TEC DESERT PTY LTD & ANOR v COMMISSIONER of STATE REVENUE (WA)

Judges:
Simmonds J

Court:
Supreme Court of Western Australia

MEDIA NEUTRAL CITATION: [2006] WASC 300

Judgment date: 21 December 2006

Simmonds J

Introduction

1. This is an appeal against the assessment of an agreement to stamp duty under Stamp Act 1921 (WA), as that statute stood at the time of execution. The agreement was executed on or about 27 November 1998, and the assessment was dated 24 July 2000. The appellant objected to the assessment, and, following the Commissioner's decision on the objection, appealed against that decision to this Court.

2. The appeal raises the question of proper characterisation for the purposes of assessment to stamp duty at the relevant time of an agreement relating to chattels and other personal property and to one or more fixtures. The agreement was entered into for the purposes of what was described at the hearing before me as a divestment by WMC Resources Ltd ("WMC") of its responsibility to generate power for its mining operations in Western Australia. This divestment was in favour of a partnership, Southern Cross Energy, of the appellants. The agreement is styled the "WMC Power Assets Sale Agreement" ("the Sale Agreement").

3. WMC had two power generation systems for the purposes of the Sale Agreement, each comprising power generation stations and, depending on the system, generators. In addition, for both systems, there were electrical wires and associated transmission and distribution plant and equipment connecting the power stations and generators to certain named operations, and, depending on the system, to a

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smelter, a village or a township or townships. There was also further personal property associated with these systems forming part of them for the purposes of the Sale Agreement.

4. For the most part the assets comprising the two systems were on lands the subject of various mining tenements, although one power generation station and certain items of the transmission and distribution transmission sort were on lands held in freehold by WMC, and there were some assets on land in respect of which it was not clear that WMC had any tenure.

5. Under the Sale Agreement, the appellants acquired certain assets among those comprising the system, and provision was made for the appellants to acquire the right to use the remaining assets in situ. For the latter purpose a series of nine licences, each under a Licence Agreement ("the Licence Agreements"), patterned on a form provided for in the Sale Agreement, were granted by WMC in January 1999. These were assessed to stamp duty. No appeal was taken before me against those assessments.

6. After dealing with a preliminary procedural point, I describe the Sale Agreement and the Licence Agreements in greater detail, focussing on the provisions to which the parties' arguments were particularly directed. I then set out the principally relevant provisions of the Stamp Act as they stood at the relevant date, which I have taken to be 27 November 1998. I then set out the questions of which the hearing before me was the trial, after which I consider the principally relevant law, and the parties' submissions. The final part of this judgment is my conclusions, comprising my answers to the questions.

A preliminary procedural point

7. The objection to the assessment of the Sale Agreement to stamp duty was under a letter dated 31 August 2000, and the decision disallowing the objection was made on 3 November 2000. On 5 December 2000, the appellants notified the respondent they were dissatisfied with the respondent's decision disallowing the objection and requested that the objection be treated as an appeal and forwarded to this Court. On 14 November 2001, the respondent filed its transmission of the objection documents and the Commissioner's statement in the Court, pursuant to the procedure prescribed for this purpose by former O 77. I have taken this date as that of the commencement of the present proceedings.

8. Order 77 governed a "stamp duty appeal", defined in O 77 r 1 as an appeal under s 33 of the Stamp Act. That former provision of the Stamp Act conferred a right of appeal to this Court, in varying terms, which (with one exception, to which I return in a different context) do not appear to be material for my purposes, until 1 July 2003, when the right to appeal was subsumed under the broader right to appeal to this Court in Taxation Administration Act 2003 (WA), s 40, read with s 41, as they then were. The parties appear to me to have assumed that the present appeal was brought under Stamp Act, s 33 as it stood at the date of the commencement of the appeal, which I take to be the date of the transmission of the objection provided for in O 77 r 5, that is, 14 November 2001. Their assumption appears to me to be correct.

9. However, since 1 January 2005, there has not been a right to appeal to this Court against a decision like that of the respondent in this case. Instead, there has been a right to apply to the State Administrative Tribunal for a review of the decision: State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA), s 1174.

10. I note the provision in State Administrative Tribunal Act 2004 (WA), s 167(4)(a), for the transfer by the statute to the SAT of a matter, jurisdiction over which was conferred on that body, and which is a matter "of a kind that is substantially similar to a kind of matter that could, before [jurisdiction was conferred on SAT], be dealt with by another … court [and that, after jurisdiction is conferred on SAT, no longer comes within the jurisdiction of that court, with an immaterial exception]".

11. No argument was addressed to me on whether or not s 167(4)(a) applied to this case. Both parties assumed the Court should determine this matter. I have concluded that assumption is well founded, and I briefly explain why I have so concluded.

12. My view is that SAT Act, s 167(4)(a) is inapplicable because SAT did not have jurisdiction conferred on it on matters that previously might have been the subject of

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appeals under Stamp Act, s 33, as that stood at the relevant time. SAT's jurisdiction was on matters that previously might have been the subject of appeals under Taxation Administration Act, s 40.

13. For the purposes of this view, I note that when the objection and appeal procedures were moved from the Stamp Act to the Taxation Administration Act, the Taxation Administration (Consequential Provisions) Act 2002 (WA), s 34(4) provided that:

  • "(4) If an objection, appeal or other legal proceeding (the 'action') was instituted under an old Act and was not finally determined before the commencement day -
    • (a) the action may be continued;
    • (b) any requirement to pay interest on an amount of tax determined in the action to have been overpaid applies and may be enforced;
    • (c) any penalty may be imposed and enforced; and
    • (d) any decision, order or determination made in the action has effect, and may be enforced,

    • as if this Act and the taxation Acts had not commenced."

14. The term "old Act" was defined to include the Stamp Act as it was in force before the "commencement day", which was defined to be the day the Taxation Administration Act came into force: Taxation Administration (Consequential Provisions) Act, s 33.

15. These provisions confirm my view that jurisdiction over matters that might previously have been the subject of appeals under Stamp Act, s 33, was not conferred on SAT, and accordingly the matter the subject of the present proceedings was not transferred from this Court to SAT by SAT Act, s 167(4)(a).

16. I return below to a further matter in respect of the application of s 33 of the Stamp Act to this case.

The Sale Agreement: the sale and purchase of Sale Assets

17. The Sale Agreement, cl 2.1, provides as follows:

"Subject to the terms and conditions of this Agreement, the Vendor [WMC] will sell and the Purchaser [the appellants] will buy, on the Completion Date, all of the Vendor's respective right, title and interest in and to the Sale Assets as at the Completion Date, free from any Encumbrance, for the Purchase Price."

18. The Sale Agreement cl 1.1 defines "Completion Date" by reference to the date of "Completion", which is defined there as completion of the sale and transfer of the Sale Assets in accordance with the Sale Agreement. It does not appear to be in contest before me that the Completion Date, as a result of a written agreement dated 29 January 1999 ("the Variation Agreement"), was changed from the original date of 15 December 1998 to 29 January 1999, when Completion did occur.

19. I also note that the Variation Agreement made a number of other changes to the Sale Agreement, including the addition of further text to cl 2.1. Except where one or other of the parties has indicated to me it is material to refer to changes made by the Variation Agreement, my references to and quotations from the Sale Agreement will be to the unamended text.

20. The Sale Agreement, cl 1.1, provides that in the Agreement Sale Assets means "collectively, such part or parts of the following assets as are not Fixtures", with various items listed, of three sorts. It will be seen that the assets listed are principally tangible property, but include certain intangibles.

21. The first sort of listed "Sale Assets" comprises a pair of diesel generators (the "Agnew Diesel Generators" and the "Mt Keith Village Diesel Generators"), and four power stations (the "Leinster Power Station", the "Mt Keith Power Station", the "Kalgoorlie Power Station" and the "Kambalda Power Station"). All of the quoted terms are defined in cl 1.1 of the Sale Agreement. Elsewhere in cl 1.1 "Power Stations" is defined to mean these diesel generators and power stations.

22. The named diesel generators and power stations making up the Power Stations are each separately defined elsewhere in cl 1.1. For my purposes, I need only refer to two such definitions, to indicate their general form.

23. The "Agnew Diesel Generators" is defined to mean:

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" … the 2 Caterpillar 1.2 megawatt diesel generators situated at the Agnew Gold Operations and interconnected to the Northern System."

24. The "Leinster Power Station" is defined to mean:

" … the electricity generating facilities adjacent to the Vendor's Leinster Nickel Operations at Leinster, more particularly described in Schedule 4."

25. The terms "Leinster Nickel Operations" and "LNO" are defined in cl 1.1 to mean: "the Vendor's nickel mine and associated plant at Leinster".

26. The second sort of listed "Sale Assets" comprises the "Northern Transmission System" and the "Southern Transmission System".

27. The Northern Transmission System is defined by cl 1.1 to mean:

" … the system of electric wires and associated transmission and distribution plant and equipment connecting the Leinster Power Station, the Leinster Nickel operations, the Mt Keith Power Station, the Mt Keith Operations, the Agnew Diesel Generators, the Mt Keith Village Diesel Generators, the Agnew Gold Operations, various borefields, the Mt Keith village and the Leinster township, more particularly described in Schedule 5."

28. I have already set out the definition of "the Leinster Power Station". I take it that "Leinster Nickel operations" is meant to be a reference to the "Leinster Nickel Operations". There are definitions similar to that of the latter for each of the "Mt Keith Operations" and "the Agnew Gold Operations".

29. Schedule 5 "Transmission Systems" provides:

"The Northern Transmission System consists of the assets represented in the diagrams entitled 'Northern WMC Power System Electrical Assets - Part 1 Mt Keith', 'Northern WMC Power System Electrical Assets - Part 2 Leinster' and 'Northern WMC Power System Electrical Assets - Part 3 Agnew Gold Operations' in Schedule 2, including [various items, listed under the headings 'Leinster Nickel Operations', 'Mt Keith Nickel Operations' and 'Agnew Gold Operations']."

30. Schedule 2 is a set of drawings of various assets.

31. The Southern Transmission System is defined in cl 1.1 to mean:

" … the system of electric wires and associated transmission and distribution plant and equipment connecting the Kambalda Power Station, the Kambalda Nickel operations, the Kalgoorlie Power Station, the Kalgoorlie Nickel Smelter, the St Ives Gold operations, various borefields, the Boulder Sub-station and the Kambalda township."

32. There are definitions in cl 1.1 of "Kambalda Power Station", "Kalgoorlie Power Station" and "Boulder Sub-station" (however, itself not part of the definition of Power Stations, as has been seen) which are similar to that of the "Leinster Power Station", set out earlier.

33. There are also definitions of "Kambalda Nickel Operations" (to which I take "Kambalda Nickel operations" to be a reference) and "Kalgoorlie Nickel Smelter" which are similar to that of the "Leinster Nickel Operations", set out earlier. However, there is no definition of the "St Ives Gold operations".

34. The third sort of listed "Sale Assets" comprises:

  • • control systems and software;
  • • spare parts and consumables;
  • • motor vehicles;
  • • certain other assets not otherwise referred to in the definition of "Sale Assets";
  • • rights and obligations of the Vendor under an agreement with a third party for its operation of the "Power System Assets" for the Vendor;
  • • the "Muja Transmission Line Interest" and "other rights and obligations of the Vendor under the Interconnection Deed";
  • • the rights and obligations of the Vendor under the "Access Agreements, insofar as they related to the Power Stations and the Transmission Systems";

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  • • the "Intellectual Property Rights" relating to all of the items under "Sale Assets" to this point; and
  • • such other chattels as are represented as being included in the Power System Assets in the drawings in Schedule 2.

35. I return below to the term "Power System Assets".

36. The "Muja Transmission Line Interest" is defined in cl 1.1 to mean:

" … the rights and entitlements of the Vendor in respect of high voltage transmission system (the 'Muja Transmission Line') from the Muja Power Station near Collie in Western Australia to the Boulder Sub-station described in the Interconnection Deed."

37. The term "Interconnection Deed" is defined in cl 1.1 to mean: "the deed referred to in regulation 50(1)(b) of the Electricity Transmission Regulations 1996 (WA)".

38. That regulation refers to an interconnection deed setting out the "the terms and conditions on which a corporation provides access to electricity transmission capacity", being the "Interconnection Deed with WMC Resources Ltd dated December 1996 (and due to expire on 10 October 1999)".

39. The term "Access Agreements" is defined in cl 1.1 to mean the agreements listed in Sch 10, which lists identified agreements with various companies and individuals, as well as an identified agreement to "allow Western Mining Corporation Limited to construct a new powerline and road over mining tenements".

40. The term "Intellectual Property Rights" is defined in cl 1.1 to mean the all rights in respect of matters to do with the Power System Assets.

41. I return below to the "Purchase Price" for the Sales Assets.

The Sale Agreement: dealing with Fixtures through the Licence Agreements

42. It will be recalled that Sale Assets is defined to exclude "Fixtures". That term is defined in cl 1.1 to mean: "an item of property affixed to land, an estate or interest in which is therefore an estate or interest in land".

43. The Sale Agreement, cl 5.2(b)(i), provides that, in consideration of the Purchaser's compliance with certain obligations to be performed on the Completion Date set out in cl 5.2(a), the Vendor would:

" … unless executed prior to Completion, execute the Northern System Site Licences and the Southern System Site Licences and such other licences or other instruments as are specified in Schedule 7 in the form of the draft specified in Schedule 8 (unless otherwise agreed), subject to the specific amendments and inclusions contemplated by the draft when applied to the specific cases."

44. The term "Northern System Site Licences" is defined in cl 1.1 to mean:

" …the licences to be granted by the Vendor to the Purchaser at Completion in respect of the Northern System in the form specified in Schedule 8 (unless otherwise agreed), subject to the specified amendments and inclusions contemplated by the draft when applied to specific cases."

45. The "Northern System" is defined in cl 1.1 to mean:

" … the interconnected electricity generation, transmission and distribution system consisting of the Mt Keith Power Station, the Leinster Power Station, the Agnew Diesel Generators and the Mt Keith Diesel Generators and the Northern Transmission System."

46. I previously described or set out the definitions of the listed diesel generators and power stations and the Northern Transmission System.

47. The term "Southern System Site Licences" is defined in cl 1.1 in the same way as Northern System Site Licences, but referring to the "Southern System" instead of the Northern System.

48. The term "Southern System" is defined in cl 1.1 to mean:

" … the interconnected electricity generation, transmission and distribution system consisting of the Kambalda Power Station and the Kalgoorlie Power Station, and the Southern Transmission System."

49. I previously described or set out the definitions of the listed diesel generators and

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power stations and the Southern Transmission System.

50. The term "Licence Agreements" is defined in cl 1.1 to mean:

" … collectively, the agreements to be entered into by the Vendor and the Purchaser to evidence the Northern System Site Licences and the Southern System Site Licences."

51. The term "Power System Assets" is defined in cl 1.1 to mean:

" … the Sale Assets and all Fixtures and improvements to the land the subject of the Northern System Site Licences and the Southern System Site Licences as consist in whole or part of [the Power Stations, the Northern Transmission System and the Southern Transmission System]."

52. The terms Licence Agreements and Power System Assets are used in cl 3.2 to explain the interrelation between the sale and purchase of the Sale Assets and the dealings with the Fixtures. In view of its importance to this case, I set out cl 3.2 in full:

  • "(a) The Parties [the Vendor and the Purchaser] have proceeded under this Agreement and the Licence Agreements on the basis that:
    • (i) all of the Power System Assets which are a chattel, chose in action or other personal property are be to sold outright to the Purchaser under this Agreement; and
    • (ii) all of the Power System Assets which comprise Fixtures are not to be sold to the Purchaser under this Agreement, but are to be treated as Licensor's Improvements under the Licence Agreements.
  • (b) The Purchaser has classified items of Power System Assets as comprising either a chattel, chose in action or other personal property (in this clause 3 the 'assumed Sale Assets') or Fixtures.
  • (c) On the basis of this classification, the Parties have agreed that:
    • (i) the Purchase Price is the sum of $190,363,990 …; and
    • (ii) the aggregate of the Licence Fees payable under all of the Licence Agreements for each Licence Year during the Licence Term will be $3,869,458.20 ….
  • (d) If, pursuant to its rights under Licence Agreements, the Vendor calls for a pre-payment at the Completion Date of the full amount of the Licence Fees payable over the Licence Term under each of the Licence Agreements, then the aggregate amount payable by the Purchaser to the Vendor at the Completion Date in respect of such pre-payment will be the amount of $39,836,010 …."

53. It will be noted that there is no reference to "improvements to the land" as that term appears apart from "Fixtures" within the definition of "Power System Assets". However, the parties appeared to proceed before me on the basis that nothing turned on this, and that cl 3.2 should be taken to have dealt with all of the Power System Assets.

54. I also note Sale Agreement, cl 5.3, whose heading is "Risk and Title", and which provides:

  • "(a) Upon Completion, ownership of the Sale Assets will, as between the Parties, pass to and vest in the Purchaser, free of any Encumbrance, but subject to any express reservations in this Agreement.
  • (b) Upon Completion, the risk of all Fixtures included in the Power System Assets will, as between the Parties, pass to and vest in the Purchaser, but subject to any express reservations in this Agreement."

55. Prior to the execution of the Sale Agreement it would appear that documents were made available to the Purchaser and its advisers "in connection with the offering for sale of the Power System Assets" (see the definition of "Data Room Documents" in cl 1.1 of the Sale Agreement). It would further appear that one such document was prepared by the Vendor. This document was in the form of a list of the buildings, plant and equipment comprising the Power Stations and the Transmission Systems and also including certain other assets such as motor vehicles and office equipment. It is not clear from the list, and the parties did not indicate, whether or not any intangible property was included. This document is called in the Sale Agreement the "Asset Register" (see its definition in cl 1.1)

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(the Asset Register was before me as Statement of Agreed Facts, document B).

56. It would also appear that prior to the execution of the Sale Agreement the appellants prepared a document, in the form of a Schedule ("the Classification Schedule") styled "Electricity Generation and Transmission - Sale Asset Register", which was the classification, as described in Sale Agreement, cl 3.2(b) above, of the items in the Asset Register, either as assumed Sale Assets (which I will call "Classified Sale Assets") or as Fixtures (which I will call "Classified Fixtures"), for each of which dollar amounts, as a "Pro Rata Portion", an "Historical Cost", a "Depreciation" and a "Book Value" (which is the difference between the last two figures) are assigned (before me in the Statement of Agreed Facts as document C). The Pro Rata Portion is in each case of a Classified Sales Asset or a Classified Fixture, where it is not a zero amount, a sum less than Historical Cost and greater than Book Value. I return below to the significance of these figures for the Licence Fee payable under each Licence Agreement.

57. It appears from the Classification Schedule that the sum of the Pro Rata Portions of the Classified Sale Assets in the Classification Schedule is the Purchase Price in the Sale Agreement, cl 3.2(c)(i), while the sum of the Pro Rata Portions of the Classified Fixtures in the Classification Schedule is equal to the amount for pre-payment of the Licence Fees in cl 3.2(d). I return to those equivalences below.

58. Later in these reasons also I will deal with a further provision in the Sale Agreement with respect to Fixtures.

The Licence Agreements and pre-payment of the Licence Fees

59. The terms Licence Fee and Licence Term are defined in the Sale Agreement cl 1.1 as having the meanings assigned to the terms Licence Fee and Term respectively in the Licence Agreements. I now consider those Agreements including those definitions.

60. There were, as I have indicated, nine Licence Agreements executed, in or about January 1999. The Licence Agreements were:

  • • "MKO Access Licence Mount Keith Power Station (P29) and Service Pipeline" (before me as "L1" in the Statement of Agreed Facts, at pp 198 - 234);
  • • "KNO Access Licence Kambalda Power Station (P5)" (before me as "L2", in the Statement of Agreed Facts, at pp 235 - 267);
  • • "LNO Access Licence Transmission Assets - Leinster Town and Airport (P17, P18)" (before me as "L3" in the Statement of Agreed Facts, at pp 268 - 309);
  • • "LNO/AGO Access Licence Transmission Assets (P19, P20, P21, P1, P2, P3)" (before me as "L4" in the Statement of Agreed Facts, at pp 310 - 361);
  • • "MKO Access Licence Transmission Assets (P22, P23, P24, P25, P26, P27, P28)" (before me as "L5" in the Statement of Agreed Facts, at pp 362 - 423);
  • • "KNO/SIG Access Licence Transmission Assets (P6, P7, P8, P9, P10, P11 and part of P4)" (before me as "L6" in the Statement of Agreed Facts, at pp 424 - 479);
  • • "LNO Access Licence Leinster Power Station (P16)" (before me as "L7" in the Statement of Agreed Facts, at pp 480 - 514);
  • • "KNS Access Licence Kalgoorlie Power Station (P15)" (before me as "L8" in the Statement of Agreed Facts, at pp 515 - 548); and
  • • "KNS Access Licence Transmission Assets (P14 & P12C & Part 4)" (before me as "L9" in the Statement of Agree Facts, at pp 549 - 592).

61. Thus, Licence Agreements "L1", "L2", "L7" and "L8" appear each to deal with assets of the Power Stations type (plus, in the case of "L1", the "Service Pipeline"), while the remaining Licence Agreements appear each to deal with assets of the Transmission Systems type.

62. These Licence Agreements for the most part contain terms in the language of Schedule 8 to the Sale Agreement. Schedule 8 is styled "Pro forma Licence Agreement".

63. The Licence Agreements' language in the terms of the corresponding language of Sch 8 is particularly notable in respect of the provisions in Sch 8 defining Licence Fees and Term and dealing with the payment, including

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the pre-payment, of Licence Fees, as I will shortly indicate.

64. However, as I will also indicate, there are, as contemplated by Sale Agreement, cl 5.2(b)(i), variations in the Licence Agreements which are allowed for in the provision in Schedule 8 itself for clauses to be included in particular cases.

65. Also as contemplated by the Sale Agreement, cl 5.2(b)(i), there are differences reflecting the agreement of the parties. Perhaps the most notable of those, to which I return below, is for those Licence Agreements in respect of land of which WMC is registered owner of the lands in freehold, being Licence Agreements "L8" and "L9".

66. For Licence Agreements "L1" to "L7", the Licensor is in the recitals described as "the registered owner of the Head Lease". This follows the language of the recitals in Sale Agreement, Sch 8, itself. The "Head Lease" is in turn defined in those Licence Agreements, cl 1.1, as "the lease more fully described in Item 1 of Schedule 4". This follows the language of Sale Agreement, Schedule 8, cl 1.1, which however refers to "Schedule 5". The references in the Licence Agreements' Schedule 4 are, as the case may be, to:

  • • identified mining leases, mineral leases, general purpose leases, or miscellaneous licences, which appear to be references to those forms of "mining tenement" as defined under the Mining Act 1978 (WA), s 8(1), read with Schedule 2, item 2(1), in respect of the mineral leases, and for which the "Head Lessor" (similarly defined in the Licence Agreements) is referred to as the Minister for Mines; and
  • • an identified airport lease and an identified town site lease, which appear to be references to leases under the Land Administration Act 1997 (WA) or predecessor legislation, and for which the Minister of Lands is shown as Head Lessor.

67. For Licence Agreements "L8" and "L9", however, the Licensor is in the recitals described as "the registered owner of the Land". There is no corresponding recital in Sale Agreement, Schedule 8, nor is there a definition in Schedule 8 of "Land". The two Licence Agreements, in cl 1.1 of each, define "Land" in terms of details for the land comprised in the Certificates of Title described there.

68. There are also differences which are not so clearly contemplated by the Licence Agreements. An example is the presence in all of the Licence Agreements, except "L1", "L2", "L8" and "L9", of a right for the Licensor to relocate the Licensee to "Alternative Lands" (cl 14 in all of the Licence Agreements, with the right in the language of Sale Agreement, Sch 8, cl 13A). Those Licence Agreements with the right deal with lands on which Transmission Systems are situate. Those Licence Agreements without the right deal with lands on which Power Stations are situate.

69. All of those matters apart, there is commonality among the Licence Agreements in respect of the principal operative language of each, which is (cl 3.1 and cl 3.2, of each, in the same language as that of cl 3.1 and cl 3.2 in Sale Agreement, Sch 8):

  • " 3.1 Grant and consent

  • The Licensor [WMC] grants to the Licensee [the appellants] and the Licensee takes from the Licensor a licence of the Licence Area and the Licensor's Improvements for the Term on and subject to the terms, covenants and provisions set out in this Licence.

  • 3.2 No tenancy

  • The grant of the licence to enter and remain on the Licence Area under this Licence does not confer on the Licensee an estate or interest in land."

70. With respect to the Licence Area, the Licence Agreements, in their cl 9.1 and cl 9.2 (in the language of Sale Agreement, Sch 8, cl 9.1 and cl 9.2), permit the Licensee to use the Licence Area for the production (if the Licence Agreement respects a site on which a Power Station is situate) or supply (if the Licence Agreement respects a site on which part of Transmission Systems is situate) of "Energy Services" during the Term, but, broadly speaking, for no other purpose without the written consent of the Licensor. The term "Energy Services" is defined in the Licence Agreements, cl 1.1 (in the language of Sale Agreement, Schedule 8, cl 1.1) as:

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" … the provision of electricity and thermal energy by the operation of the Power System Assets as may be extended or modified from time to time."

71. With respect to both the Licence Area and the Licensor's Improvements, I note cl 13 of the Licence Agreements (in the language of Sale Agreement, Schedule 8, cl 13), as follows:

"Subject to the rights expressly granted to it under this Licence, the Licensor covenants that the Licensee may peaceably exercise its rights under this Licence during the Term without unreasonable interruption or disturbance by the Licensor or any other person claiming through the Licensor."

72. With respect to the Licensor's Improvements, the Licence Agreements also provide, in their cl 2.1 (in the same language as that of Sale Agreement, Sch 8, cl 2.1) in the same terms, mutatis mutandis, as Sale Agreement, cl 3.2(a), above.

73. Those clauses of the Licence Agreements provide (cl 2.1(a)) that the parties have proceeded on the basis that "all Power System Assets which are a chattel, chose in action or other personal property" are to be "sold outright" to the Licensee under the Sale Agreement, while "all of the Power System Assets which are Fixtures" are "not be sold" to the Licensee under the Sale Agreement, but are to be treated as Licensor's Improvements under the Licence and subject to its provisions in favour of the Licensee.

74. Further, the Licensee had (cl 2.1(b)):

" … classified items of Power System Assets as a chattel, chose in action or other personal property ('assumed chattels') on the one hand, and as Fixtures ('assumed Fixtures') on the other hand."

75. It was not in contest that this classification was the one set out in the Classification Schedule, for the purposes of the Sale Agreement, and that therefore the "assumed chattels" were Classified Sale Assets and the "assumed Fixtures" were Classified Fixtures.

76. In the case of Licence Agreement "L3", however, the operative language of its cl 3.1 is different, in the terms of the variation provided for in Sch 8 under the heading "Clauses to be included in the Licence for the Leinster Airport and Town Special Lease and the Mount Keith Airport Miscellaneous Licence". The language there appears to grant the Licensee the right to enter the Licence Area to work on the Licensor's Improvements and certain connected apparatus, and for the purpose to work on the soil of the Licence Area. However, the effect of that language, Licence Agreement containing a cl 2.1 in the same terms as those described, does not appear to produce a different result for my purposes, and the contrary was not put to me.

77. I return below to the definition in the Licence Agreements of "Licence Area".

78. In all of the Licence Agreements, "Licensor's Improvements" is defined, in cl 1.1 (in the same language as that of the definition in Sale Agreement, Sch 8, cl 1.1) to mean:

" … all Power System Assets [defined as having the same meaning as in the Sale Agreement] on the Licence Area which are Fixtures [defined in the same terms as in the Sale Agreement] and includes all Fixtures added by the Licensor to the Power System Assets from time to time."

79. The term "Licence Fee" is defined in cl 1.1 of the Licence Agreements read with cl 6.1 (in the same language as that of the definition in Sale Agreement, Sch 8, cl 1.1 read with cl 6.1) to mean the licence fee payable monthly in advance for each Licence Fee Month of the Term. The "Term" is defined in cl 1.1 of the Licence Agreements (in the terms of the definition in Sale Agreement, Sch 8, cl 1.1) to mean 15 years from the Commencement Date, which is (cl 1.1) the date of completion under the Sale Agreement. As will become evident the term of the Licence may be shorter because of earlier termination under the provisions in that regard in the Licence Agreements, in the language of Sale Agreement, Sch 8.

80. The Licence Agreements all provide, in cl 6.2 (in the same language as that of Sch 8, cl 6.1), that the Licensor may at any time require the Licensee to prepay on the date specified in the notice the Present Value of the Licence Fee for all or some Licence Fee Months during the Term. The term "Present Value" is defined for these purposes, among others, in cl 1.1 of the Licence Agreements by reference to cl 1.3, which is in the same language as that of Sale

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Agreement, Sch 8, cl 1.1, which is also the language of cl 1.2(f) of the Sale Agreement. It was not in contest before me that these definitions are identical for my purposes.

81. By written notice dated 27 January 1999 the Vendor called for pre-payment of the Licence Fees under each of the Licence Agreements, cl 6.2, in a total amount which corresponded to that in Sale Agreement, cl 3.2(d). That amount was equal to the sum of the Pro Rata Portions for the Classified Fixtures in the Classification Schedule. During the hearing I was shown a document produced for the appellants which senior counsel for them said was a calculation of the monthly Licence Fee under each Licence Agreement based on the apportionment of the Classified Fixtures to each Licence Agreement. That calculation derived the Licence Fee using the Present Value formula in the Sale Agreement, Sch 8, cl 1.3, to which I have previously referred. This document showed, it was said, that the pre-payment amount was thus the sum of the Present Values of the totals of the Licence Fees payable over the Term of each Licence Agreement. No issue was taken with these calculations before me or that statement of equivalence.

82. I now need to deal with the Licence Agreements, and their interrelation with the Sale Agreement, in two further respects. One such respect is the set of provisions of the Licence Agreements with respect to the Licensee gaining "Permanent Tenure", and the other is the set of provisions with respect to the Licensee's interest in, and responsibility for, the Licensor's Improvements.

The Licence Agreements and Permanent Tenure

83. Licence Agreement, "L1", respecting the land the site of the Mount Keith Power Station as well as the "Service Pipeline" (to which I return), cl 5.1 (in the language of Sale Agreement, Sch 8, cl 5.1), provides that the Licensee at any time during the Term:

" … may elect to obtain Permanent Tenure over any part of the Site, and such parts of the Licence Area as the parties may agree ('the Permanent Tenure Area')."

84. However, as will shortly be seen, the Licensee is in fact required to apply for Permanent Tenure, at least in respect of land on which a Power Station is situated.

85. "Site" is defined in Licence Agreement "L1", cl 1.1 (in the language of Sale Agreement, Sch 8, cl 1.1) as:

" … land which is the site of a Power Station comprised in part of the Head Lease, more fully described in, and marked in red on, the Survey."

86. Below I set out the definition in Licence Agreement "L1" of "Licence Area".

87. "Survey" is defined in the Licence Agreement "L1" as

" … the survey of the Licence Area forming schedule 2, showing the exact location and boundaries of the Licence Area in relation to the Head Lease."

88. I have already indicated how "Head Lease" is defined in the Licence Agreements.

89. Licence Agreements "L2" to "L9", cl 5.1, have the same language as that of Licence Agreement "L1", cl 5.1, except that they substitute for "any part of the Site and such parts of the Licence Area as the parties may agree" the language "any part of the Licence Area as the parties may agree".

90. "Licence Area" is defined in Licence Agreement, "L1", cl 1.1 (in the language of Sale Agreement, Sch 8, cl 1.1) as "the area the subject of the Site and the Additional Premises".

91. "Additional Premises" is defined in that Licence Agreement, cl 1.1 (departing from the corresponding language of Sale Agreement, Sch 8, cl 1.1, but apparently spelling out what that definition envisages), as "the land on which the Service Pipeline is situated and within one (1) metre from the exterior of the Service Pipeline".

92. "Service Pipeline" is defined in that Licence Agreement, cl 1.1 (departing from the corresponding language of Sale Agreement, Sch 8, cl 1.1, but apparently spelling out what that definition envisages), as a particular gas transmission pipeline near the Mount Keith Power Station.

93. However, "Licence Area" is defined in the other Licence Agreements, "L2" to "L9", cl 1.1 (departing from the language of the corresponding definition in Sale Agreement,

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Sch 8, cl 1.1) in one or other of two different ways, according to whether the Licence Area respects land which is the site of a Power Station, or the Licence Agreement respects land which is the site of a part of Transmission Systems. There is no use of the terms Additional Premises, Service Pipeline or Site in those other Licence Agreements.

94. For the Licence Agreements "L2", "L7" and "L8", for lands which are respectively the sites of the Kambalda, Leinster and Kalgoorlie Power Stations referred to above, "Licence Area" is defined as:

" … the site of a Power Station comprised in part of the ['Head Lease', for Licence Agreements 'L2' and 'L7' respecting land leased by WMC, and the 'Land', for Licence Agreement 'L8' respecting land held by WMC in freehold], more fully described in, and marked in red on, the Survey."

95. There is no definition of "site" in these Licence Agreements.

96. For the Licence Agreements "L3" to "L6" and "L9", for lands which are the sites of the parts of the Transmissions Systems they identify, "Licence Area" is defined as:

" … the site of the Transmission Systems comprised in part of the ['Head Lease', for Licence Agreements 'L3' to 'L6', respecting land leased by WMC, and the 'Land', for Licence Agreement 'L9', respecting land held by WMC in freehold], more fully described in, and marked in red on, the Survey."

97. There is no definition of "site" in these Licence Agreements.

98. For the purposes of all of the Licence Agreements, in cl 5.2 of each (in the same language as that of Sale Agreement, Schedule 8, cl 5.2), "Permanent Tenure" is defined to mean:

"… in respect of each category of Power System Assets referred to in Schedule 7 of the [Sale Agreement], the form of permanent land tenure contemplated by paragraph 1.5 of that Schedule 7 for that category."

99. I note there is no use, in the Licence Agreements or in Sale Agreement, Schedule 8, of a defined descriptive term corresponding to Permanent Tenure in respect of the rights of the Licensee in relation to the Licence Area before Permanent Tenure is obtained. I have already referred to the principal provision describing those rights, cl 3.2 in the Licence Agreements, in the language of Sale Agreement, Sch 8, cl 3.2. However, in the Sale Agreement, there is a reference in Sch 12, item 5, to the Vendor's "preliminary estimate" that the liability of the Purchaser for rates and taxes "under the various licences proposed under the interim tenure approach" is "approximately" the sum indicated. Schedule 12 is the "Disclosure Statement" forming part of the "Disclosure Material" (both as defined by Sale Agreement, cl 1.1) for the purposes of the Vendor's warranty in cl 8.1(n). The term "interim tenure approach" is not defined in any of the documents before me, however. I return to it below.

100. I reach below the forms of permanent land tenure "contemplated by paragraph 1.5" of Sch 7.

101. The Licence Agreements, cl 1.2(m) (in the same language as that of Sch 8, cl 1.2(m)), to which I have previously referred, provide that, in the case of any inconsistency between the terms of a Licence and the terms of the Sale Agreement or of the "Power Purchase Agreement" (to which I return below), the terms of those latter two Agreements "have priority over the terms [of the Licence]".

102. Schedule 7, paragraph 1.5(a) of the Sale Agreement, just referred to, appears to require the Licensee to apply for "permanent tenure", at least in respect of Power Stations, as follows:

"The Purchaser shall, as soon as practicable after Completion, apply for permanent tenure in the form of General Purpose Leases under the Mining Act 1978 (WA) or such other form of tenure as the Parties may agree in respect of the land (either under the Mining Act 1978 (WA) or the Land Administration Act 1997 (WA) on which the Power Stations are situated, provided that the Purchaser will not apply for a General Purpose Lease or any other mining tenement under the Mining Act 1978 (WA) where the General Purpose Lease or other mining tenement cannot be granted immediately after the surrender of the Vendor's mining tenure under the Mining Act 1978 (WA) or the Mining Act 1904 (WA) (as the case

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requires). The Parties shall cooperate as may be reasonably necessary in relation to the applications for those forms of tenure. For the avoidance of doubt, it is recorded that the Purchaser will have the responsibility for any matters concerning native title in relation to the applications. In respect of the land on which the Transmission Systems are situated, the Purchaser shall either, as the Parties may agree, apply for such form of tenure as the Parties may agree, having regard for the requirement in some cases of the Vendor to retain access to the relevant land for the purposes of using and maintaining borefields, roadways, water pipes and other services essential for its mining operation, and to maintain the right to mine the land concerned."

103. I note in passing that senior counsel for the appellants put to me that the provision for inconsistency needs to be understood by reference to the provisions of Sch 8 itself, which is part of the Sale Agreement. The difficulty to which this would lead would be the lack of a means of resolving a conflict like the one I have described. I conclude on the true construction of the Licence Agreements that their provisions, whether or not they are in the language of Sch 8, are meant to be displaced by the other provisions of the Sale Agreement than those of Sch 8 in the event of an inconsistency.

104. It will be seen that Sch 7, par 1.5(a), makes separate provision for lands on which Power Stations are situated, and for lands on which Transmission Systems are situated.

Permanent Tenure in respect of Power Stations land

105. The language for Power Stations appears to require an application for Permanent Tenure as provided for in the language just quoted. That language includes an exception to the obligation to apply (which I repeat):

" … for a General Purpose Lease or any other mining tenement under the Mining Act 1978 (WA) where the General Purpose Lease or other mining tenement cannot be granted immediately after the surrender of the Vendor's mining tenure under the Mining Act 1978 (WA) or the Mining Act 1904 (WA) (as the case requires)."

106. This language would appear, for the circumstances it describes, to exclude the possibility of an election to obtain Permanent Tenure in the form of a "General Purpose Lease or any other mining tenement under the Mining Act 1978 (WA)" under a Licence Agreement containing a provision corresponding to Sch 8, par 1.2(m), above, giving priority to the terms of the Sale Agreement over any inconsistent provision in a Licence Agreement. As I have indicated, all of the Licence Agreements do contain such a provision.

107. This leaves open the possibility in those circumstances of the parties agreeing to another form of tenure, in respect of land that is subject to the Land Administration Act, that is, Crown land. That is because Sch 7, par 1.5(a), appears to require applications for permanent tenure in the form of "such other form of tenure as the Parties may agree", in respect of the land on which the Power Station in question is situated, to be "either under the Mining Act 1978 (WA) [which would not apply] or the Land Administration Act 1997 (WA)" (emphasis added).

108. However, at first blush, this state of affairs would leave, in the terms of the definition of "Permanent Tenure" in cl 5.2 of the Licence Agreements, no "form of permanent tenure contemplated by paragraph 1.5 of … Schedule 7" for land on which a Power Station was situate being freehold land held by WMC. As has been seen, there is one such Power Station, the Kalgoorlie Power Station, asset P15. That is, if the exception applied, there could be no form of Permanent Tenure agreed for such land.

109. This last conclusion would, however, be difficult to square with Sch 8, cl 5.5, which appears also in the Licence Agreement "L8", above, as cl 5.3, for the Kalgoorlie Power Station, asset P15. The principally material part of Sch 8, cl 5.5, is its opening words, as follow:

"Where the Licensee elects to obtain Permanent Tenure over any part of the Permanent Tenure Area, and where the form of Permanent Tenure contemplated by the Schedule 7 to the [Sale Agreement] for that part of the Permanent Tenure Area consists of the granting of a leasehold interest over or a transfer of freehold interest in lands held in

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freehold by the Licensor, then the following provisions shall apply: …"

110. Those "following provisions" in material part are that the Licensor and the Licensee "shall enter into a lease" or the Licensor "shall transfer" the relevant part of the Permanent Tenure area (cl 5.5(a)).

111. It appears to me that Sch 8, cl 5.5, should be read (not without some difficulty) to be a reference to the possibility, allowed for in Sale Agreement, Sch 7, par 1.5(a) in respect of a Power Station situated on Crown land, that the parties can agree to a leasehold (other than a mining tenement) or a freehold interest, for which the Purchaser "shall … apply". That is, such an interest is, when so agreed, within the language of cl 5.2 of the Licence Agreements, one "contemplated" for the "category" of "Power System Assets" represented by "Power Stations" and within the language of cl 5.3 of Licence Agreement "L8" "contemplated by the Schedule 7 to the [Sale Agreement]". I find it difficult to arrive at any other reading that does not deny Licence Agreement, "L8", cl 5.3 (in the language of Sale Agreement, Sch 8, cl 5.5, as I have said), any or any consistent application at all.

112. I note the submission of senior counsel for the respondent that I should take the reference to Sch 7 in Sale Agreement, Sch 8, cl 5.5 to be the entirety of that Schedule, and in particular to par 3 of that Schedule, which lists forms of "WMC Tenures", as I have indicated. I understood this submission to be that those forms should be understood to be the "form of Permanent Tenure contemplated by Schedule 7" for the purposes of cl 5.5.

113. I cannot agree.

114. Admittedly the language of cl 5.5 differs from the language of cl 5.2. Clause 5.5, unlike cl 5.2, does not refer to Sch 7, "paragraph 1.5", and does not use the language of "category of Power System Assets" but rather the language of "that part of the Permanent Tenure Area".

115. However, the respondent's reading would have the meaning of "Permanent Tenure" different in cl 5.5 from that as defined in cl 5.2, unless the latter was taken to import the forms of WMC tenure in Sch 7, par 3 into par 1.5(a). Such an importation would, however, seem to contradict the scope for agreement to forms of Permanent Tenure allowed for in that sub-paragraph. It is also unclear how, on the respondent's reading, even although it is provided for by cl 5.5, there would be any scope for a leasehold interest to be the form of Permanent Tenure contemplated by Sch 7 to be granted over lands held in freehold by the Licensor.

116. The consequence of the reading of Sch 7, sub-par 1.5(a) I have indicated I prefer is that the sub-paragraph would not take in a Power Station situated on land held in freehold by WMC in respect of which the Vendor and the Purchaser had agreed on a leasehold interest over, or a freehold interest in, the relevant part, for the Purchaser. In respect of that part the Licensee (Purchaser in the Sale Agreement) would in effect have an option to acquire that agreed interest. It would also seem to follow that, if the Vendor and the Purchaser do not agree on one or other of those two interests in relation to that land, then there would be no such option, and the Purchaser would be required to apply under the Mining Act 1978 for a General Purpose Lease in respect of the land under that Act. This would be subject to the possible exclusion of any right or obligation to make such an application, as I have indicated.

Permanent Tenure in respect of Transmission Systems land

117. The language for Transmission Systems would not, it seems to me, require the Purchaser to apply for Permanent Tenure in respect of the land on which that category of assets is situated: see the first use of "as the Parties may agree" in the last sentence of par 1.5(a).

118. It will also be seen that the form of permanent tenure provided for in the case of Transmission Systems is only such form of tenure as the Parties may agree, with the qualification for access for the Vendor as indicated in that last sentence of par 1.5(a). There is no provision for a form of tenure that applies unless there is an agreement, as there is in the case of Power Stations, notwithstanding the word "either" in that sentence, which does not carry that either's "or" clause.

119. As has been seen, there appears to be at least one case of Transmission Systems situated on land held by WMC in freehold. These are the Transmission Systems the subject of Licence Agreement "L9", above, which is the

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"Access Licence Transmission Assets (P14 & P12C & Part 4)". Like the Licence Agreement "L8", for the Kalgoorlie Power Station, to which I have referred above, the Licence Agreement "L9" has a provision, cl 5.3, for the entry into a lease or the transfer of freehold as the form of Permanent Tenure which the Licensee has elected to obtain (in the language of Sale Agreement, Sch 8, cl 5.5).

120. In my view Sch 7, par 1.5(a), is capable of applying to a form of Permanent Tenure being a leasehold or freehold interest agreed to by the parties in respect of land on which Transmission Systems are situated held by WMC in freehold, unlike the case for a corresponding interest in respect of land on which Power Stations are situated held by WMC in freehold.

The existing tenures for the Northern and Southern System Site Licences

121. Schedule 7, par 3, appears to list these tenures for the Power Stations and "Transmission Lines" (for the Northern System Site Licences) and the Power Stations and Transmission Systems (for the Southern System Site Licences). Paragraph 3 uses a series of asset identifiers, in terms of the letter P followed by a number, which appear to correspond to such identifiers used in the Licence Agreements.

122. The term "Transmission Lines" is not defined in the Sale Agreement (including Sch 8) or in any of the Licence Agreements. However, it appears, from the descriptions of the Transmission Lines itemised, that they are a reference to items in the Transmission Systems category.

123. There appears, however, to be no reference to par 3 elsewhere in Sch 7, in the Sale Agreement (including Sch 8), or in the Licence Agreements. Nonetheless the purpose of par 3 seems clear enough. It is to indicate, for the items listed in the Power Stations and Transmission Systems categories, what tenure, if any, WMC had (par 3's "WMC Tenures") and what tenure underlay that tenure, if any (par 3's "Existing Underlying Tenure").

124. In addition, Sch 3 confirms the "Form of Licence" for the items listed.

125. Schedule 7, par 3, indicates that, for three of the four Power Stations listed there, WMC's tenure is a mineral lease, with the "existing underlying tenure", in two of the three cases, shown as a pastoral lease, and "vacant Crown land and reserve for substation" in the third.

126. However, for the fourth power station (Kalgoorlie Power Station (KNS), asset P15) WMC's tenure is shown as "freehold vol 1670 Fol 313", and accordingly the "existing underlying tenure" is shown as "N/A".

127. In respect of the Transmission Systems listed there, Sch 7, par 3, indicates that WMC's tenure in most cases was in the form of a mineral lease (seven identified) or a mining lease (20 identified), although there are references also to "misc licence" (18 identified), "general purpose licences" (three identified), an exploration licence, an airport lease, and a "statutory right under Energy Corporations (Powers) Act 1979 (WA)", as well as an airport lease and a pastoral lease. There are also indications that WMC had no tenure in respect of parts of two assets (both sections of different transmission lines).

128. The "existing underlying tenure" shown for the listed Transmission Systems assets is for the most part pastoral leases, while also shown are an airport lease, "Reserves for Common", "Reserves for Water", "Reserves for Stock Route, Rifle Range and Rubbish Depot", freehold, vacant Crown land and "Crown Reserves including roads". There are also a number of references that are in the form "N/A".

129. I note that, for assets P12C and P14, in one category of "Transmission Systems" under the heading "Southern System Site Licences", being the "Kalgoorlie Nickel Smelter", the WMC Tenure is shown as "freehold vol 1670 Fol 313", and accordingly the "existing underlying tenure" is shown as "N/A". These assets are referred to in connection with Licence "L9", above.

WMC's obligations in respect of Permanent Tenure

130. The Sale Agreement, Sch 7, par 1.5(c) provides as follows:

"The Vendor does not warrant that such tenures as the Purchaser may apply for will be granted, but shall provide all reasonable assistance to the Purchaser in connection

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with its applications, including applying for any necessary conditional partial surrenders of existing mining tenures and applying for any necessary releases under the Nickel (Agnew) Agreement Act 1974 (WA) and the Nickel Refinery (Western Mining Corporation Limited) Agreement Act 1968 (WA) in an endeavour to ensure that the Vendor is not liable under those Acts for the acts and omissions of the Purchaser on any such tenures."

131. It appears to me that sub-par 1.5(c) only applies in respect of forms of Permanent Tenure other than those which the Vendor itself is required to grant or transfer. The sub-paragraph provides for the Vendor to assist the Purchaser with its application for grants from others.

132. I also note Sale Agreement, cl 8.1, which provides:

"The Vendor makes and give[s] to the Purchaser, for its sole benefit, the following warranties:

  • (a) the Vendor has the right, capacity and full power and authority to enter into and carry out its obligations under this Agreement and each transaction contemplated by this Agreement to be performed by it; …"

133. Thus, it seems to me that the provisions from the Sale Agreement I have referred to allow for the obligations of the Licensor to grant a leasehold interest or to transfer a freehold interest as Licence Agreements "L8" and "L9", cl 5.3(a) in each, provide. This is notwithstanding cl 5.4(c) in each, which provides that:

"The Licensee acknowledges that the Licensor gives no warranties other than those contained in the [Sale Agreement] concerning the provision of Permanent Tenure and the Licensee acknowledges that its claims against the Licensor in respect of the provision of tenure are limited to those set out in the [Sale Agreement]."

134. It also seems to me that the provisions from the Sale Agreement I have referred to allow for the provisions, in all of the Licence Agreements except "L8" and "L9", in their cl 5.3 (in the language of Sale Agreement, Sch 8, cl 5.3), that:

" … where the form of Permanent Tenure prescribed under Schedule 7 of the [Sale Agreement] for that part of the Permanent Tenure Area consists of obtaining a grant of General Purpose Leases or miscellaneous licences under the Mining Act […]"

then, among other things, by cl 5.3(b):

"[t]he Licensor will consent to the applications being granted over the Permanent Tenure Area. The Licensor will also consent to any subsequent applications for renewal."

135. The obligation described in cl 5.3(b) appears to arise notwithstanding that in all of the Licence Agreements with it there is also a provision corresponding to cl 5.4(c) in Licence Agreements "L8" and "L9".

136. As I have indicated, Licence Agreements "L8" and "L9", above, which as has been seen relate to Power System Assets situated on land held in freehold by WMC, have no equivalent to cl 5.3(b). It is not clear to me why there should not be such a provision, as it is not clear to me why the Vendor and the Purchaser could not agree, in respect of such land, that the form of Permanent Tenure should be one or other of those forms of mining tenement. The lack of an equivalent to this cl 5.3(b) may indicate, as at the time of execution of those two Licence Agreements, the parties had in fact agreed on a leasehold or a freehold form of Permanent Tenure. However, no submissions were made to me in this respect. I return to this matter below.

137. I reach next another aspect of cl 5.3, to be found in all of the Licence Agreements.

The effect of the grant of Permanent Tenure

138. The Licence Agreements "L1", "L3" to "L6" and "L9", cl 17.3, and Licence Agreements "L2", "L7" and "L8", cl 16.3 (in the language of Sale Agreement, Schedule 8, cl 17.3), provide:

"This Licence will terminate on the day on which the Licensee is granted Permanent Tenure of the Licence Area as described in clause 5."

139. However, those of the Licence Agreements (being "L1" to "L7") having a provision corresponding to Sale Agreement, Sch 8, cl 5.3(d), state:

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"Following grant of [a General Purpose Lease or a miscellaneous licence, being the form of Permanent Tenure prescribed under Schedule 7 of the Sale Agreement which the Licensee has elected to obtain], the Licensee and the Licensor will, to the extent reasonably applicable, continue to have rights and obligations in relation to the lands within the General Purpose Lease or miscellaneous licence, equivalent to their respective rights and obligations under this Licence in relation to the Permanent Tenure Area. Without limiting the generality of the previous sentence, sections 7 to 15 and 21 to 23 [7 to 14 and 20 to 22, for Licence Agreements "L2" and "L7"] of this Licence will continue to apply mutatis mutandis to the relationship between the parties. This clause will survive termination of this Licence."

140. The numbered clauses relate to:

  • • the Licensee's obligations to comply with all "Laws" (defined in the Licence Agreements, cl 1.1, in the language of Sale Agreement, cl 1.1), "Authorisations" (also so defined), and the provisions of the "Head Lease";
  • • assignments of the interests of the Licensee and the Licensor under the Licence;
  • • permitted uses of the Power Station or the Transmission System, as the case may be as well as the Licence Area;
  • • cessation of use and rehabilitation of the Licence Area;
  • • the rights of the Licensor to access the Licence Area for particular purposes, which differ in the case of some Licence Agreements, and which also include for some Licence Agreements a right to create easements;
  • • liability of the Licensor and Licensee for loss, damage or injury to one another;
  • • a form of covenant for quiet enjoyment;
  • • for some Licence Agreements, a right of the Licensor to relocate the Licensee from any part of the Licence Area to other areas "within the Licensor's lands", on certain terms;
  • • for Licence Agreement "L1", the grant to the Licensee of certain additional rights, to access the sites occupied by the Power Station and the "Service Pipeline" (as defined in that Licence Agreement) across the lands there described;
  • • the right of the Licensee to remove "Chattels" (defined in cl 1.1 as "all Power System Assets other than the Licensor's Improvements") and "Licensee's Improvements" (defined in cl 1.1 as "all Chattels, and all fixtures installed by the Licensee from time to time upon the Licence Area");
  • • notice provisions;
  • • provisions of a general character, denying any partnership or similar arrangement between the Licensor and the Licensee, for further assurance, to prevent merger, for severability, and for set-off; and
  • • setting the governing law of the licence as the law in Western Australia.

141. Further, those of the Licence Agreements ("L8" and "L9") having provisions corresponding to Sale Agreement, cl 5.5(e) and (f), state that:

  • "(e) If applicable, in all other respects, the rights and obligations of the Licensor and the Licensee under the lease will be equivalent to their respective rights and obligations under this Licence with regard to the Permanent Tenure Area.
  • (f) Without limiting the generality of the above, sections 7 to 15 and 21 to 23 [7 to 14 and 20 to 22, for Licence Agreement 'L8'] of this Licence will continue to apply to the relationship between the parties following the grant of Permanent Tenure."

142. The numbered clauses follow the pattern described for the other Licence Agreements.

143. While the matter is not altogether clear, it seems to me that the provisions of (f) apply only to Permanent Tenure in the form of leasehold.

The Licence Agreements and the Licensor's Improvements

144. I have previously referred to the Licence Agreements, cl 3.2, concerning the grant of a licence over the Licensor's Improvements, and cl 2.1, concerning the distinction between the sale outright of Power System Assets which are a chattel, chose in

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action or other personal property, and the treatment of Fixtures as Licensor's Improvements, as well as the Licensee's classification of items of Power System Assets as Classified Chattels or Classified Fixtures.

145. I have also previously quoted or described the Licence Agreements' definitions of Licensor's Improvements and Fixtures.

146. Here, I note that, under the Licence Agreements, cl 17 or cl 16, as the case may be (in the language of Sale Agreement, Sch 8, cl 17), provides that, by cl 17.5, cl 16.4 or cl 16.5, as the case may be, except in certain cases to which I will return, and following termination of the Licence "for any reason" (which would include terminations as a result of the grant of Permanent Tenure):

  • "(a) … the Licensee must acquire the Licensor's right, title and interest in the Licensor's Improvements and:
    • (i) where the Licensee has made any prepayment under clause 6.2 [the prepayment required by the Licensor, described above]:
      • a. the Licensor shall repay to the Licensee that part of the amount so prepaid as is attributable to the period after the date of termination; and
      • b. the Licensee shall pay as consideration for that acquisition, an amount equal to the amount calculated under clause [17.5(a)(i)(a), 16.4(a)(i)(a) or 16.5(a)(i)(a), as the case may be]; and
    • (ii) where the Licensee has not made any prepayment under clause 6.2, the Licensee shall pay as consideration for that acquisition, the Present Value of all Licence Fees [both terms are defined as above] payable in respect of the remainder of the term of this Licence as at the date of termination.
  • (b) In either case under clause 17.5(a), either party may elect to set-off all amounts so receivable by it against all amounts so payable by it."

147. I also note the power of the Licensee to sell or remove any of the Licensor's Improvements in the Licence Agreements, cl 18A or cl 17A, as the case may, in the language of Sale Agreement, Sch 8, cl 18A. The Licensee, "subject to any necessary approvals" and to the extent the Licensee may "lawfully" do so, may sever and remove the items (Sch 8, cl 18A.1), acting as "agent and attorney for the Licensor in the severance and sale" (cl 18A.2). All of the proceeds from the sale of the item are to be paid to the Licensee "by way of compensation for the early termination of the Licence with regard to the relevant item", but without effect on the Licensee's obligations regarding Licence Fees (cl 18A.3). The Licensee is also required to replace the item "if necessary to fulfil its obligations under the Power Purchase Agreement", and any such replacement becomes part of the Licensee's Improvements (cl 18A.4).

148. I consider a further provision in the Licence Agreements with respect to fixtures below.

149. I next consider the Power Purchase Agreement, and certain provisions in it relevant for my purposes.

The Power Purchase Agreement and Fixtures

150. "Power Purchase Agreement" is defined in Sale Agreement cl 1.1 as:

" … the agreement executed on the date of this Agreement between inter alia the Purchaser and the Vendor for the supply of electricity and thermal energy by the Purchaser to the Vendor."

151. The Power Purchase Agreement is annexure "TAM3" to the affidavit of Troy Anthony Morrison sworn 2 December 2004. It is dated 27 November 1998, although signed by the parties at differing dates before that one.

152. By the terms of the Power Purchase Agreement, the appellants are:

  • • required to operate, maintain and repair the "Power Stations" and "Transmission Systems" at all times (cl 6.1);
  • • "[a]s between [the appellants and WMC], and for the avoidance of doubt, … to be regarded as the owner and operator of the Power Stations and Transmission Systems for the purposes of all Laws relating to occupational health, safety and welfare", and the appellants are required to "comply with the obligations imposed on an owner and operator by those Laws" (cl 17.1);

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  • • "[a]s between [the appellants and WMC], and for the avoidance of doubt, … to be regarded as the owner and operator of the Power Stations and Transmission Systems for the purposes of all Laws relating to the maintenance and protection of the environment" and the appellants are required to "comply with the obligations placed on an owner and operator by those Laws" (cl 19.1); and
  • • required to take out and maintain in good standing insurance "of the kind known as 'Industrial Special Risks' or 'Property Risks' insurance covering loss, destruction or damage … to the relevant Power Stations and the Transmission Systems for such amount as shall be reasonable in the circumstances" (cl 31.1(a)).

153. The terms "Power Stations" and "Transmission Systems" and related definitions in the Power Purchase Agreement are very similar but not identical in language, or, so far as I can tell, effect to the corresponding terms in the Sale Agreement. However, my attention was not drawn to any differences that were material for my purposes.

154. It will be seen that the effect of these provisions is, in the respects indicated, to equate the position of the Licensee to that of an owner or prospective owner of the Power System Assets referred to. It is not in dispute that among those assets would be Fixtures including Licensor's Improvements that were Classified Fixtures for the purposes of one or more of the Licence Agreements.

The Sale Agreement and the Licence Agreements and the re-classification of Sale Assets as Fixtures

155. One provision of the Sale Agreement, particularly important to the submissions for the respondent, needs to be taken account of in this preliminary description. This provision is cl 3.4, which, in view of its importance to these proceedings, I set out in full as follows:

  • " 3.4 Potential Adjustment to Purchase Price

  • If any Governmental Agency determines that any of the assumed Sale Assets constitutes a Fixture, and the Purchaser advises the Vendor that the Purchaser accepts that determination, then:

    • (a) the relevant item of property shall hereby be deemed to not to have been included ab initio in the Sale Assets and therefore not included in the sale and purchase under this Agreement, the Purchase Price shall be recalculated ab initio by excluding the value allocated to that item of property in this Agreement, and the amount so excluded from the Purchase Price shall (subject to this clause 3.4) be refundable by the Vendor to the Purchaser;
    • (b) there shall hereby be deemed to have been added ab initio to the Licence Fees payable in respect of such one or more of the Licence Agreements as is appropriate, having regard to the location of that item of property, an amount calculated in accordance with clause 2.2(b) of the relevant licence, being an amount that is intended to ensure that, calculated as at the date of the relevant Roll Over, the present value of all Licence Fees thereafter payable by the Purchaser to the Vendor under all Licence Agreements (including both once only and permanent adjustments thereto effected as a consequence of that Roll Over), when added to the Purchase Price adjusted in accordance with clause 3.4(a) in respect of that Roll Over, equals the aggregate of the amounts specified in clauses 3.2(c)(i) and 3.2(d).
    • (c) the Vendor may, at any time prior to refunding to the Purchaser the amount determined under clause 3.4(a) as the amount by which the Purchaser Price is to be reduced, and in addition to any other rights the Vendor may then have to require the pre-payment of the whole or any part of the Licence Fees payable in respect any of the Licence Agreements, require the Purchaser to pre-pay the present value, calculated as at the date of the relevant Roll Over, of all additional Licence Fees payable under the relevant licence as a consequence of that Roll Over, provided that, for the avoidance of doubt, and to the intent that this clause 3.4(c) shall prevail over the relevant licence despite any provision in this

      ATC 4020

      Agreement or the relevant licence to the contrary, if the amount of the prepayment so calculated is different from the amount refundable by the Vendor to the Purchaser under clause 3.4(a), the amount of the prepayment shall, by operation of this clause 3.4(c), be adjusted so as to be equal to the amount refundable under clause 3.4(a); and
    • (d) any amounts payable by one Party to the other under this clause 3.4 may be set off against any amounts owed to that Party by the other under this clause 3.4."

156. It should be noted that Sale Agreement, cl 1.1, defines "Governmental Agency" to mean "in respect of the relevant sovereign state" not only any of a stipulated range of government bodies but also "any … judicial body".

157. "Roll Over" is defined in cl 1.1 of the Sale Agreement by reference to its meaning in cl 2.2(b)(i)(a) of the Licence Agreements.

158. The Licence Agreements, cl 2.2, read with cl 2.3 (in the language of Sale Agreement, Sch 8, cl 2.2, read with cl 2.3), make the same provision for reclassifications as Sale Agreement, cl 3.4, and also provide the calculations for the regular Licence Fee adjustments and the one off payment as well as the definition of "Roll Over". However, as I will indicate below, cl 2.2 goes further than its cl 3.4 counterpart in spelling out that the relevant item is included in the relevant Licence Agreement as a Licensor's Improvement.

159. The effect of this complex network of provisions is, as Sale Agreement, cl 3.4(b), in fine, provides, to ensure that the present value of all Licence Fees under all Licence Agreements that are payable after such adjustments, when added to the Purchase Price (adjusted as cl 3.4(a) provides), equals the aggregate of the amounts specified in Sale Agreement cl 3.2(c)(i) and cl 3.2(d). I have previously considered that aggregate amount.

The principally relevant provisions of the Stamp Act

160. The basis for the respondent's assessment of the Sale Agreement to stamp duty was set out as part of the document "Amended Commissioners Statement (filed 22 February 2002)" ("the Amended Commissioner's Statement") for the purposes of former O 77 r 6(1)(d)(ii). That basis was described in par 15 of the Amended Commissioner's Statement in material part as:

"That the Sale Agreement was an agreement for the sale of property consisting in whole or in part of land or an interest in land in Western Australia …"

161. The basis for the appellants' objection to the respondent's assessment was set out in the notice of objection filed for the purposes of former O 77 r 5(1)(a), being the letter from the appellants to the respondent dated 31 August 2000 ("the Notice of Objection"). That basis was that:

  • "1. There was not any relevant transfer of: -
    • a) land or any interest in land; or
    • b) any fixture or fixtures

  • from [WMC] to the [appellants].

  • 2. In the event that there has been the transfer of a fixture or fixtures, which is not admitted, such a fixture does not constitute an interest in land."

162. To assist with the understanding of these bases, I set out or describe the principally relevant provisions of the Stamp Act, as it stood at the relevant time. The parties before me proceeded on the basis that time was 27 November 1998, considered as the date of the execution of the Sale Agreement. While many of the provisions I will reach are currently in the same terms, a number are not.

163. Stamp Act, s 16 provided for the duties to be charged in respect of instruments to be those specified opposite to those instruments in the Second Schedule, while s 17 created the liability to pay the duties to be charged on those instruments. One such instrument, under the heading "4 Conveyance or Transfer on Sale of Property", was a:

"(1) Transfer of land under the Transfer of Land Act 1893 on a sale thereof or conveyance or transfer of any other property (except any marketable security or right in respect of shares) … "

164. In Pt IIIB of the Stamp Act, headed "Conveyances and Transfers", s 63(1) in material part provided:

"In this Part -

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'conveyance on sale' includes -
  • (a) every instrument and decree or order of any court or of the Commissioner of Titles, whereby any property or any estate or interest in any property on the sale thereof is transferred to or vested in the purchaser or any other person on his behalf or by his direction;
  • (b) every transfer or assignment of a lease of any lands; and
  • (c) every decree or order of any court or of the Commissioner of Titles for, or having the effect of an order for, foreclosure … "

165. In the same Part, s 74(1) provided:

"Every contract or agreement, howsoever executed, for the sale of any estate or interest in any property shall be charged with the same ad valorem duty to be paid by the purchaser as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold."

166. However, s 16(2) of the Stamp Act provided that the duties specified in the Second Schedule were subject to exemptions, being inter alia those specified in the Third Schedule. That Schedule, under the heading "2. Conveyance or Transfer on Sale of Property", provided for:

"(7c) The conveyance or transfer of any estate or interest in goods, wares or merchandise not referred to in subitems (7a) and (7b), except as provided in sections 70(2) and (3) section 31B(1)(ca) and (cb)."

167. I return to sub-items (7a) and (7b) below, which were separate exemption sub-items.

168. It will be noted that the exemption in sub-item (7c) was subject to the specified exceptions in s 70(2) and (3), and s 31B(1)(ca) and (cb). It was not in contest before me that the latter pair of exceptions had no application here.

169. However, s 70(2) and (3) provided:

  • "(2) If an instrument -
    • (a) transfers, or is or includes an agreement to transfer, or evidences the transfer of, a chattel and land; and
    • (b) is chargeable with duty in respect of the land,

    • the instrument is chargeable with duty in respect of the unencumbered value of the land plus the unencumbered value of the chattel.

  • (3) If -
    • (a) an instrument -
      • (i) transfers, or is or includes an agreement to transfer, or evidences the transfer of, a chattel; and
      • (ii) is one of several arrangements that together form, or arise from, substantially one transaction, or one series of transactions, relating to chattels and to land;

      • and

    • (b) at least one of the other arrangements mentioned in paragraph (a)(ii) transfers, or is or includes an agreement to transfer, or evidences the transfer of, land and is chargeable with duty, the instrument mentioned in paragraph (a) is chargeable with duty in respect of the unencumbered value of the land plus the unencumbered value of the chattel."

170. It was also provided, by s 70(5), that:

"For the purposes of subsection (3)(a)(ii), if a person enters into arrangements -

  • (a) within, or apparently within, 12 months of each other; and
  • (b) with the same person (whether that person enters the arrangements alone or with the same person or different persons),

it shall be presumed, unless the Commissioner is satisfied to the contrary, that the arrangements arose out of one transaction or one series of transactions."

171. I note at this point that senior counsel for the appellants drew my attention to the Amended Commissioner's Statement to show that it did not contain any reference to s 70, by which I understood him to be referring to s 70(3) and its related provisions. I did not understand him to be referring to s 70(2), which appears to me to be the basis for the assessment appealed against in this case.

172. As has been seen, s 70(3) made an instrument chargeable with duty in respect of the unencumbered value of the chattels it covered as well as of the land for the coverage

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of which another "arrangement" was chargeable with duty. The Amended Commissioner's Statement, senior counsel said, founded the assessment on the Sale Agreement alone, and was a document that came after the appellants in the Notice of Objection had stated their position that s 70 had no application to this case. In that context, it was not appropriate for there to be in these proceedings any consideration of any application of s 70 (3) (and, I took it, any directly related provisions). Indeed, the respondent's written submissions, which set out s 70(3) and (5), might appear to confirm this, where it is indicated (in par 112) that, if the Commissioner was incorrect in assessing the Sale Agreement as a conveyance of land or an interest in land or fixtures, "and the assets which were sold under the Sale Agreement were restricted to chattels" (a qualification to which I return), then "the Sale Agreement was not subject to stamp duty". Further, I note that the Questions which I made orders for this trial to address might appear not, at least on their face, it seems to me, easily to accommodate those which might arise in this case out of s 70(3).

173. However, as will become apparent when I consider the submissions for the parties below, senior counsel for the respondent relied on s 70(3) for the purposes of a "secondary or alternative submission" to the one that the Sale Agreement fell within s 70(2).

174. In the event, senior counsel for the appellants was content to make submissions on the provisions of s 70(3), although he did not abandon his objection to my considering the provision. I will treat those provisions as relevant for my purposes. In view of my conclusion as to the inapplicability of s 70(3) in this case, I do not need to reach a final conclusion on that objection.

175. However, I should indicate that, in my view, s 70(3) is appropriately considered in this case, and that I would not uphold the objection. That is because it goes to make the instrument the focus of the questions for trial assessable to duty on the basis of its relationship with another instrument or instruments assessable to duty. That relationship is evident on the face of the Sale Agreement, through its Sch 8, and the terms of the Licence Agreements I have described.

176. If s 70(3) is otherwise properly to be considered in this case, I did not understand senior counsel for the appellants to contest that there was a sufficient relationship between the Sale Agreement and the Licence Agreements for the purpose.

177. The exceptions in s 70(2) and (3) need to be read with certain definitions in s 70(1), which provides a list of definitions for the section "unless the contrary intention appears".

178. The relevant definitions in s 70(1) are of "arrangement"; of "land"; of "transfer"; and of "chattel".

179. So far as concerns "arrangement", s 70(1) provides:

" 'arrangement' means an instrument or an unwritten arrangement;…"

180. So far as concerns "land", s 70(1) provides:

" 'land' means land, other than farming land, and includes an estate or interest in land; …"

181. It was not in contest before me that that "farming land" had no application in this case.

182. The definition of "land" in s 70(1) needs to be read with certain other definitions in the Stamp Act, and with the definition of "estate" in Interpretation Act 1984 (WA), s 5.

183. Stamp Act, s 70(1) provides that:

"' estate or interest in land ' includes a mining tenement (as defined in section 76); ..

184. Stamp Act, s 76(1) in material part provides that:

"' mining tenement ' means -

  • (a) a mining tenement held under the Mining Act 1978 being a mining tenement within the meaning of that Act or the Mining Act 1904; and
  • (b) a mining tenement or right of occupancy continued in force by section 5 of the Mining Act 1978; "

185. Interpretation Act, s 5 provides that in every Act:

"' estate ' in relation to land, includes any legal or equitable estate or interest, easement, right, title, claim, demand, charge, lien, or encumbrance in, over, to, or in respect of the land; …"

186. 

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So far as concerns "transfer", s 70(1) of the Stamp Act provides that:

"' transfer ' includes convey, exchange, partition, settle, give, vest, release and renounce."

187. So far as concerns "chattels", s 70(1) provides that:

"' chattels ' means goods, wares or merchandise, other than exempt chattels, and includes an estate or interest in them".

188. This definition of "chattels" needs to be read with the definition in s 70(1) of "exempt chattels" and related provisions, as well as with the definition of "estate" in Interpretation Act, s 5, a definition I have already set out.

189. The definition of "exempt chattels" in s 70(1) is as follows:

"' exempt chattels ' means -

  • (a) chattels referred to in item 2 (7), (7a) or (7b) of the Third Schedule;
  • (b) a motor vehicle the transfer of the licence of which is chargeable with duty under Part IIIC and item 14 or 6 of the Second Schedule or is exempt under item 9 of the Third Schedule …"

190. It was not in contest before me that any of the Classified Sale Assets that were "exempt chattels" would need to be excluded from any assessment to duty otherwise appropriate under s 70(2) read if necessary with s 70(3).

191. The provisions of the Third Schedule referred to in (a) are as follow:

  • "(7) A conveyance or transfer of any estate or interest in any real or personal property locally situated out of Western Australia.
  • (7a) A conveyance or transfer of any estate or interest in goods, wares or merchandise that are -
    • (a) stock-in-trade held or used in connection with a business;
    • (b) held for use in, or are under, manufacture; or
    • (c) prescribed to be exempt.
  • (7b) A conveyance or transfer of any estate or interest in any ship or vessel, or part interest or share or property of or in any ship or vessel."

192. I note that there was no argument addressed to me on the chargeability of the Sale Agreement to duty to the extent it was a conveyance or transfer on sale of property which was not "land" or "goods, wares or merchandise". It will be noted that there are certain items included in the definition in the Sale Agreement of "Sale Assets" which appear to fall into neither category, being forms of intangible property. Although the Amended Commissioners Statement does not rely in any way on such liability, the matter of this form of liability is capable of arising under one of the Questions for the trial. However, as no argument was addressed to me on the point, I will not further address the matter, except as I will indicate below, in relation to that Question.

193. Finally, I was also referred to certain provisions of s 26 of the Stamp Act, which are as follows:

  • "(1) All the facts and circumstances affecting the liability of any instrument to duty, or the amount of the duty with which any instrument is chargeable, are to be fully and truly set forth in the instrument; and every person who, with intent to defraud the Crown -
    • (a) executes any instrument in which all the said facts and circumstances are not fully and truly set forth; or
    • (b) being employed or concerned in or about the preparation of any instrument, neglects or omits fully and truly to set forth therein all the said facts and circumstances,

  • commits an offence against this Act.

  • …

  • (4) For the purposes of this section facts and circumstances referred to in subsection (1) that are set forth in a document accompanying an instrument when it is presented for stamping are to be regarded as being set forth in that instrument."

194. In the submissions for the respondent, this provision was referred to in relation to the issue of the characterisation of the Sale Agreement, and I took it the Licence Agreements, for the purposes of their assessability to stamp duty.

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The Questions for this Court on the trial

195. Former O 77 r 6(d)(iii) required the Commissioner to forward to the Court with the notice of objection "the questions of law and fact which the Commissioner considers will require to be determined on the appeal". The respondent's statement of these was set out as part of the Amended Commissioner's Statement. Prior to the trial I had ordered that the trial be of all of these questions, with one exception.

196. The questions, in par 19 of the Amended Commissioner's Statement, are:

  • "(a) Was the Respondent correct in assessing the Sale Agreement as a conveyance of land or an interest in land or fixtures.
  • (b) If no to (a) on what basis should the Sale Agreement be assessed to duty?
  • (c) If yes to (a) which of the Generation and Transmission Assets [which refers to what the Sale Agreement calls the Power Stations and the Transmission Systems] were conveyed by WMC to [the appellants].
  • (d) Which of the Generation and Transmission Assets conveyed (if any) were fixtures.
  • (e) What is the correct interpretation to be given to clause 3.4 of the Sale Agreement, and was the Respondent bound to give effect to such provision.
  • (f) How shall the costs of the appeal be borne and paid?"

197. By my orders, the trial before me did not extend to question 19(d).

198. For the purposes of the answers to these questions, it was accepted by the respondent that the Classified Sale Assets comprised one or more chattels, while it was accepted by the appellants that one or more of the Classified Sale Assets also comprised one or more Fixtures.

199. I also note the provisions of s 33(4) of the Stamp Act as it stood at the time of the commencement of the present proceedings, which I take to be 14 November 2001:

  • "(4) Where the Supreme Court determines that the assessment of duty to which the appeal relates is in error, it shall assess the duty chargeable under this Act, recalculate any fine charged under section 20 or 31AC, and order the Commissioner -
    • (a) if the Court determines that the instrument has been charged with excess duty, to refund the amount of any of that excess of duty which may have been paid and the amount of any excess of any fine charged under section 20 or 31AC; or
    • (b) if the Court determines that the instrument has been charged with insufficient duty, to reassess the instrument under section 31AA."

200. I note that counsel for the respondent put to me that an earlier date, that of 5 December 2000, could be used, being that of the notification by letter of that date from the representatives of the appellants to the respondent that the appellants were dissatisfied with his decision on their objection, and asking him "to treat the objection as an appeal and forward it to the Registrar of the Court". While I have difficulty in seeing that date as that of the commencement of the proceedings for the purposes of determining the version of the Stamp Act applicable to this matter, I note there appears to be no material difference between the version in force on 5 December 2000 and the version in force on 27 November 2001.

201. I also note, however, that the provisions of s 33(4) corresponding to s 33(4)(b) were not in the Stamp Act at the time of execution of the Sale Agreement. It was accepted by the parties that, under the legislation as it stood in force at that date, there was no power for the Court on an appeal such as this one to re-assess the document to duty where it determined insufficient duty had been charged. See
Peko-Wallsend Operations Ltd v Commissioner of State Taxation (WA) (1989) 89 ATC 4569, Full Court WA, per Brinsden J, at 4583. Senior counsel for the appellants put to me that this was the state of the legislation that should be taken to apply for this purposes of the appeal, as the matter of the power of the Court to reassess a document to duty in such circumstances was not merely a procedural matter. Senior counsel for the respondent put to me that s 33(4) was a procedural provision whose form should be taken as that in force at the commencement of the proceedings in the Court under it.

202. While I am attracted to the position for the respondent, I do not consider that I need to

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resolve the matter. That is because, as I will indicate, I do not consider that there is any question here of the duty assessed by the respondent in the decision appealed from being "insufficient" (s 33(4)(b)). The only basis for so concluding would appear to be that the value of the Permanent Tenure referred to in the Sale Agreement and the Licence Agreements could have been included in the value assessed to duty under Stamp Act, Second Sch, Item 4. It appears to be common cause that the respondent's assessment took no account of any such value. For the reasons I set out below, I do not consider that there was any basis shown for such an assessment to be made.

The applicable law: the characterisation of the instrument for the purposes of its chargeability to duty

203. I begin with the matter of identifying the correct approach to the question of characterisation for the purposes of the Stamp Act provisions rendering instruments chargeable with duty.

204. For this purpose I note that the respondent's written submissions referred to the "sham principle", which was identified with the well known dictum of Diplock LJ in
Snook v London & West Riding Investments Ltd [1967] 2 QB 786, at 802 as to the meaning of a "sham", which is quoted for the purposes of the law as to stamp duties in this state in Peko-Wallsend (supra), per Brinsden J, at 4577 - 4578; see also Wallace J, at 4597:

"It means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create."

205. However, in his oral submissions senior counsel for the respondent confirmed he was not making any submission that the Sales Agreement or the Licence Agreements fell within this principle. Rather, the reference was for the purposes of showing part of the legal "context" which represented the correct approach to answering the "key" question for the Court, which was Question 19(a) above.

206. The identification of the correct legal approach to the issue of characterisation raised by Question 19(a) above is indeed, in my view, at the heart of this case. That approach can, it seems to me, be found in
Prime Wheat Association Ltd v Chief Commissioner of Stamp Duties 97 ATC 5015; (1997) 42 NSWLR 505. That case was an appeal against an assessment of an instrument which provided for a sale of shares, with title to pass at completion, but with the purchase price and certain additional consideration to be paid over a longer period. Certain security for what the agreement called the "financial accommodation" thereby provided was given by the purchaser to the vendor. The assessment of the agreement under the Stamp Duties Act 1920 (NSW) was as a loan security. The Court unanimously upheld the appeal as to the sale agreement.

Gleeson CJ (as he then was), at 508 and 511, Handley JA and Sheppard AJA agreeing in this respect, said this:

"A stamp duty is a tax upon instruments, not upon transactions:
Minister of Stamps v Townend [1909] AC 633 at 639. The characterisation of an instrument for the purpose of the Stamp Duties Act may require an understanding of the transaction from which the instrument emanates. Nevertheless, what is to be determined is the legal nature and effect of the instrument in question. The principal criticism which the appellants make of the reasoning of Dunford J [from whose judgment the appeal was taken] is that he appears to have allowed irrelevant considerations of economic equivalence to affect his reasoning.

Another principle is that duty becomes payable immediately upon the first execution of an instrument and liability is determined at that point: Stamp Duties Act 1920, s 5 and s 38. This, it is submitted, appears to have been overlooked by Dunford J at certain points in his judgment.

…

There is no doubt, in the present case, that the transaction in question was one under which the vendor of the shares provided financial accommodation to the purchasers, or that the instrument in question made provision for such financial accommodation.

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It does not follow, however, the form of financial accommodation agreed between the parties was by way of loan. To describe the transaction as being substantially one which involved a mortgage back to the vendor does not provide an answer to the critical questions in the case, and, as was submitted on behalf of the appellants, carries a risk of resolving the issue by reference to considerations of economic equivalence rather than by reference to an accurate characterisation of the instrument under consideration."

207. There is a substantial body of authority for the propositions, contained in the paragraph first quoted, that it is the legal effect and nature of the instrument that is to be determined, but that doing so may require resort to extrinsic circumstances. The latter would most obviously be the case if the contention was that the instrument was a "sham", in the sense referred from Snook (supra). However, as senior counsel for the respondent was contending, as I understood him, the matter goes more broadly than that.

208. The principal authority for that point is in the judgment of Dixon J in
Commissioner of Stamp Duties (Queensland) v Hopkins (1945) 71 CLR 351, at 378. That case involved the basis for the chargeability to duty of an instrument in which there was a recital that the person named as settlor intended to transfer certain property to the person named as trustee to hold the property on certain trusts, followed by a declaration of those trusts. The instrument was signed and sealed by the trustee on 18 May 1907 in Queensland, and the property was transferred to the trustee on 22 May 1907. Subsequently the instrument was sent to England, where the settlor executed it on 30 September 1907. The instrument was not brought back to Queensland for some years, after the rates of duty for instruments of settlement had been substantially increased.

209. In considering the question whether the instrument was one whereby the property was settled or agreed to be settled, Dixon J, at 378, Rich J agreeing, said this:

"An instrument is a settlement because it creates trusts and contains limitations which restrict or affect alienation and transmission, according to the course provided by law for estates in fee simple or a full ownership … It is true that trusts cannot come into operation until the trustee obtains title to a control of the trust property. But the vesting of the trust property in the trustee may be regarded as a condition of the operation of the settlement, rather than as an essential characteristic of the 'settling' of the property. Apparently that was the view taken in
Davidson v Chirnside [(1908) 7 CLR 324]. But, however that may be, the condition was fulfilled on 22nd May 1907 before the indenture was executed by the settlor. When the settlor executed the instrument, he confirmed and authenticated his intention to create the trusts amounting to a settlement and, because the property had then been vested in the trustee, the settlement was operative.

To the objection that this view involves looking outside the instrument, it may be answered that to ascertain the operation of the instrument some facts must always be taken into account, as, for instance, the existence and identity of the parties, and of the objects and subjects referred to. The very sweeping statements on this matter in
Gatty v Fry [(1877) LR 2 Ex D 265] go too far. Some years ago I had occasion to examine the subject with which that case deals, and I adhere to what I then said:
Edwards, Dunlop & Co. Ltd. v. Harvey [(1927) VLR 37], at pp. 47-54.

The rule is very carefully stated in par. 955 of the second edition of Halsbury's Laws of England, vol. 28, p. 447, as follows: 'The question whether an instrument is duly stamped, or as to what stamp is required, is in general determined by what appears upon the face of it to be its legal operation when first executed so as to be capable of that operation, but the Court is not bound by the apparent tenor of an instrument, and will decide according to the real nature of the transaction, receiving, if necessary, extrinsic evidence.'

Examples will be found in the authorities referred to in the notes. But, in any event, it seems to follow inevitably from the authorities to which I have referred that it is proper to look outside the instrument assessed as a settlement to ascertain whether

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the trust property has been vested in the trustee."

210. The connection between the law thus stated and the principle from Prime Wheat (supra), that it is the legal nature of the instrument not its economic effect or the nature of other arrangements to which it is the economic equivalent that is determinative, emerges from
Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Limited (2002) 209 CLR 651. There the question was whether certain contractual rights of the transferor of land to which the contract of sale expressed the sale to be subject had a bearing on the value of the land the subject of the transfer for the purposes of the assessment of stamp duty under Stamps Act 1958 (Vic). The relevant provision of that Act, s 63(3)(b)(i)(B), made the ad valorem duty payable on the amount for which the property might reasonably have been sold if sold free of encumbrances in the open market, if that amount were greater than the consideration for the sale. The Court held that the amount in question was to be determined on the basis that what was agreed to be and was transferred was the fee simple in the land and not a qualified interest in land (because the rights were contractual in nature, not proprietary, because they did not qualify the title of the transferor at the date of the sale, and because the transfer was not expressed to be subject to any exception or reservation).

211. In so holding, the Court said, at 663 - 664, and 666 - 667 (per Gleeson CJ, Gummow, Kirby and Hayne JJ, Callinan J agreeing):

"In considering the true construction of s 63(3)(b)(i), and, in particular, par (B), two principles must be kept in mind. First, the statutory provisions in question in this case impose a duty on instruments, not on transactions. Secondly, liability to duty arises because the dutiable instrument transfers an estate or interest in real property, and it is by reference to the value of that which is transferred that duty is imposed.

Those two principles were applied by Mason J in
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [(1982) 149 CLR 431 at 449]:

'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 … [I]n the case of a conveyance the statutory command is that it attracts duty on the property conveyed; in the case of the declaration it attracts duty on "the property comprised therein". Consequently the issues are: (1) What was the property conveyed by the transfer?; and (2) What was the property comprised in the declaration? The decision on these issues hinges on the interpretation of the two instruments, that is, on the description given by them of the relevant estate or interest as applied to the facts of the case. It is a matter of ascertaining what is the property with which each instrument deals, according to its terms.

We cannot substitute for the issues prescribed by the statute a different issue having no foundation in the statutory provisions. Nor can we substitute for the property which the parties have chosen by their instruments to convey and make the subject of a declaration of trust the interest in property which in a practical sense represents the alteration in [the transferor's] position brought about by the combined operation of the two instruments.'

Mason J went on to illustrate the practical consequences of the above principles by giving the following example [at 450]:

'A conveys an absolute estate in fee simple to B and takes from B a lease back for fifty years. If the appellant is correct, A has conveyed, not an absolute estate in fee simple, but the reversion expectant on the determination of a lease for fifty years and the conveyance is to be assessed for duty on this footing. How the lease is to be assessed on this approach does not emerge. Fortunately we do not have to solve this problem for the true position is that each instrument is to be separately assessed, the conveyance being assessed to duty on the property conveyed, viz an absolute estate in fee.'

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…

It is one thing to have regard to matters not referred to in a dutiable instrument for the purpose of understanding the legal effect of the instrument; it is another thing to do so for the purpose of considering the net effect of the transaction pursuant to which the instrument was executed. The example given by Mason J, of a transfer of an estate in fee simple accompanied by a lease back from the transferee to the transferor, which is in some respects analogous to the present case, illustrates the difference, and the significance of the fact that stamp duty is a tax on instruments, not on transactions."

212. It seems to be that it is against the background of these principles that Stamp Act, s 26, requiring the facts and circumstances affecting the liability of an instrument to duty, or the amount of the duty, to be "fully and truly set forth in the instrument" is to be understood.

213. Senior counsel for the respondent pressed on me that that provision required me to determine the characterisation of the instruments in this case by reference to their "substance" ascertained from such facts and circumstances.

214. I consider that the provision for my purposes does no more than remind me of the need to determine the legal effect of the instrument from a consideration of all of its terms properly interpreted, by reference to extrinsic materials as appropriate, and to be alive to the possibility that the terms may not appear in full or accurately in the written text of the instrument. Thus, I should not make the determination simply from the name the parties choose to give to their instrument, but rather consider the legal effect of the instrument, approached as I have indicated: see
Fleetwood-Hesketh v Inland Revenue Commissioners [1936] 1 KB 351, per Romer LJ, at 360, quoted with approval in
Fitch Lovell Ltd v Inland Revenue Commissioners [1962] 3 All ER 685, Wilberforce J (as he then was), at 691.

215. So much is, I consider, what Wilberforce J (as he then was) was indicating was the correct approach to the question of determining whether there was a conveyance on sale in the case before him, in Fitch-Lovell (supra), at 691, a passage pressed on me in this connection by senior counsel for the respondent:

"It is of course quite true in stamp duty matters that what is to be stamped is documents not transaction, but when a court is confronted with a document it is entitled and indeed bound to inquire into the nature and intended purpose of the document before it."

216. If the submission is that the provision directs me to characterise the instrument by reference to its economic effects rather than its legal effects, then I must reject such a submission as inconsistent with the authorities I have quoted from.

The applicable law: characterising an instrument as a conveyance on sale

217. The approach just described needs to be applied having regard to what the authorities establish are the essential characteristics of a conveyance on sale. A conveyance on sale includes, as has been seen, a contract of sale, under Stamp Act, s 74(1).

218. The leading authority in this State appears to be the decision of the Full Court in
Commissioner of State Taxation v Balcatta Nominees Pty Ltd [1981] WAR 7. That case concerned the liability to ad valorem duty as a conveyance on sale of an agreement by which one Menchetti (who was, the Court concluded, the holder of a Quarry Area under the Mining Act 1904 (WA) and the regulations under it) granted to the respondent a "sole and exclusive licence" to enter upon Menchetti's claim so as to enable the respondent to "mine, excavate, quarry and remove limestone and lime sands" for a period of years. The respondent was to pay to Menchetti a sum for "quarried limestone" at the rate per cubic metre stipulated, provided that in any event the respondent was to pay a minimum annual sum at the amounts stipulated. The Court (Brinsden J, Lavan ACJ and Smith J agreeing) for the purposes of the appeal treated that sum as payable whether or not there was any quarried limestone, or, if there was any, whether or not the amount payable for the cubic metres quarried did not equal the minimum sum.

219. The Court concluded the agreement was not liable to duty as a conveyance on sale, on either of two bases.

220. 

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The first basis was that, considering the agreement as or analogous to a grant of a profit à prendre, the minimum payment did not "alter the nature of the transaction", which was an agreement conferring "a right to quarry limestone and lime sands and to pay for it at specified rates" (Balcatta Nominees (supra) per Brinsden J at 11). That is, even although on the authority of
Commissioner of Stamp Duties (NSW) v Henry (1963) 114 CLR 322, there was a conveyance of the right to possession of the quarrying area (which was also the conclusion of the Full Court of the Supreme Court of New South Wales, in the decision appealed from,
Ex parte Henry;
Re Commissioner of Stamp Duties [1963] NSWR 1079), it was not a conveyance on sale of that right.

221. The second basis was as follows Balcatta Nominees (supra), per Brinsden J at 11 - 12):

"Apart from the above line of reasoning there is another way of reaching the same conclusion accepted by all the judges in the Full Court in
Ex parte Henry;
Re Comr of Stamp Duties (NSW), supra. It is to be found primarily in the judgment of Brereton J at 1094-1095. After referring to
Littlewoods Mail Order Stores Ltd v IR Comrs [1961] Ch 210, his Honour adopted Lord Simon's definition of 'sale' from Benjamin 8th Ed p 2 where it is said to involve the transfer 'of the absolute or general property in a thing'. What was granted in that case, it is said, was less than the absolute or general property in two senses namely it was not the whole of the grantor's interest either in point of duration or in point of content. His Honour concluded that the transaction was not a sale because the whole of the grantor's estate in the thing did not pass. A mortgage or a bill of sale or a lease is not a sale. That is the exact position in this case for here Menchetti has not conveyed to the respondent the whole of his interest in the quarry area but obviously retains the reversion upon the expiry of the licence. Furthermore, there is I think in the very provisions of s 63 support for this view as it will be noted that it is worded to include 'a transfer or assignment of a lease of any land'. On the definition of 'sale' accepted by Lord Simon the transfer or assignment of a lease would be the transfer of the lessee's absolute or general property in the lease and that is why s 63 makes express mention of a transfer or assignment of the lease, and because the lease itself is not a conveyance on sale, the Act makes express provision in ss 77-79 (incl) in respect of the stamp duty to be imposed on leases, where there, and in the schedule, a distinction is drawn between stamp duty on the amount payable as rent compared to stamp duty payable in respect of the consideration for the granting of the lease in the form of a fine or premium. That distinction I think might also be relevant to the distinction made above between the consideration payable for the conveyance of the profit a prendre compared to the consideration payable in respect of the limestone and lime sands quarried and carried away."

The applicable law: characterising an agreement with a range of provisions

222. There is also a statement in Balcatta Nominees (supra) of the proper approach to the characterisation of an agreement with provisions that might be seen to bring the agreement into more than one category for the purposes of that agreement's assessability to stamp duty. That statement was in relation to the question whether the agreement in that case was assessable to duty as a conveyance of the profit à prendre for no consideration. Such assessment was considered in relation to Stamp Act, s 75, as it then was, and the Second Schedule, as it then was, at the rate under the heading "Settlement, Deed of, or Deed of Gift", considered with s 19 of the Act. There appears to be no material difference between those provisions as at the date of that decision and those provisions as they were for my purposes and the contrary was not put to me.

223. In Balcatta Nominees (supra) Brinsden J, at 12, said this:

"Section 19 of the Act provides that any instrument containing or relating to several distinct matters is to be separately and distinctly charged, as if it were a separate instrument with duty in respect of each of the matters. Section 75 provides that any conveyance or transfer operating as a voluntary disposition inter vivos shall be chargeable with stamp duty at the rate

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provided in the second schedule under the heading 'Settlement, Deed of, or Deed of Gift'. By subs (2)(a) it is further provided that any conveyance or transfer (not being a disposition made in favour of the purchaser in good faith and for valuable consideration) shall be deemed a conveyance or transfer operating as a voluntary disposition inter vivos, and the consideration for any conveyance or transfer shall not for this purpose be deemed to be valuable consideration when the Commissioner is of opinion that by reason of the inadequacy of the sum paid as consideration, or other circumstances, the conveyance or transfer confers a substantial benefit on the person to whom the property is conveyed or transferred. In
Limmer Asphalte Paving Co Ltd v IR Comrs (1872) LR 7 Exch 211 at 217 it was said in the judgment of the court, 'There is no better established rule as regard stamp duty than that all that is required is, that the instrument should be stamped for its leading and principal object, and that this stamp covers everything accessory to this object'. Section 19 does not in any way alter that rule, for all it is directed to is an instrument in which there are several distinct matters, that is to say, not one principal object but several principal objects. In the High Court in [Henry (supra), per] Owen J at 339, when considering the application of this established rule to the deed in that case, remarked that the right of user granted by the deed seemed to be ancillary to the right to win coal. Kitto J at 330 also considered what was the principal object, if any, of the deed and reached the conclusion that there was only one principal object. In my view there is again nothing to distinguish of significance this agreement with the deed in question in Henry's case and I reach the same conclusion therefore, that the principal object of this agreement was to win limestone and lime sands and the right of user of the quarrying area was ancillary to that purpose. It would therefore follow that the provisions of s 75 have no application. But even if the conveyance of the right of user did amount to a voluntary conveyance under s 75 it would not, I think, be chargeable with duty on the reasoning of Taylor J at 336 in Henry's case that, though the duty chargeable would be calculated upon the value of the property conveyed, the right of user granted could have no independent value for the Commissioner could not look to the probate amount payable in respect of the limestone and lime sands won as constituting value for the conveyance."

224. I note it was not put to me that the right of use of the Licence Area had any independent value apart from the right to use the Licensor's Improvements in situ and to acquire the Licensor's Improvements as I will indicate, for which, of course, valuable consideration, whose quantum relative to the unencumbered value acquired was not in issue, was provided.

225. With these statements of the applicable law, it is now possible to consider the questions raised for the trial, and in particular the first question, Question 19(a).

Was the Sale Agreement chargeable to duty as a conveyance of land?

226. This is the first part of Question 19(a). I consider this part separately from the following part of that Question. That other part is whether the Sale Agreement was chargeable to duty as a conveyance of fixtures.

227. The first part of Question 19(a), on the submissions of both senior counsel, goes to whether or not the Sale Agreement is, under Stamp Act, s 70(2) and s 70(3) (if necessary), in both cases read with s 74, chargeable to duty as an agreement for sale of WMC's tenure, or at least of a corresponding estate or interest in the land on which the Power Stations and the Transmission Systems are situate.

228. I note that the definition of Power System Assets in the Sale Agreement does not include that form of property. However, the submissions of senior counsel for the respondent drew my attention to Sale Agreement, Sch 7, sub-par 1.5(a), which he said required an application to be made for an estate or interest in land corresponding to or being WMC's tenure.

229. His submissions also drew my attention to Sale Agreement, Sch 8, cl 5.5, which he said was the form of provision required for Licence Agreements for Power System Assets in the form of Licensor's Improvements situate on land which WMC held in freehold. That form

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of provision, it was said, required WMC to sell its tenure to the Licensee.

230. As I understood the submissions of senior counsel for the respondent, to the extent it was necessary for the respondent to rely on Stamp Act, s 70(3), he relied on the Licence Agreements "L8" and "L9" in respect of such land, which contained, as I have indicated, in their cl 5.3, provisions corresponding to Sale Agreement, Sch 8, cl 5.5. I have previously referred to the appellants' objection to the respondent relying on s 70(3).

231. I have already considered the provisions of Sale Agreement, Sch 7, subpar 1.5(a) and Sch 8, cl 5.5. I do not consider that those provisions, construed in accordance with their terms, give rise to obligations on the part of WMC to sell its tenure, in respect of any of the land on which Power System Assets in the form of Licensor's Improvements are situate.

232. With respect to Sch 7, subpar 1.5(a), in my view there is at most, as I previously explained, a requirement to apply for Permanent Tenure in respect of land other than land held by WMC in freehold. However, the Permanent Tenure lies in the grant of a person other than WMC. While WMC is required to surrender its existing tenure in the form of "existing mining tenures" (see Sale Agreement, Sch 7, subpar 1.5(c)) for the purposes of obtaining the grant in question, there is no requirement for it to assign that tenure to the appellants.

233. I appreciate that the definition of "transfer" in Stamp Act, s 70(1) includes "release and renounce", as I have previously indicated. However, it was not put to me that the effect of a surrender of a mining tenure is of itself to provide the person in whose favour the tenure is surrendered with a corresponding tenure. Indeed the contrary appears to be the law: see Hunt, M W Mining Law in Western Australia, 3rd ed, Sydney, Federation Press, 2001, at [10.1].

234. While the economic effect of the grant of a tenure corresponding to WMC's tenure may be equivalent to assignment of that tenure, economic equivalence is not the correct approach to characterisation, as I have indicated: Prime Wheat (supra).

235. I should note that, even if there were a requirement to apply for Permanent Tenure in the form of WMC's tenure in respect of land in which WMC held the freehold, that requirement would only arise (on Sale Agreement, Sch 8, cl 5.5, read with cl 5.1 and Sch 7, par 1.5(a)) after the parties had agreed on the Permanent Tenure Area, as well as on that form of Permanent Tenure. This represents an agreement to agree, which would not give rise to any obligation to agree to that form of Permanent Tenure: see
Coal Cliff Collieries Pty Ltd v Sijehama (1991) 24 NSWLR 1. In any event the parties could agree, not on WMC's tenure as the form of Permanent Tenure, but on a leasehold interest in the land or the agreed part of it. On Balcatta Nominees (supra) per Brinsden J at 11, an agreement to agree, or an agreement to grant a leasehold, could not qualify as a contract or agreement for the sale of any estate or interest in land.

236. I note, however, that, as I explained earlier, there is some reason, from the terms of those Licence Agreements, to consider that the parties may have agreed prior to the execution of the Licence Agreements "L8" and "L9" on the form of Permanent Tenure in as WMC's freehold interest in each case: see the absence of a provision with respect to Permanent Tenure in the form of a mining tenement in Licence Agreements "L8" and "L9" like that in Sch 8, cl 5.3. If there had been such an agreement, then it might be argued that those Licence Agreements were instruments that in fact were agreements for sale of that interest. However, there was no other evidence there had been such an agreement, and no such argument was put to me. It is of course inconsistent with the literal terms of the Licence Agreements to which I have referred. Therefore I put that possibility to one side.

237. I note the submissions for the respondent that drew my attention to the reference to "interim tenure" in Sale Agreement, Sch 12, item 5, which indicated, it was said, that the parties recognised that the Sale Agreement was intended to provide for a transition to Permanent Tenure as part of what in substance or according to its true nature was a sale of WMC's power generation systems.

238. Those submissions also drew my attention to the announcement made on behalf of the appellants on 27 November 1998, the date of the Sale Agreement, that:

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"SCE [the appellants] has agreed to purchase the gas turbines, power distribution and transmission assets which deliver power and thermal energy to WMC's nickel and gold operation in Kalgoorlie, Kambalda and Leinster and Mt Keith in the Eastern Goldfields of WA (in all four natural gas fired power stations with a combined generating capacity of 160MW)."

239. Senior counsel for the appellants objected to the admission of the announcement. In the event, I do not consider I need to rule on the point, as I do not consider it is of assistance to the respondent.

240. I understood senior counsel for the respondent to be inviting me to read the provisions in the Sale Agreement in the light of these two matters, which I should consider as evidence of the intention of the parties that there be a sale of WMC's tenure or corresponding tenure in respect of the land on which any of the assets were situated. The use of "interim tenure" in particular indicated that "Permanent Tenure" in the form of WMC's tenure was the parties' object.

241. I cannot so understand the two items referred to.

242. The language of the reference to "interim tenure" is not, in my view, language descriptive of intended obligation. That language, to repeat, is of the Vendor's "preliminary estimate" that the liability of the Purchaser for rates and taxes "under the various licences proposed under the interim tenure approach" is "approximately" the sum indicated. Considered as pre-contractual conduct, the language would be admissible on a question of construction "only … if the contract is ambiguous":
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, per Heydon JA (as he then was) at [24]; and Cheshire & Fifoot (supra), at [10.11]. I do not consider the language of the Sale Agreement to be ambiguous. In any event, the language appears to be me merely to describe the effect of the Sale Agreement in the respect referred to on the assumptions that language describes.

243. The language of the announcement does not go to the matter of WMC's tenure, except by implication. Considered as post-contractual conduct, even if it is admissible to resolve an ambiguity (on which there is substantial reason to consider it is inadmissible: see Brambles (supra), per Heydon JA, at [26] and
Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103, Bryson J, at 118; but see also Cheshire & Fifoot (supra) at [10.16]), there does not seem to me to be an ambiguity to resolve, as I have indicated. There is authority that post-contract conduct may be resorted to identify the subject-matter of the contract: Sportsvision, Bryson J at 118 (citing authority). However, I consider the announcement too slight a foundation on which to rest an identification of the subject-matter of the contract in the terms contended for.

244. There is, of course, no doubt that the Sale Agreement, through Sch 8, contemplated the licensing of areas of land, and of fixtures. I consider below the significance of that aspect of the Sale Agreement, or more directly of the Licence Agreements, to Question 19(a).

245. However, for the reasons I have given, the Sale Agreement is not chargeable to stamp duty as a conveyance of land or an estate or interest in land on the basis the Sale Agreement or any of the Licence Agreements is an agreement to sell WMC's tenure. They are not such agreements.

Was the Sale Agreement chargeable to duty as a conveyance of fixtures?

246. This is the second part of Question 19(a). This question raises two issues. One is whether or not there the Sale Agreement is, under Stamp Act, s 70(2) and s 70(3) (if necessary), in both cases read with s 74, chargeable to duty as an agreement for sale of fixtures. The other issue is whether, assuming it is determined the Sale Agreement was a sale of fixtures, such an agreement for sale is one of an estate or interest in land.

247. With respect to the first issue, senior counsel for the respondent drew my attention to the provisions of Sale Agreement, cl 3.2, read with cl 3.4, which on his submissions recognise the uncertainty created by the definition of Fixtures in the Sale Agreement. It was not in contest before me that that definition was an adequate reflection of the common law test for a fixture. Nor was it in contest before me that the application of such a definition creates some uncertainty.

248. 

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I understood the effect of these submissions to be that the parties should be found to have intended that the Sale Agreement be a sale of all of the Power System Assets that were Classified Sale Assets, which I should take to have included, as I have indicated, one or more fixtures. This would give proper effect to the language of cl 3.2 read with cl 3.4, so as to resolve the uncertainty as to subject-matter created by the use of Fixtures in the Sale Agreement.

249. Alternatively, it was submitted to me that I should consider the Licence Agreements to be agreements to sell the Licensor's Improvements to which they related.

250. These two sets of submissions raise different issues, and therefore I deal with them separately, in the order given.

251. The first set of submissions rests as I have indicated on cl 3.2 and cl 3.4 of the Sale Agreement. I understood these submissions to rest particularly heavily on the words in cl 3.4(a). I previously set out the full terms of cl 3.4.

252. The pertinent words of cl 3.4(a) are that, in the event a "Governmental Agency" determines that any of the Classified Sales Assets "constitutes a Fixture", and the Purchaser advises the Vendor that the Purchaser "accepts that determination", then:

" … the relevant item of property shall hereby be deemed to not to have been included ab initio in the Sale Assets and therefore not included in the sale and purchase under this Agreement … "

253. I understood the submissions to be that this language should be understood to be an indication the parties intended the sale and purchase to relate to all of the Classified Sales Assets. Any attempt by contractual provision to remove any such asset from the provision for sale into the provisions for licences, retroactively as the words indicated, would not be availing for stamp duty purposes, as liability for stamp duty must be determined at the point of execution of the instrument in question. Indeed, as at the date of the trial, no advice had been given by the Purchaser to the Vendor under cl 3.4.

254. I do not find it necessary to address the latter submission concerning the purported retroactive effect of the clause at this point, although I will return to it below, as it is one of the Questions for this trial which, unlike some of the others, is not affected by answers to other Questions. I proceed without regard to that answer in the present context because I do not consider that cl 3.4 is other than a provision for re-determining the Purchaser Price for the Sale Assets (and through cl 3.4(b), the relevant Licence Fee), as well as (albeit less clearly) for changing the classification of what were the relevant Classified Sale Assets as between the parties. These effects are to occur when the Purchaser treats as a final decision a Governmental Determination that a Power System Asset that was a Classified Sale Asset is a Fixture.

255. The provision so viewed is undoubtedly a response to the circumstances of uncertainty on which the present set of submissions rests.

256. The provisions of cl 3.4 of the Sale Agreement also has a corresponding effect on the Licence Fee under the relevant Licence Agreements, which is stated in cl 3.4(b), as I have indicated, and which is reflected in the corresponding provisions in Sale Agreement, Sch 8, cl 2.1 and cl 2.2, the latter corresponding and making reference to Sale Agreement cl 3.4. Sale Agreement, Sch 8, cl 2.1 and cl 2.2 appear in all of the Licence Agreements.

257. It seems to me that the language of the Sale Agreement is unambiguous. As cl 3.2(a) indicates, Power System Assets which are a chattel, chose in action or other personal property (Sale Assets) are sold, while Power Assets which are Fixtures "are not to be sold", but to be "treated as Licensor's Improvements under the Licence Agreements". Clause 3.4 is principally a price (and licence fee) re-determination provision, although it might be implied from it that a Classified Sale Asset in respect of which the Purchaser has accepted a determination as described is to be subtracted from the category of Sale Asset and treated as a Fixture so far as the parties are concerned, inter partes. This is to be done even although the relevant item might not on its true analysis be a Fixture in accordance with the definition in the Sale Agreement.

258. I note that the matter is clearer in the latter respect under the Sale Agreement, Sch 8, cl 2.1 and cl 2.2. I note in particular that cl 2.2

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goes further than cl 3.4, in referring not only to the relevant items "in accordance with clause 3.4 of the [Sale Agreement]" as "not … acquired" by the Licensee, and the recalculation of the purchase price and adjustments to the Licence Fee, but also in stating (cl 2.2(b)) that:

" … the relevant item shall be included among the Licensor's Improvements with effect and in all respects as if that item had been specifically included ab initio in the definition of Licensor's Improvements on the Commencement Date, and therefore shall be deemed to have been subject to this Licence with effect from the Commencement Date."

259. In my view, this means that the relevant items are treated as Licensor's Improvements even although they might not on their true analysis be Fixtures in accordance with the definition of Fixture in the Licence Agreement. As I have earlier indicated, that definition is in the same terms as the corresponding definition in the Sale Agreement.

260. That is, the acceptance by the Purchaser of the determination removes the relevant items from the sale and has them treated under the relevant licence as if they were Fixtures. The classification of the relevant items under the definition of Fixtures is replaced by the process of determination by a Governmental Agency and its acceptance by the Purchaser, so far as the position of the parties inter partes, under the Sale Agreement and under the relevant Licence Agreement, is concerned.

261. I should also note that there is no provision for a determination that a Classified Fixture is not in fact a fixture. On the analysis I have described this is an area in which the parties have not provided a response to this aspect of the uncertainty created by the definition of Fixture. This, it seems to me, indicates the parties are, to that extent at least, not concerned to provide a complete response to that uncertainty.

262. I have noted the authorities, to which senior counsel for the respondent drew my attention, that in a contract "words may be supplied, omitted or corrected in order to avoid absurdity or inconsistency":
Fitzgerald v Masters (1956) 95 CLR 420, at 426 - 427, per Dixon CJ and Fullagar J; and see Seddon N C and Ellinghaus, M P Cheshire and Fifoot's Law of Contract, 8th Aust ed, Sydney, LexisNexis Butterworths 2002, at [10.35] and other authorities cited there.

263. However, I do not consider the uncertainty to which Sale Agreement cl 3.4 is a response to point to an absurdity or inconsistency that requires address by correcting the language of the Sale Agreement in the way contended for. It seems to me that there is nothing absurd or inconsistent in having a sale as cl 3.2(a) provides with the Purchase Price determined and if necessary adjusted as cl 3.2 and cl 3.4 provide, while recognising the scope of the sale and licences as the latter and the Licence Agreements provide, in the terms (as all of the Licence Agreements are) of Sale Agreement, Sch 8, cl 2.1 and cl 2.2. The uncertainty as to the subject-matter of the sale and the licences is not in my view the kind of uncertainty that, unless resolved, would threaten the validity of the contracts: there is nothing vague, unclear, imprecise or ambiguous about the subject-matters of the sale and the licences. The Sale Agreement and the Licence Agreements have, in their definitions of Fixture, rooted as I have indicated in the common law, provided "a criterion by reference to which the rights of the parties may ultimately and logically be worked out": see
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, per Barwick CJ, McTiernan, Kitto and Windeyer JJ agreeing, at 437.

264. Indeed, as I have said, the parties have indicated that they are content to have at least one aspect of the uncertainty solely resolved by reference to the criterion to which I have referred.

265. It is true that for the balance of the uncertainty the parties have provided a mechanism by which the subject-matter of the sale and the licences and the price and the licence fees may be varied as a result of a determination by a Governmental Agency accepted by the Purchaser. However, as to that balance of the uncertainty the absence of such an acceptance does not mean there is no criterion by reference to which the subject matter of the sale or the price may ultimately and logically be worked out. In that case, the Sale Agreement provisions would in the

ATC 4035

absence of such acceptance simply operate in accordance with their terms without the adjustment allowed for by Sale Agreement cl 3.4. I note again that there is no evidence any such adjustment has in fact been made in this case.

266. Therefore I consider the authority cited by senior counsel for the respondent,
Stocks & Holdings (Constructors) Pty Limited v Arrowsmith (1964) 112 CLR 646 to be distinguishable. That case concerned a sale of land to be subdivided with the price determined by the number of lots into which the land was subdivided but where the plan of subdivision was subject to the vendor's approval. There was no provision that could be seen to have been made for the price in the absence of such an approval, which it was held the vendor was not obliged to give.

267. This takes me to the second set of submissions, concerning the Licence Agreements as agreements to sell the Licensor's Improvements to which they related. The provisions to which the submissions directed my attention all appear in Sale Agreement, Sch 8, which are in the language of the corresponding provisions of the Licence Agreements. The characterisation of the Licence Agreements for the purposes of assessment to stamp duty has its effect (if any) on the assessability of the Sale Agreement to stamp duty through Stamp Act, s 70(3), as I have indicated.

268. It will have been seen that "Licensor's Improvements" is defined in the Licence Agreements, cl 1.1, in the language of Sale Agreement, Sch 8, cl 1.1, as the Power System Assets on the Licence Area that are Fixtures. The submissions are that the Licence Agreements provide for the sale and purchase of them, with effect from the commencement of the Licences, or at least with effect from their terminations. I deal with those two possibilities separately.

269. The submissions as to the acquisition of the Licensor's Improvements from the commencement of the periods of the Licences directed my attention to the total amounts of the Licence Fees under each Licence Agreement as contemplated by Sale Agreement, Sch 8; the provisions in the Power Purchase Agreement to which I have referred earlier that treat the Licensee as owner or a person who was purchaser under a contract of sale of the Licensor's Improvements or otherwise make provisions of a sort that would be expected if the Licensee were owner or a person who was purchaser under a contract of sale of the Licensor's Improvements; and the announcement of 27 November 1998 to which I previously referred and in which the Licensee is described as having "agreed to purchase" what I would accept are the Power System Assets. They would include the Licensor's Improvements. The effect of these was, it was said, that the parties had indicated their intention that the Licensee have agreed to purchase the Licensor's Improvements from the commencement of the Term of the Licence.

270. I understood this submission to be in terms that the provisions of the Licence Agreements for the licensing of the Licence Area and the Licensor's Improvements should be seen simply as provisions for letting the Licensee into possession of the assets sold before their purchase had been completed.

271. I do not agree.

272. The fact the total amounts of the Licence Fees, expressed in present value terms as the Licence Agreements, in the language of Sale Agreement Sch 8, provide, is the sum of the Pro Rata Portions of the Classified Fixtures in the Classification Schedule, as I previously indicated, shows economic equivalence. Economic equivalence does not require that the language of the Licence Agreements, in the language of the Sale Agreement Sch 8, be taken to be that of purchase and not of licence. It is the "legal nature and effect" of the Licence Agreements, not their economic effects, that are determinative of the answer to the characterisation question I must consider: Prime Wheat (supra), per Gleeson CJ, at 508, 511, quoted above. The legal nature and effect of the provisions in the Licence Agreement must be gathered from their terms, which include not only the way the Licence Fee is calculated but also the other provisions.

273. Those other provisions are clear as to the interest conferred on the Licensee by the Licence Agreements in respect of the Licensor's Improvements. They are to use the Licensor's Improvements in situ for the purposes of the Licence Agreements: see cl 3.1

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read with cl 9 of Sale Agreement, Sch 8, set out above, which is the language used in the corresponding provisions of the Licence Agreements. The only provision which might be described as a right during the Term of the Licence for the Licensee to acquire the Licensor's interest in the Licensor's Improvements is the right to remove Licensor's Improvements in cl 18A of the Sale Agreement, Sch 8, which is the language of the corresponding provisions of the Licence Agreements. I have previously set out that language, by which the Licensee is entitled to sever, remove and sell any of the Licensor's Improvements, with proceeds to be paid by the Licensee as compensation for early termination of the Licence with regard to the relevant item, and with the requirement to replace the item if that is necessary for the Licensee to fulfil its obligations under the Power Purchase Agreement. This does not seem to me to go to show the Licence should be seen to be an instrument of sale of the Licensor's Improvements as contended for.

274. However, it is true that the Licensee must acquire the Licensor's Improvements at the termination of the Licence in the circumstances described in cl 17.5 of the Licence Agreement. I return to the effect of that provision below. As I will explain there I do not consider that this makes the Licence Agreement an agreement for the purchase of the Licensor's Improvements for the purposes of stamp duty. However, as I will also explain there, I do consider that the provision does represent an agreement to purchase Licensor's Improvements. Although I conclude it may not be strictly necessary for me to do so, I will there consider whether such an agreement represents an agreement to purchase an interest in land.

275. Turning to the provisions of the Power Purchase Agreement relied upon, they are cl 6, cl 17, cl 19 and cl 31, which I have described and quoted from previously. They go respectively, so far as the appellant as Licensee is concerned, to requirements:

  • • for it to operate, maintain and repair Power System Assets that would include Licensor's Improvements;
  • • as between it and WMC for it to be regarded as owner and operator of those assets for the purpose of laws as to occupational health, safety and welfare, and for the purposes of laws as to the maintenance and protection of the environment; and
  • • for it to take out and maintain insurance of those assets of the kinds known as policies against industrial special risks and property risks.

276. However, I do not consider these provisions, themselves not part of the Licence Agreements, should be taken as indicating the legal nature and effect of the Licence Agreements contended for. Those provisions are, in my view, ones which on their face assume the Licensee is not the owner of the assets. While they are consistent with the Licensee having agreed to purchase the assets, they do not, in my view, require any such conclusion to be drawn. They are rather provisions for allocating certain costs as between the appellant and WMC as parties to the Power Purchase Agreement whereby the former will use certain assets as described in that agreement to conduct the activities required of it under that agreement. This is too slight a foundation on which to ground the conclusion that the Licence Agreements have the legal nature and effect, notwithstanding their express terms, of contracts to sell Licensor's Improvements.

277. Although senior counsel for the respondent did not refer to this provision of the Sale Agreement in this context, I note its cl 5.3(b), set out above. This provision provides for the risk in the Fixtures to pass to the Purchaser at Completion, the same provision as is made for Sale Assets in cl 5.3(a), also set out above. I do not consider this provision adds anything so far as the present submission is concerned to the provisions of the Power Purchase Agreement just referred to. That is because, while the provision is indeed consistent with the Purchaser under the Sale Agreement being, not a Licensee under a Licence Agreement in respect of the Fixtures, but a purchaser under a contract of sale of them, it does not require that conclusion. It is rather a provision for the allocation of risk of loss (and reason to insure) to the Licensee.

278. The submissions as to the acquisition of the Licensor's Improvements as from the termination of the periods of the Licences

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directed my attention to the provisions of Sale Agreement, Sch 8, cl 17.5, read with cl 17.3, which is the language of the corresponding provisions in all of the Licence Agreements.

279. I have previously set out the full text of cl 17.5. The provisions of cl 17.5 material to these submissions are that, on the termination of the Licence "for any reason", and with certain exceptions, "the Licensee must acquire the Licensor's right, title and interest in the Licensor's Improvements". The balance of the material provisions of cl 17.5 provide in effect that the Licence Fees paid or payable are the measure and, when paid, at least in part the payment of the price of the Licensor's Improvements so acquired.

280. The exceptions, in cl 17.1(a), (b) and (c) and cl 17.4, cover two forms of termination. The first is termination of the Licence in circumstances in which WMC unwinds the sale of Power System Assets because of default under the Power Purchase Agreement. The second is termination of the Licence on notice by the Licensee in the event of a determination of a Governmental Agency which the Licensee is satisfied means Licence Fees will not be deductible. In the latter case the Licensee is required to acquire the Licensor's right, title and interest in the relevant Licensor's Improvements.

281. It was put to me for the appellants that cl 17.5 was an agreement for sale of the Licensor's Improvements in the nature of a default arrangement. If by this was meant that the clause is a provision for acquisition on default under the Licence Agreement, or another of the other agreements to which they are related, being the Sale Agreement and the Power Purchase Agreement, then I am unable to agree. It will be evident that the clause is not a default provision in that sense. Rather, it is, on the face of the clause, provision for the acquisition of the Licensor's Improvements, subject to possible early termination of the Licence, on the expiry of the Licence.

282. Nor is the provision a default provision in the sense that it operates only in default of any other arrangement for the Licensor's Improvements, such as the acquisition by the Licensee of the Licensor's tenure, which would carry with it the fixtures. It seems to me that the provision is indeed intended to be an agreement for the sale of the Licensor's Improvements.

283. However, it does not appear to me that this has the effect of calling into question the earlier characterisation of the Licence Agreement I described, as not one for the sale of the Licensor's Improvements, at least for the purposes of stamp duty law. The provisions of the Licence Agreement are, it seems to me, not directed to that acquisition, as their "leading and principal object", for the purposes of the assessment of the Licence Agreements to stamp duty, and thus their characterisation for the purposes of the law of stamp duty (
Limmer Asphalt Paving Co Ltd v Commissioners of Inland Revenue (1872) LR 7 Ex 211, at 217, referred to with approval on this point in Balcatta Nominees (supra), per Brinsden J at 12, in the quotation set out above),

284. It is not altogether clear from the terms of the Licence Agreements whether or not they grant a right to exclusive possession of the Licence Area and the Licence Improvements. No argument was addressed to me on this point. I note for this purpose that the Licence Agreements grant a right to use the Licence Area and the Licensor's Improvements "without unreasonable interruption or disturbance by the Licensor or any other person claiming through the Licensor" (Sale Agreement, Sch 8, cl 13, and the corresponding provisions in the Licence Agreements). This may be taken to be the equivalent of the "sole and exclusive licence" in Balcatta Nominees (supra).

285. However, it does not appear to me to matter whether or not that represents a grant of a right to exclusive possession of the Licence Area or the Licensor's Improvements. That is because it is clear that an agreement to grant a licence over land for a term, even one which might be taken to grant a right of exclusive possession, is not an agreement to sell an estate or interest in land: Balcatta Nominees (supra). This conclusion may be arrived at on either of the two bases I have previously indicated as put in that case for the conclusion there described in respect of the agreement in that case, considered as one for conveyance of a profit à prendre.

286. It seems to me that the "leading or principal object" of the Licence Agreements is

ATC 4038

the provision of a right to use the Licence Area and the Licensor's Improvements. This provision is in turn for the purpose of the production (if the Licence Agreement respects a site on which a Power Station is situate) or supply (if the Licence Agreement respects a site on which part of Transmission Systems is situate) of "Energy Services" during the Term (Licence Agreements, cl 9.1 and cl 9.2). This, of course, is for the purposes of the obligations of the Licensee under the Power Sale Agreement. Unlike the position in Balcatta Nominees (supra) with respect to the substances to be extracted from the quarry, it seems to me to be an incidental feature of the Licence Agreement that property forming part of the land (the Licensor's Improvements) is to be acquired, at the end of the Licence.

287. However, it might be put that the Licence Agreements had several principal objects, and thus that s 19 of the Stamp Act applied. I have already referred to the treatment of that provision in Balcatta Nominees (supra). In the event that I am in error as to my conclusion as to the treatment of the Licence Agreements as having a single "leading or principal object', and that the correct view is that they have two such objects, one to grant licences of the sorts described, and the other to provide for a sale of the Licensor's Improvements at the termination of those licences, I consider the submissions of the parties as to the proper approach for the purposes of assessment to stamp duty of a contract for the sale of unsevered fixtures.

288. I begin by noting that the contract for sale relates only to fixtures. There is no provision with respect to the Licence Area. At the termination of the Licence Agreement, unless the Licensee has obtained Permanent Tenure (obtaining which, as has been seen, of itself works a termination, but is not the only form of termination to which cl 17.5 applies: see Sale Agreement, cl 17.3 read with cl 17.5), there is no provision for a right of use of the assets to be acquired in situ.

289. It seems to me that, in those circumstances, by implication the acquirer would have at the least the right to remove the assets acquired. If there were no more to the matter than that, it would, in my view, make the contract for sale of the Licensor's Improvements equivalent to the contract in Balcatta Nominees (supra).

290. However, senior counsel for the respondent put considerable argument to me to the effect that a sale of fixtures in situ was a sale of at least an equitable interest in land. The sale of the fixtures with no provision with respect to the portion of the land to which they were affixed (what was formerly the Licence Area) should be taken to be a sale of at least that portion of WMC's tenure.

291. I was referred to authorities on the deductibility for income tax purposes of payments made by an owner of land to a financial institution, to which it had sold what were found to be fixtures, and from which it had taken a lease back of those fixtures. In particular I was referred to
Federal Commissioner of Taxation v Metal Manufactures Ltd [2001] ATC 4152, per Lee J, at [2], per Carr J, at [20] and per Sunderland J, at [56]. There, their Honours, dismissing the appeal from the decision below, all concluded that the financial institution had taken a sufficient interest in the fixtures to support the lease back of them, and that the nature of the interest was an equitable proprietary one. I was also referred to commentary on the decision below in that case and also the decision the unsuccessful appeal from which is referred to in their Honour's judgments,
Eastern Nitrogen Ltd v Federal Commissioner of Taxation [2001] ATC 4164 (Full Court Fed Ct), another case involving a sale and leaseback of fixtures. That commentary, by Professor Peter Butt, expresses the view that a sale of unsevered fixtures, at least by a registered proprietor of Torrens land on which the fixtures are located, should be seen to be a disposition of an equitable interest in the land: see Peter Butt, "Selling land separately from fixtures" (2000) 71 ALJ 130.

292. It was put to me by senior counsel for the appellant that I should see a subsequent commentary by Professor Butt on the appellate decisions as at least a partial recanting of the views in the earlier commentary: see Peter Butt, "Selling fixtures separately from land" (2001) 75 ALJ 405. However, I do not so read that later commentary. Rather, I see Professor Butt providing an elaboration of his views, to better accommodate the effect of town planning legislation, which in Western Australia was

ATC 4039

Town Planning and Development Act 1928 (WA), s 20 (see now Planning and Development Act 2005 (WA), s 146) precluding the conveyance of less than a lot without the approval of the relevant authority: see Butt (2001), at p 406.

293. However, I note that none of these authorities address the characterisation of the disposition in the terms material to me for present purposes, of whether or not that disposition is a conveyance on sale of an interest in land.

294. It seems to me that the disposition considered in those terms is not a disposition of the fixtures for the purposes of severance, such as the minerals to be quarried in Balcatta Nominees (supra). I consider that the disposition should be seen to be of the fixtures with a right to use them in situ for the time being (which would appear to me to be a revocable arrangement), and to sever and remove them at any time. However, I do not consider the disponee of the fixtures also acquires the whole of the disponor's interest in the fixtures in situ "either in point of duration or in point of content", in the language used in Balcatta Nominees (supra), per Brinsden J, at 11". I note also the following from Metal Manufacturers (supra), per Carr J at [56]:

"[b]ut for the lease, the Bank's proprietary interest would give it the right to enter upon and sever the plant and equipment from the land."

295. That is, cl 17.5 of Sale Agreement, Sch 8, followed in the corresponding provisions of the Licence Agreements, is an agreement to carve out an interest from the disponor's tenure less than the whole of the disponor's interest in the portion of the land concerned.

296. The case before me is different from the decision of this Court cited to me by senior counsel for the respondent,
Eon Metals NL v Commissioner of State Taxation (WA) 91 ATC 4841; (1991) 22 ATR 601, Ipp J. That case concerned the assessability to stamp duty under the Stamp Act of a sale to Eon Metals of certain mining plant and equipment located on a mine by the company that had purchased them from the operator of the mine. The operator had previously sold to Eon Metals the operator's interest in the mining leases in respect of the site on which the mine was located. It was "common cause" in that case that the exception in Stamp Act, Third Schedule, former Item 2(7), for a conveyance or transfer of goods, wares and merchandise, would cover the plant and equipment if it was not a fixture: Eon Metals, Ipp J, at p 4843. It seems to me that in that case the sale of the plant and equipment in the context of the sale of the mining leases was a disposition of the whole of the interest of the operator of the fixtures in situ.

297. That case might be closer to this one if the only form of termination were the acquisition of Permanent Tenure. However, even if that were so, it seems to me no conveyance on sale is involved. That is because there is no conveyance on sale of the Permanent Tenure concerned, for the reasons I have previously explained.

298. This conclusion as to the characterisation of cl 17.5 means I do not need to consider whether that provision, in its application to a sale of fixtures on land held by WMC in leasehold tenure, or as a mining tenement under the Mining Act, is neither a sale of goods nor a sale of an interest in land, but rather a surrender of WMC's right to enter and remove the fixtures at the termination of its interest: see
McDonald's Australia Ltd v Chief Commissioner of State Revenue (NSW) [2005] ATC 4094, SC NSW, Gzell J, in respect of the sale of tenant's fixtures to the landlord at the termination of the lease.

299. For the reasons I have given, the Sale Agreement is not assessable or chargeable to stamp duty as a conveyance of fixtures on the basis neither it nor the Licence Agreements is an agreement to sell fixtures as an interest in land.

The answers to Question 19(a) and 19(b)

300. It follows from the foregoing that the answer to Question 19(a) is no. That is, the assets sold under the Sale Agreement were restricted to personal property, not an estate or interest in land.

301. It was common cause that if the answer to Question 19(a) was no, and the assets sold under the Sale Agreement were restricted to chattels, then the answer to Question 19(b) was that the Sale Agreement was not subject to stamp duty.

302. 

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However, I note again, as I did earlier, that in fact the Sale Assets under the Sale Agreement included a number of items that do not appear, at first glance at least, to be chattels, in the sense of "goods, wares and merchandise" Stamp Act, Third Schedule, Item 2(7a), (7b) or (7c). That is because they are clearly intangible personal property. They are, from the description of the items comprised in the definition of "Sale Assets" above, at least the following:
  • • rights and obligations of the Vendor under an agreement with a third party for its operation of the "Power System Assets" for the Vendor;
  • • the rights and obligations of the Vendor under the "Access Agreements, insofar as they related to the Power Stations and the Transmission Systems"; and
  • • the "Intellectual Property Rights" relating to all of the items under "Sale Assets" listed previously to that inclusion.

303. However, no argument was addressed to me as to the assessability to stamp duty of agreements to sell such assets. The agreement to sell those of them to which no separate consideration is allocated and which are should be seen as merely incidental to the sale of goods, wares or merchandise falling within the class Sale Assets (which at first blush would appear to be the case in respect of the "Intellectual Property Rights") might not attract the payment of any duty, on the analysis of Stamp Act in Balcatta Nominees (supra) per Brinsden J, at 12, quoted from above. At the same time, it may be that the change from the form of Stamp Act, s 75 as at the time of that decision and s 75 as it stood for the purposes of this appeal calls for some qualification of that analysis.

304. However, as no argument was addressed to me on this or any other point relevant to the matter, I do not consider I should consider it further, as I have indicated.

What is the correct interpretation of Sale Agreement, cl 3.4 and was the respondent bound to give it effect?

305. I consider I have largely answered this question. I have indicated that in my view cl 3.4 is a provision for re-determining the Purchase Price for the Sale Assets (and through cl 3.4(b), the relevant Licence Fee), as well as (albeit less clearly) for changing the classification of what were the relevant Classified Sale Assets as between the parties.

306. The effect of that interpretation I have also indicated above. The provision does not, on its correct interpretation, indicate that the Classified Sale Assets were intended to be sold, regardless of whether or not they were fixtures. The matter of the respondent being bound to give it effect, as I understood the form of Question 19(e), does not arise on that interpretation. The provision does not have an effect on the characterisation of the Sale Agreement for the purposes of its assessability to stamp duty.

307. This makes it unnecessary for me to determine whether or not an agreement whereby assets were agreed to be sold unless it was subsequently determined they were fixtures, in which case they were to be taken, at the purchaser's option, and ab initio, to be the subject of a licence, was assessable to stamp duty as a conveyance on sale. This was the issue posed on the interpretation of cl 3.4 which was pressed upon me by counsel for the respondent. This was, it seems, the sense in which Question 19(e) raised the issue of whether the respondent was bound to give cl 3.4 effect on the characterisation of the Sale Agreement for the purposes of its assessability to stamp duty.

308. I have considerable doubt that cl 3.4, so interpreted, would permit the Purchaser so to determine the assessability of the Sale Agreement to stamp duty at its option. It is not in contest between the parties that the assessability of an instrument to duty is to be determined on its characterisation as at the date of execution. Changes subsequently, even those contemplated in the instrument, of the sort worked by the Purchaser under cl 3.4, would not seem to me to be effective to change the character of the instrument for the purposes of its assessability to stamp duty. However, I do not consider it necessary to reach a final view on this point, in view of my conclusion on the correct interpretation of cl 3.4.

My conclusions

309. It follows that my answers to the Questions for the trial are as follows;

  • ATC 4041

    (a) Was the Respondent correct in assessing the Sale Agreement as a conveyance of land or an interest in land or fixtures?

  • No.

  • (b) If no to (a) on what basis should the Sale Agreement be assessed to duty?

  • The Sale Agreement is not subject to stamp duty on the basis assessed by the Respondent. No argument was addressed to me on the assessability of the Sale Agreement to stamp duty on the basis of its inclusion as Sale Assets of assets other than ones that are 'goods, wares and merchandise' for the purposes of Stamp Act, Third Schedule. No other basis for its assessment to stamp duty was addressed in argument before me at the trial.

  • (c) If yes to (a) which of the Generation and Transmission Assets [which refers to what the Sale Agreement calls the Power Stations and the Transmission Systems] were conveyed by WMC to [the appellants].

  • Does not arise.

  • (d) Which of the Generation and Transmission Assets conveyed (if any) were fixtures.

  • Not called for.

  • (e) What is the correct interpretation to be given to clause 3.4 of the Sale Agreement, and was the Respondent bound to give effect to such provision.

  • The correct interpretation of cl 3.4 of the Sale Agreement is as a provision for re-determining the Purchase Price for the Sale Assets (and through cl 3.4(b), the relevant Licence Fee), as well as for changing the classification of what were the relevant Classified Sale Assets as between the parties. On that interpretation, no issue arises as to the Respondent being bound to give effect to the provision.

  • (f) How shall the costs of the appeal be borne and paid?

  • As the appeal has been successful, my preliminary view is that the respondent should pay the appellant's taxed costs.

310. I invite the parties to make submissions to me as to the orders that should be made to give effect to these conclusions, in view of Stamp Act, s 33(4)(a) as it stood at the commencement of this appeal.

 

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