportion to their existing unit holdings;[69]

1. The subject transaction, being the acquisition of the 300 units by the three Applicants, was therefore a unit holding acquired solely from a pro rata increase in the interests of all the unitholders, as provided by section 85(1)(d)); and 2. On the assumption that the acquisition of the 300 units by the three Applicants was the "acquisition" of an "interest" [which the Applicants otherwise deny] the acquisition was therefore an exempt acquisition by reason of section 85(1)(d).
2. In my view the reasoning employed on behalf of the Applicants is fundamentally flawed and I concur with each of the submissions made on behalf of the Commissioner. In particular:

1. There was no pro rata increase for all unit holders. Immediately prior to the transactions there were four unit holders: the three Applicants and 2 Sand.[70] For s.85(1)(d) to apply the Applicants must show a proportional increase in the interests all unit holders prior to the relevant transaction: the three Applicants and 2 Sand. 2 Sand sold its interest to the Applicants. Thus only 3 of the 4 unit holders increased their interests. The fourth, 2 Sand, did not. It disposed of its interest. 2. The Applicants reasoning assumes that at the time of "acquisition" there were only the three unit holders, namely the Applicants. Whereas the Applicants' "acquisition" occurred only because 2 Sand sold its units to them, for consideration. It was a transaction of simultaneous exchange: disposition and acquisition were contemporaneous. 2 Sand did not first sell into a vacuum, nor did the Applicants then purchase from one.

1. The acquisition must arise solely from a pro rata increase of the interests of all unit holders. In this case the increase in unit holding of each Applicant was effected by the sale of units by one of the existing unit holders. Hence, the acquisition did not arise solely from a pro rata increase of the interests of all unit holders.

1. In their Notice of Objection the Applicants sought remission in full or to a lower amount the interest charged at the market and premium rates. Although the outcome of this review will require repayment in full by the Commissioner, this ground is still pursued on the basis that if there were any liability to duty the interest imposed should be remitted in full.
2. Interest in the amount of $5,712.43 was charged in the assessment at market and premium rates,[72] from 27 June 2007 to the date of the assessment.[73] At the objection stage, the premium interest was remitted, reducing the amount of interest to $2,477.15.
3. In relation to market interest, the Applicants contend that this interest should be remitted because the position they took was...reasonable and clearly arguable in the circumstances.
4. Counsel for the Commissioner submitted that such circumstances do not warrant remission of market interest, which represents not a penalty but rather a reimbursement to the revenue for being deprived of the use of funds.[74] In fairness to other taxpayers who pay their taxes on time, market interest should only be remitted in exceptional circumstances, for instance where the Commissioner has contributed to the default.
5. Although the imposition of a market rate of interest is not imposed as a penalty per se, in my view the circumstances of this case are exceptional and a market rate of interest should be remitted in full. There is no question that the Applicants made full and relevant disclosure in a timely manner. There is also no question that the objections raised, in particular the primary objection confirmed by the Landrow decision at first instance, was reasonable and clearly arguable in the circumstances and subsequently confirmed by judicial authority. There is little more that a taxpayer can do in the circumstances and it would be unreasonable for the taxpayer to also bear the risk of the cost of unpaid duty from the time the liability is deemed to arise to the date of assessment.

1. In relation to costs of the Tribunal proceeding, it is noted that clause 91 of Schedule 1 to the VCAT Act provides that each party is to bear their own costs in a proceeding under a taxing Act [defined to include the Taxation Administration Act]; and Division 8 [Costs] of Part 4 does not apply to a proceeding under a taxing Act.
2. The Commissioner concedes that the Landrow case binds this Tribunal and that the assessment must be set aside.
3. The Commissioner relies upon the provisions in the Schedule to the VCAT Act as relieving him from any obligation to pay or offer to pay the Applicants' costs. Furthermore the Commissioner states that he has no general or civic obligation to pay the Applicants' costs where there are grounds in the objection, other than the Landrow ground of objection.
4. Counsel for the Applicants submitted that, in light of the foregone conclusion represented by this proceeding, it is most unsatisfactory that the Commissioner has refused to meet the Applicants' costs of the proceeding. The fact that the Applicants must succeed because of the Landrow case is a sufficient, and a compelling, reason for the Commissioner to pay the costs of the Applicants. Counsel further submitted that in any other costs-awarding jurisdiction a party who pursued an indefensible position would be at risk of a costs award on an indemnity basis.
5. Although there is no authority in the Tribunal to award costs in this kind of case, I endorse the submissions made on behalf of the Applicants. The Commissioner has disallowed the Applicants Notice of Objection with the ulterior motive of setting up this proceeding for a test case. While there are important legal issues to explore at the appellate level and the financial ramifications for the Commissioner and the revenue base are potentially very significant, there is no justification for the Applicants being obliged to meet their own costs. The fact that there were alternative grounds also argued by the Applicants does not undermine their position in relation to costs. In view of the Commissioner's foreshadowed appeal, the Applicants were obliged to raise alternative grounds as insurance against the possibility that the principle in the Landrow case is ultimately overturned.
6. The Orders flowing from these reasons are set out above.

[1] section 111(1) of the Taxation Administration Act 1997

1. [2] section 111(1) of the TAA and section 51(2) of the Victorian and Civil Administrative Tribunal Act 1998.

[3] section 115(1)(b) of the TAA (in relation to the duty), and section 116 of the TAA (in relation to the interest)

[4] [2010] VSCA 197

[5] Urban Consolidation and Development Pty Ltd & Ors v Commissioner of State Revenue [2010] VCAT 2124

[6] Clause 89(1) of Schedule 1 to the VCAT Act provides for the Commissioner to file documents with the Tribunal.

[7] Commissioner of State Revenue v Landrow Properties Pty Ltd [2010] VSCA 197 @ para 3

[8] [2008] VSC 590, Headnote (2) 19 December 2008[2008] VSC 590; , (2008) 73 ATR 901, 2008 ATC 20-083.

[9]Commissioner of State Revenue v Landrow Properties Pty Ltd [2010] VSCA 197 [2010] VSCA 197 Neave, Harper and Hansen JJA, 6 August [2010] VSCA 197; 2010, 2010 ATC 20-200.

[11] [2010] VSC 464 (at [2]) Pagone J, 19 October 2010, unreported.

[15] Pursuant to section 109(a) of the Taxation Administration Act 1997 (Vic)

[16] Ground IV in the notice of objection (T2, at page 12).

[17] Ground V in the notice of objection (T2, beginning at page 12). The ground is abandoned in a letter dated 11 December 2008 from the Applicants' solicitor (amongst the correspondence at T9).

[18] This ground is contained in a letter dated 25 November 2008 (T3) seeking to add a further ground.

[19] refer Ex-AP 1 to affidavit of Alan Parish

[20] (2008) 73 ATR 901; [2008] VSC 590. (18 December 2008)

[21]being the decision of Mandie J in Landrow Properties Pty Limited v Commissioner of State Revenue (2008) VSC 590.

[22] (Tab 4) of the filed documents @ paragraph 51

[23] Cf Commissioner of Taxation v Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; (2007) 158 FCR 325, 327 [3] (Allsop J).

[24] Ground 1 of the objection is set out under paragraph I at page 5 of the objection letter dated 27 November 2007.

[26] Adsteam Building Industries Pty Ltd v Queensland Cement and Lime Company Ltd (No 4) [1985] 1 Qd R 127.

[27] Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd & Ors (1995) 13 WAR 407

[28] Federal Commissioner of Taxation v Lutovi Investments Pty Ltd [1978] HCA 55; (1978) 140 CLR 434

[29] Jeffrey v Commissioner of Stamps [1980] 23 SASR 398

[31] See "Background" section of the notice of objection (T2), particularly at paragraph 8.

[32] Ground 3 of the objection is set out at paragraph II at page 5 of the letter of objection dated 27 November 2007. Like Ground 2, this ground is in the alternative, and is without prejudice to these other grounds.

[33] [2001] VSC 113

[36] See "Background" section of the notice of objection (T2) and the financial statements for the Unit Trust (T21). The agreement that governed the relationship between unit holders in the Unit Trust (T18) provided in clause 7 for loans by the unit holders to the Unit Trust and the financial statements treat the unit holders' contributions as loans.

[38] For example: Extra Nominees Pty Ltd v Comptroller of Stamps (Vic) (1990) 21 ATR 3664; Commissioner of State Revenue v Pattison (2001) 3 VR 520.

[39] Gleeson v Commissioner of State Revenue 2009 ATC 20-139; [2009] VSC 464.

[40] See "Background" section of the notice of objection (T2) and the Unit Trust's balance sheet (T20).

[41] Ground 4 is set out under section III at pages 6-11 of the letter of objection dated 27 November 2007.

[42] Ground III in the notice of objection (T2, beginning at page 6).

[43] The Applicants also relied upon authorities where a similar discretion was said to have been exercised: Lee v Chief Commissioner of State Revenue (1998) 41 ATR 1; Chief Commissioner of Stamp Duties v Lee (2000) 45 ATR 130; Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663; (2005) 60 ATR 1.

[44] Being $50,000 which represented 0.7% of the purchase price

[45] Applicant's Counsel relied the comments of Pagone J in Challenger referred to below

[47] Giris Pty Ltd v Federal Commissioner of Taxation [1969] HCA 5; (1968) 119 CLR 365; Federal Commissioner of Taxation v Swift [1989] FCA 413; (1989) 20 ATR 1434.

[48] Section 5 of the Duties Act provides that the Duties Act is to be read with the Administration Act.

[49] For completeness, the Commissioner says he did take Landrow at first instance into account - in its proper place; that is, on the question of the correct operation of (in particular) ss 76 and 77 of the Act (in this proceeding this is described as the "Landrow ground").

[50] See paragraph 29 above.

[52] Victoria, Parliamentary Debates, Legislative Assembly, 13 May 2004, 1314 (John Brumby)

[53] [2010] VSC 608 Davies J, 17 December 2010, unreported (at [26])

[54] STIC (Australia) Pty Ltd & Anor v Commissioner of State Revenue (Taxation) [2010] VCAT 1057 (15 June 2010) Deputy President Macnamara

[56] Duties Act 2000 (Vic) Part 6, Chapter 2.

[57] Eg. Duties Act 2000 (Vic) ss 80, 89, 250J.

[58] Tax Administration Act 1997 (Vic) ss 29, 30, 32.

[61] Giris Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia [1969] HCA 5; (1969) 119 CLR 365; Deputy Commissioner of Taxation of the Commonwealth of Australia v Truehold Benefit Proprietary Limited [1985] HCA 36; (1985) 158 CLR 678; Federal Commissioner of Taxation v Swift [1989] FCA 413; (1989) 20 ATR 1434.

[62] K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48; (1985) 60 ALR 509.

[64] It is noted that the Commissioner alleges that the contribution by 2 Sands was in the order of $147,063, which was still a relatively minor sum in the context of the total purchase price and the liability incurred by the Applicants.

[65] Refer Applicants Statement of Legal Contentions - Submission Re section 85(1)(d) dated 8 March 2011

[66] Refer pars 7 and 8 of the Respondent's Outline of Submissions dated 1 March 2011; Statement of Agreed Facts; and paragraphs 5, 10 & 11 of affidavit of Alan Parish

[67] Applicants' Statement of Legal Contentions paragraphs 7-14

[68] refer paragraph 15(c) of the Outline of the Respondent's Submissions

[69] para 33(b) of the Outline of the Respondent's Submissions

[70] In its Submission the Applicants omit reference to 2 Sand's status as a unit holder prior to the transactions (see [6]). They also omit reference to 2 Sand as the seller of the units ([7]).

[71] Ground VI in the notice of objection (T2, beginning at page 14). The ground receives no elaboration in the Applicants' statement of legal contentions dated 23 December 2010.

[72] (see section 25 of the Administration Act)

[73] The 27 June 2007 date is 3 months after the relevant acquisition was made. The Commissioner normally does not charge interest during the period allowed to taxpayers in section 80(1) to lodge an acquisition statement. The 1 October 2007 date is the date of the assessment.

[74] Maax Spa Corporation Pty Ltd v Commissioner of State Revenue (2004) 57 ATR 291; [2004] VCAT 1814 at [17], applying Chief Commissioner of State Revenue v Incise Technologies Pty Ltd and Incise Sales Pty Ltd (2004) 56 ATR 82; [2004] NSWADTAP 69 at [60]. See too the Commissioner's Revenue Ruling TAA.007.