ALCAN (NT) ALUMINA PTY LTD v COMMISSIONER OF TERRITORY REVENUE (NT)

Members:
French CJ
Hayne J
Heydon J
Crennan J
Kiefel J

Tribunal:
High Court of Australia

MEDIA NEUTRAL CITATION: [2009] HCA 41

Decision date: 30 September 2009

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French CJ

Introduction

1. In November 2005, the Commissioner of Territory Revenue ( " the Commissioner " ) assessed for stamp duty two transactions by which Alcan (NT) Alumina Pty Ltd ( " Alcan " ) acquired all of the shares in Gove Aluminium Ltd ( " GAL " ). The assessment was based in part upon the value of a Special Mineral Lease and Special Purpose Leases ( " the Leases " ) held by GAL and the value of its goodwill. In making the assessment the Commissioner relied upon s 56N of the Taxation (Administration) Act (NT) ( " the Act " ) ^[1] Which has been subsequently renamed the Stamp Duty Act (NT). See fn 29 below. , which renders the acquisition of shares in a corporation dutiable by reference to the value of its landholdings where that value exceeds 60 % of the value of all of its property. Section 56R provides for the dutiable value of the shares acquired to be assessed by reference to the same proportion of the unencumbered value of the corporation ' s land as the proportion of the corporation ' s

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shares acquired. The Court of Appeal of the Northern Territory held, contrary to the conclusion of the primary judge ^[2] Alcan (NT) Alumina Pty Ltd v Commissioner of Taxes 2007 ATC 4198 ; (2007) 19 NTLR 153 . , that the value of the Leases should be assessed by taking into account options to renew them ^[3] Commissioner of Territory Revenue v Alcan (NT) Alumina Pty Ltd 2008 ATC ¶ 20-086 ; (2008) 156 NTR 1 at 25 [ 78 ] per Martin (BR) CJ, 30 [ 104 ] per Angel J, 34 [ 121 ] per Southwood J. . The definition of " lease " in s 4(1) of the Act expressly excludes " an option to renew a lease " . The factual and procedural history and the provisions of the relevant legislation are set out in the joint judgment ^[4] See [ 18 ] – [ 27 ] and [ 30 ] below. . I agree, for the reasons expressed in that judgment and the reasons that follow, that the options to renew the Leases should not have been taken into account by the Commissioner. I agree with the proposed orders allowing the appeal.

The constructional questions

2. The issue which is determinative of the appeal is whether the assessment of the dutiable value of the Leases requires that the Commissioner take into account options to renew contained in them.

3. The two constructional questions raised are:

• 1. Whether, properly construed, ss 56N and 56R in their application to leases as a species of land pick up the definition of " lease " in s 4(1).
• 2. Whether, properly construed, the exclusion of " an option to renew a lease " in the definition of " lease " in s 4(1) precludes consideration of such an option in assessing the value of a lease as land for the purposes of s 56N(2) and s 56R(2).

The resolution of the first question involves determination of the question whether the definitions of either or both " land " and " lease " in s 4(1) are displaced in ss 56N and 56R by a contrary intention. The resolution of the second question involves the application, in those sections, of the exclusion of renewal options from the definition of " lease " .

Whether the statutory definitions of " land " and " lease " are displaced

4. The starting point in consideration of the first question is the ordinary and grammatical sense of the statutory words to be interpreted having regard to their context and the legislative purpose. That proposition accords with the approach to construction characterised by Gaudron J in
Corporate Affairs Commission (NSW) v Yuill ^[5] (1991) 9 ACLC 843 ; (1991) 172 CLR 319 at 340; [ 1991 ] HCA 28 . as:

" dictated by elementary considerations of fairness, for, after all, those who are subject to the law ' s commands are entitled to conduct themselves on the basis that those commands have meaning and effect according to ordinary grammar and usage. "

In so saying, it must be accepted that context and legislative purpose will cast light upon the sense in which the words of the statute are to be read. Context is here used in a wide sense referable, inter alia, to the existing state of the law and the mischief which the statute was intended to remedy ^[6] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ , particularly authorities referred to in fns 46 and 47; [ 1997 ] HCA 2. .

5. The provisions of the Interpretation Act (NT) ( " the NT Interpretation Act " ) as they stood at the time of the relevant transactions have to be taken into account. Section 62A of the NT Interpretation Act requires a construction promoting the purpose or object underlying the statute to be preferred to a construction that does not do so ^[7] See also Acts Interpretation Act 1901 (Cth), s 15AA. . Section 62B authorises recourse to extrinsic materials in the interpretation of statutes ^[8] See also Acts Interpretation Act 1901 (Cth), s 15AB. . The NT Interpretation Act has no equivalent of s 15AB(3) of the Acts Interpretation Act 1901 (Cth) ( " the Commonwealth Interpretation Act " ), which requires regard to be had to " the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act " . Despite the lack of such a provision in the NT Interpretation Act, the established common law approach, which begins with the ordinary grammatical meaning of the text having regard to context and purpose, applies to like effect. The Court of Appeal in this case construed the Act by reference to an imputed legislative intention reflecting a revenue - maximising approach to taxing statutes ^[9] 2008 ATC ¶ 20-086 ; (2008) 156 NTR 1 at 17 [ 45 ] , 22 [ 66 ] , 24 [ 76 ] - [ 77 ] per Martin (BR) CJ, Angel J agreeing at 30 [ 104 ] , Southwood J agreeing at 34 [ 121 ] . which paid insufficient regard to the clear words of the Act.

6. In the present case the displacement of the definitions in s 4(1) of the Act is expressly conditioned upon the appearance of a " contrary intention " . This kind of provision, like that in the present s 18 of the NT Interpretation Act ^[10] Which provides: “ Definitions in or applicable to an Act apply except so far as the context or subject matter otherwise indicates or requires. ” , has been described as " a standard device to spare the drafter the embarrassment of having

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overlooked a differential usage somewhere in his [ or her ] text " ^[11] M v Secretary of State for Work and Pensions [ 2006 ] QB 380 at 407 [ 84 ] per Sedley LJ . . The ninth edition of Craies on Legislation calls it ^[12] Greenberg (ed), Craies on Legislation , 9th ed (2008) at 732 [ 24.1.5.1 ] . :

" a general gloss of a kind that would have to be inferred in any event, where a provision elsewhere in the legislation to which the definition purported to apply showed by express provision or necessary implication that the definition was not intended to apply there. "

The exclusion of a particular definition where a " contrary intention " appears would be implied in any event ^[13] In the Matter of The Fourth South Melbourne Building Society (1883) 9 VLR(E) 54 at 58 per Holroyd J ; Buresti v Beveridge (1998) 88 FCR 399 at 401 per Hill J . . A contrary intention may appear from context or legislative purpose. But, as Pearce and Geddes observe ^[14] Pearce and Geddes, Statutory Interpretation in Australia , 6th ed (2006) at 196 [ 6.1 ] . :

" A good drafter will indicate ' the contrary intention ' clearly. "

7. If the definition of " land " in s 4(1) was displaced in ss 56N and 56R, then the definition in s 19 of the NT Interpretation Act as it stood at the relevant time would apply, namely:

" ' land ' includes all messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate or interest therein " .

That definition dates back to Lord Brougham ' s Act ^[15] 13 & 14 Vict c 21, s 4. and was included in the Interpretation Act 1889 (Imp) ^[16] 52 & 53 Vict c 63. . It found its way into colonial interpretation statutes in Australia ^[17] See, for example, Interpretation Act 1897 (NSW), s 21(e). , and into s 22(c) (now s 22(1)(c)) of the Commonwealth Interpretation Act. It includes " freehold and leasehold, corporeal and incorporeal interests of every description. " ^[18] Re Lehrer and the Real Property Act 1900 – 1956 [ 1961 ] SR (NSW) 365 at 370 per Jacobs J . It was described as being in “ wide and general terms ” in Goldsworthy Mining Ltd v Federal Commissioner of Taxation 73 ATC 4010 ; (1973) 128 CLR 199 at 215 per Mason J; [ 1973 ] HCA 7 . See also Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [ No 2 ] (1987) 162 CLR 153 at 163 per Brennan, Deane, Dawson and Toohey JJ; [ 1987 ] HCA 10 . It is to be read with the definition of " estate " in s 19 which " includes any estate or interest, charge, right, title, claim, demand, lien or encumbrance at law or in equity " . It would no doubt pick up, within the meaning of " leasehold interests " , options to renew incorporated in the grant of such interests.

8. At common law an option to renew a lease is " an incident of the lease " ^[19] Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 344 per Gibbs J ; see also at 337-338 per Barwick CJ, 351-352 per Stephen J; [ 1976 ] HCA 9. That case dealt with the priority accorded under the Torrens system to an unregistered, executed extension in registrable form granted pursuant to an option to renew in a registered lease. . It is a present interest running with the land and is " intertwined with the lease itself " , which, it has been suggested, is probably why it did not attract the rule against perpetuities at common law ^[20] Butt, Land Law , 5th ed (2006) at 192 [ 1276 ] . . A lease obtained by the exercise of an option to renew is a new lease and the option is " merely an irrevocable offer, but beyond that there is no contract for a further term, unless and until the offer is duly accepted, by exercising the option. " ^[21] Gerraty v McGavin (1914) 18 CLR 152 at 163-164 per Isaacs J; [ 1914 ] HCA 23 , citing Hand v Hall (1877) 2 Ex D 355 at 357-358 per Lord Cairns LC and Woodall v Clifton [ 1905 ] 2 Ch 257 at 271 per Stirling LJ (in argument) and 274 per Romer LJ (in argument) . See also Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 345-346 per Gibbs J . That characterisation was relied upon by Hill in commentary on the definition of " lease " in s 76 of the Stamp Duties Act 1920 (NSW) ^[22] Hill, Stamp, Death, Estate and Gift Duties , (1970) at 136 [ 76/7(a) ] . :

" Where a lease for a term grants to the lessee the option for a further term, the term of the lease does not include the term of the renewal and hence duty is charged without reference to the rent payable during the renewal. See
Hand v Hall (1877) 2 Ex D 355 . The option for renewal is not itself stampable as a lease within the definition since until exercise it does not amount to an agreement for lease, nor does it confer upon the tenant the right to use property. It is considered that an option for renewal of a lease is subsidiary to the main object of the instrument and thus covered by the stamp on the lease itself … In practice such options are not separately stampable. "

And in the seventh edition of Sergeant and Sims on Stamp Duties and Capital Duty , published in 1977, the following observation was made ^[23] Sims and Tavar é (eds), Sergeant and Sims on Stamp Duties and Capital Duty , 7th ed (1977) at 155. This passage remains in the current edition: Quinlan (ed), Sergeant and Sims on Stamp Duties and Stamp Duty Reserve Tax , 12th ed (1998) at 317. :

" A lease for a definite term of x years, with an option to the tenant to renew for a further y years, is chargeable as a lease for x years not as a lease for x + y years; see
Hand v Hall (1877) 2 Ex D 355 " .

These commentaries are indicative of legal opinion at the time of the making of the Taxation (Administration) Ordinance1978 (NT), enacted in identical terms in the Act, which contained the exclusions in the definition of " lease " relevant to this case ^[24] See the legislative history reproduced from the Commissioner ’ s submissions in the joint reasons at [ 44 ] below. . Those exclusions were themselves derived from the Australian Capital Territory Taxation (Administration) Act 1969 (Cth) ^[25] Australian Capital Territory Taxation (Administration) Act 1969 (Cth), s 4. . The Explanatory Memorandum for the Bill that became that Act contained no explanation of why options to renew had been excluded ^[26] Australia, House of Representatives, Australian Capital Territory Taxation (Administration) Bill 1969 et al, Explanatory Memorandum at 10. . By way of contrast, when a leasehold interest is valued for the purpose of determining compensation for its compulsory acquisition, valuation practice and authority (sparse as it is) indicate that the value of such an option would be taken into account ^[27] Jacobs, The Law of Resumption and Compensation in Australia , (1998) at 178 [ 12.5.5.3 ] - [ 12.5.5.4 ] ; Bogg v Midland Railway Co (1867) LR 4 Eq 310 ; In re A Proposed Sale, Public Trustee to Mitchell [ 1947 ] NZLR 697 at 702 per Archer J . See also Fricke, Compulsory Acquisition of Land in Australia , 2nd ed (1982) at 340. .

9. On the face of it, there is nothing in the text of ss 56N and 56R which indicates an intention to displace the definition of " land " in

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s 4(1) so as not to apply to the word as used in those provisions. There is no textual indicator of such an intention in the other provisions of the Act. Neither the context in the wide sense nor legislative purpose suggests such an intention. There is nothing to indicate any basis upon which the term " lease " as used in the definition of " land " in s 4(1) should not take its meaning from the definition of " lease " in that section.

10. It was common ground that the purpose of Div 8A of Pt III of the Act was to tax transactions involving the sale of shares in corporations which had the effect of indirectly transferring ownership, or a share in the ownership, of land in the Territory. The " mischief " to which that purpose was directed arose out of ^[28] See Northern Territory, Legislative Assembly, Parliamentary Record , 24 August 1988 at 3883. :

• • the much lower rate of marketable security duty payable on transfer of shares than on transfer of land;
• • the calculation of the duty payable on transfer of shares by reference to the consideration for the transfer or by reference to the value of the shares;
• • the relief from payment of duty enjoyed in respect of the indirect transfer of the shares in the company holding the subject land to the new shareholder.

So it was submitted by the Commissioner and not contested by Alcan that " by the device of transferring shares in a landholding company and winding it up all but minimal duty could be avoided " . But, as Alcan submitted, to identify the purpose of Div 8A as providing a remedy for the mischief so described does not answer the constructional question.

11. That submission should be accepted. The ultimate purpose of Div 8A was to impose stamp duty on the transactions to which it applied. Its purpose says nothing about the extent of that imposition, which must be determined by reference to its terms. The terms are not to be read by reference to some general principle that requires taxing statutes to be construed so as to maximise the recovery of revenue. In my opinion, no contrary intention was disclosed which would warrant displacing the definitions of " land " and " lease " in s 4(1) so as to render them inapplicable in ss 56N and 56R.

Whether exclusion of options to renew affects dutiable value

12. The negative answer to the first constructional question leaves open the possibility that, even though the definition of " lease " for the purposes of ss 56N and 56R excludes an option to renew, the existence of an option to renew can be taken into account in valuing the lease and therefore arriving at the dutiable value attaching to the relevant share acquisition. That possibility fell within the broad sweep of the Commissioner ' s submission. The Commissioner argued that the words " does not include … an option to renew " in the definition of " lease " in s 4(1) did not require that the value added to a leasehold estate by inclusion in the grant of an option to renew should be excised. The submission appeared to focus upon the proposition that the words " does not include " simply meant " not adding " and did not mean " deducting " . Division 8A was said to manifest an intention contrary to any exclusion of the value added by an option.

13. The possible construction for which it seemed the Commissioner was contending can be judged by transposition of the relevant definitions into ss 56N and 56R of the Act. A necessary condition for the application of Div 8A is that the corporation whose shares are the subject of acquisition be a landholder. Making the transposition into s 56N(2)(b), that condition relevantly reads:

" the value of all leases (not including options to renew) to which the corporation is entitled, whether in the Territory or elsewhere, … is 60 % or more of the value of all property to which it is entitled … "

Under a like transposition, s 56R(2) would provide that the dutiable value is the same proportion of the unencumbered value of the leases (not including options to renew) in the Territory to which the corporation is entitled as the proportion of the corporation ' s shares acquired.

14. This reading demonstrates that the exclusion of renewal options is directly related to the determination of whether a corporation is a corporate landholder and the dutiable value of the acquired interest by reference to the unencumbered value of the corporation ' s

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leaseholdings. The exclusion of the options cannot be detached from the determination of the value of the land held by the corporation and the relevant dutiable value.

15. The second constructional question is therefore also answered adversely to the Commissioner.

Conclusion

16. The appeal should be allowed and orders made as proposed in the joint judgment.