PIONEER CONCRETE (VIC) PTY LTD v COMMISSIONER OF STATE REVENUE (VIC)

Members:
Tadgell JA
Batt JA
Chernov JA

Tribunal:
Victorian Court of Appeal

MEDIA NEUTRAL CITATION: [2001] VSCA 55

Decision date: 2 May 2001

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Tadgell JA

This is an appeal by leave from an interlocutory decision of a judge of the Supreme Court made in the course of an appeal against an assessment to stamp duty ad valorem [ reported at 99 ATC 4708 and 4884]. The dutiable document in question was an instrument of transfer on sale of Torrens Title land that was assessable pursuant to subdivision (6) of Division 3 of Part 2 and Heading VI of the Third Schedule of the Stamps Act 1958 according to ``the value of the property'' transferred. The essential issue was the proper value for duty of the subject land. Section 63(3)(b)(i) of the Act <sup>[1]</sup> Found in subdivision (6) of Division 3 of Part 2. provides in effect that, in such a case, the value of the property transferred is to be taken to be the greater of ``the consideration for the sale'' and the amount for which the property might reasonably have been sold had it been sold, free from encumbrances, in the open market on the day of the sale. ^[2] Specifically, the provisions of s. 63 now relevant are these: ``63(1) In this subdivision and in the provisions of the Third Schedule under Heading VI — `Conveyance' includes transfer; `Convey' includes transfer; `Real property' includes any estate or interest in real property. ... 63(2) In this subdivision and in the provisions of the Third Schedule under Heading VI, a reference to a conveyance of real property includes a reference to an instrument and to a decree or order of a court or of the Registrar of Titles by which real property is conveyed to or vested in a person. 63(3) Except as otherwise provided in this Act — (a) a reference in this subdivision or in the provisions of the Third Schedule under Heading VI to real property or property includes a reference to chattels not being stock-in-trade held or used in connexion with a business carried on or in connexion with the real property — (i) that, by reason of the sale of or agreement to transfer the real property or property to the transferee, are sold or transferred to the transferee or a person who is related to the transferee (within the meaning of section 75(3)); or (ii) the sale or transfer of which to the transferee or any other person forms, in the opinion of the Comptroller of Stamps, substantially one transaction with the conveyance of the real property or property; (b) a reference in this subdivision or in the provisions of the Third Schedule under Heading VI to the value of real property or property is a reference — (i) in relation to a conveyance on sale of the real property or property — (A) to the sum of the consideration for the sale and the consideration for the transfer of chattels included in the real property or property by reason of paragraph (a); or (B) to the sum of the amount for which the real property or property and the amount for which such chattels might reasonably have been sold if they had been sold, free from encumbrances, in the open market on the date of the sale — whichever is the greater ... 63(3A) For the purposes of sub-section (3)(b), in determining the amount for which real property, property or chattels might reasonably have been sold free from encumbrances, there must be disregarded subject to sub-section (3B), any interest, agreement or arrangement (other than an encumbrance) granted or made in respect of the real property, property or chattels, that has the effect of reducing the value of the real property, property or chattels. 63(3B) An interest, agreement or arrangement referred to in sub-section (3A) is not to be disregarded if the Comptroller is satisfied that it was not granted or made as a part of an arrangement or scheme with a collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property, property or chattels. 63(3C) In considering whether or not he or she is satisfied for the purposes of sub-section (3B), the Comptroller may have regard to — (a) the duration of the interest, agreement or arrangement before the conveyance of the real property, property or chattels; and (b) whether the interest, agreement or arrangement has been granted to or made with an associate, a related corporation or a trustee of the transferor or transferee; and (c) whether there is any commercial efficacy to the granting of the interest or the making of the agreement or arrangement other than to reduce stamp duty; and (d) any other matters he or she considers relevant.''

2. The dutiable instrument was executed to give effect to a contract of sale from Amatek Ltd. to the appellant, Pioneer Concrete (Vic.) Pty. Ltd. The subject land, a parcel of some 35 hectares occupying a partly worked-out sand quarry at Clayton, was at the time of sale most valuable, it appears, as a tip, which is to say that that was its highest and best use. The vendor, formerly Monier Ltd., having for many years operated a sand extraction business on the land, proposed to continue that operation into the future and, in order that it might do so, was willing to give possession to the purchaser only progressively. Accordingly, by special conditions 5.1 and 5.3 of the contract of sale, the vendor retained to itself rights (which it is convenient to call ``extraction rights'') to possess, use and occupy defined parts of the land for terms up to 12 years, and to extract sand from those parts. By special condition 5.2 the vendor retained also to itself rights (called in the contract ``tipping rights'') to tip and treat waste on defined parts of the land for terms up to 15 years. The contract of sale expressed the day of sale to be 21 November 1995 and the price (payable over a 12-year period) to be $1,731,053, and that was the consideration for the sale expressed in the instrument of transfer.

3. The contract provided, at the vendor's insistence, that the land be transferred to the purchaser as at the day of sale; and it was from settlement at the risk of the purchaser, which was obliged to indemnify the vendor against environmental claims arising, for example, from the undertaking of tipping operations.

4. The contract of sale was expressed to be interdependent with and to take effect at the same time as a contemporaneously-executed Grant Agreement by which Amatek Ltd. granted the tipping rights to Pioneer Australia Waste Management Pty. Ltd. (which I shall call

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Pioneer Waste), a company related to the appellant by virtue of sharing the same ultimate holding company. The effect of the contract of sale and the Grant Agreement in combination, so far as is now relevant, was to reserve to the vendor, Amatek, rights to occupy and extract sand from defined portions of the subject land and to retain tipping rights in relation to those portions until sand extraction was completed. Thereafter, Pioneer Waste had the right, by virtue of the Grant Agreement, to conduct tipping operations on such of the land as was worked out as a quarry. The consideration moving from Pioneer Waste for the tipping rights was $1,503,794 payable on the day of the date of the Grant Agreement and subsequent indexed monetary instalments payable, in effect, as specified areas became available to Pioneer Waste for tipping.

5. In order to facilitate the assessment to duty of the instrument of transfer the respondent instructed the Valuer-General to value the land, initially excluding the value of tipping rights and including the value of extraction rights, but the instruction was later altered so that the value of tipping rights should be included, together with the value of extraction rights. The Valuer- General's valuation on the latter basis was $7,710,000 and the duty assessed in accordance with the valuation, by notice dated 6 March 1997, was $424,050. The appellant lodged notice of objection to the assessment, together with a cheque for $95,208, contending that that sufficed for the stamp duty exigible on the footing that the properly assessable value of the property was an amount equal to the consideration for the sale, exclusive of the value of both the extraction rights and the tipping rights that were reserved to the vendor and granted under the Grant Agreement. The notice asserted (providing substantial detail) that the appellant did not take the land in a ``clear, unencumbered, risk-free manner''; and that it had been required, ``before the vendor would sign the contract of sale, to accept very substantial restrictions on its right to use, enjoy and occupy the land''; that its rights were limited, and that it had ``no tipping rights over the land'' and ``... no `interest' in sand reserves, as it has no legal right to them. All rights in respect of sand reserves are retained by Amatek''. ^[3] The notice of objection also pointed out that the contract gave the appellant the use of limited proportions of the total site in terms of area as follows: until 30 June 1996 16.9%, then 35.8% until 20 November 2000, then 45.1% until 20 November 2002, then 48.1% until 20 November 2003, then 50.1% until 20 November 2007 and, only after that, use of the whole site.

6. By notice of decision dated 2 June 1998 the respondent allowed the objection in part, excluding from the assessable value of the property only the value of the extraction rights ($570,000), thus reducing the assessable value to $7,140,000 and correspondingly reducing the stamp duty assessed to $392,700. The respondent's reasons for the decision do not clearly state why the value of extraction rights was excluded. Counsel for the respondent in this Court offered the reason however that, because stamp duty is not imposed upon property that is not sold and transferred, the value of the remaining extractable sand was not included because it was not sold. That is scarcely convincing. Duty is imposed by reference to the value of real property conveyed not as sand or soil but as a proprietary interest; and it is not easy to discern for present purposes a relevant distinction between a proprietary interest in some sand and that in a void or hole in the ground. One is therefore tempted to discern in the decision, to that extent, a measure of inconsistency. If it be so, however, it is no doubt by the way: it could not have affected the result of the appeal from the decision.

7. On 27 July 1998 the appellant requested pursuant to s. 33B(1)(b) of the Act that the respondent treat the objection as an appeal to the Supreme Court. The matter was heard by the judge in two stages, orders having been made by consent pursuant to Rule 47.04 of Chapter I of the Rules of Court for the trial of preliminary issues. In the first stage two questions were posed for the judge. The first was whether ``the consideration for the sale'' in terms of paragraph (A) of s. 63(3)(b)(i) (which for convenience I shall henceforth call simply ``paragraph (A)'') was the price of $1,731,053 payable pursuant to the contract of sale or whether, as the respondent submitted, it was that price together with the amounts paid or to be paid to Amatek under the Grant Agreement. The judge decided that question in favour of the appellant, holding that ``the consideration for the sale'' was ``the consideration expressed in the instrument of transfer, being the amount contracted to be paid for the land in the contract of sale''. The second question does not appear to have been exactly articulated but evidently it was, in effect, whether ``the consideration for the sale'' was or was not greater than the amount referred to in paragraph (B) of s. 63(3)(b)(i) - I shall henceforth call it simply ``paragraph (B)''. It appears to have been common ground that, in accordance with the

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decision in Commr of State Revenue (Vic) v. Bradney Pty. Ltd. ^[4] 96 ATC 5130; (1996) 34 ATR 233. in which O'Bryan, J. held ^[5] At ATC 5134; ATR 237. that ``encumbrances'' in the Stamps Act ``... should bear its historical meaning, something in the nature of a mortgage or charge'', the land was unencumbered. The expression ``free from encumbrances'' in paragraph (B) was therefore regarded by the judge as of no relevant significance. In response to the second question the order made on 30 March 1999, in relation to the first stage, recited that ``The amount for which the real property might reasonably have been sold if it had been sold in the open market on the date of the sale is its market value on that day on the basis of its highest and best use''. In the reasons for the decision the learned judge enlarged on that to the extent of saying that ``the real property'', as described in the instrument of transfer, was all the vendor's interest in fee simple in the land in three specified certificates of title and that no part of the vendor's interest in the land had been excluded. The reasons concluded by saying that, on the available evidence, ``that amount, being $7,140,000, is greater than the amount which I have found to be the consideration for the sale, but the question as to the amount of the market value is not before me and I make no finding thereon.''

8. No appeal or exception followed the judge's decision to that stage but there was disagreement, subsequently expressed in correspondence between the parties, as to the effect of it. The respondent, contending that the decision had been tantamount to a finding that on the day of the sale the market valuation was $7,140,000, offered to accept stamp duty calculated on that figure. The appellant, on the other hand, contended that the judge's findings amounted to a decision that -

• (a) reservation of the tipping rights is not an encumbrance for the purpose of calculating market value under paragraph (B); and
• (b) the consideration paid to the vendor in respect of the tipping rights is not to be treated as part of the consideration for the sale of the land;

and that accordingly the appeal against the assessment should be allowed on the footing (as I would gather it) that the value of the real property for the purpose of assessment of the instrument to stamp duty was the consideration expressed therein. So it was that the judge was invited by consent to answer further questions, and responded to them by order made on 30 August 1999, as follows -

``(a) In determining the amount for which the real property might reasonably have been sold free from encumbrances in the open market on the date of the sale for the purposes of Section 63(3)(b)(i)(B) of the Stamps Act 1958 (`the Act') is the property described in the transfer to be treated as subject to the reservation to the vendor of tipping rights as specified in the contract of sale dated 21 November 1995?

Answer: No.

(b) If question 1 is answered in the affirmative, and without prejudice to the Respondent's contention that this question has already been fully argued and decided in its favour, should the instrument of transfer of the fee simple estate in the land and the grant agreement be aggregated pursuant to the provisions of section 68 of the Stamps Act 1958 for the purpose of assessing the stamp duty payable? ^[6] The question of aggregation under s. 68 of the Stamps Act was not considered by the learned judge and no argument was presented in respect of it in this Court on behalf of the respondent.

Unnecessary to answer.

(c) If question 1 is answered in the affirmative and question 2 is answered in the negative, should the appeal be allowed pursuant to Rule 47.05 of the Supreme Court Rules and the assessment of the Respondent reduced to $95,208.00, being the stamp duty payable upon the consideration of $1,731,053.00 stated in the transfer?

Unnecessary to answer.''

It is against that order that this appeal is now brought.

9. Leaving aside the reference in s. 63(3)(b)(i) to chattels, the provision requires that a comparison be made between two monetary amounts, namely, by virtue of paragraph (A), the actual consideration for the sale of the real property and, by virtue of paragraph (B), the amount for which the real property ``might reasonably have been sold if [ it] had been sold, free from encumbrances, in the open market on the date of the sale.'' Sub-s. (3)(b)(i) no doubt assumes that, if there has in fact been a sale of the kind contemplated by paragraph (B) - that is, a sale of the real property at arms' length free from encumbrances in the open market - the market price will be the consideration actually payable, duty being chargeable by reference to it; and

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that, if it is not the consideration actually payable, the market price will be the value for duty. Where, however, there has not been, or may not have been, such a sale sub-s. (3)(b)(i) will require that a notional or hypothetical sale of the appropriate kind be assumed so that the necessary comparison may be made. In either case the evident purpose of the sub-section is to subject the instrument to the same duty as if the consideration for the transfer on sale were the value of the real property free from encumbrances. In the present case the land was sold by private treaty but, although the purchaser and grantee were related companies, there is no suggestion either that the unusual contractual arrangements entered into were made with a view to avoiding or minimising stamp duty or that the consideration upon the sale was agreed on otherwise than on a bona fide commercial basis. The essential difference between the Revenue and the taxpayer was and is whether or not paragraph (B) requires that the value of the tipping rights be included in the value of the land for the purpose of assessment of duty. If the statute does not require it then the respondent is otherwise satisfied that the value for duty for which the appellant contends is correct.

10. The judge heard no oral argument upon the three questions the subject of the order made on 30 August 1999 but received written submissions with respect to them. We have not seen the submissions but presumably they included the contentions that I have summarized in paragraph [ 8], reflecting the essential difference between the parties as I have just stated it. According to the reasons given, the principal submission for the appellant [ at 4885] -

``... turned on the fact that the sale of the real property to the appellant was subject for a specified period of time to two specific conditions and reservations, being a reservation of the right to extract sand and a reservation of a right to tip waste. The amount for which the real property might reasonably have been sold in the open market was clearly affected by those reservations. Accordingly, the Court having found them not to be encumbrances [ scil. in the reasons for the interlocutory decision given on 30 March 1999]... they must be taken into consideration in valuing the property for the purposes of section 63(3)(b)(i)(B).''

11. The reasons record that the learned judge treated question (a) as being, ``... in effect,... `What was the property conveyed by the transfer?''', and answered it, <sup>[7]</sup> By reference to a dictum of Mason, J. in D.K.L.R. Holding Co. (No 2) Pty. Ltd. v Commr of Stamp Duties (NSW) 82 ATC 4125 at 4136; (1982) 149 CLR 431 at 449 , that it is ``... a fundamental principle of the law relating to stamp duties that duty is levied on instruments, not on the underlying transactions to which they give effect''. consistently with the reasons given upon the first stage as I have noted, namely, (in terms of the instrument of transfer) ``all the vendor's estate in fee simple in the land''. Perhaps the question might have been more directly expressed but, with respect, its purport is not, as it seems to me, to ask for identification or description of the property conveyed, or the nature of it, for that was not in doubt: rather, the question concerned the value to be attributed to the interest in real property that was indubitably conveyed. The question so understood was not to be properly considered without reference to the matter of the price that the reasonable hypothetical purchaser would have paid in the open market for the land conveyed on the day it was actually sold. That matter was not considered because the learned judge was led to reason that a contractual [ at 4886] -

``... variation of the tipping right would not affect the nature of the real property the subject of the conveyance on sale, i.e. the transfer; and thus it becomes clear that the contractual arrangement as to the tipping right is not relevant to the nature of that real property. The subject of the transfer is the real property, which is the whole of the vendor's estate in fee simple in the land. The tipping right is not a property right, but a contractual right. The nature of the real property the subject of the conveyance on sale is not, for the purposes of section 63(3)(b)(i)(B), affected by any decision as to that contractual right.''

12. The judge concluded that the reasoning in this last-quoted passage required that the first question be answered No, and that it was therefore not necessary to answer the other two. To reason in that way was, as I respectfully think, to fall into error. There was no question of seeking to ``affect the nature of the real property'', that is to say, the nature of the estate in real property that was the subject of the conveyance. The question that mattered was the value of that estate in real property to a reasonable hypothetical purchaser in the open market on the day. The position was that although, on the day, the vendor was agreeable

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to sell its estate in fee, it would do so only if there were to be reserved to it by contract over a specified protracted period the right to exploit or to allow the exploitation of the tipping capacity of the land. That was an ineluctable fact with which, on the day, the reasonable hypothetical purchaser was faced. It was a fact that must have affected the price that such a purchaser would be prepared to pay: it was no less a fact that would affect the price than, for example, the geographical location of the land, its area, its zoning, the quality and quantity of the sand available to be extracted from it, the existence of any relevant easements over it or the nature and condition of any improvements upon it. No facts of this kind could affect the nature of the vendor's estate in the land, and yet each of them would or could influence the price that it would fetch in the open market. The reservation of the tipping rights to the vendor was therefore a relevant fact that fell to be considered in the valuation exercise required by s. 63(3)(b)(i) unless paragraph (B) required it to be to be ignored. Counsel for the appellant had relied below, and relied in this Court, on the decision in Commr of State Revenue v. Bradney , to which I have already referred, for the conclusion that paragraph (B), upon its proper interpretation, did not so require.

13. Bradney's case concerned the assessment to stamp duty of an instrument of transfer on sale of a freehold interest in real property that was at the time of sale subject to a 50-year lease of which about 44 years remained unexpired and pursuant to which no rent was payable. The question was whether, in assessing the amount for which, in terms of paragraph (B), the real property might reasonably have been sold had it been sold, ``free from encumbrances, in the open market on the date of the sale'', account should be taken of the lease. The Revenue contended that the lease was properly to be regarded as an ``encumbrance'' from which the real property was to be treated as ``free'' at the time of sale and a valuation for duty made accordingly. The taxpayer's contention was to the contrary, namely that the lease was not an ``encumbrance'' within the meaning of paragraph (B), with the consequence (although this was, I think, not specifically spelled out) that an amount fell to be assigned for the purpose of paragraph (B) as the market price as if a sale of the real property was made on the date of the sale not ``free from'' the lease but subject to it. O'Bryan, J. upheld the argument for the taxpayer, interpreting the word ``encumbrances'' as I have indicated in paragraph [ 7]. No appeal was taken from the decision but, by way of response to it, (as counsel for the respondent told us he was instructed) s. 63 of the Stamps Act was amended by Act 86 of 1997, by the addition of sub-ss. (3A), (3B) and (3C), as set out in footnote 2 above. Counsel for the respondent before us submitted that the decision in Bradney decided no more than that ``encumbrances'' in paragraph (B) does not include a lease: it does not stand for a proposition that any right of occupation less than that of a lessee is to be taken into account as a factor in a valuation exercise made in accordance with paragraph (B). In this Court counsel for the appellant sought to apply Bradney's case to its advantage in two ways. First it was submitted that the reservation under the contract of sale of the tipping rights conferred a right of exclusive possession which was, or was in the nature of, a reservation of an interest in land; or that it might be equated to a lease, in which case Bradney's case was directly in point, and that in either case the tipping rights were not to be disregarded by virtue of paragraph (B). I do not accept either branch of the argument. The instrument of transfer, conveying all the vendor's interest in fee, is altogether inconsistent with the first branch, and, as to the second, there is no evidentiary basis for a conclusion that the creation of a leasehold interest, or anything like it, was ever the intention of the parties: cf KJRR Pty Ltd v. Commr of State Revenue (Vic). ^[8] 99 ATC 4335; [ 1999] 2 VR 174. Secondly it was submitted that, whether or not the reservation of the tipping rights constituted or was akin to the creation of either a proprietary interest or a lease, Bradney's case stood for the proposition that they were not an encumbrance within the meaning of paragraph (B). This, indeed, was common ground. It was said on behalf of the appellant, as I understand, to follow that, since paragraph (B) required an encumbrance to be disregarded in establishing a value, it necessarily required the tipping rights (not being an encumbrance) to be taken into account, thus reducing the value of the land the subject of the conveyance. The submission was, in other words, that paragraph (B) amounts to a prescription that the tipping rights can be disregarded only if they constitute an encumbrance; and that to disregard them would

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be contrary to the decision in Bradney . I think this approach is not warranted by the relevant words of paragraph (B), which are nullifying rather than prescriptive. The paragraph requires that a market price be reckoned without regard to encumbrances but it does not say what should be regarded in the reckoning; and O'Bryan, J. did not decide that for the purpose of paragraph (B) any and every fetter or restriction, not being an ``encumbrance'', placed by the owner of the fee on the use of the real property is to be taken into account. An alternative submission that, because the tipping rights are not ``encumbrances'' within the meaning of paragraph (B), the paragraph does not require them to be disregarded in the valuation exercise, has more substance.

14. Some support for the approach that O'Bryan, J. took in construing ``encumbrances'' in paragraph (B), and further assistance in divining the meaning of that word in the context, is afforded by Chief Commr of Stamp Duties (NSW) v. Buckle & Ors. <sup>[9]</sup> 96 ATC 4098; (1995) 38 NSWLR 574. That case concerned the assessability to ad valorem stamp duty of a supplemental deed varying a deed of settlement under a discretionary trust so as to vest the trust property in named beneficiaries from a certain date in default of the exercise of a power of appointment. The supplemental deed was assessed to duty, under s. 66(1) of the New South Wales Stamp Duties Act 1920, as a ``conveyance'' on the footing that it was a resettlement of the whole of the trust fund, ``in respect of the unencumbered value of the property thereby conveyed''. An appeal by the taxpayers to a Master was allowed and the assessment was set aside. Appeals by the Revenue to the Court of Appeal and the High Court failed. Two points were canvassed: (1) the nature of the property conveyed, and (2) its ``unencumbered value''. As to the first Sheller, J.A. concluded in the Court of Appeal that the supplemental deed did not constitute a resettlement of the full beneficial interest in the trust property, that the estate that was resettled constituted certain interests in remainder, that that was the property conveyed, and that it was the ``unencumbered value'' of that property that was chargeable with ad valorem duty. Powell, J.A. disagreed and Kirby, P. expressed no concluded opinion. Relevantly to the second point - the determination of the unencumbered value - it appeared that on the day the supplemental deed was made the assets of the trust fund of some $4M were marginally exceeded by its liabilities. The Revenue contended (in a submission somewhat akin to that made for the Revenue in this case) that the liabilities were encumbrances which, for the purpose of assessment of duty, fell to be disregarded; and that the value of the property conveyed was the value of the whole of the assets of the trust fund, being the property to which the beneficiaries were entitled in equity. In answer, the taxpayers contended that the value of the property conveyed had to be assessed having regard to the trustee's right of indemnity, which was not an encumbrance on the beneficiaries' interest. Sheller, J. A., with whom Kirby, P, agreed, accepted the submission for the taxpayers, expressing himself thus: ^[10] At ATC 4107; NSWLR 586.

``... If it be right, as in my opinion it is, that the trustee has a beneficial interest in the trust assets to the extent of its right to be indemnified out of those assets against personal liabilities incurred in the performance of the trust and that interest will be preferred to the beneficial interests of the cestuis que trust, the consequence is that the interest conveyed has no value. This does not depend in any way upon treating the interest as encumbered. It flows from the fact that the trustee has a preferred beneficial interest in the Trust Fund.''

15. The High Court, ^[11] 98 ATC 4097; (1998) 192 CLR 226. in a joint judgment, upheld the Court of Appeal's decision essentially by reference to the first point, thus removing the necessity to construe the phrase ``unencumbered value'' in s. 66 of the Act. Since, however, the matter of its construction had been fully considered below and in submissions of counsel, the Court provided the benefit of its opinion upon it. The Court observed <sup>[12]</sup> At ATC 4105; CLR 245. that s. 66(1) charges a conveyance with ad valorem duty upon the property conveyed by means of that instrument and that, in a case of the kind in question, the effect of the relevant schedule, which is to be read in conjunction with the section, is to impose upon the instrument the same duty as if the unencumbered value were the amount of consideration for the conveyance. Much the same may be said of s. 63(3)(b)(i) of our own Stamps Act , as I have suggested in paragraph [ 9]. Building on its observation, the Court drew from the language of the provision the suggestion that ``... `unencumbered' is used in it

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not in a loose sense but to refer to security interests in, or charges or other liabilities which attach to, the property in question''. The Court quoted and expressly approved the passage from the reasons of Sheller, J.A. that I have set out, having observed ^[13] At ATC 4106; CLR 247. that -

``... It [ the equitable charge enforceable in aid of a trustee's right of indemnity] is not a security interest or right which had been created, whether consensually or by operation of law, over the interests of the beneficiaries so as to encumber them in the sense required by s. 66(1) of the Act. In valuing the interests of beneficiaries which are conveyed by an instrument, there is no encumbrance which the Act requires to be disregarded.''

16. As well as tending to support the interpretation that in Bradney's case O'Bryan, J. gave to ``encumbrances'' in paragraph (B), the decision in Buckle's case suggests that the respondent seeks to give to paragraph (B) an operation going beyond its intended purpose. The concept of a value of property ``free from encumbrances'', which is relatively new in the context of the Stamps Act of this State, is evidently cognate with the concept of ``unencumbered value'' found in the New South Wales legislation that was in question in Buckle's case . The latter concept has long been applied in the calculation of stamp duty ad valorem both in this jurisdiction and elsewhere, but there is a longer history of its application in this State in the case of duty imposed on instruments transferring marketable securities <sup>[14]</sup> Under Heading IV of the Third Schedule. than in the case of duty on conveyance of real property and land transfer. <sup>[15]</sup> Under Heading VI. Section 26(1) of the Stamps Act 1946 (Act 5204), which used to require duty on an instrument transferring a marketable security to be calculated on the value of the security according to ``the average price thereof on the day of the date of the instrument'', was amended by s. 3 of the Stamps Act 1957 (Act 6104) by the substitution of ``unencumbered value'' for the quoted words I have just italicised. By a ``more or less consequential'' ^[16] The words are those of the minister moving the Second Reading of the Bill: Hansard, vol. 251, p. 701, 15 May, 1957. amendment, s. 17 of the 1957 Act amended s. 66(1) of the 1947 Act to provide that a conveyance on sale the consideration for which consisted of ``any marketable security'' should be charged with ad valorem duty in respect of the unencumbered value of the security. Save for this there was, so far as I can discover, no mention in Victorian stamp duty legislation of ``unencumbered value'' in relation to the exaction of duty on a conveyance or land transfer before the Stamps (Further Amendment) Act 1981 (Act 9662), until whose enactment duty on a conveyance of real property or land transfer on sale was generally calculable by reference to the consideration stated in the instrument. Section 7 of the 1981 Act substituted a new subdivision (6) of Division 3 of Part II and a new Heading VI, which included a provision that was practically the same (so far as concerned conveyance of real property and land transfer) as the present s. 63(3)(b)(i). That last owes its existence in its present form to s. 8 of the Stamps (Further Amendment) Act 1983. Nowhere, so far as I know, has ``unencumbered value'' ever been defined in any stamp duty legislation of this State. The minister moving the second reading of the Stamps Bill 1957 said of the expression, in the context of the ascertainment of ad valorem duty by reference to the ``unencumbered value'' of marketable securities, that ``It does not seem necessary to define this term and it is not defined in the Act as it stands.'' <sup>[17]</sup> Hansard, vol 251, p. 699, 15 May 1957. The purpose of the introduction of the expression as a valuation concept for the purpose of calculation of ad valorem duty seems also to be clear enough: to meet attempts to avoid or reduce ad valorem duty by the statement in instruments transferring property on sale of less than a full monetary consideration for the sale. The purpose of s. 63(3)(b) of the Stamps Act 1958 as it now stands is, as I should discern it, no different. Accordingly, I should understand the expressions ``the amount'' and ``free from encumbrances'' in paragraph (B), so far as they refer to real property, as referring to the unencumbered market value to purchasers generally ^[18] Cf Davis Investments Pty Ltd. v. Commr of Stamp Duties (NSW) (1958) 100 CLR 392 at 413 , per Kitto, J. of the real property on the day of the date of the sale to which the conveyance gives effect. A consideration on sale of an amount not less than the unencumbered value of property may be described in the context as a full monetary consideration for it; ^[19] Cf. Comptroller of Stamps v. Buckland [ 1959] VR 517 at 536 , per Sholl, J. and the comparison required by paragraphs (A) and (B) of s. 63(3)(b)(i) is ultimately one between the consideration stated in the conveyance and a full monetary consideration in that sense.

17. It was submitted for the respondent that it is not relevant, when valuing the land under s. 63(3)(b)(i)(B), that the purchaser has been willing to acquire the land subject to limitations

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on the way in which it is to use it; just as it would not be relevant (for stamp duty purposes) if the purchaser had been willing to acquire the land subject to a mortgage securing payment of money. The present case, however, was not so much one of the purchaser's being willing to acquire subject to the reserved tipping rights as one in which the vendor was willing to sell only subject to those rights. In an associated submission counsel for the respondent said that the relevant hypothesis is the ``open market'', with the land being offered for sale unencumbered. One cannot disagree with that; but the submission went on to say that if the subject land here were offered for sale on the open market the evidence is that a purchaser, being able to put it to its highest and best use, would pay $7,140,000 for it. This points up the intrinsic difference between the parties' opposing approaches. The evidence indicates that the land was not in fact available in the open market for purchase on the footing that the purchaser could use it for its highest and best use. There is nothing in paragraph (B) to require that the concept of a hypothetical sale in the ``open market'' should disregard the basis on which the vendor successfully offers to sell, save that any encumbrance is in any event to be disregarded. It follows, in my opinion, that the relevant supposititious amount contemplated in paragraph (B) is the price that might reasonably have been obtained for the real property had it been sold (a) free from encumbrances (b) in the open market (c) on the day of the date of the actual sale but (d) otherwise on the terms on which the vendor did actually sell it, save for the price.

18. In addition or alternatively to relying on the terms of paragraph (B) for a positive requirement that the tipping rights be regarded, rather than ignored, in the valuation of the land the subject of the conveyance, the appellant relied on the terms of s. 5A of the Valuation of Land Act 1960. ^[20] That section provides (insofar as is relevant to the present case): ``5A(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account. 5A(2) In considering the weight to be given to the evidence of sales of other lands when determining such a value, regard shall be given to the time at which such a sale took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances. 5A(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where relevant, be taken into account — (a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use; ... (f) the actual and potential capacity of the land to yield a monetary return.'' The argument was that, having regard to the various matters which that section requires to be taken into account in determining the value of the land - and in particular the highest and best use to which the land might reasonably be expected to be put - the effect of the tipping rights fell naturally to be considered. So it was argued that at the date of sale the hypothetical purchaser, taking into account the restrictions on the use of the land subject to which it was being offered for sale, would discount the price by reference to the value of the tipping rights.

19. Since I have reached the conclusion without reference to s. 5A of the Valuation of Land Act that the appellant should succeed, I shall say no more of the provision than that it would appear to reinforce the appellant's primary argument - or, at least, to do it no harm.

20. Counsel for the appellant relied on a further alternative submission, founded on the insertion, by s. 19 of Act 86 of 1997, following the decision in Bradney's case , and as an evident reaction to it, of sub-ss. (3A), (3B) and (3C) of s. 63 of the Stamps Act . These additional provisions commenced operation on 10 October 1997 and accordingly have no application to the present case but they are said for the appellant to throw light on the meaning that s. 63(3) bore before they were enacted.

21. The second reading speech of the Bill for Act 86 of 1997 (the State Taxation (Amendment) Act 1997) reveals ^[21] Hansard , vol. 436, p. 448, 9 October, 1997. that the additional sub-sections of s. 63 were intended to deal with -

``... arrangements designed to reduce artificially the dutiable value of interests in land upon transfer. Such arrangements, if allowed to continue, would, with unrealistically low valuations of property being transferred, lead to a long-term erosion of the revenue base... [ the amendments] reflect the government's intention to prevent avoidance whilst protecting legitimate commercial arrangements.''

The submission was that the amendments are only explicable on a view of s. 63(3), before the enactment of the amendments that ``encumbrances'', and encumbrances only, were to be disregarded under paragraph (B). Reference was made to the principle of statutory interpretation, exemplified in a well- known passage in Grain Elevators Board (Victoria) v. Dunmunkle Corporation , ^[22] (1946) 73 CLR 70, at 85-6, per Dixon, J. Other instances are given in Pearce and Geddes, Statutory Interpretation in Australia , 4th ed., para. 3.18. whereby in some circumstances it may be legitimate to interpret a statutory provision by reference to a later amendment of it. The submission may well have merit but I have no need to investigate it as a side-issue and shall not stay to do so: having regard to the amendments, - the essential question with which the Court is now faced is unlikely to arise again, whereas the amending sub-sections

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may well call for interpretation that I should not wish to compromise by unnecessary dicta.

22. The appeal to this Court should in my opinion be allowed and the order below set aside. If it were necessary I should answer the three questions that were the subject of the decision as follows: (a) Yes; (b) No; (c) Yes. In the circumstances however it seems appropriate to order, in lieu of the order appealed from, simply that the appeal instituted by the appellant on 12 August 1998 against the decision of the respondent (in the capacity of Comptroller of Stamps) on 2 June 1998 upon the appellant's objection by notice dated 30 April 1997 to the respondent's assessment to stamp duty numbered DA32885-A35607 be allowed.