COMMISSIONER FOR ACT REVENUE v ARAGHI & ANOR

Judges:
Penfold J

Court:
Supreme Court of the Australian Capital Territory

MEDIA NEUTRAL CITATION: [2013] ACTSC 43

Judgment date: 14 March 2013

Penfold J

Introduction

1. The respondents to this appeal signed two contracts with the intention of obtaining a house in a new development in Canberra. One contract was for the purchase of a block of land (strictly, for the purchase of a Crown lease), and the other was with a developer for the building of a house on the land concerned. Both contracts provided, in general terms, that the house was to be built before the land sale was completed, and that the sale would not be completed until the house was built.

2. The Commissioner for ACT Revenue ( the Commissioner ) assessed the contract with the seller of the Crown lease as a dutiable transaction under the Duties Act 1999 (ACT), and assessed the value of the transaction as the total value of the lease and the related building contract.

3. On 3 November 2010 the ACT Civil and Administrative Tribunal ( ACAT ) at first instance set aside that decision of the Commissioner (
Roozbeh Araghi and Luke Johnathon Dorsett v Commissioner for Australian Capital Territory Revenue [2010] ACAT 78) and remitted the matter to the Commissioner for reconsideration.

4. The Commissioner appealed the ACAT decision under s 79 of the ACT Civil and Administrative Tribunal Act 2008 (ACT) (the ACAT Act ), and on 17 December 2010 the Appeal President referred the matter to the Supreme Court under s 83(1) of that Act.

5. Under s 79 of the ACAT Act, an appeal within ACAT lies on "a question of fact or law". No question of fact appears to arise in this case. Nor has any question of law been identified as such, and certainly none was identified in the notice of appeal from ACAT's

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decision, despite the requirement set out in the ACAT approved form for a notice of appeal for the appellant to "state … any questions of law or fact involved".

6. The ground of appeal was identified as that:

ACAT erred in failing to hold that, under chapter 2 of the Duties Act 1999, duty was assessable on the value of the land as improved by the erection of a residence pursuant to the agreement for sale or transfer of block 25 section 15 Crace that constituted the dutiable transaction.

7. There is no agreed statement of facts, but fortunately the facts do not seem to be in dispute.

The facts

The land sale contract

8. The respondents to this appeal, Roozbeh Araghi and Luke Johnathon Dorsett ( the Buyer ) entered into a contract ( the land sale contract ) with the Land Development Agency ( LDA ) on 9 April 2009 to buy the lease of a specified block in Crace, a suburb of Canberra, for $81,000.

9. In general terms, this contract required the Buyer to enter a further contract, with another party (the "developer"), for the building of a house on the block, and to complete the building contract before the land sale contract was completed.

10. The land sale contract identifies the "developer" as Crace Developments Pty Ltd ( Crace Developments ) and refers to a "Home Building Contract" between the Buyer and Crace Developments entered into "on or about" the date of the land sale contract (cl 1.1).

11. The land sale contract contains provisions about the completion of the contract; among other things, the land sale contract must be completed within 28 days after the latest of three dates, one being the Date of Practical Completion under the Home Building Contract) (cls 2.6 and 22). There are provisions (cl 27) about the developer's proposal to develop the land including the relevant Crown lease under a Community Plan under the "Community Title Act" (presumably the Community Title Act 2001 (ACT)). Clause 30 contains an undertaking by the Buyer to develop the land subject to the land sale contract in accordance with the Community Title Scheme and the Community Title Plan, and cl 27.4 gives the Buyer a right to rescind the contract if a change to the developer's approach causes, in general terms, a substantial detriment to the Buyer.

The building contract

12. On the same day, the Buyer entered into another contract ( the building contract ) with Crace Developments. This contract identified the block to be built on, the contract price for the house to be erected ($352,900), and a "target date" of 31 December 2010; by cl 2(b) of the building contract, the developer was required to reach Practical Completion by the target date, subject to extensions available under cl 10.

Interdependence

13. Each of the two contracts contains provisions referring to, relying on, or "adopting" provisions of the other contract. For instance, as well as the significance for the land sale contract of Practical Completion under the building contract (at [11] above):

(a) clause 1.1 of each contract refers to the entry into the other contract;
(b) clause 11 of the building contract refers to breaches of that contract or the sales contract; and
(c) clauses 12.2 and 13 of the building contract adopt several provisions of the land sale contract dealing with defaults, and cl 18 relies on the notice provisions of the land sale contract.

14. As well, each contract contains a provision specifying that the contracts are interdependent or, more accurately, that completion of the contract concerned is "interdependent with and conditional on" completion of the other contract.

15. Clause 31 of the land sale contract is as follows:

31.1 Completion of this contract is interdependent with and conditional on completion of the Home Building Contract entered into with respect to the land by the Buyer. If the Home Building Contract is rescinded or terminated, this Contract is taken to be rescinded.

16. Clause 7.1 of the building contract says:

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Completion of this contract is interdependent with and conditional on completion of the Sale Contract in respect of the Site. If the Sale Contract is rescinded or terminated, this contract is taken to be rescinded.

17. It is not clear to me that the "interdependent contract" provisions do any more than give a label to the relationship between the two contracts that is created by the provisions I have mentioned and various others.

The assessment

18. The Commissioner assessed stamp duty on the Buyer's acquisition of the house and land at $16,864.50, based on a dutiable value of $433,900, being the total of the land sale price and the amount payable under the building contract.

The applicable legislation

19. The relevant provisions of the Duties Act are set out in the Appendix to this judgment. Before summarising their application, I note that there appear to be some gaps in the attempt to adapt common form duties legislation (for instance as enacted in New South Wales (Duties Act 1997 (NSW)) and other Australian jurisdictions) to take account of the ACT's leasehold system of landholding. There are references at some appropriate points in the Duties Act to Crown leases, but no real recognition of the fact that transactions involving ACT land do not transfer ownership of land but ownership of a Crown lease of land. Counsel for the respondents pointed out that the Duties Act would not operate effectively in the ACT if it were not read as if references to "land" and to "Crown leases" were interchangeable. In fact the "interpretation" of the Duties Act needs to be somewhat more sophisticated than that; in relation to several provisions, what has to be accepted is that some references to land are references to Crown leases and other references to land in the same provision are references to the land subject to the Crown lease (see, for instance, ss 16A(4) and 22(2)) and that references to property that "includes" land are adequate to describe property consisting of a Crown lease of land.

20. Neither of the parties sought to rely in this appeal on this possible weakness in the Duties Act. In particular there was no argument based on the fact that a house is erected on land, not on a Crown lease.

Duties Act - core provisions

21. Under s 7 of the Duties Act, duty is charged on transactions listed in s 7(1), being transfers of "dutiable property" and various other specified transactions. Such a transfer or other transaction is a "dutiable transaction" (s 7(2)). Dutiable transactions include certain agreements, and under s 17(2), where an agreement for the sale or transfer of dutiable property is subject to duty, only nominal duty is charged on a subsequent transfer in conformity with the agreement.

22. Section 10 of the Duties Act defines "dutiable property" to include "a Crown lease".

23. Section 8 of the Duties Act says that duty on a dutiable transaction is to be charged as if the dutiable transaction were a transfer of dutiable property. Table 8 specifies, for each dutiable transaction, the property taken to be transferred; the person taken to be the transferee; and the time at which the transfer is taken to have happened. Relevantly for present purposes, item 1 of the table provides that where the dutiable transaction is an agreement for the sale or transfer of property:

(a) the property agreed to be sold or transferred is taken to be the property transferred;
(b) the purchaser or transferee is taken to be the transferee; and
(c) the time when the agreement is entered into is when the "transfer" is taken to have happened.

24. The effect of these deeming provisions is that duty is charged on an agreement for the sale or transfer of dutiable property as if it were a transfer of the property to the intending purchaser or transferee that took place when the agreement was entered into.

25. Section 18 of the Duties Act identifies the rate at which duty is charged on dutiable property (being the rate set out in pt 2.3 of the Act).

26. Section 20(1) of the Duties Act defines the dutiable value of dutiable property subject to a dutiable transaction to be, relevantly, the greater of:

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(a) the consideration (if any) for the dutiable transaction (being the amount of the monetary consideration or the value of a non-monetary consideration); and
(b) …
- (iii) … the unencumbered value of the dutiable property.

27. There was no argument to the effect that s 20(1)(a) recognised either monetary or non-monetary consideration but not both.

28. Section 22(2) says, in effect, that the unencumbered value of land transferred does not include the value of any improvements made to the land by the transferee before the transfer.

Duties Act - mitigating provisions

29. As well as the basic provisions required for the effective imposition of duty, the Duties Act contains several provisions apparently aimed at mitigating the effect of duties on certain purchasers of residential properties.

30. Section 16B empowers the Minister to declare a house and land package to be an "affordable house and land package". There is no definition of "house and land package", but a package so declared is a "declared affordable house and land package" for s 16.

31. Section 16A(4) defines "'off the plan' purchase agreement" to mean:

(a) an agreement for the sale or transfer of dutiable property that is, or includes, land where a residence is to be erected or developed before completion of the sale or transfer; or
(b) a purchase agreement for a declared affordable house and land package.

32. Section 16A provides concessions for "off the plan" purchase agreements as to the time within which duty must be paid.

33. Section 20(2) provides a concessional "dutiable value" for declared affordable house and land packages, being, in effect, the lesser of two possible values of the land component of the house and land package.

Other relevant legislation

34. The other relevant legislation is s 180 of the Land (Planning and Environment) Act 1991 (ACT) (repealed in 2008); that section is set out in the Appendix to this judgment, but the immediately relevant provision is as follows:

180 Transfer of land subject to building and development provision

(1) If a lease of territory land contains a building and development provision, the lease, or an interest in the lease, is not capable of being assigned or transferred, either at law or in equity unless -

…

(d) the lessee has obtained -

(i) a certificate of compliance [with the building and development provision] under section 179;

35. I understand, on the basis of a title search tendered and exhibited without objection, that on 16 November 2009 the LDA became the holder of a Crown lease of the specific block to which the land sale contract related (after the conversion of the original Crown lease into multiple Crown leases reflecting a subdivision under the Community Title Act).

36. It is agreed for present purposes that the LDA's lease did contain a building and development provision, which required the construction of an approved development at a minimum cost of $60,000, and that the effect of s 180 of the Act in the current case was that the LDA could not legally have transferred the Crown lease concerned to the Buyer until the land subject to the Crown lease had a building erected on it in accordance with that provision. I am told that the purpose of s 180 (now replaced by s 298 of the Planning and Development Act 2007 (ACT)) was to prevent speculation in land in the ACT.

37. Counsel for the respondent noted that this meant not only that the Buyer needed the house to be built on the land but also that the LDA needed a house built before the relevant Crown lease was saleable. This, it was said, explains the form in general and the "interdependency" in particular of the two contracts.

38. Not only was the LDA unable to transfer the lease without a house on it, but it was also subject to a positive obligation under its lease to begin construction of the approved development within 12 months from a date intended to be specified in the lease, and to complete construction within 24 months from that date; both deadlines could be extended by the Planning and Land Authority. The relevant

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date was not specified in the approved copy of the lease that was in evidence; fortunately this does not seem to be immediately relevant to the matters I have to decide, but it could become relevant in any examination of the "value" of that positive obligation.

The question of law

39. I frame the question of law as follows:

Under the Duties Act, what value is to be considered in the assessment for duty of an agreement for the sale of a Crown lease by the Land Development Agency, being an agreement under which the buyer is required, before the transfer of the lease is required or able to be completed, to complete a separate contract with a different party for construction of a building on the land subject to the lease?

40. The question of law might have been framed differently if the appellant, or the parties jointly, had sought to articulate it.

The ACAT decision

41. Counsel for the appellant noted the points at which, he said, ACAT's approach was incorrect. Since my task is not specifically to identify errors by ACAT but to answer a question of law relating to the application of the Duties Act to the land sale contract, I do not propose to canvass all those asserted errors. Some of them will be addressed in my consideration of the arguments.

42. However, I mention at this stage that it does seem that ACAT overlooked the law relating to fixtures in saying at [101] that:

The LDA did not have any title to the improvements constituted by the house and so could not, and did not, transfer the value of those improvements to the [respondents]. Thus the dutiable property for the purposes of section 7(1) is the value of the land only.

43. In summary, the general position in relation to fixtures is that a building on land is at least a fixture (if not "part and parcel of the land" - see Butt P, Land Law (6th ed, Thomson Reuters, 2010) at [3 12]) and as such, passes to a buyer of the land "without need for special mention in the contract or conveyance" (Butt at [3 02])

44. In
Ball-Guymer v Livantes (1990) 102 FLR 327, Miles CJ at 330 quoted from the "authoritative statement" of the relevant law on fixtures made by Jordan CJ in
Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR(NSW) 700 at 712:

A fixture is a thing once a chattel which has become in law land through having been fixed to land. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is. The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose. (citations omitted)

45. Miles CJ went on at 330:

It is clear from the judgment of Jordan CJ that the test is a subjective one, that is to say, one has regard to the intention accompanying the fixing. If the intention is that the item shall remain in position permanently, indefinitely or for a substantial period, then it is a fixture. If it is fixed with the intent that it may remain only temporarily or for a temporary purpose, then it is not a fixture.

46. The significance of an item being a fixture in relation to the sale of the land concerned is described in Bradbrook AJ, MacCallum SV, Moore AP, Gratton S, Australian Real Property Law (5^th ed, Thomson Reuters, 2011) at 784:

All fixtures attached to the land at [the date of the contract of sale] pass with the land to the purchaser [
Phillips v Lamdin [1949] 2 KB 33;
Gibson v Hammersmith and City Rwy Co (1863) 32 LJ Ch 337; 62 ER 748;
Meehan v NZ Agricultural Co Ltd (1907) 26 NZLR 766] unless they are expressly exempted in the contract of sale or unless

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the court is satisfied that the purchaser bought with notice (whether in writing or orally) that specified fixtures would not pass with the land [
Isaacs v Lord [1920] VLR 274].

47. Neither party disputes that once the house was built on the land concerned, it was a fixture and as such, formed part of the land for the purpose of a transfer of a lease of the land, and did, therefore, affect the value of the land transferred. However, as will become apparent, the value of the land, or of the lease, at any particular point is not necessarily determinative in this appeal.

The arguments

The appellant's primary argument

48. The primary argument made by the appellant in support of the Commissioner's assessment of the dutiable value of the dutiable transaction as the total value of the land sale contract and the building contract can be summarised as follows:

(a) The contracts entered into by the Buyer constituted an "'off the plan' purchase agreement" as defined in s 16A(4) of the Duties Act (conveniently referred to as a "house and land package") generally because of their "interdependency" and particularly because of the requirement that the Buyer complete the land sale contract within a specified time after completion of the building contract (at [11] above). The appellant's submissions sometimes referred to the contracts constituting a "house and land package" and sometimes said they were an "'off the plan' purchase agreement", and I have used "house and land package" in my analysis except where the two concepts are relevantly used differently.
(b) A purchase agreement for a house and land package is a dutiable transaction. This is implicit in s 20(2) of the Duties Act, which provides concessional treatment for certain "house and land packages". In cases where a developer agrees to transfer a Crown lease of land with a building on it, ss 7(1)(b)(i) and 10(1)(b) explicitly impose duty on the value of the Crown lease, which will include the value of the building.
(c) The dutiable value of a dutiable transaction consisting of an agreement for the sale of a house and land package is the greater of:
- (i) the consideration for the dutiable transaction; or
- (ii) the unencumbered value of the dutiable property.
(d) A house and land package purchased on the basis that the land concerned would only be transferred after the house has been built on it would be subject to s 22(2) of the Duties Act, and this would operate to reduce the unencumbered value of the dutiable property; because of s 22(2), the unencumbered value would be the total value of the property to be transferred under the agreement, reduced by the value of improvements made by the buyer (that is, the house erected at the buyer's expense) before the transfer. That is, the relevant unencumbered value of the dutiable property would in fact reflect only the value of the Crown lease of the unimproved land.
(e) The consideration for a dutiable transaction that is a house and land package is the total paid for the transfer of the Crown lease and for the building of the house.
(f) This means that for a dutiable transaction consisting of a purchase agreement for a house and land package, the consideration for that transaction will routinely be greater than the unencumbered value of the dutiable property concerned (because the consideration will include the cost of the house).
(g) Under s 20(1), the consideration for the transaction will be the dutiable value of the transaction, and this is the amount on which duty is properly assessed.

The appellant's secondary argument

49. The appellant also put a more general version of this argument that did not depend on the interdependent contracts being found to be an "off the plan" purchase agreement or a house and land package. It can be summarised as follows:

(a) Even if the dutiable property is only the Crown lease to be transferred under the land sale contract, and only the land sale contract is the dutiable transaction, the consideration

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for the dutiable transaction still consists of the total value that was required to be paid by the respondents under the two interdependent contracts.
(b) The price paid for the Crown lease is monetary consideration. The non-monetary consideration consists of the Buyer's promise to the seller of the Crown lease (the LDA) to pay for the building that is a necessary pre-requisite for the transfer of that Crown lease.
(c) The value of the non-monetary consideration is the value of the building contract with the developer.
(d) The consideration for the dutiable transaction constituted by the land sale contract is therefore the total of the value of the land sale contract and the value of the building contract, and this is the amount on which duty is properly assessed.

The appellant's fallback argument

50. The appellant also had a fallback argument, if I found that the dutiable transaction consisted only of the land sale agreement and the only consideration for that transaction was the amount payable directly under the land sale contract. It had the following elements:

(a) If the dutiable transaction consisted only of the land sale agreement, then the ultimate transfer of the Crown lease was not "in conformity" with the dutiable transaction, because by then there was a house on the land.
(b) Under s 17(2) of the Duties Act, if the transfer was not "in conformity" with the land sale agreement, then the transfer of the land was dutiable at an ad valorem rate (s 7(1)(a)), which would be applied to the total value of the improved land without any rebate for any duty paid on the dutiable agreement for the sale of land.
(c) The total value of the improved land transferred was the value of the Crown lease of the unimproved land and the value of the improvements (that is, the combined value of the land sale contract and the building contract).

Analysis

Was there a house and land package or an "off the plan" purchase agreement?

51. The appellant's primary argument depends on the claim that the two contracts, because of their "interdependency", constituted a house and land package or an "off the plan" purchase agreement of the kind mentioned in the Duties Act.

52. There are problems with this claim.

53. First, while it is clear that the land sale contract and the building contract are intended to be "interdependent", the meaning of "interdependence" and the significance of that relationship, at least in relation to the operation of the Duties Act, are far less clear. No argument has been put to me that the concept of "interdependence" carries with it anything beyond the various impacts that are explicit in the provisions in the two contracts about the effect of each contract on the operation of the other contract. As far as I can see, "interdependent" is simply shorthand for the combined operation of the various explicit provisions by which the operation of one contract is related to the operation of the other. As such, it would seem to have no significance of its own in the application of the Duties Act.

54. Counsel argued not only that the two contracts were interdependent but that "what has been agreed to be transferred is this combined package". It is true that the effect of the two agreements would be a transfer of land with a house on it, but this does not mean that there was an agreement to sell or transfer dutiable property consisting of a "combined package", another phrase which does not appear to be a technical term under the Duties Act.

55. Secondly, I am not convinced that the two contracts entered into by the respondents in this case do constitute either a house and land package or an "off the plan" purchase agreement", as argued by the appellant.

56. There is no definition of "house and land package" in the Duties Act. Rather, there is a provision empowering the Minister to declare a house and land package to be an "affordable house and land package" (s 16B). Presumably, in the normal course of events, the question whether the subject of a particular declaration was a house and land package such that the Minister's power was validly exercised would be determined by interpreting the words

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of the legislation, that is, "house and land package". However, that is not an inquiry I need to embark on, because on the evidence before me there was no such declaration in relation to the two contracts I am dealing with.

57. For the purposes of s 16A of the Duties Act, there is a definition of "off the plan" purchase agreement, which refers to:

(a) an agreement for the sale or transfer of dutiable property that is, or includes, land where a residence is to be erected or developed before completion of the sale or transfer; or
(b) a purchase agreement for a declared affordable house and land package.

58. Paragraph (a) of the definition clearly includes a reference to the common arrangement under which a developer subdivides land and offers blocks for sale on the basis that the developer will, before the sale is complete, build a residence of the purchaser's choice on the block. In that simple case, although the purchaser has a significant involvement in determining the details of the residence that will be built on the block of land, the residence is directly funded by the developer and, as a fixture on the land, remains the property of the developer until the land, with the fixture, is transferred to the purchaser. The value of the house and land that are ultimately transferred would seem to be generally dutiable in the same way as the value of a block of land sold with an established house on it; however, special provisions are made in the Duties Act (ss 16 and 16A) about when the liability to pay duty arises in relation to such agreements, being provisions that take account of the sometimes extended delays between the signing of the original purchase contract and the completion of the agreement by the transfer of the land and constructed residence.

59. An arrangement of the kind just described was, albeit in a commercial context, described in
Bambro (No. 2) Pty Ltd v Commissioner of Stamp Duties [1963] SR (NSW) 522 ( Bambro ) at 528 to 529 as follows:

if the whole building is to be completed before conveyance, then the dutiable "matter", in the form of an agreement for the sale or conveyance of property, which is contained in the instrument is constituted by an agreement for the sale or conveyance of the land with the building upon it; and consideration and unencumbered value for the purpose of assessing ad valorem duty are to be assessed accordingly.

60. Paragraph (a) of the definition of "off the plan" purchase agreement might, however, also refer to arrangements constructed using "interdependent" contracts of the kind signed by the respondents in this case, even though, as pointed out by counsel for the respondents, the details of what is to be built under the building contract are a matter for the developer and the buyer of the land, not for the seller of the land.

61. An arrangement using interdependent contracts of the relevant kind could certainly be described as a house and land package without doing any particular violence to the English language. If a Minister had, under s 16B of the Duties Act, declared such an arrangement to be an "affordable house and land package", then that arrangement, would also be an "off the plan" purchase agreement under paragraph (b) of the definition of that expression.

62. Whether, apart from a declaration of "interdependent" contracts as an "affordable house and land package", such contracts would together be an "off the plan" purchase agreement depends among other things on whether the reference to "an agreement" in the definition of "'off the plan' purchase agreement" can be read as covering multiple agreements that, taken together, produce the result described in that paragraph.

Significance of "house and land package" or "off the plan" purchase agreement

63. However, whether a particular arrangement is an "off the plan" purchase agreement, or a house and land package of the kind that might be declared affordable under s 16B, is, with two exceptions, irrelevant to the operation of the Duties Act.

64. Apart from s 16B, the Duties Act does not make any specific provisions for house and land packages except in ss 16A and 20. Only s 16A refers to "off the plan" purchase agreements.

Deferral of liability to pay duty

65. Under s 16A(4), all purchase agreements for declared affordable house and land packages

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are "'off the plan' purchase agreements". However, not all "off the plan" purchase agreements are "declared affordable house and land packages" or even, necessarily, house and land packages more generally (noting again the absence of any definition of "house and land package").

66. Furthermore, even if all house and land packages were "off the plan" purchase agreements, the only significance of being such an agreement is the availability of a deferred payment date for duty that would otherwise be payable, under s 16, within 90 days after liability arises. The deferred payment date for an "off the plan" purchase agreement is 14 days after the date on which liability under such agreements is taken to arise, which happens on the earliest of the following events, being:

(a) the completion of the agreement;
(b) the assignment of the purchaser's interest under the agreement;
(c) the issue of the certificate of occupancy for the building concerned; or
(d) the expiration of a specified period after the date of the agreement (s 16A(1)(c)).

67. The specified period mentioned in s 16A(1)(c) is two years for a purchase agreement for a declared affordable house and land package, and one year for any other "off the plan" purchase agreement. A purchaser who buys "off the plan" may defer payment of stamp duty for up to 12 months and 14 days from the date of the agreement, roughly nine and a half months longer than other purchasers (who have 90 days to pay after liability arises), unless the purchaser buys a declared affordable house and land package, in which case the deferral is in the order of 21½ months longer than for other purchasers (2 years and 14 days compared with 90 days).

68. That is, a purchaser who enters a purchase agreement for a declared affordable house and land package has roughly 21 months longer to pay the relevant duty than a purchaser not buying "off the plan". The purchaser who enters a purchase agreement that satisfies the description in paragraph (a) of the definition of "off the plan" purchase agreement" but relates to something that has not been declared an affordable house and land package is entitled to the 12 months and 14 days deferral period, but the availability of this concession says nothing about whether or not the purchase agreement relates to "a house and land package" as distinct from being simply an arrangement explicitly described in paragraph (a) of the definition. Nor do either of these concessions have any direct implications for the application of the rest of the Duties Act to the relevant agreements.

Dutiable value for declared affordable house and land packages

69. Section 20 provides for the dutiable value of dutiable property that is subject to a dutiable transaction. Section 20(2) make special provision for a dutiable transaction that is a purchase agreement for a declared affordable house and land package under s 16B. There is no special provision for house and land packages that have not been declared affordable, nor for "off the plan" purchase agreements.

70. The particular impact of s 20(2) on declared affordable house and land packages is not clear. The provision is as follows:

(2) However, the dutiable value of a dutiable transaction that is a purchase agreement for a declared affordable house and land package, is the lesser of-
- (a) the value of the land component of the package on the date of the agreement; and
- (b) the value of the land component of the package on the date the liability for duty arises under section 16A (1).

71. The provision appears to distinguish purchase agreements for declared affordable house and land packages from other dutiable transactions in two respects:

(a) First, in contrast to s 20(1), which provides that the dutiable value is the greater of two specified values, s 20(2) provides that the dutiable value is the lesser of two specified values.
(b) Secondly, the two specified values identified relate only to the land component of the house and land package, being the value of the land component on the date of purchase agreement and the value of the land component on the date to which the liability to pay duty is deferred under s 16A(1).

72.

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Thus, purchasers of declared affordable house and land packages are protected from any increase in the value of the land component during the two-year deferral of liability for duty (or, alternatively, given the benefit of any reduction in the value of the land component during that period).

73. Secondly, those purchasers are only required to pay duty on the land component of the house and land package.

74. By implication, the purchasers of house and land packages that are not declared affordable may be required to pay duty assessed not only on the land component but also on the value of the house. This is unsurprising. As noted at [58] above, many arrangements of the kind that would commonly be referred to as house and land packages would involve duty being assessable on both the value of the land and the value of the building that has been built on it.

75. This does not, however, imply that any arrangement that may reasonably be described in non-technical English as a house and land package is subject to duty assessed by reference to the total value of the package, and nor does it imply anything about the kinds of arrangements that may reasonably, whether in ordinary conversation or even for the purposes of ministerial declarations under section 16B, be described as house and land packages.

Significance of multiple instruments

76. Section 17(1) deals with dutiable transactions effected by more than one instrument. In the current case there are two instruments involved, and it is implicit in this argument that the two separate (albeit "interdependent") contracts implement a single dutiable transaction. However, the existence of two different instruments, even two different instruments setting out agreements with one common party, does not of itself establish a single dutiable transaction. For instance, there would seem to be no basis for arguing that the many sale agreements presumably entered into by the LDA in relation to the Crown leases of subdivided land in Crace constitute a single dutiable transaction just because the LDA was a party to all the agreements. A dutiable transaction is, relevantly, "an agreement for the sale or transfer of dutiable property", and even s 145 of the Legislation Act 2001 (ACT) ("words in the singular number include the plural") is not sufficient to permit s 7(1)(b) of the Duties Act to be read as saying that "a dutiable transaction" may consist of multiple agreements only one of which is for the sale or transfer of dutiable property and the other or others of which provide not for the sale or transfer of dutiable property but for the building of a house. The reference in s 17(1) of the Duties Act to multiple instruments is of no help to the appellant.

Conclusions - house and land packages

77. In summary, the undefined concept of house and land package is used in the Duties Act to provide two kinds of concessions to purchasers of declared affordable house and land packages, one of which is also available in a less generous form to others who purchase "off the plan". The concept is not used to give meaning to "dutiable transaction", "dutiable property" or "dutiable value". Accordingly, the appellant has nothing to gain by asserting that the arrangement under consideration in this case is a house and land package. It may well be a "package" of a kind that the Minister has regarded or would regard as available to be declared under s 16B (subject to its value), but that provides no support for any particular proposition about the nature of the dutiable transaction, or the dutiable value of whatever is the dutiable property, in an arrangement that could in ordinary English be referred to as a house and land package. Nor would the appellant's argument be advanced by a finding (which may well be available) that the land sale contract was an "off the plan" purchase agreement for the purposes of s 16A.

78. Having rejected the argument based on the proposition that the arrangement in this case constitutes a house and land package or an "off the plan" purchase agreement and is therefore dutiable as to the full value of the house and land, I turn to the appellant's second argument, which relies on the proposition that the consideration for the land sale contract included the amount payable under the building contract.

What was the consideration for the dutiable transaction?

79. Section 21 of the Duties Act makes various provisions about the consideration for

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transfer of dutiable property, but none of them is directly relevant to a determination of whether the consideration for the land sale contract in this case included the amount payable by the respondents under the building contract.

80. It is accordingly necessary to consider the case law.

Approach to meaning of "consideration"

81. In
Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496 ( Dick Smith ), the High Court (Gleeson CJ and Callinan J at [22] and Gummow, Kirby and Hayne JJ at [71]) approved the comments of Dixon J in
Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 at 152 that:

the word "consideration" should receive the wider meaning or operation that belongs to it in conveyancing rather than the more precise meaning of the law of simple contracts.

82. Gleeson CJ and Callinan J also quoted Dixon J's description at [22] of consideration under the relevant duties legislation as "the money or value passing which moves the conveyance or transfer".

Bambro

83. The question of consideration arose in Bambro, which concerned s 41(1) of the Stamp Duties Act 1920 (NSW). The appellant had agreed to buy land for £600,000 and to pay £1,405,000 to the vendor to erect buildings on the land after it was conveyed to the appellant. There was a single agreement dealing with these transactions, and the respondent Commissioner of Stamp Duties assessed the agreement for stamp duty as a conveyance of land and buildings for a consideration of £2,005,000. It was accepted that a building contract as such was not an "agreement for the sale or conveyance of any property" as mentioned in s 41(1).

84. The question in the case was summarised by Sugerman J (with whom Collins and Macfarlan JJ agreed) at 524:

The whole question is one of the application to the circumstances of this agreement of s. 41 (1) of the Stamp Duties Act read with s. 66 (2). Section 41 (1) reads as follows: "Every agreement for the sale or conveyance of any property in New South Wales shall be charged with the same ad valorem duty to be paid by the purchaser or person to whom the property is agreed to be conveyed as if it were a conveyance of the property agreed to be sold or conveyed and shall be stamped accordingly." Section 66 (2) provides: "(a) A conveyance on sale of any property is to be charged with ad valorem duty on the amount or value of the consideration for the sale. (b) If the amount or value of the consideration is less than the unencumbered value of the property the duty is to be charged on the unencumbered value of the property ascertained in accordance with section sixty-eight." Everything turns upon the answer to the question: What was the "property agreed to be sold or conveyed" within the meaning of s. 41 (1)?

85. His Honour at 525 noted that:

The charge is on the agreement as if it were a conveyance, and not upon the subject matter as if conveyed in accordance with the agreement.

86. In contrast, the Scottish case of
Paul v Inland Revenue [1936] SC 443 ( Paul ), related to a scheme under which "the conveyance, and it alone for relevant purposes" was subject to duty, and the question was what was the consideration for that conveyance. For this reason, Sugerman J said at 527, under the NSW duty regime (relevantly equivalent to the ACT's current regime):

such principles as may be considered to emerge from the English and Scottish decisions provide no guidance on the question which arises here, namely: What is the property agreed to be sold or conveyed?

87. I accept the submission of counsel for the appellant to the general effect that Paul, given its focus on the consideration for the conveyance , was unlikely to be relevant in the current inquiry into what was the dutiable transaction and what was the consideration for that transaction. In particular, to the extent that the questions asked by the Lord President in Paul and quoted by ACAT related to whether the consideration for the conveyance could or should be identified by looking at two distinct contracts, those questions (and their answers) are not to the point in determining whether the

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consideration for a dutiable transaction that is an agreement for sale or transfer of dutiable property can or may be identified by looking at two or more agreements only one of which is strictly speaking an agreement for sale or transfer of dutiable property.

88. In Bambro at 528-9, Sugerman J set out his two conclusions:

First, that where there are both an agreement to sell land and an agreement by the vendor to build upon the land sold, the considerations being distinct and the building to commence only after conveyance of the land, these are distinct matters in respect of which duties are separately leviable of the appropriate kinds and amounts. Secondly, that in cases which fall within s. 41(1) of the Stamp Duties Act the ascertainment of the ad valorem duty to be charged is to be by reference to the property agreed to be sold or conveyed regarded as that which, viewing the matter as at the date of the agreement, will be, under the terms of the agreement, the subject of conveyance at the time when, under the terms of the agreement, the conveyance is to be executed. Stated differently, whatever, in accordance with the agreement, is to be transferred or vest or accrue by force of the conveyance to be executed pursuant thereto is the property agreed to be sold or conveyed. The amount or value of the consideration for its sale, and its unencumbered value, are the relevant sums for the purpose of applying the formulas contained in s. 66 (2) to the assessment of the ad valorem duty upon the agreement for sale or conveyance charged with duty by s. 41 (1).

The two conclusions stated lead to the result that if the whole building is to be completed before conveyance, then the dutiable "matter", in the form of an agreement for the sale or conveyance of property, which is contained in the instrument is constituted by an agreement for the sale or conveyance of the land with the building upon it; and consideration and unencumbered value for the purpose of assessing ad valorem duty are to be assessed accordingly. The opposite result is reached, where, under the agreement, erection of the building is to be commenced only after conveyance of the land. Here what is dutiable is an agreement for the sale or conveyance of the land alone, and ad valorem duty is to be assessed by reference to the purchase price of the land alone or its unencumbered value. (emphasis added)

89. The appellant relies on the conclusion emphasised above.

90. I note first that this conclusion was set out to distinguish the circumstances there described from the circumstances in fact dealt with in Bambro. The decision in Bambro turned on the fact that the land the subject of the agreement was to be conveyed to the buyer before the building work to be procured by the vendor was to start, and in that respect, Bambro differs from the instant case.

91. Furthermore, in drawing a distinction between the case in which the subject land was to be conveyed before building started, and one in which the land was to be conveyed after the building had been erected, Sugerman J did not purport to go beyond the specific circumstances of that case, being that the building work was provided for in the same contract as the land sale, and that it was to be arranged, although not performed, by the vendor of the land, who was also entitled to be paid the consideration for that building work.

92. Finally, the statement relied on by the appellant, even if accepted as authoritative, or at least correct, does not answer the real question identified as arising in this case (at [79] above), namely, what was the consideration for the agreement under which land with a building on it was to be conveyed to the respondent Buyer.

Lindquist

93. In
Lindquist v Commissioner for ACT Revenue [2004] ACTAAT 12 (26 March 2004) ( Lindquist ), the ACT Administrative Appeals Tribunal dealt with a case in which the two owners of a block of land (presumably in fact the holders of the Crown lease over the land) sold the block to themselves (the sellers ) and another two people, the Lindquists, to be held as tenants in common as between the sellers and the Lindquists, with the sellers and the Lindquists each holding their half shares as

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joint tenants. The purchase price of the land was $351,000, of which it seems that half moved, in effect, from the sellers back to themselves.

94. The Lindquists' agreement to buy a half share in the block "was conditional upon the parties entering a development deed and a building agreement and an acknowledgment that on completion the land would be subject to a mortgage" (at [5]). Duty was assessed on, apparently, the whole purchase price for the block, and the transfer of the block was registered on 25 May 2000, at which point there was no building on the block. The development deed provided for registration of a units plan dividing the block into two units on each of which a residence could be built, and common property, and the Lindquists agreed to buy Unit 1 of the development. One of the sellers entered a building agreement with the Lindquists to build, for a price of $392,000, a residential unit which would be Unit 1. In due course the units plan was registered and the four owners of the block (including Mr and Mrs Lindquist) executed a transfer of Unit 1 to the Lindquists.

95. Following a dispute about the assessment of duty on the transfer of Unit 1, the respondent Commissioner re-assessed the dutiable value of the original transaction to include not just the value of the original contract for sale but also the value of the building agreement. It was this reassessment which was challenged.

96. The AAT concluded as follows:

23. By itself, a contract for the construction of a house on land is not a transaction that attracts the imposition of a duty under the Duties Act. In that event, a contract for the sale of bare land does not attract the imposition of duty on any agreement for the construction of improvements on the land made after its transfer.

24. The agreements entered into in respect of unit 1 in this case were, however, not of that kind. The effect of the agreements was for unit 1, as distinct from the subject block already assessed for duty on its transfer, to be transferred to the applicants after subdivision of the subject block into 2 unit title units and after the construction of a house on the unit to be transferred to the applicants. The subject matter of the agreement was not, therefore, the transfer of bare land. The subject matter of the agreement was the transfer of part of the subject block created as a unit title lease upon which, prior to the transfer, a house was to be constructed.

25. The dutiable property agreed to be transferred by the agreements, therefore, was the land and the attachments to it at the date of transfer to be assessed at the date the agreement was entered into. The fact that at that date neither the unit title sub-division had been registered so as to permit the transfer of what had been agreed to be transferred nor had the house of the then proposed unit been constructed, does not avoid the attraction of duty to what had been agreed between the parties to be the subject of transfer.

97. ACAT at [66] distinguished this case on the grounds that it did not "address the issue where the parties in the second agreement were different to the parties of [sic] the first agreement".

98. I am not convinced that Lindquist was correctly decided, or, at least, that the reasons given by the AAT were sound. The AAT's conclusion about "the subject matter of the agreement" involved, among other things, a very broad-brush approach to the identification of the transaction that it found to be dutiable, and involved glossing over the inconvenient facts that:

(a) there were several agreements, having different effects and entered into between different parties or between individuals in different capacities (for instance, the Lindquists as part owners of the land, with an equivalent entitlement to that of the sellers in relation to the interests created by the units plan, then joined with the other owners (the sellers) in selling one of the units created by the units plan to themselves);
(b) the original agreement related to the Crown lease of the block of land while the unit title unit transferred after the construction of the house was a different kind of dutiable property (possibly a land use entitlement mentioned in s 10 of the Duties Act); and

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(c) as one unit of the unit title development involving two units and common property, the unit title unit transferred could not, as far as I can see, be equated to the property originally acquired by the Lindquists, being a half share as tenants in common in the Crown lease of a block of land.

99. The fact that duty is charged on a transaction as if it were a conveyance and not, relevantly, on a conveyance as such seems to require a fairly careful identification of:

(a) the relevant transaction as described in s 7 of the Duties Act;
(b) the dutiable property subject to the transaction; and
(c) the consideration for that transaction.

100. It does not seem to be enough simply to look at what a party has finished up with and conclude that the value of that property is the value of the dutiable property without bothering to identify the dutiable transaction on which the Duties Act charges duty.

101. Nor am I convinced, having regard to the different capacities in which the various individuals acted in the course of the transaction, and the different nature of the various interests created and transferred, that the AAT in Lindquist properly assessed the actual value of the "consideration" in that case. There was in the AAT's decision no explanation of why particular payments between different parties were identified as part of the consideration, only a confirmation of the amount assessed by the Commissioner, which appeared to consist of the total original sale price of the block and the price of the building contract. In particular, the AAT did not explain why it considered that the half of the original sale price that was, on the facts as set out in the AAT decision, paid by the sellers to themselves could be seen as part of the consideration for whatever the AAT had in mind as the dutiable transaction. As such, whether or not the result in Lindquist was correct, its reasoning does not seem to me to provide any help in resolving the question before me.

Dick Smith

102. In Dick Smith, the vendor sold all the shares in a company to the purchaser, under an agreement that defined the purchase price as $114,139,649 reduced by an amount, up to a maximum of $27 million, which the company would be able to pay to the vendor out of retained earnings on completion of the agreement. The purchaser agreed to "fund' the company to pay a declared dividend representing the relevant retained earnings. In the event, the company declared a dividend of $25,584,097, which was paid out of funds lent to it by the purchaser, and the higher price specified in the definition of "Purchase Price" was accordingly reduced to $88,555,552.

103. Duty was assessed on the basis that the consideration for the transaction was $114,139,649. The purchasers argued that the consideration should have been the lower price calculated under the definition of "Purchase Price", namely $88,555,552. The Commissioner's assessment of duty was upheld in the High Court by a majority (Gummow, Kirby and Hayne JJ). The Court considered the operation of s 21(1) of the Duties Act 1997 (NSW), which is in relevantly identical terms to s 20(1) of the ACT Duties Act, and defines the dutiable value of dutiable property subject to a dutiable transaction as the greater of the unencumbered value of the dutiable property and:

(a) the consideration (if any) for the dutiable transaction (being the amount of monetary consideration or the value of a non-monetary consideration);

104. The Court did not need to consider the unencumbered value of the dutiable property. The question addressed by the Court was what was meant by "consideration".

105. The minority (Gleeson CJ and Callinan J) held that the monetary consideration for the dutiable transaction (being the sale of the shares) consisted only of the amount paid directly by the purchaser to the vendor, but also held that the obligation taken on by the purchaser to ensure that the dividend representing retained earnings could be paid by the company was non-monetary consideration and, if its value could have been established, could have been assessed for duty.

106. The majority (Gummow, Kirby and Hayne JJ) noted at [72] that:

the criterion in the Act of consideration "for" the transaction, being the Agreement for the sale and transfer of the Shares to the

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Purchaser, upon whom s 13 imposes the liability to pay the duty, looks to what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement.

107. At [73] the majority said that the vendors were to receive, and did receive, $114,139,649 in total, and that the vendors "had bargained for an obligation on the part of the Purchaser to bring about that result". Their Honours went on:

74…. The tripartite element in the transaction does not by itself provide an answer to what otherwise is the operation of the Act.
75. The consideration which moved the transfer by the Vendors to the Purchaser of the Shares which they owned in the Company was the performance by the Purchaser of the several promises recorded in the Agreement in consequence of which the Vendors received the sum of $114,139,649. [citations omitted]

108. Counsel for the appellant drew particular attention to the comments by the majority that "the tripartite element of the transaction does not by itself provide an answer to what otherwise is the operation of the Act".

109. This case is relevant to the instant case to the extent that it determines that the involvement of a third party in the process by which value moves from the purchaser to the vendor, and the indirectness of the route by which that value moves, do not necessarily exclude, from assessment as part of the consideration for a transaction, the value that moves via a third party or otherwise indirectly. As the majority put it at [76]:

Noticing the several steps which the Agreement required to be undertaken in order to achieve that result must not be permitted to obscure that the amount of monetary consideration for the transaction of the sale and transfer of the Shares was the sum identified.

110. However, Dick Smith is also relevant to this case in its emphasis upon consideration being:

what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement.

111. The factual position in Dick Smith can be distinguished from that of the current case in that, despite the involvement of a third party in channelling part of the $114 million from the purchaser to the vendor, the vendor did in the end finish up with the total $114 million, and would not have been willing to transfer the shares for less than that amount. Here, the LDA received the monetary consideration for the Crown lease ($81,000). It received none of the $352,900 paid for the building of the house. Nor was there any requirement or even expectation that the value of the building contract would be $352,900, although there was no doubt an expectation that the value would have been more than the $60,000 specified in the building and development provision and probably an assumption that it would in fact have been in the order of several hundred thousand dollars.

112. The LDA did, however, receive the capacity to transfer the Crown lease, which arose from the Buyer's completion of the building contract. This might have been non-monetary compensation; there would in that case be a question as to the value of that non-monetary compensation.

113. It could be argued that any such non-monetary consideration did not increase the total consideration beyond $81,000, because in fact without that non-monetary consideration the LDA would not have been able to sell the lease even for $81,000. On that analysis, the value provided to the LDA was an increase in the value of the Crown lease being transferred from what might have been a nominal amount representing the value of an unsaleable property to the actual sale value of the Crown lease, namely $81,000.

114. Alternatively, it could be said that there was non-monetary consideration that consisted of the undertaking to complete the building contract, and that had a value to the LDA over and above enabling the lease to be sold for $81,000 (cf Gleeson CJ and Callinan J in Dick Smith at [43]). The appellant submitted that in the current case, "the promise by the purchaser to complete the building contract" was part of what "moved the vendor", and this may be accurate as far as it goes. However, it does not establish that the value of that promise to the

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LDA in this case was the total $352,900 that the Buyer paid to the developer under that building contract.

115. While the facts of Dick Smith can be distinguished, the basic proposition from that case (at [74]) seems to be applicable, namely that the question is to establish "what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement".

Forest Research Institute Case

116.
Commissioner of Inland Revenue v New Zealand Forest Research Institute [2000] 1 WLR 1755 (the Forest Research Institute Case ) involved the sale of a government entity, in connection with which the purchaser accepted liability for the accrued leave entitlements of government employees who became employees of the purchaser. The leave entitlements paid by the purchaser in the year after the sale were found by the Privy Council to be part of the capital cost of the purchase of the government entity and hence not deductible as a revenue expense for tax purposes. This case is relevant to the extent that it permits the identification, as part of a purchase price, of a liability of the seller that is accepted by a purchaser; however, it does not answer the question of how such a liability is valued, or whether the acceptance of such a liability is monetary or non-monetary consideration. Relevantly for present purposes, it does not address the status, or appropriate valuation method, of an obligation the deadlines for which can be varied by the appropriate authority, let alone the method of valuing an obligation one of the parameters of which may not in fact have been specified in the lease concerned (at [38] above).

117. This case does not seem to me to take matters further than Dick Smith; the accrued employee entitlements were a liability of the vendor government that was accepted by the purchaser, providing a benefit to the government in addition to the purchase price actually paid. The treatment of the subsequent payment of those liabilities by the purchaser as part of the purchase price of the entity does not detract from the proposition that "consideration" is what is received by the vendor, since it is clear that the vendor government had, as a result of the purchaser's acceptance of the government's accrued liability, already received the value of that liability as part of the transaction. The fact that the money finished up in the hands of the government's former employees who had had accrued entitlements is no more relevant to whether the vendor received that value than would be the fact that any payment received by a vendor is likely to be spent on something eventually. The Privy Council said at 1758:

There can be no doubt that the discharge of the vendor's liability to a third party, whether vested or contingent, can be part of the purchase price. It does not matter that the payment is not made at once but pursuant to an arrangement whereby the purchaser agrees to be substituted as debtor to the third party.

Oakland Property Holdings

118.
Oakland Property Holdings v Chief Commissioner of State Revenue [2009] NSWSC 1190 was determined in reliance on the approach taken by the majority in Dick Smith that determining consideration "looks to what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement". In that case, payments to be made by the vendor to the purchaser after payment of the full purchase price, and to be used in specific ways, were held by Gzell J at [29] not to be either a rebate or refund of part of the purchase price but to arise under a separate agreement, and therefore could not be relied on to reduce the consideration for duty purposes.

Consideration

119. It is clear that in this case the seller (the LDA) did not receive the full amount of $433,900 paid by the Buyer. The only monetary consideration contracted for or received by the LDA was the $81,000 on which the respondents say duty was properly assessable. The so-called "interdependence" of the two contracts does not seem to provide any basis for finding that the $352,900 that was payable to Crace Developments under the building contract, and that in no way reached the LDA, was, as such, part of the monetary consideration for the land sale contract.

120. The appellant argued, however, that the consideration received by the LDA should be

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taken to include the promised performance by the Buyer of its obligations under the land sale contract to complete the building contract, which performance was said to be of value to the LDA because of the LDA's inability to transfer the Crown lease until a complying building had been built on the land concerned. Further, the appellant submitted, the value of that consideration was the value of the building contract. There are problems with this argument.

121. It may well be the case that the entry into, and performance of, the building contract by the respondents was of value to the LDA. I accept for present purposes that the land sale contract assumed that the purchasers under that contract would also enter into a building contract, and certainly the land sale contract specified that it would not be completed until the building contract had been completed. I also accept for present purposes that the LDA was not able to transfer the Crown lease until a complying building had been built on the relevant land.

122. Counsel for the appellant submitted that the non-monetary consideration consisted of releasing the LDA from its obligation to put an approved development on the land concerned. In this case, counsel argued, the issue is not only what goes into the vendor's pocket but what the vendor's pocket is saved, a proposition consistent with the outcome of the Forest Research Institute Case. On that basis, he argued, the LDA has $352,900 that it would not have had if it had to develop the land itself.

123. The LDA's obligation under the Crown lease conditions was to spend at least $60,000 on development, to be completed within a 24 month period after an unspecified event which was, however, probably intended to be the granting of the lease in November 2009.

124. On the basis that the Crown lease in the hands of the LDA was simply not saleable without the expenditure of $60,000, the $81,000 specified as the price of the land transfer might have already assumed the expenditure of $60,000 on the building of a residence, so that the Buyer's completion of the building contract might have had no value to the LDA beyond the $81,000 price of the land (see [113] above).

125. Another possible basis for valuing the benefit of that performance to the LDA would seem to be by reference to the minimum value of the residence required to be built on the land before the Crown lease could be transferred by the LDA, being $60,000 - that is, $60,000 was the minimum amount required to be spent before the Crown lease could be transferred by the LDA. On this basis, the value of the non-monetary consideration provided by the respondents in entering into and completing the home building contract could be said to be $60,000, plus, possibly, an amount representing the costs to the LDA of arranging and managing the building work if it had had to do so.

126. There is, however, no basis that I can see, in the Duties Act, in the authorities that have been drawn to my attention, or in the terms of the leases or agreements concerned, for finding that the value of the monetary consideration constituted by the respondents' performance of the building contract could be equated to the cost of that contract to the respondents.

127. In particular, there is nothing before me suggesting that the LDA would have had to spend any particular amount in excess of $60,000 to erect a complying residence on the block subject to the Crown lease. There is no basis for finding, for instance, that $352,900, or any particular amount below that, was the minimum cost of erecting a complying residence.

128. Finally, even if I accepted the argument of counsel for the appellant that the vendor (the LDA) "has $352,000 in his pocket which it would not otherwise have if it had had to spend it on developing the land", I would also have to note that the LDA would then have a block whose saleable value reflected, at least in rough terms, the expenditure of that $352,900; that is, the LDA would not have lost the $352,900, it would simply hold that value in a different form.

129. I can see no basis on which to find that the total amount of the $352,900 paid by the respondents to Crace Developments for the building of their house represented the value of non-monetary consideration under the land sale contract, and no adequate basis for making a finding that the non-monetary consideration had

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any other specific value. This is not to suggest that it would be impossible to put a value on such consideration, only that the material before me does not permit such an assessment.

Fallback argument

130. Finally, the appellant submitted that if the arguments already canvassed were rejected, then the respondents would be liable for duty on at least the full value of the two contracts on another basis. That basis was that the ultimate transfer of the Crown lease, which took place only after the building contract had been completed and therefore after a residence existed on the land, was not "in conformity with" the original dutiable transaction (the land sale contract) and that therefore, instead of being subject only to nominal duty under s 17 of the Duties Act, the transfer of the lease with a house on the land would be subject to ad valorem duty (that is, the respondents would be liable to pay duty on the value of the property transferred by the LDA, which (contrary to the appellant's argument noted at [48](d) above) would include both the land value and the value of the residence).

131. Again, there are flaws in this argument.

132. There is no definition of when a transfer is "in conformity with" the agreement for the transfer. Section 17 implicitly identifies circumstances in which a transfer would not be in conformity with the agreement, specifically where the purchaser under the agreement and the transferee are different (s 17(3)). The provision also provides for nominal duty in various other circumstances, for instance relating to declarations of trust, without implying that those circumstances involve a transfer that is not in conformity with an agreement. There is no other assistance given by the legislation in identifying when a transfer is not in conformity with the relevant agreement.

133. The appellant's argument relied on the fact that under the land sale contract, there was no residence on the land to which the Crown lease applied at the time the contract was entered into, but that at the time when the transfer of that Crown lease took place there would necessarily be a residence on the land; this, said counsel, meant that the transfer would not be in conformity with the agreement.

134. Certainly it is true that the condition of the land when transferred, and the economic value of the land at that point, neither of which is as such, a term of the contract (as distinct from assumptions arguably implicit in provisions such as the requirement to erect a building and the sale price of the lease), were different from the condition and economic value of the land when the land sale contract was entered into. The test in the Duties Act is whether the transfer is in conformity with the agreement. It is not whether the value of the dutiable property transferred, or the condition of that property, has changed since the agreement was made (a circumstance that would frequently be the case, and a circumstance in respect of which specific provision is made in some cases, for instance in s 20(2)). I cannot see that it could be said that the transfer of land that had been burnt out by a bushfire, or that had been re-zoned, between a contract for sale and the subsequent transfer, was not transferred in conformity with the agreement. The Duties Act also makes specific provision for transactions in which the purchase price changes between agreement for transfer and the actual transfer (s 30), but it says nothing about a case where the purchase price stays the same but the value of the property has changed in that interval. Furthermore, the transfer of the land with a residence built on it was, in fact, exactly the transfer that was contemplated by the agreement by virtue of cl 30.1(b) (by which the Buyer accepted the obligation to develop the land concerned) and of the cl 2.6 requirement on the Buyer to complete the land sale contract within a period determined, among other things, by the Date of Practical Completion under the building contract (cl 22). The land sale contract did not refer to the details, or the price, of the building contract, nor even require that the building contract be already entered into - but it clearly not only contemplated but required that there would be such a contract and that it would be completed. I cannot see that a transfer that took place in exactly the circumstances contemplated by the agreement for the transfer, and exactly as contemplated, can be said for the purposes of the Duties Act to have been not in conformity with the agreement and therefore subject to ad valorem duty.

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Sportscorp

135. The circumstances of the transfer in this case contrast with the position in
Sportscorp v Chief Commissioner of State Revenue (2005) 213 ALR 795 ( Sportscorp ), which involved the purchase of land by an agent for the three partners who proposed to develop the land, and the subsequent transfer of the land, after registration of a strata plan, to the three partners. The respondent had assessed the transfers to the three partners for ad valorem duty, but the partners claimed that the transfers should have been assessed only for nominal duty on the basis that those transfers were simply additional instruments implementing a single dutiable transaction, being the agreement for the original acquisition of the land by the agent. Gzell J noted that, since the partners were not identified as the real purchasers in the contracts for sale to the agent, the transfers from the agent to the partners could not be regarded as in conformity with the agreements for sale to the agent.

136. Finally, if the transfer to the respondents could be said to be not in conformity with the land sale agreement, and therefore subject to ad valorem duty, the dutiable value of the dutiable property would be determined having regard to the provisions of s 22(2) of the Duties Act, which says:

If, before land is transferred to a transferee, the transferee has made improvements to the land, the unencumbered value of the land is to be determined as if those improvements had not been made.

137. In Sportscorp, Gzell J held at [87] that the intention of Parliament in enacting section 23(3) of the NSW Duties Act (relevantly identical to s 22(2) of the ACT Duties Act), was:

to relieve a transferee [of land] from duty on the increment to value resulting from improvements for the cost of which the transferee was responsible.

138. In that case, since the improvements made to the land before it was transferred from the agent to the partners were financed (albeit indirectly) by the partners, his Honour held that the unencumbered value of the property transferred should have been determined as if the improvements to the land had not been made.

139. In this case, the unencumbered value of the Crown lease transferred would exclude the value of the improvements made by the transferee (that is, the residence erected at the expense of the Buyer).

140. This would seem to mean that:

(a) the dutiable value of the Crown lease when the agreement was entered into would be an amount in the order of the $81,000 payable under the land sale contract or, conceivably, the possibly even lower value of the Crown lease in its unimproved and accordingly unsaleable condition (see [113] above); and
(b) the dutiable value of the Crown lease at the time of transfer would be the land value without the value of the house.

141. Counsel for the respondents noted that the threshold for ad valorem duty was $100,000, so that only nominal duty would be payable on the land sale contract and, unless the Crown lease originally "valued" at $81,000 had increased significantly in value after the agreement was entered into, only nominal or a small amount of duty would be payable on the transfer of the Crown lease.

Conclusions

142. Accordingly, I find:

(a) that the dutiable transaction in this case was the land sale contract;
(b) that the monetary consideration for that contract was $81,000;
(c) that the acceptance by the respondents of obligations in respect of the building contract might have constituted non-monetary consideration for the land sale contract, but that the way in which such consideration should be valued, if at all, was not ascertainable on the material before me; and
(d) that the transfer to the respondents was not prevented from being in conformity with the relevant agreement (being the land sale contract) by the fact that the value of the Crown lease by the time it was transferred had been increased by the building of a residence on the land concerned under the building contract.

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Answer to question of law

143. The question of law framed at [39] above is answered as follows:

In the legislative and contractual context in which this matter arose:

(a) the dutiable transaction is the contract for the transfer by the LDA of a specified Crown lease to the buyer;

(b) the dutiable value is the consideration for that contract;

(c) the monetary consideration is the price specified for the transfer of the Crown lease;

(d) there may be non-monetary consideration consisting of the buyer's agreement to perform, or the performance by the buyer of, actions that enable the LDA to comply with relevant legislation and to perform its obligations under the land sale contract;

(e) the value of any such non-monetary consideration cannot be determined on the materials and argument put before me; but

(f) there is no basis on which to find that the value of that non-monetary consideration is the price of the building contract.

Orders

144. I shall hear the parties as to the necessary orders to give effect to those answers.

145. The appellant is to pay the costs of the respondents.

Appendix - Relevant legislation

Duties Act 1999 (ACT)

7. Imposition of duty on certain transactions concerning dutiable property

(1) This chapter charges duty on -
- (a) a transfer of dutiable property; and
- (b) the following transactions:
  - (i) an agreement for the sale or transfer of dutiable property;
  - (ii) a declaration of trust over dutiable property;
  - (iii) a grant of a Crown lease;
  - (iv) a grant of a long-term lease;
  - (v) a grant of a franchise arrangement.
(2) A transfer or transaction mentioned in subsection (1) is a dutiable transaction for this Act.
…

8. Imposition of duty on dutiable transactions that are not transfers

(1) The duty charged by this chapter on a dutiable transaction mentioned in section 7 (1) (b) is to be charged as if each such dutiable transaction were a transfer of dutiable property.

(2) For the purpose of charging duty under this chapter, in relation to a dutiable transaction mentioned in column 2 of an item in table 8:

(a) the property mentioned in the item, column 3 is taken to be the property transferred (and a reference in this Act to property transferred includes a reference to such property);
(b) a person mentioned in the item, column 4 is taken to be the transferee of the dutiable property (and a reference in this Act to a transferee includes a reference to such a person);

(c) the transfer of the dutiable property is taken to have happened at the time mentioned in the item, column 5 (and a reference in this Act to the time when a transfer occurs includes a reference to such a time).
Table 8

Table 8
column 1 item	column 2 dutiable transaction	column 3 property transferred	column 4 transferee	column 5 when transfer happens ATC 14655
1	agreement for sale or transfer	the property agreed to be sold or transferred	the purchaser or transferee	when the agreement is entered into
2	declaration of trust	the property vested or to be vested in the declarant	the person declaring the trust	when the declaration is made
3	grant of a Crown lease	the leasehold interest	the lessee	when the lease is granted
4	grant of a long-term lease	(a)	for a long-term lease mentioned in s 10 (1) (d) or (e)-the leasehold interest; and	the lessor	(a)	for a long-term lease mentioned in s 10 (1) (d) or (e)-when the lease is granted; and
		(b)	for a long-term lease mentioned in s 10 (1) (f)-the extension or further extension mentioned in that section		(b)	for a long-term lease mentioned in s 10 (1) (f)-when the lease is extended or further extended as mentioned in that section
5	grant of a franchise arrangement	the franchise	the franchisee	when the franchise arrangement is granted

10. Dutiable property

(1) Dutiable property is any of the following:
- (a) land in the ACT;
- (b) a Crown lease;
- (c) a land use entitlement;
  …

11. When does a liability for duty arise?

(1) A liability for duty charged by this chapter arises when a transfer of dutiable property occurs.
(2) However, if a transfer of dutiable property is effected by an instrument, liability for duty charged by this chapter arises when the instrument is first executed.

16. When must duty be paid?

A tax default does not happen for the Taxation Administration Act if duty is paid within 90 days after the liability to pay it arises.

16A. Payment of duty - 'off the plan' purchase agreements

(1) For section 16, liability for duty on an 'off the plan' purchase agreement is taken to arise if at least 1 of the following events happens:
- (a) the agreement is completed;
- (b) the whole, or any part, of the purchaser's interest under the agreement is assigned;
- (c) the following period, beginning on the date of the agreement, ends:
  - (i) for a purchase agreement for a declared affordable house and land package-2 years;
  - (ii) for any other 'off the plan' purchase agreement-1 year;
- (d) a certificate of occupancy has been issued under the Building Act 2004 for
  
  ATC 14656
  the building to which the agreement relates.
(2) The duty payable on an 'off the plan' purchase agreement -
- (a) is payable within 14 days after 1 of those events happens; and
- (b) may be paid before any of those events happens.
(3) Despite section 16, a tax default happens for the Taxation Administration Act if the duty payable on an 'off the plan' purchase agreement is not paid within the 14 day period under subsection (2) (a).
(4) In this section:
declared affordable house and land package means a house and land package declared under section 16B.

'off the plan' purchase agreement means -
- (a) an agreement for the sale or transfer of dutiable property that is, or includes, land where a residence is to be erected or developed before completion of the sale or transfer; or
- (b) a purchase agreement for a declared affordable house and land package.

16B. Declaration of affordable house and land packages

(1) The Minister may declare a house and land package that is, or is to be, offered for purchase to be an affordable house and land package.
(2) A declaration is a disallowable instrument.

Note A disallowable instrument must be notified, and presented to the Legislative Assembly, under the Legislation Act.

17. No double duty

(1) If a dutiable transaction is effected by more than 1 instrument, 1 instrument is to be stamped with the duty payable on the transaction and in respect of the other instruments-
- (a) no duty is chargeable on an instrument that is lodged with the commissioner for stamping at the same time as the instrument to be stamped with the duty payable on the transaction; and
- (b) duty of $20 is chargeable on an instrument lodged with the commissioner for stamping at any other time.
(2) If a transfer of dutiable property is made in conformity with an agreement for the sale or transfer of the property-
- (a) no duty is chargeable in respect of the transfer if it is lodged with the commissioner for stamping at the same time as the agreement for sale or transfer; and
- (b) duty of $20 is chargeable in respect of the transfer if it is lodged for stamping at any other time.
(3) The duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $20 if-
- (a) the duty chargeable in respect of the agreement has been paid; and
- (b) the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement; and
- (c) the purchaser under the agreement and the transferee under the transfer were related people at the time the agreement was entered into.
(4) The duty chargeable on a transfer to a trustee of dutiable property subject to a declaration of trust is $20 if ad valorem duty has been paid on the declaration of trust in respect of the same dutiable property.
(5) The duty chargeable on a declaration of trust that declares the same trusts as those on and subject to which the same dutiable property was transferred to the person declaring the trust is $20 if ad valorem duty has been paid on the transfer.
…

Part 2.2 Dutiable value

20. What is the dutiable value of dutiable property?

(1) The dutiable value of dutiable property that is subject to a dutiable transaction is the greater of-
- (a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration); and
  
  ATC 14657
- (b) whichever of the following applies:
  - (i) for a long-term lease or franchise arrangement-the unencumbered value of the Crown lease of the land in relation to which the long-term lease or franchise arrangement is granted;
  - (ii) for a land rent lease-the amount that would be the unencumbered value of the lease if it were a Crown lease that is not a land rent lease;
  - (iii) for any other dutiable property-the unencumbered value of the dutiable property.
(2) However, the dutiable value of a dutiable transaction that is a purchase agreement for a declared affordable house and land package, is the lesser of-
- (a) the value of the land component of the package on the date of the agreement; and
- (b) the value of the land component of the package on the date the liability for duty arises under section 16A (1).
…
(5) In this section:

declared affordable house and land package means a house and land package declared under section 16B.

…

21. What is the consideration for the transfer of dutiable property?

(1) The consideration for the transfer of dutiable property is taken to include the amount or value of all encumbrances, whether certain or contingent, subject to which the dutiable property is transferred.
(2) The consideration for the transfer of the interest of a transferee under an uncompleted agreement for the sale or transfer of dutiable property is taken to include the balance of the amount or value of the consideration that would be required from the transferee under the agreement to complete it in accordance with its terms.
…

22. What is the unencumbered value of dutiable property?

(1) The unencumbered value of dutiable property is the value of the property determined without regard to any encumbrance to which the property is subject.
(2) If, before land is transferred to a transferee, the transferee has made improvements to the land, the unencumbered value of the land is to be determined as if those improvements had not been made.
…

30. Effect of alteration in purchase price

(1) If after an agreement for the sale or transfer of dutiable property is entered into and before the property is transferred-
- (a) the consideration under the agreement is reduced and the reduced consideration is not less than the unencumbered value of the dutiable property when the consideration was reduced; or
- (b) the consideration under the agreement is reduced because the parties have agreed not to transfer some of the dutiable property previously agreed to be transferred and the reduced consideration is not less than the unencumbered value of the dutiable property that remained to be transferred when the consideration was reduced; or
- (c) the consideration under the agreement is increased and the dutiable value when the consideration was increased is greater than the dutiable value when the agreement was entered into;
  the commissioner must assess or reassess the liability to duty of the agreement in accordance with the change in the consideration.
(2) The liability to pay additional duty arising from an increase in the consideration occurs on the day when the consideration is agreed to be increased.

Land (Planning and Environment) Act 1991 (ACT)

180. Transfer of land subject to building and development provision

(1) If a lease of territory land contains a building and development provision, the lease, or an interest in the lease, is not

ATC 14658
capable of being assigned or transferred, either at law or in equity unless-
- (a) the lessee has died; or
- (b) the transfer or assignment is made under any of the following orders:
  - (i) an order of the Family Court;
  - (ii) an order of another court having jurisdiction under the Family Law Act 1975 (Cwlth);
  - (iii) an order under the Domestic Relationships Act 1994, part 3.2 adjusting the property interests of the parties in a domestic relationship; or
- (c) the transfer or assignment happens by operation of, or under, bankruptcy or insolvency; or
- (d) the lessee has obtained-
  - (i) a certificate of compliance under section 179; or
  - (ii) the consent of the planning and land authority under subsection (2) or (3).
    
    Note A consent under the City Area Leases Ordinance 1936 may be taken to be a consent under s (2) (see s 292).
(2) The planning and land authority may, in writing, consent to a legal or equitable assignment or transfer of a lease, or an interest in a lease, mentioned in subsection (1) if-
- (a) the authority-
  - (i) is satisfied that the proposed assignee or transferee intends to comply with the building and development provision; and
  - (ii) has been given the security (if any) required by the authority for compliance with the provision by the proposed assignee or transferee; and
- (b) either-
  - (i) the authority is satisfied that the lessee cannot, for personal or financial reasons, comply with the building and development provision; or
  - (ii) the proposed transferee or assignee (the homebuyer ) has a contract with the person (the builder ) proposing to transfer or assign the lease and, under the contract, the builder is required to build a home on the leased land for the homebuyer.
    
    Note A fee may be determined under s 287 for this provision.
(3) The planning and land authority may also, in writing, consent to a transfer of a lease, or an interest in a lease, mentioned in subsection (1) if the proposed transfer is the first sale of an individual lease of undeveloped land by the person who provided the infrastructure on, and subdivided, the holding lease of which the individual lease is a subdivision.

Note A fee may be determined under s 287 for this provision.
(4) In deciding under subsection (2) or (3) whether to consent to an assignment or transfer of a lease, the planning and land authority must take into consideration any matters determined by the Minister, in writing, for the subsection.
(5) A determination under subsection (4) is a disallowable instrument.

Note A disallowable instrument must be notified, and presented to the Legislative Assembly, under the Legislation Act.

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