Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue [2004] VSCA 10

Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue [2004] VSCA 10 - VSCA 2004 case summary — Zoe

[7]

so critical to this appeal, consisted of about eight tanks, most of which were used for the purpose of storing petrol, oil and other petroleum products, together with certain related plant and equipment, such as pipes and pumps, which went to make up a petroleum storage terminal at Barclay Crescent, Hastings which was owned and operated by Whitemark Pty. Ltd. ("Whitemark") before the land was transferred into the name of the appellant. There was no dispute on the hearing of this appeal as to the fact that the various tanks and other structures had been properly held to be fixtures, inasmuch as, notwithstanding that they were all, with difficulty because of their size, capable of being detached from the land if somebody was entitled to exercise such a power, they were sufficiently connected to the land to have become an integral part of it. One relevant company, Wickland Oil Terminals Pty. Ltd. ("Wickland Terminals")[3] was said to have obtained a lease of the land and to be the lessee of the land at the time of the transfer and to have the right to remove about half (or thereabouts) of those fixtures as "tenant's fixtures", in particular pursuant to s.28(2) of the Landlord and Tenant Act 1958. Another company Whitemark Rollover Pty. Ltd. ("Whitemark Rollover") was said also to have certain rights (in equity) to detach and remove what were in effect the remaining half of the fixtures pursuant to a complicated transaction, to which reference will be made below, which had led to an assignment by Whitemark of those rights to Whitemark Rollover immediately before the land was transferred. Vopak contended that on a proper understanding of the relevant provisions, including heading VI to the Third Schedule and s.63 of the Act, and the recent High Court decision in Commissioner of State Revenue v. Pioneer Concrete (Vic.) Pty. Ltd.[4], the fixtures were not to be taken into account in assessing the value of the land transferred, although they were at the relevant time fixtures, whereas the Commissioner contended that the very fact that they were fixtures made them part of the estate for the purpose of valuation and, having regard also to the decision in Pioneer Concrete, the interests of Wickland Terminals and Whitemark Rollover should be disregarded for the purposes of assessment.

[21]

It is necessary again to mention briefly the fixtures, plant and equipment, the value of which formed the essential basis for difference between the two values asserted on each side. However, as neither party challenged the findings of the learned member of VCAT on this issue either at the hearing before Hansen, J. or on this appeal, relatively little need be said. Mr Gibson considered the fuel tanks, the other tanks, the pumps and the other loading bay equipment and concluded, having regard to the nature and structure of those items, their connection with the land itself, the cost of their installation, their comparative expense, the difficulty of removing them and finally the fact that they formed an integral part of the terminal, that they were put there to remain permanently on the site or at least for an indefinite or substantial period. He conceded that the tanks in particular rested on their own weight, though they were affixed in a sense by reason of their connection to the pipes attached to them. The fact that the fuel tanks, in particular, were so large meant that any removal from the site would be very difficult and expensive, though the evidence did indicate that similar items have been moved elsewhere in the world, either by rail, crane, modular trailer or by flotation, though the evidence made it clear that it was both a complex and extremely expensive exercise. It is sufficient to say that each of the tanks is between 32.5m. and 44m. in diameter and between 12 and 14.5m. in height. Obviously, the pumps and related pipes are not as bulky, but they would each require to be detached, at least in part, though in comparative terms that would not be so expensive. The learned member pointed out that the tanks had not been removed since their installation so that the plain inference he drew was that they were put there to be left for a very substantial time and so were an integral part of the terminal. In one way or another they were connected with the land so that they should be treated as fixtures rather than as chattels. I should add that it appears that four of the tanks, numbered 101 to 104, appear on the lists of both Whitemark's fixtures and Wickland's fixtures, but at different assessed values, and I can only assume, in the absence of any explanation in the materials to which we were taken, that those values reflect the respective interests of the two companies in those tanks. Neither party appeared to place any significance on this fact, so that I shall not deal with it further, although it would be unusual for two parties to make claims to be entitled to remove the same fixtures as chattels where those claims were based on two different rights.

[45]

At least two other reported cases in the period immediately preceding the passing of what is now s.28(2) of the Landlord and Tenant Act may also help to explain the language of the sub-section. They involved interests in the estate of Madame De Falbe who, as tenant for life of the Luton Hoo estates, had attached a number of exceptionally valuable tapestries with some care to the walls of the drawing room of the mansion, such that on her death the remainderman claimed that they were fixtures. In Re De Falbe[32] the Court of Appeal held that the object of the annexation of the tapestries was the better enjoyment of them as chattels so that they did not pass with the freehold to the remainderman. This decision was affirmed on appeal by the House of Lords in Leigh v. Taylor[33]. A majority of the Court of Appeal (Rigby and Vaughan Williams, L.JJ.) and all but one of the members of the House of Lords appeared to accept two trends in the development of the law relating to fixtures, but then, with the greatest of respect, to overlook their consequences. The first, perhaps most authoritatively stated in Leigh v. Taylor itself, was the additional (and sometimes seen to be controversial) test requiring consideration of the object of annexation, though without examining actual intention, and the second was the expansion of exceptions to the absolute consequences of affixation, which had resulted in tenants for years and tenants for life being permitted during their possession as tenants to remove certain items attached by them which had become fixtures and thus part of the realty. In strictness the first development of the rule could lead only to a conclusion in any case, where the object points unequivocally to a lack of intent to affix, that there has been no sufficient annexation of a particular chattel and thus that it is not and could thereby never be a fixture, whereas the second development in the law assumes that the degree and purpose of annexation were sufficient to make the chattel a fixture, but that the tenant had subsidiary rights to remove the so-called fixture and effectively convert it back to its character as a chattel. The better view of the De Falbe decisions was and is that the tapestries never became fixtures because at all times Madame De Falbe attached them only for the purpose of better enjoying them as chattels. Unfortunately from time to time[34] it was said that the tapestries were each "a sort of ornamental fixture" (sic), though at the same time it was held that they were "not part of the house", so that they were removable as chattels. Likewise their Lordships in both the Court of Appeal and the House of Lords appeared, with respect, to treat the practical qualification of the law relating to fixtures as dependent upon the imposition of the secondary test as to purpose of affixation, whereas for many years the relevant qualification of the strictness of the law had been in the development of principles relating to what had been and are called tenant's fixtures, whether described as trade fixtures or ornamental fixtures, which principles, of course, assume that the chattels become fixtures over which there is a qualified right of removal remaining in the tenant.[35]

[55]

This elaborate description of what occurred to the proposed clause (C) is set out only to explain what occurred when the Real Property Bill was reintroduced the following year.[48] The relevant clause 8 of the bill, which contained some presently irrelevant amendments to the former clause, was incorporated in the bill as introduced in the Council by the Attorney-General on behalf of the Government on 23 July 1907. The previous dispute provides a reason why the Minister did not find it necessary to explain the clause in his Second Reading Speech, except to observe that it was "the rock upon which the Houses split last session". Likewise, in response, the Hon. T.C. Harwood said little about the bill, although he noted the addition of the clause which he thought was "a very innocent one, merely providing for what many people contended should have been the law before now, viz., that if a tenant improved property by putting up any additional buildings, he should have the right to remove them". However, in committee there was further disputation, for in the first place it was pointed out that there was no time limit to the tenant's right of removal, but it was soon amended so as to add the words "during his tenancy but not afterwards" after the words "and shall be removable by him". Secondly some members seemed to think that the clause was rather more far-reaching than had been explained to them previously and debate was then adjourned so as to allow closer examination. When debate was resumed much concern was expressed by Council members as to various aspects of the proposed clause and certain amendments were made to it. What the Attorney-General did make clear in the course of debate was that he had adapted the clause put before the previous parliament after considering what was said to be a similar section passed by the English Parliament, although he was not specific about the section, while at least one other member acknowledged[49] that the clause was "evidently modelled on a section of the English Act", "which was passed to deal with agricultural properties". It may be assumed that this was thereby intended to be a reference to sections such as s.3 of 14 & 15 Victoria c.25 and at least to the provisions subsequently passed relating to agricultural tenancies expressed in not dissimilar terms.

[73]

The issue, nevertheless, is whether, in the light of the statutory scheme and in the light of binding authority on the Act and in particular the High Court decision in Pioneer Concrete, the value of the estate transferred should take account of Whitemark Rollover's interest. The latter case is relied on by the Commissioner to place a seemingly inflexible interpretation on the word "conveyance" and more particularly on the expression "any estate or interest in real property", which forms part of the definition of "real property" in s.63 of the Act. More particularly it is said that the language of the statute requires a restrictive approach to be taken to the process of valuation pursuant to sub-para.(B) in determining the amount for which the real property might reasonably have been sold free from encumbrances in the open market. It is then said that, not only does one ignore the effect and arguable diminution in value of the transferred property by reason of any obligations to repay and the like pursuant to any mortgage, charge or similar security over the land, but one further ignores the effect on the value of the land transferred of all other interests in the land held by a third party, unless they can be characterised as "exceptions" or "reservations" as defined by the High Court in para.[40] of Pioneer Concrete.[54] The High Court said that those definitions were consistent with the Victorian decision in Chirnside v. Registrar of Titles[55]. The consequence was, in the Commissioner's contention, that any equitable interest in Whitemark Rollover arising out of its right to reclaim Whitemark's fixtures was not an interest which should be recognised for the purposes of determining the value of the real property transferred. Counsel for the Commissioner seemed to concede only that certain legal interests in the estate, such as the leasehold interest held to reduce the value in Commissioner of State Revenue v. Bradney Pty. Ltd.[56], could be ignored, for it was argued that, whereas legal interests might be treated as having been "carved out" of the estate, equitable interests were merely "impressed upon" the interest of the holder of the estate being capable only of enforcement pursuant to the rules of equity.[57] So, it was said, the mere impressing of Whitemark Rollover's rights in the chattels on the appellant's interest in the land was not sufficient to deny the appellant's full interest in the estate in the land, such that it must be given its full value for the purpose of exacting duty on the transfer of it.

[94]

The Commissioner's primary contention was that the only qualifications on the estate or interest transferred which could be looked at by commissioner or court for the purposes of s.63 were either exceptions or reservations, or legal proprietary interests which qualified the title. The argument seemed, fallaciously, in my opinion, to depend on twin foundations, one that stamp duty was imposed on instruments rather than transactions and secondly that the instrument here transferred only an unqualified estate in fee simple in the subject real property. The contrary, as posited by counsel, would have been a duty on transactions which might take account of the various personal rights of the parties to transactions, which the Act, so it was said, intended to eschew. One cannot doubt the emphasis in the authorities on transactions; indeed so far as heading VI is concerned, whatever be its possible inapplicability in relation to certain other heads of liability, such an emphasis is beyond argument on the authorities. It is the consequences which are more important. Counsel likewise emphasised that the relevant instrument expressed itself in terms of transferring merely the "estate in fee simple" in the described land. That, however, takes one very little further along the relevant path of enquiry. The language so used is required by the terms of the Transfer of Land Act 1958 and, in a sense, is a shorthand devised to allow the simple passing of interests in real estate from transferors to transferees, but it does not deny that under or pursuant to that act other interests not mentioned in the transfer may affect that which is transferred and that other interests which are incapable of registration may be enforced indirectly, in particular by the caveat procedure. In any event, although exceptions to the Torrens system may now be very few, titles and estates may be passed in other ways. Title itself under the general law applicable to unregistered land may still be conveyed and equitable interests in land may be transferred by any document to which equity will give recognition. All of these are equally the subject of heading VI and of the provisions relating thereto, the principal ones having already been described.

[96]

As part of this argument considerable emphasis was placed upon the absence of any exceptions or reservations to the transferor's interest. Weight was placed on the observation in Pioneer Concrete that in that case "there was no reference in the transfer to any exception or reservation of any kind".[90] Some emphasis was placed upon the detailed definitions given of those two terms, in particular by referring to the observations of Hope, J.A. in DKLR Holding (No. 2), but also referring to the earlier Victorian decisions of Chirnside v. Registrar of Titles[91]. In my opinion, however, undue significance was given to this discussion. It was important in Pioneer Concrete because of the nature of the interests there under consideration and the way in which the case was argued. There the primary issue, as formulated by the trial judge, was whether the transfer was "to be treated as subject to the reservation to the vendor of tipping rights as specified in the contract of sale" (emphasis added). Thereafter on a number of occasions the High Court referred to the matter in terms of the allegation that there was a "reservation" and as to how the lower courts had dealt with that allegation. The trial judge's answer to that question was "No", but the Court of Appeal took the opposite approach, saying that the existence or otherwise of a reservation was irrelevant to the question of valuation.[92] The Court of Appeal therefore approached the matter on the basis that valuation of the vendor's interest was central to the question in the case, and the precise characterisation of the interests were irrelevant, "unless they amounted to an exception or reservation from the property transferred".[93] Although those matters were of significance to the resolution of Pioneer Concrete and thus were emphasised from time to time, the reasoning of the High Court was obviously wider, so that the detailed references to exceptions and reservations were merely part of their overall reasoning, but justifying, in terms of the history of the case, some more detailed examination.

[100]

It may be accepted that an equitable interest strictly binds only the conscience of the holder of an estate or interest in land, but it is now too late to say that it does not constitute an "interest" enforceable in the courts or that it should be distinguished or ignored when making a valuation of an estate or interest for the purposes of heading VI. Counsel asserted that, where a conveyance or transfer was expressed to be of an "estate" (in fee simple) in land, equitable interests could not qualify that estate or have a bearing on its value, largely again because they are not "carved out" of the estate, so that the estate remains unimpaired for the purpose of valuation. But if both hypothetical vendor and purchaser could fairly take account of an equitable interest in fixing their price on sale, then surely it cannot be ignored because it is merely "impressed upon" the estate. Certainly, if it amounted only to a personal equity or an obligation peculiar to the vendor not amounting to an interest, it must be ignored, but if it is an equitable interest enforceable against any holder of the estate by action or by use of the caveat procedure under the Transfer of Land Act, then it ought to be taken into account for that purpose. As the Court emphasised in Pioneer, if interests are of a kind which would "reduce the amount for which the relevant real property, that is, the estate in fee simple in the land the subject of the certificates of title, might reasonably be sold free from encumbrances at the date of sale"[96], then they are fundamentally different from the personal contractual rights there considered. Although the High Court in the same paragraph said that the subsequent 1997 amendments, effected by the insertion of sub-ss.(3A), (3B) and (3C) of s.63,[97], being there discussed, were not decisively relevant to the construction of the provisions of the Act then under consideration, they were in force at the time of the present sale in 1998 and were therefore part of both the statute and in particular of s.63 at the relevant time. Those provisions would point, at the very least, to a broad rather than a narrow, meaning of s.63 and of sub-para.(B) of sub-s.(3)(b)(i) thereof.

[108]

The final question is whether the first contract of 8 May relating to Whitemark's fixtures resulted in the creation of an equitable interest enforceable against the land. I have assumed that it did, largely because there was comparatively little argument put against that proposition. The crux of the respondent's case was the lack of relevance of such equity interests. A number of authorities were cited by the appellant in favour of the view that by the contract enforceable rights were created, not merely to remove the fixtures as chattels, a contradiction in terms in itself, but to the effect that any such right entitling a third party to claim and remove fixtures was in itself an interest in land enforceable against the owner for the time being, because, by definition, those items, which had been chattels and which might again be converted into chattels, were by virtue of the doctrine as fixtures part of the real property at the relevant time. A right to take away part of that which constitutes realty must be an interest in it, not an interest in some hypothetical chattels as they might thereafter become on enforcement of the right. For this or similar propositions the following cases were cited: Cottee Dairy Products Pty. Ltd. v. Minad Pty. Ltd.[107]; Kay's Leasing Corporation Pty. Ltd. v. CSR Provident Fund Nominees Pty. Ltd.[108]; Eastern Nitrogen Ltd. v. FCT[109]; FCT v. Metal Manufactures Ltd.[110]. The respondent in answer cited Emanuel (Randle Mall) Pty. Ltd. v. Commissioner of Stamps (S.A.)[111], but in my opinion the circumstances were significantly different in that at the relevant time the transferor had ownership both of the real property and so in what otherwise would have been chattels, namely the fixtures. On the contrary in the present case the owner of the land had already divested itself of its rights to the fixtures, at least in equity. Some reliance was placed by the respondent on Mills v. Stokman[112] but, in my opinion, not only was that a case about profits à prendre, but, insofar as it dealt with an analogous subject matter, it seemed to support the view that an agreement of the relevant kind was capable of creating "an interest in the land".[113] I am not persuaded that the interest here created was merely either a contractual interest or a personal right, so that I would conclude that there was an interest enforceable against the land and its owner for the time being. If that be so, then such an equitable right ought to be taken into account on assessing the amount for which the property might be sold.

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