ALCAN (NT) ALUMINA PTY LTD v COMMISSIONER OF TERRITORY REVENUE (NT)
Judges: French CJHayne J
Heydon J
Crennan J
Kiefel J
Court:
High Court of Australia
MEDIA NEUTRAL CITATION:
[2009] HCA 41
Hayne, Heydon, Crennan and Kiefel JJ
17. This appeal from the Court of Appeal of the Northern Territory concerns a disputed assessment of stamp duty by the Commissioner of Territory Revenue (
"
the Commissioner
"
) for Alcan (NT) Alumina Pty Ltd (
"
Alcan
"
) under the
Taxation (Administration) Act
(NT) (
"
the Act
"
)
[29]
18. The parties brought two issues before this Court in two separate appeals. The first appeal, brought by the Commissioner, raises the question of whether the property of GAL to be assessed for stamp duty included
"
goodwill
"
as that term is understood in
Federal Commissioner of Taxation
v
Murry
[30]
The transactions
19. GAL is a joint venturer in the business enterprise of operating a bauxite mine and alumina refinery near Nhulunbuy on the Gove Peninsula, Arnhem Land, in the Northern Territory. On 30 January 2001, CSR Investments Pty Ltd executed a share sale agreement pursuant to which 70 % of the share capital in GAL was transferred to Alcan. At the same time, GAL entered into a share buy - back agreement with AMP Life Ltd ( " AMP " ) for the remaining 30 % of its shares. By these two transactions, Alcan became the sole shareholder in GAL.
20. The prices agreed to be paid for the two acquisitions were US $ 275 million for the 70 % share interest and US $ 117.9 million for the share buy-back, totalling US $ 392.9 million. After adjustments, the total Australian dollar equivalent of the acquisition prices was A $ 740.1 million.
Joint venture assets
21. The
"
land
"
to which GAL was entitled at the relevant date comprised leases granted under statute
[32]
22. One of these leases, Special Mineral Lease 11, included land on which the joint venture has a number of key assets, namely:
- (a) the mine site comprising 49,466 acres;
- (b) a corridor of land comprising an area of 698 acres for the purpose of establishing, operating and maintaining a bauxite conveyor installation for the transportation of bauxite from the mine site to the bauxite treatment plant area; and
- (c) a third area of land containing approximately 600 acres located by the wharf area which is used for the purpose of operating and maintaining the bauxite treatment plant and stockpile area, as well as office buildings and other buildings used or associated with the treatment plant.
In addition, the joint venture has a number of special purpose leases which relate to associated facilities, including the township. All but two of the leases were granted for a term of 42 years commencing in 1969 and contain an option to renew for a further 42 years.
The assessment
23. On 16 November 2005, the Commissioner determined that the transactions involved relevant acquisitions for the purposes of Div 8A of Pt III of the Act. Division 8A operates to charge the acquirer of shares in a corporation with stamp duty as if the acquirer had acquired the same proportionate interest in the land of the corporation that the shares represent
[33]
ATC 10160
duty on the transactions in the amount of $ 31,050,000, together with a penalty of $ 16,467,997, making Alcan ' s total liability $ 47,517,997.Relevant legislation
24. In 1988, the
Taxation (Administration) Amendment Act (No 2)
1988 (NT) inserted into Pt III of the Act a new Div 8A (ss 56C
-
56U) entitled
"
Change of Control of Certain Land
-
owning Corporations and Unit Trusts
"
. Part III is headed
"
Liability to Duty or Tax
"
. Following the insertion of Div 8A and prior to the transactions under consideration here, the Act had been relevantly amended on four occasions, in 1992
[34]
25. On the occasion of the Second Reading Speech the Treasurer, Mr Perron, explained that the amendments which became Div 8A were directed to a specific mischief. He said
[38]
" [ T ] he amendments will introduce measures to counter the avoidance of conveyance duty where a company or unit trust is set up temporarily to hold land which is, in effect, then sold by transferring the relevant shares or units. At present, such a transfer can attract a significantly lower level of marketable security duty based on the number of units transferred, rather than the conveyance duty assessed on the value of the land. In many cases, such purchases are commercially artificial and are carried out to avoid stamp duty. "
Relevantly, the statutory scheme in Div 8A for levying duty on the acquisition of " land rich " companies is contained in the following provisions of the Act, which, at the date of the relevant transactions, provided as follows:
- " 4. Interpretation
- (1) In this Act, unless the contrary intention appears -
- …
- ' dutiable property ' means -
- (a) land;
- …
- and includes an estate or interest in dutiable property;
- …
- ' instrument ' includes any document;
- …
- ' land ' means land in the Territory [39]
“ The Territory ” was defined at the relevant date in s 18 of the and includes -Interpretation Act (NT) relevantly as “ the geographical area constituting the Northern Territory of Australia ” .
- (a) a lease of land;
- (b) a mining tenement under the Mining Act, including information relating to the tenement; and
- (c) a fixture to land, including a fixture to land comprised in a lease or mining tenement;
- ' lease ' includes a lease granted under an Act, a sub - lease and an agreement for a lease or sub - lease, but does not include -
- (a) an attornment under a mortgage or contract of sale;
- (b) a right granted by a company to a shareholder of the company, by virtue of his being such a shareholder, to occupy or use land owned or held under lease by the company; or
- (c) an option to renew a lease;
- …
- 56K. When statement to be lodged
- (1) Where by a relevant acquisition a person acquires a majority interest or a further interest in a corporation to which this subdivision applies, that person shall prepare and lodge with the Commissioner a statement in respect of that acquisition.
- …
- 56M. Statement chargeable with duty
- (1) A statement lodged under section 56K is chargeable, in accordance with section 56R, with duty at the rate provided for in item 5 in Schedule 1 to the Stamp Duty Act …
- 56N. Corporations to which this Division applies
- (1) This Division applies to a relevant acquisition of shares in a corporation that is -
- (a) a corporation, other than a corporation shares in the capital of which are listed on a recognized stock exchange within the meaning of the Securities Industry (Northern Territory) Code ; and
- (b) a land - holder within the meaning of subsection (2).
ATC 10161
- (2) A corporation is a land - holder for the purposes of this Division if, at the time of a relevant acquisition -
- …
- (b) the value of all land to which the corporation is entitled, whether in the Territory or elsewhere, … is 60 % or more of the value of all property to which it is entitled, other than property directed to be excluded by subsection (4) …
- (4) There shall not be included, for the purpose of calculating the value of property under subsection (2)(b), any property of a corporation or a subsidiary within the meaning of subsection (5) that is -
- (a) cash or money in an account at call;
- (b) a negotiable instrument or money on deposit with any person;
- (c) money lent by the corporation or a subsidiary to a person …
- 56P. Meaning of relevant acquisition
- (1) An acquisition by a person is a relevant acquisition for the purposes of this Division -
- (a) where it -
- (i) is an acquisition of an interest that alone constitutes a majority interest in the corporation …
- other than an interest acquired -
- (c) before 17 August 1988; or
- (d) as a result of an agreement entered into before 17 August 1988.
- …
- 56Q. Meaning of ' interest ' , ' majority interest ' and ' further interest '
- (1) For the purpose of section 56K, a person acquires an interest in a corporation if the person, or the person and a related person, acquires on or after 17 August 1988, otherwise than as a result of an agreement entered into before 17 August 1988, a shareholding in the corporation that would entitle the person, or the person and a related person, if the corporation were to be wound up after the shareholding was acquired, to participate (otherwise than as a creditor or other person to whom the corporation is liable) in a distribution of the property of the corporation.
- …
- 56R. How dutiable value determined
- …
- (2) Where by a relevant acquisition a person acquires a majority interest in a corporation, the dutiable value is the same proportion of the unencumbered value of the land in the Territory to which the corporation is entitled, as provided by subsection (4), at the time of the acquisition, as the proportion of the property of the corporation which the person, or the person and a related person, would be entitled, as provided in subsection (5), after the acquisition. "
26. The
Stamp Duty Act
(NT) (
"
the Stamp Act
"
) is incorporated into, and to be read as one with, the Act
[40]
27. It is relevant to note that the definition of " lease " , by reference to exclusions (a), (b) and (c) set out above, has been in that form in the legislation since 1978. The definition of " dutiable property " was inserted by the Taxation (Administration) Amendment Act (No 2) 1991 (NT). It is also necessary to note that the definition of " land " was inserted into the Act in 2000 by the Taxation (Administration) Amendment Act 2000 (NT) ( " the 2000 amendments " ).
The issue
28. The ultimate issue was identified correctly by the primary judge as whether Alcan is liable to stamp duty in respect of either or both of the transactions involving the issued capital of GAL and, if so, in what amount
[43]
ATC 10162
(other than property directed to be excluded). It is common ground that without the inclusion of the value of the options to renew in the leases this 60 % threshold would not be met. It is therefore agreed by the parties that Alcan ' s liability for stamp duty turns on whether " land " referred to in s 56N(2)(b) includes an option to renew a lease.29. The resolution of that issue requires consideration of the definitions in s 4(1) of the Act. The definition of
"
land
"
includes a
"
lease of land
"
but the definition of
"
lease
"
expressly states that
"
'
lease
'
…
does not include
…
an option to renew a lease
"
. Those definitions apply
"
unless the contrary intention appears
"
. The Court of Appeal of the Northern Territory found a contrary intention with the effect that
"
land
"
was interpreted by the Court of Appeal to include
"
an option to renew a lease
"
, notwithstanding the abovementioned definitions
[44]
The proceedings below
30. Alcan lodged an objection against the Commissioner
'
s assessment pursuant to s 100 of the Act. The Commissioner dismissed Alcan
'
s objection and determined that the assessment was payable according to its terms. Alcan successfully appealed from the Commissioner
'
s dismissal of the objection to the Supreme Court of the Northern Territory and the assessment was set aside
[45]
Construction of " land " by the primary judge
31. There were two hearings and two sets of reasons for judgment given by the primary judge. In the first set of reasons
[47]
32. The starting point for the primary judge was that even though leases are in law personalty, they have long been regarded as land. So much was uncontroversial. His Honour also accepted a submission on behalf of the Commissioner that a covenant to renew runs with the land and with the reversion and is an incident of a lease.
33. His Honour found that there was therefore no need for the definition of land in s 4 to include a lease
"
as plainly a lease of land is already
'
land
'
"
[48]
" The purpose, it seems to me, of these definitions [ ie of ' land ' and ' lease ' ] , is to exclude from what is ' land ' those things which are excluded from the definition of ' lease ' which, relevantly to this case, means that the options to renew are not part of the lease and must be ignored. Otherwise there is no work to do for the words ' includes a lease … but does not include … ' etc in the definition of ' lease ' and no work for the words ' includes a lease of land ' in the definition of ' land ' . … The result is that the option to renew is not ' land ' as defined. "
34. In the second set of reasons
[50]
Reasoning in the Court of Appeal
35. The Court of Appeal found error in the reasoning and conclusions of the primary judge and set aside his judgment. The Court of Appeal decided that the word " land " in Div 8A did not take its defined meaning in s 4, at least to the extent that an option to renew a lease was thereby excluded. That conclusion depended mainly on an analysis of the history of the legislation from 1978 to 2000.
36. The Court of Appeal accepted submissions from the Commissioner to the effect that a contrary intention is manifest and the common law definition of a lease (which includes, as an incident, an option to renew a lease) should be preferred to the definition of lease in the text of the Act. The contrary intention was said to be evinced by the context and legislative history, particularly as the latter suggested that the purpose of the relevant amendments was to increase the capacity of the Northern Territory to raise revenue through the imposition of stamp duty. The primacy given to these considerations is exemplified in the
ATC 10163
following extracts from the judgment of Martin (BR) CJ [51]" It is readily understandable that on an instrument for a lease in respect of which duty is assessed by reference to the rent payable for the term of the lease, the legislature would intend to exclude an option to renew for the purposes of assessing duty because it might never be exercised. However, it is also readily understandable that the legislature would intend that duty be assessed on the transfer of a lease on the basis of the total value of the lease, determined by reference to all the incidents of the lease. Indeed, it would be surprising if the legislature intended to sever from the lease an incident of the lease which contributes to the value of the lease.
…
The application of the definition [ of ' lease ' in s 4(1) ] would result in dissecting from a lease, for the purposes of assessing the value of the lease, an incident of the lease that travels with the lease upon conveyance. Such a dissection would create an air of unreality in relation to the assessment of the value of the lease being conveyed. The legislature intended to apply duty according to the market value of the lease being conveyed and exclusion of an option to renew contained in a lease would distort the value. Exclusion of the option to renew would also reduce the revenue of the Territory. I am unable to discern any sound reason for applying the definition of lease to a conveyance of a lease. For these reasons, in my view a ' contrary intention appears ' and the definition does not apply to a conveyance of a lease.
…
Over the years since 1978, the legislature has consistently increased its capacity to raise revenue by closing off avoidance practices and increasing the range of transactions attracting duty. …
Read literally in isolation from the legislative history, and applying the definitions in s 4 without qualification, the ordinary meaning of the provisions excludes an option to renew from ' land ' for the purposes of Div 8A and from ' dutiable property ' . However, apart from such a literal application of the 2000 amendments, there is nothing in the amendments or the extrinsic material to suggest that, contrary to the consistent history of increasing its capacity to raise revenue through the application of stamp duty, the legislature intended in 2000 to reduce that capacity by excluding options to renew leases from the value of ' land ' held by a corporation for the purposes of Div 8A. "
37. This reasoning led the Court of Appeal to overturn the primary judge ' s decision and to hold that, for the purposes of valuing the land to which GAL was entitled at the time of the relevant acquisitions, the value of the options to renew the leases should be included.
Submissions on the appeal
38. Alcan sought to restore the decision of the primary judge, relied on the natural and ordinary meaning of the definitions of " land " and " lease " in s 4(1) of the Act and contended that no contrary intention appears in s 56N(2)(b).
39. Alcan accepted that a contrary intention might be discerned, not only in the text of legislation, but also by reference to the purpose and operation of relevant parts of the legislation
[53]
40. Adopting the approach to statutory definitions explained by McHugh J in
Allianz Australia Insurance Ltd
v
GSF Australia Pty Ltd
[56]
41. Next, it was contended that the Court of Appeal erred in not closely considering the text, preferring instead to focus on the context of the Act. It was submitted that in focussing on the context, particularly the legislative history, the Court of Appeal concentrated erroneously on a general legislative intention to amend the
ATC 10164
legislation to increase revenue and on extrinsic materials dealing with the mischief of avoidance of stamp duty, to the exclusion of the text. Alcan also pointed out that a person who did not appreciate the meaning of s 56N(2)(b), as discerned by the Court of Appeal, would be liable to penalties [57]Anderson v Commissioner of Taxes (Vict) [59]
42. The Commissioner sought to affirm the interpretation of Div 8A given by the Court of Appeal with two main arguments. The first was a semantic argument. The second propounded a contrary intention in respect of the definition of " land " as it occurred in s 56N(2)(b) which in turn depended on the definition of " lease " in the Act.
43. First, the Commissioner contended that, as a matter of ordinary meaning, the words " ' lease ' … does not include … an option to renew a lease " do not mean excluding from a lease the value attributable to an option to renew the lease. It was suggested that the words mean " do not add the value of an option to renew to a lease " or, more simply, that they mean " an option to renew is not a lease " .
44. Secondly, in propounding a contrary intention in respect of the definition of
"
land
"
, the Commissioner relied on the context of Div 8A in the
"
widest sense
"
[61]
- •
the definition of
"
lease
"
[63]
The definition was derived from the in the Act, as enacted [64]Australian Capital Territory Taxation (Administration) Act 1969 (Cth): see Northern Territory, Legislative Assembly,Parliamentary Record , 15 June 1978 at 1482.The Act was enacted as the Taxation (Administration) Ordinance 1978 (NT) immediately prior to self-government. The Ordinance was assented to on 30 June 1978 and commenced operation on 1 July 1978. Self-government commenced on 1 July 1978. , contained the same exclusions (a), (b) and (c) as the definition set out above, which applied to this case; in particular, " lease " was defined to exclude " an option to renew a lease " ; - •
in 1979
[65]
The Act was amended in 1979 by the , the statutory scheme for the imposition of stamp duty imposed duty on instruments for conveyance of a lease of an estate or interest in land which was assessed by reference to the consideration paid on the value of the interest transferred. Duty was also payable on an instrument for a lease, agreement for a lease or grant of a lease of an estate in fee simple and duty was assessed by reference to the total rent payable during the term;Taxation (Administration) Act 1979 (NT). - • in respect of the latter, the legislature did not intend to assess duty payable on an option to renew a lease because that term might never come into operation. If a lease were renewed, the renewal would be treated for stamp duty purposes as a grant of a lease. The exclusion of an option to renew a lease from the definition of " lease " was intended to apply to the grant of a lease, not the conveyance of a lease;
- • in Div 8A, as enacted in 1988, the criterion for liability was entitlement to " real property " , which was defined in s 56C to include an estate or interest in real property, so that the definition of " lease " was wholly irrelevant to Div 8A;
- •
the purpose of the 2000 amendments, which inserted a new definition of
"
land
"
and which substituted that term for
"
real property
"
in Div 8A, was to remove doubt as to what was in the tax base
[66]
The definition is set out at [ 25 ] above. It can also be noted that the ; andInterpretation Act (NT) at the relevant date defined land in s 19: “ ‘ land ’ includes all messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate or interest therein ” . - •
the successive amendments to the Act after 1988 up to and including the 2000 amendments precluded any inference that the new definition of
"
land
"
inserted by the 2000 amendments had, as its purpose, the reduction of revenue.
ATC 10165
Conclusions on the construction of " land "
45. It was common ground that giving s 56N(2)(b) its natural and ordinary or literal meaning, once the relevant definitions from s 4(1) were inserted into the substantive text, did not lead to an absurd result of the kind referred to in
Cooper Brookes (Wollongong) Pty Ltd
v
Federal Commissioner of Taxation
[67]
46. It was also common ground that the Act fastened on particular aspects of the bundle of rights created in connection with land
[68]
47. This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself
[69]
48. The Commissioner ' s first argument must be rejected. The construction given by the Commissioner to the words " ' lease ' … does not include … an option to renew a lease " was strained and contrary both to the natural and ordinary meaning of the words and to considerations of grammar and syntax. The construction was tantamount to excising the ordinary adverb of negation " not " , as it occurs in the phrase " does not include " , so as to give the words a meaning quite different from their ordinary and natural meaning such that " lease " would include an option to renew.
49. As to the Commissioner ' s second argument, propounding a contrary intention, the steps in that argument set out above reveal that the critical issue of statutory construction is whether the definition of " lease " to be found in s 4(1) of the Act was irrelevant to Div 8A as enacted in 1988 and whether it continued to be irrelevant when the 2000 amendments inserted the new definition of " land " into s 4(1).
50. In the Court of Appeal, Martin (BR) CJ (with whom Angel and Southwood JJ agreed) observed that over the years the Northern Territory legislature had consistently increased its capacity to raise revenue. Such considerations underpinned his Honour ' s conclusion that Div 8A operates independently of the definitions in s 4(1) because there is no reason to suppose that the legislature intended to reduce its capacity to raise revenue by excluding an option to renew a lease from the definition of " land " .
51. Fixing upon the general legislative purpose of raising revenue carried with it the danger that the text did not receive the attention it deserves. This danger was adverted to by Gleeson CJ in
Carr
v
Western Australia
[74]
" [ I ] t may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling. "
52. There is nothing express in the text of relevant parts of the Act, as enacted, or in amendments made to the Act in 1979
[75]
ATC 10166
reasoning was not based on the text, but on an inference that the text would not apply because it would be surprising if the legislature intended to sever from a lease something which contributed to its value on a conveyance [77]53. In conclusion, " land " in s 56N(2)(b) takes its defined meaning so that it includes " lease of land " and the words " ' lease ' … does not include … an option to renew a lease " bear their natural and ordinary meaning, which is not displaced or reversed by contextual or historical considerations. The general purpose of the Act to raise revenue is insufficient to support an intention to exclude a clearly expressed definition and to substitute a quite different meaning. Accordingly, the value attributable to an option to renew a lease should be excluded in making relevant calculations for stamp duty purposes under s 56N(2)(b) of the Act.
Other arguments
54. There are consequences for a corporation which fails to lodge a statement as required by the Act. First there is a direct offence under s 56K(6) of the Act and secondly under ss 94 and 96 of the Act the Commissioner may apply a penalty when making a default assessment. A power to remit penalties is to be found in s 96(6).
55. Alcan submitted that if, contrary to its main argument, the definitions of
"
land
"
and
"
lease
"
in the Act were found to be ambiguous, after applying the current principles of statutory interpretation referred to above, then it could rely on
Anderson
[78]
Waugh
v
Kippen
[79]
56. The Commissioner contended that Anderson cannot stand with the purposive approach to statutory interpretation which has emerged and is now well settled.
57. Given the basis on which this appeal is to be allowed, it is not necessary to deal with these arguments beyond the making of two points. First, tax statutes do not form a class of their own to which different rules of construction apply; they are to be construed by application of the settled principles referred to above. Secondly, the fact that a statute is a taxing Act, or contains penal provisions, is part of the context and is therefore relevant to the task of construing the Act in accordance with those settled principles. Whether or when
"
rules
"
of the kind considered in
Anderson
[81]
Waugh
v
Kippen
[82]
Orders
58. The appeal should be allowed with costs. Orders 1, 3 and 4 of the Court of Appeal should be set aside. In place of those orders the appeal to the Court of Appeal should be dismissed with costs. This has the effect of restoring the judgment of the primary judge. The Commissioner should pay Alcan ' s costs of the proceedings before Mildren J.
Footnotes
[29][30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]
[41]
[42]
[43]
[44]
[45]
[46]
[47]
[48]
[49]
[50]
[51]
[52]
[53]
[54]
[55]
[56]
[57]
[58]
[59]
[60]
[61]
[62]
[63]
[64]
[65]
[66]
[67]
[68]
[69]
[70]
[71]
[72]
[73]
[74]
[75]
[76]
[77]
[78]
[79]
[80]
[81]
[82]
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