HALWOOD CORPORATION LTD v CHIEF COMMISSIONER OF STAMP DUTIES (NSW)
Judges:Loveday J
Court:
Supreme Court of New South Wales
Loveday J
This is an appeal pursuant to s 124(8) of the Stamp Duties Act 1920, the plaintiff being a person dissatisfied with an assessment of duty made by the Chief Commissioner of Stamp Duties in relation to a deed entered into between the plaintiff and Daines Investments Pty Limited dated 22 April 1988.
In the summons the plaintiff claims a declaration that the deed did not constitute an agreement for the sale or conveyance of any property in New South Wales within the meaning and for the purposes of s 41 of the Stamp Duties Act 1920 and that consequently it was liable to duty in the amount only of $10.00. If, as claimed by the Chief Commissioner of Stamp Duties, the deed constituted an agreement for the sale or conveyance of property it was liable to duty assessed ad valorem, conceded to be $381,490, together with a penalty as provided by s 25(2) of the Act in a similar amount, a total of $762,980. The summons also seeks consequential orders.
The subject matter of the deed is described as ``transferable floor space''. Whether or not this subject matter constituted ``property'' as that term is defined in the Stamp Duties Act 1920 is the question to be answered in this appeal.
The concept of ``transferable floor space'' requires an explanation. Development on land in New South Wales is controlled by the Environmental Planning and Assessment Act 1979. An application to develop land is made to a consent authority, in this case the Council of the City of Sydney, and that authority takes into consideration such of the matters set out in s 90 of the Act as are relevant to the development the subject of the application. These matters include the City of Sydney Planning Scheme Ordinance (an environmental planning instrument, see s 4 of the Act). To provide further guidance to would-be developers the Sydney City Council has passed resolutions adopting policies and setting out a code called ``Code for Control of Development and Floor Space Ratio''. The code sets out requirements and fixes standards for development within the City of Sydney but has no legally binding effect on the council or on the developer.
One of the matters dealt with by the code is floor space ratio, that is the ratio of the areas of floor space of the proposed building compared with the area of the site. A development site has under the code, a ``basic floor space ratio'' and a ``maximum floor space ratio''. Subject to the matters set out in s 90 of the Act, an applicant can expect to obtain approval for development in respect of a building, the floor space of which does not exceed the basic floor space ratio for the precinct in which the site is situated. Clause 6 of the code sets out the circumstances in which the basic floor space ratio may be exceeded, thus:
``Consent to develop more floor space than is permissible by the basic floor space ratio, may be granted if a development provides, or contributes to the provision of, certain elements required or approved by council and specified in this code, which are deemed to offset the otherwise detrimental effects on the city of such additional density of development. The particular elements of development qualifying for the award of bonus floor space are defined in clause 8 (of the code).''
Clause 6 then states that the maximum floor space ratio:
``May not under any circumstances be exceeded, notwithstanding the combinations of bonus elements for which application may be made.''
Bonus number 6, the relevant bonus in the present case, is described in clause 7 of the code thus:
``Policy 13 of the Strategic Plan calls for the adoption of measures to preserve places and structures on (the) council's register of places and structures of historical or
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architectural significance. The most practical measure is to permit the sale or transfer of the development potential of the site it is desired to preserve to an adjacent site, or to another site, within the same precinct or district.''
The particular development potential for the sale of which permission is given is floor space. The council has regard to the cost of restoration of the historic building and to the difference between (a) the floor space permissible under its code for the site of the historic building calculated in accordance with the basic floor space ratio and (b) the actual floor area of the historic building, and determines a figure for ``transferable floor space''. The grant of the award of transferable floor space by the council to the owner of the historic site is subject to the applicant owner entering into a deed which ensures that money gained by sale of the space will be used in the restoration of the historic building. The Policy thus provides money for the restoration of historic buildings on sites that could not be developed because of the presence of the historic buildings. The council keeps a register of these awards called the ``Transferable Floor Space Register'' and the transferable floor space noted in the register as having been awarded in respect of the preservation of the historic buildings noted therein is available to be transferred to a recipient site as a ``bonus'' ``deemed to offset the otherwise detrimental effects on the city'' of the additional density of development caused by the increase in the floor space permissible in relation to the recipient site beyond the basic floor space ratio of that site.
In accordance with this policy the Council of the City of Sydney in 1975 awarded a large area of transferable floor space, 11,939 square metres, to Katies Properties (NSW) Pty Limited, in respect of land in Victoria Street Potts Point and in Rowena Place and Brougham Street Woolloomooloo. This transferable floor space, apparently by some transfer or transfers not proved in evidence before me, became available to Daines Investments Pty Limited. In a letter dated 23 October 1987 to Daines Investments Pty Limited, the Council of the City of Sydney advised that this transferable floor space was available to Daines Investments Pty Limited:
``to be added to any development, subject to the recipient site being capable of absorbing the floor area in question in relation to the allowable floor area for the particular development on the terms of the Floor Space Code. Subject to the overall maximum floor space ratio allowable to the recipient site, such approval to the increase in floor area will be given by the granting of the relevant development consent. Each transfer will be subject to the development consent in each case.''
The deed the subject of the present appeal purported to sell 60,000 square feet (5,574 square metres) of this available 11,939 square metres of transferable floor space.
The submissions
Senior counsel for the plaintiff, Mr Gzell QC and Mr Austin QC with whom Mr Morling appeared, submit that the subject matter of the deed was not property within the meaning of the Stamp Duties Act 1920.
Section 3 of the Stamp Duties Act 1920 defines ``property'' so as to include:
``Real and personal property and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest.''
The expression ``any other right or interest'' they submit, is limited to proprietary rights, a contention only formally contested by the defendant having regard to the decision in
Commissioner of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235.
Their submission is accordingly, that transferable floor space is not a proprietary right, it is merely an expectation that a proprietary right might come into existence in the future and as such falls outside the concept of property. The transfer of that expectation did not confer any rights enforceable against anyone and in particular no relief would have been obtainable against the council in the event that the council refused approval of a development application relying on the ``bonus'' gained by the applicant who had acquired the transferable floor space. Counsel stressed the fact that the council's policies and the code had no legal effect since the council was still required to comply with s 90 of the Environmental Planning and Assessment Act 1979 and was bound to refuse consent to a development if it was proper to do so having regard to the matters set out in that section. The right to work and the right to personal service
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are examples of similar non-proprietary rights so the argument ran, citingNokes v Doncaster Amalgamated Collieries Ltd (1940) AC 1014 at 1018, 1019;
Government of Malaysia v Selangor Pilots Association (1978) AC 337 at 345, 346;
Dorman v Rodgers & Ors (1982) 148 CLR 365 at 367, 369, 370 and 374; and
Hepples v FC of T 91 ATC 4808 at 4813, 4814, 4827 and 4839; (1991) 65 ALJR 650 at 653, 654, 664 and 674.
Counsel also referred me to statements in a number of authorities to the effect that technical information and ``know how'' is not property notwithstanding that large sums of money may be paid for it. Typical of such statements is that in
FC of T v United Aircraft Corporation (1943) 7 ATD 318 at p 321; (1943) 68 CLR 525 at p 534 where Latham CJ said:
``It was argued that the American company transferred to the Australian company information to be used by that company in Australia... It was said that this amounted to a transfer of property... I am unable to regard the communication of information as constituting a transfer of property.''
I do not find the technical information and know how cases of assistance. As Latham CJ pointed out in FC of T v United Aircraft Corporation, when knowledge is communicated (transferred) ``the transferor still has everything that he had before'' and ``a man with a richly stored mind is not for that reason a man of property''.
Nor do I regard the right to work or right to personal service as comparable. Those rights have many different characteristics from the transferable floor space in question here.
Counsel submitted that the ``expectancy'' in question here is similar to that of a person who hopes or expects to benefit under a will or other disposition there being no legal entitlement thereto. In that situation an assignment of that ``right'' is not an assignment of property. Such a case was in In the Matter of the Stamps Act and In the Matter of Rule's Settlement (1915) VLR 670. At p 674 Madden CJ said:
``Now, in this case it is contended for the settlor that that which is sought to be settled here is certainly not property, because there is no property or interest in the thing at all so far as the settlor is concerned; that she has no right or interest in it whatever; that she has a mere expectation that her father or her mother, in pursuance of the powers given to them, may give her some interest in the funds as to which they have powers of appointment. It is contended on the other hand that, nevertheless, this is a settlement of property within the Act. We do not think it is. The word `property' is used in the Act in the sense of `proprium,' something of one's own, some property in which the settlor has a distinct interest, vested or contingent. It may be that the property may never come to enjoyment by reason of the failure of the contingency upon which enjoyment is to depend, but none the less, such a distinct contingent interest would be `property'. But it is not possible to extend the meaning of the word `property' to cover something which cannot be contemplated in law as `property' at all. Here the lady who is the settlor has merely an expectation that her father or mother will remember her, and will make some provision for her out of the property as to which he and she have powers of appointment. We think this is a matter which does not fall within the section...''
It is true that in the present case also, the recipient of the transferable floor space may not be able to use it precisely as he desires. Council may not grant him the ``bonus'' promised because of some planning considerations. In Re Rule's Settlement however the settlor had a bare expectation, the transferee could make no demands whatsoever upon the father or mother. The transferee under the present deed may demand that its transferable floor space be considered by the council in accordance with the council's published policy and in accordance with the council's statement to the transferor even though there is no legally binding obligation on the council to approve a development application relying on the transferable floor space. And if the council refuses to approve the application the transferee may use its right in relation to some other development application to be made by the transferee or by some other person to whom the transferee has sold the right.
Other cases cited by counsel as illustrations of mere expectations such as
The Commissioner of Stamp Duties (NSW) v The Perpetual Trustee Co Ltd (1926) 38 CLR 12 may, I think, be similarly answered.
Mr Lindgren QC senior counsel for the Chief Commissioner of Stamp Duties as I have
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already indicated, makes a formal submission that the expression ``any other right or interest'' in the definition of ``property'' in s 3 of the Stamp Duties Act 1920 is not limited to rights or interests of a proprietary nature. He concedes however that I am bound by the decision inCommr of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235; see also
McCaughey v Commr of Stamp Duties (1945) 46 SR NSW 192;
Commr of Stamp Duties (NSW) v JV (Crows Nest) Pty Limited 86 ATC 4740; (1987) 7 NSWLR 529; and
2 Day FM Australia Pty Ltd v Commr of Stamp Duties (NSW) 89 ATC 4840.
Mr Lindgren submitted that the Council of the City of Sydney would be estopped from refusing a development application made by the transferee ``except on environmental grounds''. Thus he argued, the transferee had more than a mere expectation.
I see no merit in this submission. In determining a development application the council would be required to take into consideration such of the matters set out in s 90 of the Environmental Planning and Assessment Act 1979 as were relevant to the application. No estoppel could prevail against that provision: see
United Grocers, Tea and Dairy Produce Employees' Union of Victoria v Linaker (1916) 22 CLR 176 at 179. If by ``environmental grounds'' Mr Lindgren meant the provisions of s 90 then the ``estoppel'' has no force additional to that section. If he meant the provisions of s 90(1)(b) which require the council to take into consideration ``the impact of (the proposed) development on the environment...'' then the ``estoppel'' would purport to require the council to ignore the other provisions of s 90, contrary to the provisions of s 90. I reject this argument.
Mr Lindgren's main argument is that the ``right'' the subject of the deed is a ``proprietary right''. He points to the wording of the deed which in recital A describes the subject matter of the deed as:
``Rights in respect of... transferable floor space or floor space ratio for use as development potential... granted by the Council of the City of Sydney.''
The operative part of the deed is framed in a manner appropriate to the sale of a proprietary right. The covenants, including a provision for payment of stamp duty by the purchaser, are covenants that might be expected in a document relating to a proprietary right. It should be noted however that clause 4 of the deed acknowledges that the purchaser:
``is aware that any transfer of transferable floor space is subject to and will only be effective if all necessary consents and approvals have first been obtained from or given by the Council.''
However, if the rights transferred are not in fact proprietary rights the fact that the parties to the deed have so regarded them does not make them proprietary rights.
As Lord Chancellor Brougham said in
Keppell v Bailey (1834) 2 Myl & K 517 at 535/536 (39 ER 1042 at 1049) in a passage cited by McLelland J in
Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) NSW ConvR ¶ 55-523:
``There are certain known incidents to property and its enjoyment; among others, certain burthens wherewith it may be affected, or rights which may be created and enjoyed over it by parties other than the owner; all which incidents are recognised by the law... But it must not therefore be supposed that incidents of a novel kind can be devised and attached to property at the fancy or caprice of any owner. It is clearly inconvenient both to the science of the law and to the public weal that such a latitude should be given. There can be no harm in allowing the fullest latitude to men in binding themselves and their representatives, that is, their assets real and personal, to answer in damages for breach of their obligations. This tends to no mischief, and is a reasonable liberty to bestow; but great detriment would arise and much confusion of rights if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, which should follow them into all hands, however remote.''
But it was not only the parties to the deed who regarded the rights as proprietary. Formal notice of the assignment pursuant to s 12 of the Conveyancing Act 1919 was given to the Council of the City of Sydney and the notice was acknowledged by a letter to the transferee from the Town Clerk confirming:-
``That Council acknowledges that 60,000 square feet of transferable floor space has
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been transferred from Daines Investments Pty Limited to your company.''
Later on 3 February 1989, the Town Clerk advised the solicitors for the transferee:
``That the right to transfer the subject floor space is not altered by the fact that the donor site is now in the City of South Sydney and that the Council will continue to honour the rights previously granted.''
Lord Brougham's statement cited above, does not mean that the categories of proprietary rights are closed. New proprietary rights are created by legislation. Courts also recognise proprietary rights that are ``created'' by commerce. An illustration is trade marks. Courts of equity ``protected and established a property in trade marks before they were recognized by statute'': (
Colbeam Palmer Ltd & Anor v Stock Affiliates Pty Limited (1968) 122 CLR 25 at 34 per Windeyer J).
What then is the test to be applied to see whether a new concept such as ``transferable floor space'' is to be regarded as a proprietary right?
In
National Provincial Bank Ltd v Ainsworth (1965) AC 1175, at 1247, 1248, Lord Wilberforce said:
``Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.''
This statement has been applied in Australia; see
The Queen v Toohey & Anor Ex Parte Meneling Station Pty Ltd & Ors (1982) 158 CLR 327 at 342.
Mr Gzell argues that transferable floor space has no ``permanence or stability''. On the contrary it is uncertain, it is little more than a hope, at the most an expectation that the Sydney City Council will act in a particular way.
I do not agree. The fact that there may be some element of uncertainty as to the degree of enjoyment of transferable floor space does not mean that it is not a valuable right. Goodwill was recognised as a proprietary right even when it meant nothing more than the probability that customers would resort to the old place of business. Even in the modern wider view of ``goodwill'' the enjoyment of transferred goodwill is as much an ``expectation'' as transferable floor space. (See generally as to goodwill
Box v FC of T (1952) 10 ATD 71 at 73-74; (1952) 86 CLR 387 at 395-396.)
In Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (New South Wales Supreme Court, Young J 15 November 1990 unreported) the vendor of transferable floor space sought specific performance of a contract in the form of a deed to sell the floor space. His Honour refused relief holding that the purchaser was entitled under the terms of the deed, to rescind and stated:
``I cannot see that the City Council, in keeping a register of bonus floor space, creates any proprietary right at all. Accordingly, it is difficult to see how a decree for specific performance could be made.''
The Court of Appeal however reversed his Honour's decision and made an order for specific performance (Court of Appeal 9 October 1991 unreported). At p 2 of his judgment in the Court of Appeal Meagher JA (with whom Samuels AP and Handley JA agreed) said this:
``A `transfer' of `air space' amounts to that which would have astonished a Roman Lawyer, the assignment in gross of a ius altius tollendi. McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) NSW Conv R 58,902 has held that an `air space' is not `a legal or equitable estate or interest' in land within the meaning of s 74F of the Real Property Act 1900. No doubt this is so. However, in the same decision his Honour held that they do not constitute `proprietary' rights. This seems to me debatable. They are transferable, and I assume transmissible; they are of large commercial value; and I see no reason why they are not `proprietary' rights in the same way as goodwill, patents or shares in the capital of a company are `proprietary' rights.''
Mr Gzell has submitted that his Honour's remarks are obiter dicta and that they do not amount in any event to a definite statement to the effect that transferable floor space is a proprietary right. It is true that his Honour in using the expression ``this seems to me debatable'' suggested doubt but as I read the passage he was at least expressing a tentative opinion that rights to transferable floor space are proprietary rights. The order for specific
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performance made by the court is not an order appropriate to a mere ``expectation''. It is however appropriate to a right in the nature of a proprietary right. In this regard Meagher JA said this:``I should have thought that rights of `air space'... are sufficiently unique to attract the doctrine. Specific performance is available as a remedy to enforce a contract for the sale of `property' in circumstances where damages would not afford an adequate remedy. See Dougan v Ley (1946) 71 CLR 142 at 153/154.''
Registration in the council's register confers an exclusive entitlement to the floor space. The transferee of the transferable floor space has a right recognised by the council to have a development application considered by the council taking into account the existence of the transferable floor space. This is a valuable right not possessed by an applicant for development approval without transferable floor space. The reality is that commerce regards transferable floor space as a proprietary right. The courts should do likewise.
It follows that in my opinion the deed entered into between the plaintiff and Daines Investments Pty Limited dated 22 April 1988 was an agreement for the sale or conveyance of property and accordingly that it was properly assessed as liable for ad valorem duty.
The appeal therefore fails. The summons is dismissed. The plaintiff is to pay the defendant's costs.
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