Supreme Court New South Wales Medium Neutral Citation: Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 1074 Hearing dates: 14 – 16 February 2022 Date of orders: 12 August 2022 Decision date: 12 August 2022 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Set aside the defendant's Further Amended Assessment, dated 25 August 2021, in whole. 2. The parties are to file and serve submissions on the question of costs within 14 days of the publication of these reasons (including whether, and if so why, an oral hearing on costs is sought or that issue can be dealt with on the papers). Catchwords: TAXES AND DUTIES — Landholder duty — Landholdings — Threshold value — Whether Power Stations located on land were landholdings within the meaning of the Duties Act 1997 (NSW) — Whether Power Stations were fixtures or innominate sui generis property TAXES AND DUTIES — Dutiable transactions — Dutiable value — Property — Whether methodology in SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395 applicable TAXES AND DUTIES — Dutiable transactions — Dutiable property — Goods — Whether Power Stations could be characterised as "goods" Legislation Cited: Duties Act 1997 (NSW), ss 23(1), 26, 145, 146, 147, 155, 163, Pt 4, Ch 4 Duties Amendment (Abolition of State Taxes) Act 2006 (NSW), s 26A(1) Electricity Generator Assets (Authorised Transactions) Act 2012 (NSW), ss 7, 9, 13, Sch 4 Energy Services Corporations (Eraring Energy) Regulation 2000 (NSW) Energy Services Corporations Act 1995 (NSW), s 6A, cl 3, Sch 5 Personal Property Securities Act 2009 (Cth), s 267 Petroleum Pipelines Act 1969 (WA) Real Property Act 1900 (NSW), s 42 Sale of Goods Act 1923 (NSW), ss 26, 27, 28 Stamp Act 1921 (WA) Stamp Duties Act 1920 (NSW) Stamp Duties Act 1920-1933 (NSW), s 43A(2) State Revenue and Other Legislation Amendment (Budget Measures) Act 2013 (NSW) State Revenue Legislation Further Amendment Act 2009 (NSW) Taxation Administration Act 1996 (NSW), ss 97(1)(a), 101(1)(a) Valuation of Land Act 1916 (NSW), s 6A Water Management Act 2000 (NSW), s 371 Cases Cited: Alcan (NT) Alumina v Commissioner of Taxes (2007) 19 NTLR 153; [2007] NTSC 9 Asciano Services Pty Limited v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46 Auckland City Council v Ports of Auckland [2000] NZCA 190, [2000] 3 NZLR 614 Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322 Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43 Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630; [2010] VSC 464 Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462; [2011] NSWCA 325 Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118; [1967] HCA 41 Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1; [2013] HCA 2 Commissioner of State Revenue v TEC Desert Pty Ltd (2009) 40 WAR 344; [2009] WASCA 128 Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150; [2001] FCA 365 Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 108 FCR 27; [2001] FCA 366 Elitestone Ltd v Morris [1997] 1 WLR 687 Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186; [2011] WASCA 228 Federal Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150; [2001] FCA 365 Federal Commissioner of Taxation v Miley (2017) 106 ATR 779; [2017] FCA 1396 Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 Lees & Leech Pty Ltd v Commissioner of Taxation (Cth) (1997) 73 FCR 136; [1997] FCA 404 Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 May v Ceedive (2006) 13 BPR 24,147; [2006] NSWCA 369 McDonald's Australia Ltd v Chief Commissioner of State Revenue (2005) 58 ATR 260; [2005] NSWSC 6 Metal Manufacturers v Commissioner of Taxation (1999) 43 ATR 375; [1999] FCA 1712 Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154 MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 Newcastle-under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 North Shore Gas Company Limited v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7 Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (2017) 93 NSWLR 765; [2017] NSWCA 8 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; [1982] HCA 69 Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) (2013) 97 ATR 904; [2013] NSWCA 470 Spencer v The Commonwealth (1906) 5 CLR 418; [1907] HCA 82 SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395 The Noordam (No 2) [1920] AC 904 Valuer-General Victoria v AWF Prop Co 2 Pty Ltd [2021] VSCA 274 Vopak Terminal Darwin Pty Limited v Natural Fuels Darwin Pty Limited (Subject to Deed of Company Arrangement) (2009) 258 ALR 89; [2009] FCA 742 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 Winston Smith v Chief Commissioner of State Revenue [2019] NSWCA 75 Texts Cited: R Abbs "The Law of Fixtures: Informed Principle or Independent Predilection?" (2004) 11 Australian Property Law Journal 31 W Woodfall, Landlord and Tenant (looseleaf ed, 1998, Sweet & Maxwell) Category: Principal judgment Parties: Meridian Energy Australia Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: M Richmond SC with NYH Li (Plaintiff) S Balafoutis SC with S Kanagaratnam and O Berkmann (Defendant) Solicitors: PwC (Plaintiff) Crown Solicitor's Office (Defendant) File Number(s): 2020/223736 Publication restriction: Nil Judgment 1. HER HONOUR: By summons filed on 31 July 2020, the plaintiff, Meridian Energy Australia Pty Ltd (Meridian), seeks a review pursuant to s 97(1)(a) of the Taxation Administration Act 1996 (NSW) (Taxation Administration Act) of the Duties Notice of Assessment made on 25 August 2021 (the Assessment) by the defendant, the Chief Commissioner of State Revenue (Chief Commissioner), under Ch 4 of the Duties Act 1997 (NSW) (Duties Act), in respect of Meridian's acquisition of 100% of the shares in GSP Energy Pty Ltd (GSP) from Trustpower Limited (Trustpower) on 29 March 2018 for over $160 million (the Acquisition). The amount of duty in question is $7,979,740, calculated on land holdings and goods valued by the Chief Commissioner in the amount of $145.35 million. 2. Under the Duties Act, landholder duty is paid on the acquisition of entities with land holdings valued at more than $2 million. Once the threshold value of the land holdings is exceeded, duty is calculated on the total value of the landholder's land and goods. The present dispute goes to the question whether the threshold value of land holdings was exceeded and, if it was, to the total value of the landholder's land and goods. 3. At the time of the Acquisition, GSP was the operator of three hydro-electric power stations in New South Wales, located at Lake Burrinjuck, Keepit and Hume, respectively (collectively referred to in these reasons as the Power Stations) and the lessee of the land on which the Power Stations are situated pursuant to leases entered into in 2014 (the Leases). GSP's access to the water required for the operation of the Power Stations (and its licence to access the Power Stations themselves) was pursuant to Water Agreements entered into with the State Water Corporation (SWC). Meridian emphasises that its right to use the Power Stations (and infrastructure therein) derives not from the Leases but from its ownership of the Power Station assets (pursuant to statutory Vesting Orders to which I will refer in due course). 4. There is no dispute that the Acquisition (of 100% of the issued shares in GSP) was a "relevant acquisition". The dispute is as to whether GSP was a "landholder" within the meaning of Ch 4. Meridian contends that the Assessment should be set aside because GSP was not a landholder within the meaning of Ch 4 of the Duties Act at the time of the Acquisition (as GSP's interests in land did not exceed $2 million). In the alternative, Meridian submits that the Assessment should be set aside and an assessment of a lesser amount should be made. 5. One of the principal differences between the parties is as to the nature of GSP's interest in the Power Stations or how the Power Stations are to be characterised. Meridian contends that GSP's interest in the Power Stations is an innominate sui generis property interest which cannot be classified as land or goods, which was created by virtue of a statutory Vesting Order; whereas the Chief Commissioner says that the Power Stations are fixtures (being part of the leased land). 6. The Chief Commissioner denies that the effect of the statutory Vesting Order was to sever the Power Stations from the land on which they are situated or to grant a sui generis property interest to GSP; and contends that the Leases ought to be valued on the basis that they include the inherent right to exploit the fixtures. Alternatively, the Chief Commissioner says that, if the landlord's interest in the Power Stations was conveyed to GSP and the Power Stations are not an interest in land, then the Power Stations are "goods" and the Leases are worth more than $2 million. Regardless of whether the Power Stations are land or goods, the Chief Commissioner says that GSP had landholdings worth more than $2 million and that the total value of its landholdings and goods remains at $145.35 million (such that the Assessment is correct). 7. The Chief Commissioner contends that the value of the Leases at the relevant time (valued in two components – by reference to the right to exploit and use the fixed plant and equipment in the Power Stations and to the value of the lease of the bare land) was $144.85 million and the value of GSP's goods was $500,000. Hence, the Chief Commissioner has assessed duty on the sum of those items, namely, $145.35 million. Meridian says that no duty is payable because the Leases have less than nil value (or alternatively are valued at negative $2 million). 8. The expert valuers who gave evidence in the proceeding disagree as to the value to be attributed to the Leases and the Water Agreements, respectively (the significance of this being that it is accepted that the Water Agreements are non-land assets and do not fall within the definition of "goods"). 9. The nature of a review of the kind here sought was explained by Payne JA in SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue (2021) 113 ATR 24; [2021] NSWSC 395 (SPIC Pacific Hydro) (at [54]ff). Relevantly, it is not limited to considering whether there was error by the Chief Commissioner; rather, the correct application of the legislation to the facts at hand must be determined. Background Power Stations 1. As noted above, at the time of the Acquisition, GSP was the operator of three hydro-electric power stations (the Keepit Power Station on the Namoi River, the Burrinjuck Power Station on the Murrumbidgee River, and the Hume Power Station on the Murray River) (see the affidavit affirmed on 3 December 2020 by Angus David Holcombe, Head of Asset Development for Meridian, at [4]-[5]) . The Power Stations had been built between 1928 and 2002 (see Plaintiff's Amended Appeal Statement at [14]; Defendant's Further Amended Appeal Statement at [16]); and each has at all relevant times been located on land owned by statutory corporations. At the time of the Acquisition, the land was owned by the Water Administration Ministerial Corporation (WAMC), a statutory body established under s 371 of the Water Management Act 2000 (NSW). The predecessor statutory corporations to WAMC include the Electrical Assets Ministerial Holding Corporation (EAMHC) and the Water Resources Commission. 2. Burrinjuck Power Station (Station No 2) was commissioned in 1938 (units 3 & 4). (Burrinjuck Station No 1 – units 1 & 2 – was commissioned in 1928 but decommissioned in 1974.) Hume Power Station was commissioned in 1957. Keepit Power Station was commissioned in 1960 (and upgraded in 1983). A new unit was installed at the Burrinjuck Power Station and the existing units in Burrunjuck Station No 2 were upgraded in 2002. Position prior to 2000 1. Prior to the incorporation of Eraring Energy (see below), the Electricity Commission of New South Wales (trading as Pacific Power) had generating assets that included the Power Stations (see Plaintiff's Amended Appeal Statement at [15]; Defendant's Further Amended Appeal Statement at [16](e)). 2. With respect to the Burrinjuck Power Station, it appears that this was the subject of a lease granted by WAMC to Pacific Power in 1998 (1998 Lease) (marked as Ex J in the hearing). There is no evidence of any lease in respect of the other two Power Stations (Hume and Keepit) at this time. 3. Clauses 6(g) and 12 of the 1998 Lease provide that the operator of the Burrinjuck Power Station is entitled to remove its fixtures at the determination of the 1998 Lease but that, if it fails to do so, those fixtures become the property of the lessor (thus broadly reflecting the position at law with respect to tenant's fixtures – see SPIC Pacific Hydro at [76]-[79]). The Chief Commissioner points out that there is no evidence about how much of the plant and equipment attached to the Burrinjuck land could be characterised as Pacific Power's fixtures. 4. As there is no evidence about any lease of the land for the Hume and Keepit Power Stations prior to 2000, the Chief Commissioner submits that it should be inferred that the general law applies, such that Pacific Power's interest with respect to any fixtures was comprised by the rights conferred on tenants who install fixtures on a landlord's property. Again, the Chief Commissioner points out that there is no evidence about how much of the plant and equipment attached to the Hume and Keepit land could be characterised in that way. 5. The Chief Commissioner emphasises that, in accordance with general law principles applicable to tenant's fixtures, until the tenant removes them tenant's fixtures remain part of the land and are thus owned by the landlord; and that, while the tenant has a right under law to remove the fixtures during or at the end of the tenancy, if the tenant fails to do so the tenant loses that right and the fixtures become the absolute property of the landlord (reference here being made to Lees & Leech Pty Ltd v Commissioner of Taxation (Cth) (1997) 73 FCR 136; [1997] FCA 404 at 149 per Hill J; Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 at [27]-[28] per EM Heenan AJA (with whom Pullin and Miller JJA agreed)). This is relevant to the Chief Commissioner's argument as to the effect of the 2000 (and subsequent) Vesting Order(s) (see below). Eraring Energy 1. On 1 July 2000, Eraring Energy was incorporated as a statutory corporation (see s 6A of the Energy Services Corporations Act 1995 (NSW) (Energy Services Corporations Act) and cl 3 of the Energy Services Corporations (Eraring Energy) Regulation 2000 (NSW)). 2000 Vesting Order 1. On 1 July 2002, the Treasurer ordered (pursuant to cl 3 of Sch 5 of the Energy Services Corporation Act) that the "nominated staff, assets, rights and liabilities of Pacific Power" be transferred to Eraring Energy on 2 August 2000 (2000 Vesting Order). 2. Meridian says that, pursuant to the 2000 Vesting Order, Eraring Energy acquired the generating assets of Pacific Power, including the Power Stations. The Chief Commissioner says, on the other hand, that Meridian has not adduced any evidence of what staff, assets, rights and liabilities were transferred by this order, noting that the relevant provision of the Energy Services Corporation Act empowered the Treasurer to direct that "any specified staff, assets, rights or liabilities of Pacific Power be transferred to such energy services corporation", it does not appear to be in dispute that, after the 2000 Vesting Order, Eraring Energy assumed the operation of the Power Stations (see below); and the Chief Commissioner accepts that the generating assets of Pacific Power included the Power Stations (see the Defendant's Further Amended Appeal Statement at [16](e)). 3. The Chief Commissioner emphasises that Pacific Power was not the owner of the leased land on which the Power Stations operated when the 2000 Vesting Order was made (noting the reference to the lease between WAMC and Pacific Power for the Burrinjuck Dam that was in existence in 1998, being Ex J) (see the 2014 Burrinjuck Lease, cl 1.1(e)). 4. The Chief Commissioner argues that the effect of the 2000 Vesting Order was to transfer Pacific Power's assets (including its interest as lessee or tenant of the leased land) to Eraring Energy but contends that the effect of the 2000 Vesting Order was not (and could not be) to transfer the fixtures owned by the owner of the land (WAMC) to Eraring Energy (since tenants' fixtures remain part of the freehold land until and unless the fixtures are physically removed – see SPIC Pacific Hydro at [139]). The Chief Commissioner notes that there is no reference in the 2000 Vesting Order to WAMC, nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to Eraring Energy. Further, the Chief Commissioner points out that the legislation which authorised the making of the order (the Energy Services Corporation Act) only permitted a transfer of assets from Pacific Power (not from WAMC). In other words, the Chief Commissioner maintains that the 2000 Vesting Order did not sever the fixtures from the leased land. (I address Meridian's response to this contention in due course.) Commencement of operations by Eraring Energy 1. On 2 August 2000, Eraring Energy commenced operation as an electricity generator energy services corporation (see Exhibit MSW-1 to the affidavit of Michael Shannon Wixted, Senior Solicitor at the Crown Solicitor's office with carriage of the matter on behalf of the Chief Commissioner, affirmed 28 April 2021 at 90-91, marked as Ex 1 in the hearing). Agreement for Lease between WAMC and Eraring Energy 1. Schedule 1 of the 2013 Vesting Order provides that, on 1 March 2002, Eraring Energy and WAMC entered into an Agreement for Lease in respect of Burrinjuck Dam (see Ex 1 at 2615-2621). This appears, however, to be a reference to the 1998 Lease, in light of the definition of "Existing Lease" in the 2014 Burrinjuck Lease (see also T 174.33-48). It does not, therefore, appear that the 2002 Lease did in fact exist, but rather was an erroneous reference to the 1998 Lease. Incorporation of GSP 1. On 20 June 2002, GSP was incorporated (then known as Sellicks Hill Wind Farm Pty Ltd) (see Ex 1 at 97). (Later, in June 2014, the company name was changed to GSP Energy Pty Ltd – i.e., GSP, as here defined (Ex 1 at 97).) Incorporation of Green State Power 1. On 4 June 2013, Green State Power Pty Ltd (Green State Power) was incorporated as a state-owned corporation (Plaintiff's Amended Appeal Statement at [17]; Defendant's Further Amended Appeal Statement at [16](g)) pursuant to s 9 of the Electricity Generator Assets (Authorised Transactions) Act 2012 (NSW) (EGA Act) (see further the Green State Power Constitution, Ex 1 at 106 and 115, cl 1.10 which provides for the establishment of Green State Power). Green State Power is not related to GSP. 2013 Vesting Order 1. On 30 July 2013, the Treasurer made the Electricity Generator Assets (Authorised Transactions) (Eraring Energy Excluded Assets) Order 2013 (the 2013 Vesting Order or Eraring Vesting Order) (see Ex 1 at 167). 2. Section 7 of the EGA Act confers power on the Treasurer to exercise all such functions as are necessary or convenient for the purposes of an authorised transaction. Section 13 empowers the Treasurer to make Vesting Orders under Sch 4 of the EGA Act for the purposes of an authorised transaction. 3. Relevantly, cl 2 of Schedule 4 of the EGA Act provides that: The Treasurer may, by order (a vesting order), vest assets, rights and liabilities of a public sector agency that is an electricity generator or transaction entity in a person specified in the order as the transferee. 1. Schedule 1 of the EGA Act defines "assets" to mean: any legal or equitable estate or interest (whether present or future, whether vested or contingent and whether personal or assignable) in real or personal property of any description (including money), and includes securities, choses in action and documents. 1. The Chief Commissioner says that the effect of this legislation is thus to permit the Treasurer to make a transfer of assets from one named entity to another. 2. Clause 3 of Sch 4 of the EGA Act sets out the effect of a vesting order, providing, relevantly, that: (1) When any assets, rights or liabilities are vested by a vesting order, the following provisions have effect (subject to the vesting order): (a) the assets vest in the transferee by virtue of this clause and without the need for any conveyance, transfer, assignment or assurance, … (d) the transferee has all the entitlements and obligations of the transferor in relation to the assets, rights and liabilities that the transferor would have had but for the order, whether or not those entitlements and obligations were actual or potential at the time the order took effect, … 1. Clause 7 of Sch 4 of the EGA Act provides for the vesting of interests in land: (1) A vesting order may vest an interest in respect of land vested in the transferor without vesting the whole of the interests of the transferor in that land. (2) If the interest vested is not a separate interest, the order operates to create the interest vested in such terms as are specified in the order. (3) This clause does not limit any other provision of this Schedule. 1. The 2013 Vesting Order vested in Green State Power all of "the assets, rights and liabilities of Eraring Energy" described in Sch 1 (cl 3). Schedule 1 contained two parts. 2. Paragraph 1 of Sch 1 vested in Green State Power "all of the assets, rights and liabilities of Eraring Energy in, attaching to or running with the property identified below" (and contained Part A – headed Freehold Property and Part B – headed Leasehold Property). Clause 4 defines "property" as "the real property identified in paragraph 1 of Schedule 1". Part B of par 1 of Sch 1 included the "Agreement for Lease (Burrinjuck Power Station)", erroneously referring to a Lease commencing 1 March 2002, apparently being a reference to the 1998 Lease (see above) (see Ex 1 at 163-165). 3. Paragraph 2 of Sch 1 vested in Green State Power all "assets, rights and liabilities of Eraring Energy in all fixtures, chattels, plant, equipment, infrastructure, facilities and other tangible property located at or on the Property and to the extent owned, benefitting, burdening or used by Eraring Energy in connection with the Excluded Assets Business". The reference to Excluded Assets Business included the business carried on in respect of the Renewable Assets which was in turn defined to include the three Power Stations (Ex 1 at 161). Paragraph 2 of Sch 1 was headed "Property, Plant and Equipment". At subpar (a), reference is made to the "assets, rights and liabilities of Eraring Energy in all fixtures, chattels, plant, equipment, infrastructure, facilities and other tangible property located at or on the Property" (including Burrinjuck Dam) and subpar (c) makes reference to "[t]he other property listed in Annexure 2", which listed a large number of specified property, plant and equipment (PPE). Sub-paragraph (c) vested the "things" in Sch 2 in Green State Power. 4. To anticipate at this stage the parties' submissions, which I will address in due course, Meridian emphasises that par 1 of Sch 1 of the 2013 Vesting Order vested freehold or leasehold and other forms of real property; whereas par 2 of Sch 1 vested other forms of PPE ; and Meridian says that the 2013 Vesting Order, coupled with cl 3 of Sch 4 of the EGA Act, operated to sever the Power Stations from the land and vest ownership of them (an innominate sui generis interest – not being an interest in land) in Eraring Energy. The Chief Commissioner, on the other hand, says that the effect of the 2013 Vesting Order (like the 2000 Vesting Order) was to transfer the assets of the previous energy operator (i.e., Eraring Energy), including its interest as lessee or tenant of the Leased Land, to the future energy operator (i.e., Green State Power). 5. The Chief Commissioner says that the effect of the 2013 Vesting Order was not (and could not be) to sever the fixtures from WAMC's land and transfer the fixtures from WAMC to Green State Power. The Chief Commissioner points out there is no reference in the 2013 Vesting Order to WAMC (or its predecessors), nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to Green State Power. The Chief Commissioner says that the reference in par 2 of Sch 1 of the Vesting Order to the plant and equipment that was to be transferred to Green State Power (see cl 4.3) must be read, in the context of cl 2 of Sch 4 of the EGA Act and cl 3 of the 2013 Vesting Order, as Eraring Energy's interest in the plant and equipment. The Chief Commissioner maintains that Eraring Energy's interest was as the lessee under the 1998 Lease and successor of the tenant which had installed the fixtures. 6. Meridian contends, to the contrary, that the only interests in land transferred by the 2013 Vesting Order were those set out in par 1 of Sch 1 and that they did not include the leasehold interests in respect of the land on which the Power Stations were situated. Privatisation of Green State Power's assets 1. On 14 May 2014, in anticipation of the privatisation of Green State Power's assets, application was made (by a Form 11R lodged with the Registrar General) to change the registered proprietor of the freehold on which the Hume Power Station was located (the Hume freehold) from the Water Resources Commission to WAMC (see Ex 1 at 172). The form referred to the operation of legislation which provided that WAMC was the same legal entity as the Water Resources Commission. 2. On 23 June 2014, as noted above, there was a name change in relation to Sellicks Hill Wind Farm Pty Ltd to GSP. 3. On the same day (23 June 2014), the New South Wales Government, Green State Power and GSP entered into a Sale and Purchase Agreement (Green State Power Assets) (here referred to as the Privatisation Agreement). 4. By cl 2.1 of the Privatisation Agreement, Green State Power agreed to sell, and GSP agreed to purchase, the "Green State Power Assets". Clause 2.5(b) provided that (subject to the satisfaction of all obligations in cl 2.4 and satisfaction of all Completion Requirements) the Privatisation Agreement would complete by the Treasurer making the Vesting Order set out in Sch 9 of the Privatisation Agreement. Recital D noted that the "transfers will be effected by the Treasurer making the Vesting Order under the Act". 5. The "Green State Power Assets" were defined in cl 1.1 as meaning the Vendor's (i.e., Green State Power's) interest in, among other things, the: Generation Assets (at (a)); Green State Power Contracts (at (b)); Property Interests (at (c)) and at (g) the Privatisation Agreement provided as follows: (g) other assets, rights and liabilities comprising the Green State Power Business to be vested in the Purchaser under the Vesting Order including: (i) plant and equipment; (ii) consumables and spares; (iii) vehicles; and (iv) books and records … 1. The Generation Assets were defined by cl 1.1 to include, inter alia: the Burrinjuck Hydro Power Station (the 27.2 megawatt power station at Burrinjuck Dam comprising generation units 3, 4 and 5); the Keepit Hydro Power Station (the 7.2 megawatt hydro power station located at Keepit Dam); and the Hume Hydro Power Station (the 58 megawatt hydro power station located at Hume Dam). 2. The Green State Power Contracts were those contracts that were to be vested in GSP by the Vesting Order as specified in Annexure 6 of the 2013 Vesting Order. 3. The Property Interests were defined by cl 1.1 to include the Freehold Property, Leases, Easements and Licences and all interests and privileges arising in connection with them. The Freehold Property and Leases were listed in Sch 12 of the Privatisation Agreement. 4. The Chief Commissioner emphasises that the definition of Green State Power Assets refers to the "Vendor's interest" in the defined assets and says that Green State Power agreed to transfer its existing interest in the Power Stations, without defining what that interest was. In response to the reliance by the Chief Commissioner on the Privatisation Agreement, Meridian submits that it is relevant to note that cl 6 of Sch 1 of the Privatisation Agreement sets out the Vendor Warranties which include a warranty that Green State Power "is the sole legal and beneficial owner of its interest in the Green State Power Assets", (and such assets include the Power Stations). Meridian thus submits that the warranty records the effect of the 2013 Vesting Order which was to vest in Green State Power "sole legal and beneficial" ownership of the Power Stations, being an interest not derivative of the grant of a leasehold interest (see Meridian's submissions in reply, dated 14 February 2022, at [7]). 5. On 30 June 2014, EAMHC compulsorily acquired the freehold land on which the Keepit and Burrinjuck Dams were situated (the Keepit Freehold and the Burrinjuck Freehold) and vested that land in WAMC (Ex 1 at 174-194 and 209-238). Pausing here, I note that it seems odd that the land would be compulsorily acquired and then vested in WAMC, who, under the terms of the 1998 Lease, was the registered proprietor of (at least) the Burrinjuck property but this was not explored in the respective submissions. 6. On 2 July 2014, the Electricity Generator Assets (Authorised Transactions) (Electricity Assets Ministerial Holding Corporation – Keepit and Burrinjuck Property Interests) Order 2014 (First Property Interests Vesting Order) was made, to vest the assets of the EAMHC (including the freehold and "any improvements" on which the Keepit and Burrinjuck Power Stations were situated) from EAMHC to WAMC. On the same day, a Form 11R was lodged with the Registrar General to register WAMC as the registered proprietor of the Keepit Freehold and Burrinjuck Freehold (Exhibit MSW-1 at 174-194); (Ex 1 at 209-238). 7. Thus, by early July 2014, WAMC was the registered proprietor of all of the freehold on which the Power Stations were situated. Grant of leases 1. On 11 July 2014, WAMC granted the Keepit Lease, the Burrinjuck Lease and the Hume Lease to Green State Power (collectively, the Leases). Each Lease commenced on 18 July 2014 and was for a term of 30 years with 3 x 10 year options to renew. 2. Clause 13.5 of each Lease, to which I refer as it is raised in the context of the parties' submissions, provides that: For the avoidance of doubt, despite any provision of law to the contrary, it is the intention of the parties that all fixtures, fittings, assets and other items installed on or in the Land by the Lessee or otherwise used in connection with its business are to be classified as Assets in accordance with the provisions of the ["Deed of Agreement" or "Water Agreement"] and will remain the property of the Lessee at all times, regardless of their nature, their degree of affixation to the Land or any other relevant matter. 2014 Vesting Order 1. On 17 July 2014, the Treasurer made the Electricity Generator Assets (Authorised Transactions) (Green State Power Assets) Order 2014 (2014 Vesting Order) to vest the Power Stations, the Leases and other assets of Green State Power in GSP. The making of the 2014 Vesting Order effected the completion of the 2014 Agreement under which the Green State Power assets were transferred to GSP. 2. The 2014 Vesting Order vested in GSP all of "the assets, rights and liabilities of Green State Power" listed or described in Sch 1 (cl 3). Clause 2 of the Vesting Order provided that the Vesting Order has effect from 11.59pm on the Completion Date (which is defined in the Vesting Order as 17 July 2014). 3. Paragraph 1 of Sch 1 of the 2014 Vesting Order vested in GSP all assets, rights and liabilities of Green State Power in, attaching to or running with, any real property owned or occupied by Green State Power in connection with the Green State Power Business. Part B of par 1 of Sch 1 vested inter alia the Keepit Lease, Burrinjuck Lease and Hume Lease in GSP. 4. Paragraph 2 of Sch 1 of the 2014 Vesting Order vested in GSP: The assets, rights and liabilities of Green State Power in all fixtures, inventory, chattels, plant, equipment, infrastructure, facilities and other tangible property including those located at or on the property, or located at or on the property the subject of (or affected by) a real property interest identified in Section 1 [includes the Leased Land], to the extent owned or used by Green State Power in connection with the Green State Power Business "including the property identified below: (a) All of the fixed assets listed in Annexure 1 – Green State Power Generation Assets; (b) All of the moveable assets listed in Annexure 2 – Green State Power Moveable Assets; (c) All of the spare parts listed in Annexure 3 – Green State Power Inventory and Spares; (d) All of the motor vehicles listed in Annexure 4 – Green State Power Vehicle Assets; and (e) All of the information technology assets listed in Annexure 5 – Green State Power IT Assets". 1. Annexure 1 of the 2014 Vesting Order listed the physical assets that constitute the Power Stations. 2. Paragraph 3 of Sch 1 of the 2014 Vesting Order vested in GSP all "assets, rights and liabilities of Green State Power in all contracts, purchase orders, undertakings, representations, deeds, agreements or legally enforceable arrangements to the extent entered into by, or benefitting or burdening Green State Power in connection with the Green State Power Business". Annexure 6 of the 2014 Vesting Order listed the contracts to be vested in GSP, including the Water Agreements. 3. The Chief Commissioner says that the effect of the 2014 Vesting Order (like that of the 2000 and 2013 Vesting Orders) was to transfer the assets of the previous energy operator (i.e., Green State Power), including its interest as lessee of the leased land, to the future energy operator (i.e., GSP); and that the effect of the 2014 Vesting Order was not (and could not be) to transfer the fixtures from WAMC to GSP. Again, the Chief Commissioner notes that there is no reference in the 2014 Vesting Order to WAMC (or its predecessors), nor any suggestion that the assets of WAMC (including its fixtures) were to be transferred to GSP. Meridian's acquisition of GSP 1. On 21 December 2017, Meridian and Trustpower entered into a Share Sale Agreement pursuant to which Meridian acquired 100% of the shares in GSP from Trustpower (Plaintiff's Amended Appeal Statement at [11]; Defendant's Further Amended Appeal Statement at [16](a)). The Acquisition completed on 29 March 2018 (Plaintiff's Amended Appeal Statement at [11]; Defendant's Further Amended Appeal Statement at [16](a)). GSP's interests in freehold land 1. As at 29 March 2018, GSP was the registered proprietor of freehold land at Pejar in New South Wales (Pejar Land). The Pejar Land has a registered land value of $16,300. The Assessment 1. On 28 June 2018, Meridian lodged, on a without prejudice basis, a Form ODA 043A (being an acquisition statement made upon the acquisition of an interest in a private landholder) in respect of the Acquisition. 2. On 20 December 2018, the Chief Commissioner assessed Meridian to duty in the amount of $9,225,490, on the basis that the unencumbered value of GSP's land holdings and goods was $168 million. On 18 February 2019, Meridian lodged an objection against this assessment. 3. On 4 June 2020, the Chief Commissioner allowed Meridian's objection in part and determined that Meridian was liable for duty of $8,170,337, on the basis that the unencumbered value of GSP's land holdings and goods was $148,815,340. 4. On 31 July 2020, Meridian filed its summons in the present proceeding, seeking review of that amended assessment pursuant to s 97(1)(a) of the Taxation Administration Act. On 25 February 2021, Meridian filed its Amended Appeal Statement (Plaintiff's Amended Appeal Statement). 5. On 25 August 2021, the Chief Commissioner issued a further amended assessment (the Assessment which is now the subject of review), on the basis that the dutiable value of GSP's land holdings and goods was $145,350,000 (reduced from $146,670,000) and assessing the duty payable as $7,979,740 (reduced from $8,052,340) (see further the letter dated 23 August 2021 from NSW Revenue setting out the basis for the relevant amendments to the assessment). 6. On 26 August 2021, the Chief Commissioner filed a Further Amended Appeal Statement (Defendant's Further Amended Appeal Statement). Duties Act 1. The Assessment was issued pursuant to the significant landholder acquisition provisions of the Duties Act as at 29 March 2018 (it has since been amended). Relevantly, those provisions are as follows. 2. Section 146 provides that a landholder includes a private company that has land holdings in New South Wales with a threshold value of $2 million or more. 3. As to the threshold value of a private company's land holdings, s 146A provided at the relevant time that: (1) For the purposes of this Chapter, the threshold value of the land holdings of a unit trust scheme, private company or listed company is the total value of all land holdings in New South Wales of the unit trust scheme or company. (2) For a land holding that consists of an estate in fee simple in land (other than a strata lot), the value of the land holding is the registered land value of the land as at 1 July in the previous year. … (7) For any land holding for which a value cannot be obtained under the above provisions, the value of the land holding is the unencumbered value of the land holding, determined in the same way as it is for dutiable property under Chapter 2. (8) For the purposes of this section, the registered land value of land (including a parcel) is the land value of the land as entered in the Register of Land Values kept by the Valuer-General under section 14CC of the Valuation of Land Act 1916. … 1. Here, there is no question that GSP did not hold an estate in fee simple and hence subs (2) does not apply; the relevant provision for determination of the threshold value of GSP's land holdings is thus subs (7). 2. Section 147 defines a land holding to mean an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor. The Dictionary to the Duties Act defines interest to include an estate or proprietary right. 3. Section 23(1) of the Duties Act defines the "unencumbered value" of dutiable property as the value of the property determined without regard to any encumbrance to which the property is subject. 4. Section 163G of the Duties Act, which is here invoked by Meridian in the event that the Power Station assets are not landholdings but are held to be "goods", provides that: If the Chief Commissioner is satisfied that the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales of a landholder, the Chief Commissioner may disregard the value of the goods in determining the duty chargeable under this Chapter. Evidence 1. Meridian filed lay affidavit evidence from: Simon Rooke, solicitor at PricewaterhouseCoopers and solicitor on record for the plaintiff, by affidavit sworn 31 July 2020; Angus David Holcombe, Head of Asset Development for Meridian Energy, by affidavit affirmed 3 December 2020 to which was exhibited Ex ADH-1 (marked as Ex A in the hearing); and Bradley Douglas Wilkins, Hydro Engineer for Meridian, by affidavits affirmed 18 June 2021 with Ex BDW-1 (marked as Ex B in the hearing) and 12 July 2021. 2. Meridian adduced expert evidence from: Mr Cameron Dunsford, a Managing Principal for RHAS, an operating division of Aon Risk Solutions and a property valuer, by affidavit affirmed 3 December 2020, together with a valuation report dated 28 November 2018 entitled "Meridian Energy Australia Pty Limited Valuation of [N]ominated infrastructure, Buildings, Plant and Equipment for Tax – V1.0" (Income Tax Report) and a letter dated 7 May 2019 entitled "Re: Meridian Energy Australia Pty Limited acquisition of GSP Energy Pty Ltd – Valuation of Infrastructure, Buildings, Plant and Equipment for Stamp Duty purposes" (Stamp Duty Report); Mr Antony Bryn Samuel, a chartered accountant, by reports dated 3 December 2020 (marked as Ex C in the hearing) and 5 July 2021 (marked as Ex D in the hearing), respectively; and Mr Michael Charles Dyson, a property valuer (three reports dated 3 December 2020, one in respect of each of the Burrinjuck, Keepit and Hume Power Stations respectively titled "Market Value of Leasehold Interest" (the Dyson Burrinjuck Report; Dyson Hume Report; and the Dyson Keepit Report). 3. The Chief Commissioner filed an affidavit affirmed 28 April 2021 of Michael Shannon Wixted, Senior Solicitor at the Crown Solicitor's office with carriage of the matter on behalf of the Chief Commissioner, together with Ex MSW-1 (marked Ex 1 in the hearing) and expert evidence from Mr Grant Kepler, a property valuer, by affidavit affirmed 24 November 2021 (Kepler Report). 4. Mr Samuel and Mr Kepler prepared a joint report dated 13 August 2021 (Joint Report) (marked Ex L in the hearing). 5. None of the lay witnesses was cross-examined; nor was Mr Dunsford. Mr Dyson was cross-examined on his report; and Mr Samuel and Mr Kepler gave concurrent evidence and were cross-examined on their reports. No issues of credit arise. Issues 1. The issues for determination have been identified by Meridian as follows: first, whether, at the time of the Acquisition, the Power Stations were land holdings within the meaning of s 146 of the Duties Act; second, what is the correct valuation of the Leases and Water Agreements; third, whether the Power Stations are "goods"; fourth, the exercise of the s 163G "discretion"; and, fifth, flowing from the determination of the first four issues, the dutiable value of the Acquisition. Issue 1 – Whether the Power Stations were land holdings 1. In summary, Meridian maintains that the Power Stations were not land holdings at the time of Acquisition. It is said that, to the extent that the Power Stations had once been part of the freehold on which they are situated (and Meridian's submissions seem to accept that the Power Stations were indeed embedded in so as to become part and parcel of the freehold land), the 2013 Vesting Order had the effect of creating and vesting in Green State Power a sui generis property interest in the Power Stations to be held in gross; and that, thereupon, the Power Stations lost their character as land (and as interests in land). 2. Meridian thus says that the effect of the subsequent 2014 Vesting Order was to convey Green State Power's (sui generis property) interest in the Power Stations to GSP; and that these Power Station interests were never held by GSP as interests in land. As the 2014 Vesting Order was effective from 11.59pm on 17 July 2014 (prior to the commencement of the respective Leases on 18 July 2014), Meridian says that WAMC, as lessor under the respective Leases, never acquired an interest in the Power Stations (which had already by then been conveyed in gross to GSP). 3. The Chief Commissioner, on the other hand, as adverted to above, contends that the effect of the statutory Vesting Orders was not to enact a statutory severance of the Power Stations from the land upon which they were situated; rather, that the Vesting Orders had the effect of transferring the existing assets of the tenant of the leased land to the future tenant of the leased land (i.e., that Pacific Power's existing interest in the leased land was transferred to Green State Power and then transferred again to GSP). The Chief Commissioner says that there is no support in the language of the Vesting Orders for Meridian's proposition that the respective Vesting Orders severed the fixtures from the leased land; and that it was outside the statutory power to make such a Vesting Order, the power being limited to the transfer of the existing interests of the previous tenant of the leased land. 4. I address in more detail below the respective submissions on this issue. Meridian's submissions as to the first issue 1. As to the approach to the characterisation of property interests created by statute, Meridian refers to R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; [1982] HCA 69 at 344 per Mason J, as his Honour then was, for the proposition that property interests owing their existence to statute should be characterised in the light of the relevant statutory provisions without attaching undue significance to similarities to a common law analogue. 2. In this regard, emphasis is placed by Meridian on the decision in Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118; [1967] HCA 41 (North Shore Gas (No 2)) where the plurality (Barwick CJ, McTiernan, Kitto and Taylor JJ) at 127 pointed to the fallacy of assimilating the exercise of a statutory right (there, the power to lay and maintain pipes) to categories of interest in land known to the common law. Their Honours there cited the judgment of Evershed J (as his Honour then was) in Newcastle-under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 (Newcastle-under-Lyme) at 103, where reference is made to the general rule that no greater rights or interests should be treated as conferred (on the donee of the relevant power) than are necessary for the fulfilment of the object of the statute. Meridian notes that Windeyer J, in his concurring judgment in North Shore Gas (No 2) said (at 133) that where Parliament confers innominate statutory rights "there is no need for lawyers to insist on finding an old name for them, when they are in fact sui generis". 3. Meridian also refers to the approach to the characterisation of statutory rights articulated by Basten JA (as his Honour then was) in Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 (CCSR v Pacific National) (at [68]) and approved by the High Court on appeal in Asciano Services Pty Limited v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46 (Asciano HCA), namely that: … The correct approach is to identify the nature of any power or interest conferred on a statutory authority pursuant to its constituting regime, or any other Act relevant to it, and to identify such consequences as may flow from that scheme without assuming that the legal consequences will be those which would flow from an analogous general law categorisation of the power or interest. 1. It is noted that in Asciano HCA (at [26]), the plurality (Gummow, Kirby, Hayne, Crennan and Kiefel JJ) accepted the appellant's submission to the effect that there was nothing to be gained from a consideration of the grantor's rights to use land upon or in which the facilities were constructed or embedded by reference to principles relevant to land under the general law. 2. Meridian notes that these principles were subsequently applied in Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186; [2011] WASCA 228, where McLure P (Buss JA, as his Honour then was, and Murphy JA agreeing), considering whether or not certain pipelines constituted land for the purposes of the Stamp Act 1921 (WA), held (at [75]) that whether and what type of interest the appellants had in the pipelines was answerable solely by reference to the provisions of the legislation (the Petroleum Pipelines Act 1969 (WA)) and that, in that context, the general law could not intrude to change the character of the pipelines from personal property to real property. 3. In the present case, as to the nature of the Power Stations prior to the making of the Vesting Orders, Meridian argues that the Power Stations are so connected with their respective dams which are in turn embedded into the land that they became part and parcel of the land upon their construction (referring to the depictions in Mr Wilkins' first affidavit at [10] and [19]). Meridian argues that, in that sense, the Power Stations were not fixtures which might have been independently conveyed in equity (referring to Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 108 FCR 27; [2001] FCA 366 (Eastern Nitrogen v FCT) at [45] per Carr J and Federal Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150; [2001] FCA 365 at [56]-[57] per Sundberg J) but fall instead within the third of the categories of things within the three-fold classification preferred by Lord Lloyd of Berwick in Elitestone Ltd v Morris [1997] 1 WLR 687 (Elitestone) (at 690-691), namely, an object that is "part and parcel of the land itself". (His Lordship had there referred to the classification suggested in W Woodfall, Landlord and Tenant (looseleaf ed, 1998, Sweet & Maxwell) vol 1, [13.131] of objects being: chattel; fixture; or an object that is "part and parcel of the land itself".) Meridian also refers in this regard to the decision of Lindgren J in Vopak Terminal Darwin Pty Limited v Natural Fuels Darwin Pty Limited (Subject to Deed of Company Arrangement) (2009) 258 ALR 89; [2009] FCA 742 (Vopak Terminal Darwin) at [51], where his Honour (in obiter) considered that objects falling with the category of things "part and parcel of the land" would include (among other things) materials brought onto land that could only be removed by being destroyed. 4. Meridian contends that (although part and parcel of the land on which they were situated) the Power Stations could be (and were) conveyed by a Vesting Order made under the EGA Act (for which cl 7 of Sch 4 makes express provision). 5. As to the effect of the 2013 Vesting Order on Green State Power, Meridian says that, by force of cl 3 of Sch 4 and cl 7 of Sch 4 of the EGA Act, an interest in the Power Stations was conveyed to Green State Power without the need for any conveyance, transfer, assignment or assurance. 6. Meridian argues that the 2013 Vesting Order did not grant to Green State Power an interest in the relevant freehold or a leasehold interest in the land on which the Power Stations were located. It is noted that at the time that the 2013 Vesting Order was made, the Hume freehold was held by the Water Resources Commission (not Eraring Energy) and that the Burrinjuck and Keepit Power Stations were held by their former owners (prior to their compulsory acquisition by the State of New South Wales on 30 June 2014). 7. Meridian thus contends that, immediately prior to the making of the 2013 Vesting Order, the Power Stations were part and parcel of the land on which they were situated; and says that, whatever impediment there might have existed at general law to a conveyance of the Power Stations separately from the land, this does not apply to cl 7(1) of Sch 4 of the EGA Act, which expressly enabled the vesting of something which is part of land without vesting the whole of the interests of the transferor in that land. It is submitted that where, as in the present case, the interests sought to be conveyed by the Vesting Order are not separate interests in land, the EGA Act enables the creation of sui generis property interests in such terms as are specified in the order (reference here being made to cl 7(2) of Sch 4 of the EGA Act). 8. Meridian says that the Power Stations were conveyed by force of par 2 of Sch 1 of the 2013 Vesting Order (headed "Property, Plant and Equipment") as they met the description of all "plant, equipment, infrastructure, facilities and other tangible property … to the extent owned, benefitting, burdening or used by Eraring Energy in connection with the business carried on by Eraring Energy in respect of the "Hume, Burrinjuck and Keepit hydro power stations" (reference here being made to the definition of Excluded Assets Business and Renewable Assets in Ex 1 at 160-161). Excluded Assets Business being defined as "the business carried on in respect of the Renewable Assets and other Excluded Assets" and Renewable Assets being defined as "the assets, rights and liabilities of Eraring Energy in connection with the ownership and operation of the … Hume, Burrinjuck, Brown Mountain, Warragamba, and Keepit hydro power stations". Whether or not the Power Stations were plant, equipment, infrastructure or facilities, Meridian says that they at least met the description of "tangible property"; and Meridian contends that the Power Stations were thereby conveyed in gross to Green State Power as an innominate sui generis property interest that is not an interest in land. 9. Thus, it is argued that Green State Power commenced holding the Power Stations in gross and not in connection with any interest in land. 10. Meridian says that the result was that Green State Power did not acquire any interest in the freehold land on which the Power Stations were situated (whether as lessee or otherwise) under the 2013 Vesting Order and Green State Power's interest in the Power Stations was not dependent on the grant of any lease (or other interest in land) by the registered proprietor of the freehold land on which the Power Stations were situated. Thus, it is contended that the Power Stations thereby lost their character as land from the effective time of the 2013 Vesting Order. 11. As to the effect of the 2014 Vesting Order on GSP, Meridian says that, upon the making of that order, the Power Stations held by Green State Power became vested in GSP and GSP continued holding the Power Stations as innominate sui generis property interests (not being an interest in land). It is submitted that nothing in the making of the 2014 Vesting Order or the acquisition of the Power Stations or Leases by GSP caused the Power Stations to change their character or to take on the character of an interest in land. 12. It is noted that the Power Stations were vested in GSP by force of paragraph 2 of Sch 1 of the 2014 Vesting Order and that the physical assets constituting the Power Stations were expressly incorporated in Annexure 1 of the 2014 Vesting Order. Meridian says that the Power Stations were vested in GSP by virtue of cl 3(1)(a) of Sch 4 of the EGA Act without the need for any conveyance, transfer, assignment or assurance. It is noted that, by cl 3(1)(d) of Sch 4, GSP has all the entitlements and obligations of Green State Power in relation to Power Stations that Green State Power would have had but for the 2014 Vesting Order, whether or not those entitlements and obligations were actual or potential at the time the order took effect. 13. Meridian points out that GSP acquired its interest in the Power Stations as at 11.59pm on 17 July 2014; and GSP did not acquire its leasehold interest in the respective Leases until 18 July 2014. Meridian says that, between the effective time of the 2014 Vesting Order and the commencement time of the Leases, GSP held the Power Stations in gross (similar to the manner in which Green State Power held the Power Stations); and that there is no mechanism in the EGA Act that changes the nature of GSP's interest in the Power Stations after the commencement of the Leases. 14. Meridian argues that the character of the Power Stations is confirmed by the fact that the 2014 Vesting Order does not describe the Power Stations as interests in land or as any part of any interest in land (noting that the Power Stations are not mentioned in par 1 of Sch 1 of the 2014 Vesting Order but are instead particularised in Annexure 1 of the 2014 Vesting Order, being a list of "Green State Power Generation Assets"). 15. Meridian says that the rights acquired by GSP pursuant to the 2014 Vesting Order remained sui generis property interests vested by force of the EGA Act which deliberately permitted the Power Stations to be held in gross separate from the interests in the land upon which they were situated. It is said that no greater rights or interests should be treated as conferred on GSP than is necessary for the fulfilment of the object of the statute (using the language of Evershed J (as his Lordship then was) in Newcastle-under Lyme, referred to above, at 103); and that it would be erroneous to reason by analogy that GSP obtained an equitable or other interest in a fixture in situ unsevered from the land on which the Power Stations stand. 16. Meridian thus contends that the Power Stations were granted to Green State Power, and then GSP, by force of Vesting Orders made pursuant to the EGA Act as property interests of a sui generis nature because they were held in gross independent of any interest in land. Meridian says that the Power Stations do not form an interest in land within the meaning of s 147 of the Duties Act and therefore the only interests in land held by GSP at the time of the Acquisition were the Pejar Land and the Leases. As noted above, the Pejar Land has a registered land value of $16,300. Meridian contends (see the second issue below) that the leases are of no value. If those contentions are correct, then the significant landholder acquisition provisions would not be applicable because the threshold value would not have been reached. (The Chief Commissioner, as will be seen, maintains that even if what GSP held in relation to the Power Stations was a sui generis interest, the value of the leases exceeds the threshold landholding value.) Chief Commissioner's submissions as to the first issue 1. The Chief Commissioner says that Meridian's first contention (that the various statutory vesting orders created in GSP a sui generis property interest in the Power Stations, with the result that the Power Stations were no longer fixtures forming part of the leased land; and not separately an interest in land) is incorrect for the following two reasons. 2. First, the Chief Commissioner says that Meridian mischaracterises the effect of the statutory Vesting Orders. The Chief Commissioner contends that the Vesting Orders simply transferred the previous tenant's interest in the Power Stations to GSP; and that they did not have the effect of severing the Power Stations (as fixtures) from the leased land, extinguishing the rights of the owner of the leased land with respect to the Power Stations or creating any new sui generis property interest. The Chief Commissioner contends that the Power Stations remain as fixtures, forming part of the leased land. 3. Second, the Chief Commissioner argues that if (which is denied) the effect of the statutory Vesting Orders was to sever the Power Stations from the leased land, then the nature of the rights created in GSP in the Power Stations depends upon the manner in which those rights were transferred to GSP. It is said that if a statute severed the Power Stations from the leased land, the nature of GSP's rights would depend upon the terms of the statute but that Meridian has identified no statute that severed the Power Stations from the leased land. The Chief Commissioner says that, if the Power Stations were conveyed from the owner of the leased land to GSP or its predecessors, then GSP would have an equitable interest in the fixtures; and points to the lack of any evidence that the Power Stations were so conveyed. 4. As to the effect of the statutory Vesting Orders, the Chief Commissioner analyses the position from the starting point of the distinction between the owner of the leased land and the operator of the Power Stations, noting that, at all material times, they have been different entities. As set out in the chronology above, the owner of the leased land presently is WAMC (see the Leases). The Chief Commissioner points out that at earlier times, the owner of the leased land has been the predecessor statutory corporations to WAMC, including EAMHC and the Water Resources Commission. 5. As noted above, the Chief Commissioner contends that the effect of the relevant Vesting Orders was not to enact a statutory severance of the Power Stations from the land upon which they were situated; rather, the Chief Commissioner says that the Vesting Orders had the effect of transferring the existing assets of the tenant of the leased land to the future tenant of the leased land (i.e., that Pacific Power's existing interest in the leased land was transferred to Green State Power and then transferred again to GSP). 6. As to Meridian's contention (that, assuming the effect of the Vesting Orders was to sever the Power Stations from the leased land, the Vesting Orders created new rights in GSP in the Power Stations which are a sui generis property interest and not to be characterised as an interest in land), the Chief Commissioner maintains that the assumption underlying this contention is incorrect. The Chief Commissioner contends that the Vesting Orders did not sever the Power Stations from the leased land nor did they transfer WAMC's ownership of the Power Stations (as fixtures) to GSP. However, the Chief Commissioner argues that, even if such a transfer did occur, the result is that GSP's interest in the Power Stations is an interest in land. 7. The Chief Commissioner points to the need for careful attention to be given to the terms of the statute when determining whether new rights created by statute may be characterised as land; pointing by way of example to the North Shore Gas (No 2) decision to which Meridian has referred. It is noted that the High Court there considered that the statutory scheme that granted the gas company the right to use the land by placing and maintaining its pipes under the street and permitted the local council to direct the gas company to alter the location of those pipes (see at 133 of that judgment) did not grant an interest in land because the exercise of the power to lay pipes under another person's land was not considered to confer an interest in that other person's land (see at 127-128). 8. The Chief Commissioner argues that the cases cited by Meridian in this respect are not of assistance since they are all concerned with the nature of rights granted by statute; whereas the Chief Commissioner says that the Vesting Orders do not grant any new rights – they merely effect a transfer of the existing rights owned by the previous tenant of the leased land to the new tenant (and hence it is said that no debate about the terms of a statutory scheme to grant new rights arises where there is no such scheme). 9. In response to the submission by Meridian (at [60]-[62]) that the Power Stations are so connected with the land that they have become part and parcel of the land (and therefore are not fixtures which might have been independently conveyed in equity), the Chief Commissioner says the following. 10. First, that Meridian's argument is irrelevant as there is no evidence to suggest that the owner of the leased land did convey the Power Stations to GSP or its predecessors. 11. Second, while the Chief Commissioner does not cavil with the proposition that the Power Stations are so connected with the land that they have become "part and parcel" of the land, the Chief Commissioner argues that this is simply another way of saying that the Power Stations are "fixtures" (and that there is no real distinction between these two terms). It is said that the reference to items that are "fixtures" and items that are "part and parcel" of the land was an attempt to re-cast a broad category of fixtures into two sub-categories (that attempt being more readily explicable if one does not ordinarily think of a building as a fixture) (reference here being made by the Chief Commissioner to Auckland City Council v Ports of Auckland [2000] NZCA 190, [2000] 3 NZLR 614 at [72] per McGrath J; and R Abbs "The Law of Fixtures: Informed Principle or Independent Predilection?" (2004) 11 Australian Property Law Journal 31 at 36-38). In any event, the Chief Commissioner says that this three-fold categorisation has not been adopted in Australia. While this may be so, and the High Court has not expressly adopted this approach, it has nonetheless been hinted at by the New South Wales Court of Appeal, where Hodgson JA referred to railway infrastructure as being so "integrated into land as not to be distinguishable from land" (see CCSR v Pacific National at [27] and Vopak Terminal Darwin at [51] per Lindgren J). 12. Third, the Chief Commissioner points to authorities where it has been held that if an owner of land purports to transfer fixtures to a third party then that third party's interest in the fixtures is at least an equitable (and perhaps legal) interest in the land (citing Metal Manufacturers v Commissioner of Taxation (1999) 43 ATR 375; [1999] FCA 1712 at [189] and [196] per Emmett J as his Honour then was; Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150; [2001] FCA 365 at [56] and [57] per Sundberg J, with whom Lee and Carr JJ agreed; Eastern Nitrogen v FCT at [45], [46], [50] per Carr J, with whom Lee and Sundberg JJ agreed; Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 (Vopak Terminals Australia) at [80] per Ormiston JA, with whom Warren CJ and Buchanan JA agreed; Commissioner of State Revenue v TEC Desert Pty Ltd (2009) 40 WAR 344; [2009] WASCA 128 (TEC Desert) at [86] and [117] per Wheeler JA, [226] Per McLure JA, as her Honour then was; and SPIC Pacific Hydro at [150]). 13. The Chief Commissioner submits that Meridian's contention (that Vesting Orders created in GSP a sui generis property interest in the Power Stations) mischaracterises the effect of the Vesting Orders and that those orders transferred the previous tenant's interest in the Power Stations to GSP (they did not have the effect of severing the Power Stations (as fixtures) from the leased land). The Chief Commissioner says that the Power Stations remain as fixtures, forming part of the leased land. 14. Further, the Chief Commissioner argues that, even if the Vesting Orders did create a sui generis property interest in GSP in the Power Stations, that interest was created on the date of the 2000 Vesting Order in July 2000. The Chief Commissioner says that this means that all assets installed after that date remain as fixtures, forming part of the leased land. The Chief Commissioner points out that Mr Dunsford identifies in his report (see the affidavit of Cameron Dunsford affirmed 3 December 2020, and Mr Dunsford's valuation report dated 28 November 2018 at Annexure CD-2 to that affidavit) that a substantial proportion of the assets comprising the Power Stations were installed after that date (see also the affidavit of Angus Holcombe affirmed 3 December 2020). The Chief Commissioner says that it follows that, even on Meridian's case, a substantial proportion of the Power Stations remain as fixtures, forming part of the leased land. 15. If it is held that the Power Stations are fixtures, then the Chief Commissioner argues that Meridian's third and fourth contentions (i.e., as to whether the Power Stations are goods and the exercise of the power under s 163G of the Duties Act) do not arise. In those circumstances, the Chief Commissioner understands that Meridian also accepts that the (so-called) "Pacific Hydro Methodology" applies (see below) and the only remaining issues are remediation costs and the value of the right to lease the unimproved leased land (both of which are addressed in submissions on the second issue below). Pausing here, Meridian in its reply submissions says that the report of Mr Samuel in this regard relies on an instructed assumption. Meridian made clear in the course of the hearing that it does not accept that the "Pacific Hydro Methodology" applies in this case (see at T 23-26). Meridian's submissions in reply as to the first issue 1. In reply submissions as to the effect or operation of the Vesting Orders, Meridian cavils with the submission by the Chief Commissioner that the effect of the 2013 Vesting Order was to transfer the assets of Eraring Energy "including its interest as lessee of the Leased Land" to Green State Power. 2. Meridian says that the only interests in land transferred by the 2013 Vesting Order were those set out in par 1 of Sch 1 of the 2013 Vesting Order. Meridian contends that par 1 of Sch 1 of the 2013 Vesting Order is exhaustive in that it provides that "[t]he assets, rights and liabilities of Eraring Energy in, attaching to or running with any of the property identified below, or arising as a result of ownership, occupation or possession of the property" (emphasis as per Meridian's submissions). 3. The 2013 Vesting Order refers to the "Agreement for Lease (Burrinjuck Power Station)" in part B of par 1 of Sch 1 of the 2013 Vesting Order; but goes on specifically to particularise the vesting of the Power Stations as interests other than land by Annexure 2 of the Vesting Order, which lists "Property, Plant and Equipment". 4. Meridian says that it does not appear to be contested by the Chief Commissioner that the 2013 Vesting Order was competent to vest an interest in all Power Stations (including the Hume and Keepit Power Stations) in Green State Power (referring to [28] and [29] of the Chief Commissioner's submissions). Meridian argues that, by omission from par 1 of Sch 1 of the 2013 Vesting Order, Eraring Energy's interest in the Hume and Keepit Power Stations did not fall to be vested in Green State Power as an interest in land. It is submitted that the only form in which they could be received by Green State Power was as Property, Plant and Equipment pursuant to par 2 of Sch 1 of the 2013 Vesting Order and Annexure 2 to that Vesting Order, which enumerates the Power Stations as "Property, Plant and Equipment". Meridian notes that cl 7(2) of Sch 4 of the EGA Act has the effect that par 2 of Sch 1 of the 2013 Vesting Order creates in Green State Power an interest in the Hume and Keepit Power Stations (and so much of the Burrinjuck Power Station) in the form of "Property, Plant and Equipment" other than "Real Property". Meridian says that this is confirmed by subpar (c) of par 2 of Sch 1 which vests in Green State Power the identified items in Annexure 2 (being the Power Station assets) as "things", and not merely Eraring Energy's interest in those things. 5. Insofar as the Chief Commissioner relies (at [31] of his submissions) on the terms of the Privatisation Agreement between the State of New South Wales, Green State Power and GSP, Meridian notes that cl 6 of Sch 1 of the Privatisation Agreement sets out the Vendor Warranties, including a warranty that Green State Power "is the sole legal and beneficial owner of its interest in the Green State Power Assets". It is noted that (as the Chief Commissioner accepts) the Green State Power Assets include the Power Stations. Meridian says that the warranty coincidentally records the effect of the 2013 Vesting Order, which was to vest in Green State Power "sole legal and beneficial" ownership of the Power Stations, being an interest not derivative of, nor dependent on, the grant of a leasehold interest by a third party. 6. Meridian says that (contrary to the Chief Commissioner's submissions at [29] and [36]), it was not necessary for the 2013 Vesting Order or the 2014 Vesting Order expressly to refer to WAMC (even if WAMC were the holder of the freehold land) because it is sufficient for the two Vesting Orders to pick up the Power Station assets of Eraring Energy (and Green State Power) (specifically identified as particular things in each case) and to vest them in the transferee as "Property, Plant and Equipment". 7. Meridian says that (contrary to the Chief Commissioner's submissions at [38]) the evidence is inconsistent with the contention that Pacific Power, Eraring Energy, Green State Power and GSP were only successors in title of leasehold interests in the Power Stations. It is said that the evidence goes only as high as an inference that Pacific Power held a lease of the Burrinjuck land. Further, Meridian says that the existence of a former lease between WAMC and Pacific Power of the Burrinjuck Freehold does not prevent cl 7(2) of Sch 4 of the EGA Act from enabling the Minister to create sui generis statutory rights in respect of property that was formerly part of the land owned by another government entity by vesting order. 8. As to the submission by the Chief Commissioner (at [40]) that (even if the Vesting Orders severed the Power Stations from the leased land or transferred, to GSP, WAMC's ownership of the Power Stations (as fixtures)), "GSP's interest in the Power Stations is an interest in land", Meridian says that such a contention would invite disharmony between the EGA Act and the Real Property Act 1900 (NSW) (Real Property Act). 9. Meridian says that that conflict arises by reference to the following matters. First, that cl 7 of Sch 4 of the EGA Act enables the Treasurer to vest an interest "in respect of land" which does not have to be the whole of the interests of the transferor in that land and the statutory language is not limited to subdivisions or lesser estates carved from larger estates. Second, that cl 7(2) of Sch 4 facilitates the creation of those partial interests "in respect of land". Third, that the EGA Act otherwise does not restrict the registered proprietor of the land, from which a partial interest has been vested in the transferee, from conveying the underlying freehold to a third party. Fourth, that s 42 of the Real Property Act would confer on the third party transferee the freehold title "absolutely free from all other estates and interests" that are not recorded on the Register other than those in s 42(1)(a)-(d). Fifth, that if the partial interest vested by cl 7(2) of Sch 4 of the EGA Act remained an estate or interest in respect of land, s 42 of the Real Property Act would defeat the plain intention of cl 7 of Sch 4 and of purpose of the EGA Act as a whole. 10. Meridian contends that two statutes which share a field of operation should be construed in a way which best achieves an harmonious result (reference here being made to Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1; [2013] HCA 2 at [78] per Crennan, Kiefel (as her Honour then was) and Bell JJ, and at [98] per Gageler J (albeit that his Honour dissented on the outcome)). Meridian says that, to the extent that the Real Property Act and the EGA Act concern the regulation of title to property they should be construed harmoniously; and that sui generis property interests which have been vested by force of the EGA Act should not be defeated by the indefeasibility provisions of the Real Property Act. Meridian argues that an harmonious construction would give full force to cl 7(2) of Sch 4 of the EGA Act by recognising that the interests in respect of land vested separately to the land and as things ("Property, Plant and Equipment"), rather than land, lose their character as an "estate or interest" in the land within the meaning of s 42 of the Real Property Act. 11. As to the Chief Commissioner's submission (at [49]) that, even if the Vesting Orders did create sui generis property interests, they could only do so upon the making of the 2000 Vesting Order, Meridian says that, to the extent that the Vesting Orders are found to have been capable of giving rise to sui generis property interests, then the 2013 Vesting Order and 2014 Vesting Order were capable of achieving that result irrespective of the effect of the 2000 Vesting Order. Accordingly, it is submitted that Power Station assets installed by Eraring Energy and Green State Power were vested in GSP as sui generis property rights and not as land. 12. In further written submissions addressing the Chief Commissioner's invocation in opening submissions of the nemo dat principle, Meridian says that the consideration of this principle must be qualified by the statutory scheme enacted by the EGA Act. Meridian says that the nemo dat principle is not an inflexible rule but, rather, the common law's attempt to balance competing principles, referring to what was said by Lord Denning in Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322 (at 337). Meridian also points out that the nemo dat principle admits of exceptions by statute (referring by way of example to s 42 of the Real Property Act, ss 26 to 28 of the Sale of Goods Act 1923 (NSW) and s 267 of the Personal Property Securities Act 2009 (Cth)); and Meridian argues that this is also the case with the EGA Act. Meridian submits that the EGA Act can vest things not otherwise recognised as property interests by the common law, including allowing the transfer of a lessee's "assets" fixed on another person's land. 13. As to the proper construction of the EGA Act, Meridian notes that cl 2 of Sch of the EGA Act provides that the Treasurer may vest "assets rights and liabilities" and that the definition of "assets" (see as extracted earlier) includes unassignable legal or equitable interests and future property. Meridian emphasises that cl 3(1)(d) of Sch 4 of the EGA Act (which vests assets, rights and liabilities of the transferor "whether or not those entitlements and obligations were actual or potential at the time the order took effect") expressly refers to "potential" entitlements and obligations. 14. Meridian argues that the legislation permits the separate vesting of a lessee's interest in fixtures on leased land without their physical severance (as an exception to the nemo dat principle), noting that the 2013 Vesting Order vested the Agreement For Lease (Burrinjuck Power Station) as an interest in land by par 1 of Sch 1 (which exhaustively lists the "Real Property" interests vested in Green State Power) (read with Ex K, being a redacted copy of the entire Vesting Order); and that the assets of Eraring Energy that meet the description in par 2 of the 2013 Vesting Order are specifically vested as "Property, Plant and Equipment" (which includes assets constituting the Burrinjuck Power Station, the Hume Power Station and the Keepit Power Station). 15. Meridian thus maintains its contention that the 2013 Vesting Order vests the assets constituting the Hume Power Station and the Keepit Power Station separately from any interest in the underlying land. Meridian says that the presumption of regularity applies to presume that Eraring Energy owned the Hume Power Station and the Keepit Power Station immediately prior to the making of the Vesting Order (Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154 at 164 per McHugh JA, as his Honour then was). 16. It is noted that the 2014 Vesting Order separately vested in GSP the leases as interests in real property and the Property, Plant and Equipment constituting the Power Stations as things specifically listed in Annexure 1. 17. Meridian says that a comparison of the 2013 Vesting Order Annexure 2 and the 2014 GSP Vesting Order Annexure 1 shows the deliberate inheritance by GSP of Eraring Energy's "Property, Plant and Equipment" (i.e., the Power Station Assets) as specific assets not as land. Determination of the first issue 1. Tracking through the operation of the Vesting Orders from 2000, there is at first blush much to support the argument of the Chief Commissioner that all that was conveyed by the respective Vesting Orders was an interest in the Power Stations as fixtures (and hence that GSP held an interest in land in the Power Stations for the purposes of considering the landholder duty provisions). 2. That is because Pacific Power was not the owner of the land on which the Power Stations were situated and (whether by the terms of a lease conferring upon it a right of removal or on the application of the common law principles relating to tenants' fixtures) if the Power Stations were installed by it (or a predecessor) on the land as a tenant's fixture ownership would be in the owner of the land unless and until the exercise of the right to remove the fixture; and hence, at the time of the 2000 Vesting Order, the right or interest of Pacific Power in the Power Stations would be simply the right of removal (subject to the provisions of any relevant lease) not as owner of the assets. 3. If so, then the 2000 Vesting Order, which provided for the "nominated staff, assets, rights and liabilities" to be transferred to Eraring Energy could at that stage only have included the right to remove the fixtures and would not have vested ownership in them on Eraring Energy. I accept that there is nothing in the 2000 Vesting Order that indicates an intention to interfere with the rights of the owner of the freehold in the land (including in any fixtures on the land). 4. Accordingly, one would expect that the 2013 Vesting Order, insofar as it conferred Eraring Energy's interest in the Power Stations on Green State Power, could only have conferred Eraring Energy's interest in the fixtures as acquired under the 2000 Vesting Order (there being no suggestion that in the interim Eraring Energy had taken any action to convert its right to remove the fixtures to ownership of the fixtures). And it would follow that the 2014 Vesting Order was so limited. 5. However, when one focuses on the terms of the 2013 Vesting Order, and in particular the identification in the schedules thereto of the interests there being vested in Green State Power, I am driven to the conclusion that what was effected was indeed a statutory severance of the Power Stations (as fixtures) from the land on which they were situated. 6. I do not place reliance on the postulated three-fold classification of property interests (since, with no disrespect to Lindgren J in Vopak Terminal Darwin (or Lord Lloyd in Elitestone)) I have difficulty seeing any real distinction between an item that is so affixed to or embedded in land as to become a fixture and an item so affixed to or embedded in land as to become "part and parcel of the land"). However, the force of Meridian's argument in my opinion derives from the way in which the 2013 Vesting Order is framed; and particularly the inclusion in the Schedule of the Hume and Keepit Dams not in the category of real property or leasehold property but as "things" falling within the second part of the Schedule under the heading "Property, Plant and Equipment" and enumerated in Annexure 2 to the Vesting Order. Thus, I find that the Power Stations do not meet the description of land (or of interests in land) insofar as they fall within the catch-all description of "tangible property" within par 2 of Sch 1 of the 2013 Vesting Order. I therefore consider that the Power Stations were conveyed, in gross, to Green State Power under the 2013 Vesting Order as an innominate sui generis property interest. As such, the effect of the 2013 Vesting Order was that Green State Power did not acquire an interest in the freehold land, nor was that interest dependent on the grant of any lease by the registered proprietor of that land. Such a conclusion is consistent with the parties' subsequent treatment of the Power Stations (though I do not suggest this is in any way determinative) in the warranties in the Privatisation Agreement. 7. Thus, upon the making of the 2014 Vesting Order, the Power Stations held by Green State Power as an innominate sui generis property interest became vested, in gross, in GSP, and GSP continued to hold those Power Stations as innominate sui generis property. Nothing in the making of the 2014 Vesting Order, which was in materially identical terms to the 2013 Vesting Order, caused the Power Stations to change their character, or in effect "undid" the statutory severance of the Power Stations from the land. 8. Therefore, I have concluded (although I accept that this runs counter to the traditional dichotomy between chattels and fixtures) that the interest in the Power Stations vested in GSP is not an interest in land. In those circumstances I do not need to address the submission that, to conclude otherwise, would invite disharmony between the EGA Act and the Real Property Act (although I see force in Meridian's submissions on that issue). Issue 2 – The value of the Leases and Water Agreements 1. Before addressing the parties' submissions on this issue it is convenient to summarise the expert evidence. Mr Dunsford 1. There is no disagreement between the parties as to the valuation by Mr Dunsford of the plant and equipment at $131 million. 2. For completeness, I note that there was an objection by the Chief Commissioner to the tender, in the context of Mr Samuel's report, of a report that Mr Dunsford had provided to Meridian (on which it relied to produce its accounts), that report (together with the accounts) being the basis for an instruction to Mr Samuel as to the amount of remediation costs in respect of the Power Stations at the end of the Leases (see T 26-27). Meridian accepted that the opinions given by Mr Dunsford in that report could not be relied upon as an expert opinion to the effect that $30 million was the remediation cost (not having been prepared in compliance with the expert witness code); and accepted that a s 136 limitation on the use of that document would be appropriate if necessary. Ultimately, no such ruling was made on the basis that Meridian accepted that it was simply being relied on as a business record of what was before the company and not as proof of the amount for remediation costs. Meridian also accepted that the assumption on which Mr Samuel gave his opinion based on an allowance for remediation costs was therefore affected by that ruling (see T 27) but maintained that it did not ultimately affect Mr Samuel's conclusions in any material way (and on Meridian's case would be irrelevant in any event). Mr Dyson 1. As noted above, Meridian relied upon three reports dated 3 December 2020 prepared by Mr Dyson, a property valuer, as to the market value of the leasehold interests (see Ex E (Dyson Burrinjuck Report), Ex F (Dyson Hume Report) and Ex G (Dyson Keepit Report)). 2. Objection was taken by the Chief Commissioner to the tender of Mr Dyson's reports on the basis that Mr Dyson did not explain the basis of the reasoning leading to the conclusions expressed in his reports (see Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [60] per Heydon JA, as his Honour then was) (see T 46ff). In essence one of the complaints by the Chief Commissioner was that there was no evidence or basis for the opinion expressed by Mr Dyson that many leases for land owned by the New South Wales Government have a rental assessed as a percentage of the assessed land value in the range of 5% to 10% depending on when the lease was prepared (see at [49] of the report in relation to the Burrinjuck Lease for example, being Ex E). Meridian's contention was that the basis for Mr Dyson's opinion was his recollection of what he had seen and done in relation to government leases over some 30 years of practice, noting that Mr Dyson had annexed to his report two examples of leases where the rent was shown to be calculated by reference to percentage of land value within the range that Mr Dyson had adopted in his calculations (see T 50.4-17). I provisionally admitted the reports subject to weight (see T 52.7-43). I deal in due course with the ultimate status of this report (see at [266] below). 3. Mr Dyson valued each of the Leases by applying the Amortisation of Profit Rental Method (a "profit rental approach") which compares the market rent for the lease and the actual rent paid ("passing rent") under the lease. Under such a "profit rental approach", the market value of a leasehold interest is equal to the present value of any profit rental (being the excess of the market rental over the passing lease rental) that is attributable to the lease. Mr Dyson's opinion was that the profit rental approach was the appropriate methodology to value the Leases (the difficulty here, I interpose to note, is that this approach requires comparable properties and, as became apparent in cross-examination, none was here available – no doubt due to the unique location and features of the land). 4. In each case, Mr Dyson's opinion was that the passing rent paid by GSP is greater than the market rent; that there is no profit rental attributable to the Lease; and the market value of each Lease is therefore $nil. 5. For the Burrinjuck and Keepit Leases, Mr Dyson first determined the market rent based on a percentage (10%) of the statutorily assessed land value (see Ex E at [49] in relation to Burrinjuck); and then checked the value derived by reference to market rents for residential cottages in the surrounding regions, which he then halved in order to account for improvements (see Ex E at [41] in relation to Burrinjuck). In relation to the Burrinjuck Lease, for example, Mr Dyson made reference to some nearby residential dwellings (that in cross-examination he accepted were not particularly comparable – not least because the Lease prohibited residential dwellings on the site – see the Permitted Use clause). For the Keepit Lease, Mr Dyson determined the market rent of the Keepit Lease by applying a 10% return to the NSW Valuer General's assessment of the Keepit land ($1,500 p.a.) and checked that result against the rental of nearby rural properties from which he deducted 50% to account for the value of the improvements on those properties. Using this methodology, Mr Dyson valued the market rent for the land ($1,500 p.a.) at far less than the passing rent ($28,000 p.a.), arriving at a nil value for the Keepit Lease (see Ex G at [56] to [65]). Mr Dyson adopted the same approach with respect to the Burrinjuck Lease (Ex E at [56] to [65]). 6. With respect to the Hume Lease, Mr Dyson only used the second of the two methodologies to determine the market rent of the Hume Lease (on the basis that there were no comparable properties) and concluded again that the actual rent paid under the Hume Lease was greater than the market rent so that the value of the Lease was nil (see Ex F at [55] and [63] to [69]). 7. In cross-examination, Mr Dyson referred to his experience of Land and Environment Court determinations and said that the profit rental approach was the only method he knew as to how to value a lease. Mr Dyson accepted that it would be inappropriate to apply such an approach to value a leasehold interest if the business (on the leased land) was intrinsically linked to the land (see at T 50.28-31); and that if there were not truly comparable properties the market value could not be determined with a high degree of confidence (see at T 56.33-45). 8. Mr Dyson accepted in cross-examination that the best use of the land in question was as a power station (see at T 60.24-35); and accepted the proposition that the more profit that can be generated the more valuable the lease would be (see T 59.38-44). Ultimately, Mr Dyson acknowledged that the determination of market rent in this case was very difficult and he did not appear to have much confidence in the market rent determination but thought it would be "fairly correct" (a somewhat lukewarm endorsement of the valuation, it seemed to me). 9. The Chief Commissioner argues that Mr Dyson's application of the profit rental approach is wrong for two reasons. 10. First, that Mr Dyson proceeds on the basis that each Lease confers upon the Lessee only the use of the land and does not include the use of or access to any buildings, fixtures, plant or equipment situated on the land (and, as such the Dyson Reports purport to value a lease of the "unimproved land" and not a lease of the land inclusive of improvements which exist on it). The Chief Commissioner notes that Mr Dyson adopts this approach because he forms the opinion that the legal effect of cl 13.5 of the Leases (see as extracted above) is that the Leases are "only for the use of the land and does not include any buildings, fixtures, plant or equipment" (see, for example, Ex E at page 13). 11. The Chief Commissioner says that Mr Dyson's opinion as to the legal effect of cl 13.5 is both incorrect and outside Mr Dyson's field of expertise. (It is noted by the Chief Commissioner that Meridian's written submissions do not rely on cl 13.5 as conferring any ownership interest – though in oral submissions I note that Meridian referred to cl 13.5 as an acknowledgement by the parties as to the ownership of the Power Station assets residing in GSP). The Chief Commissioner says that cl 13.5 in the Leases is not a basis for finding that the Power Stations are not fixtures owned by WAMC (noting that most of the assets comprising the Power Stations were in place well before the date of the Leases). The Chief Commissioner says that cl 13.5 is a statement of intention; and that the point of time at which intention is relevant is when the item was put in place on the land (it being the objective intention of the person bringing the object on the land, i.e., the person who constructed the Power Stations, which is relevant). It is noted that no evidence of that intention is led by Meridian. The Chief Commissioner says that the intention of a subsequent owner or lessee of the land is irrelevant (citing May v Ceedive (2006) 13 BPR 24,147; [2006] NSWCA 369 (Ceedive) at [49], [65] and [72] per Santow JA with whom Mason P and Beazley JA (as Her Excellency then was) agreed; Alcan (NT) Alumina v Commissioner of Taxes (2007) 19 NTLR 153; [2007] NTSC 9 at [82] per Mildren J). The Chief Commissioner thus submits that the intention expressed in the Leases by GSP is irrelevant to determining whether any asset installed on the land the subject of the Leases before the date of the Leases is a fixture. 12. As to the limited assets that were installed after the date of the Leases, again the Chief Commissioner says that cl 13.5 is of limited assistance (again noting that cl 13.5 is no more than a statement of the parties' intention). The Chief Commissioner says that, while a term of a lease recording the parties' intention is a relevant factor, it is not determinative in ascertaining whether the asset is a fixture (citing SPIC Pacific Hydro at [105] and [120]; Ceedive at [49]). In this regard the Chief Commissioner says that Meridian is correct in its submission that the "Power Stations are so connected with their respective dams which is in turn embedded into the land that they became part and parcel of the land" (see Meridian's submissions at [62]). 13. Further, the Chief Commissioner contends that the statement in cl 13.5 (that the parties' intention is that the plant and equipment is the "property" of GSP) is ambiguous and unhelpful. It is said that the statement may simply mean that the parties' intention was that those assets be tenant's fixtures (the Chief Commissioner arguing that tenants' fixtures, which a tenant has the right to remove, are in a sense property owned by tenants) and because the fixtures are part of the property until they are removed) property owned by the landlord – see SPIC Pacific Hydro [105]). 14. The Chief Commissioner further says that even if the effect of cl 13.5 was to transfer the assets to GSP, the result would be that GSP would have an equitable (or perhaps legal) interest in the leased land (which is the relevant question for the purposes of Pt 4 of the Duties Act) and the result would be that the Power Stations would be an interest in land. 15. The second reason that the Chief Commissioner says that Mr Dyson's application of the profit rental approach is wrong is that the Chief Commissioner contends that, in ascertaining the market rent of the leased land, Mr Dyson used methodologies that could not rationally inform him of the market rent of the leased land (i.e., land used for a hydroelectric power station). 16. The Chief Commissioner says that Mr Dyson's assessment of market rent based on leases of nearby properties should not be accepted because the nearby properties were in no way comparable. In that respect, it is noted that in cross-examination Mr Dyson agreed that: in a commercial site, the value to the lessee derives from the lessee's ability to generate profit from the site, so the more profit that can be generated from a site the more valuable is the lease of that site (see at T 59.32-47); the best use of the land the subject of the Leases was for a power station (see at T 60.25 for Burrinjuck, T 67.22 for Keepit and T 69.25 for Hume); rents for rural sites with cottages on them were in no way comparable to the sites the subject of the Leases (see at T 60.30 for Burrinjuck, T 67.25-50 and T 68.1-5 for Keepit and T 70.7 for Hume); he was unable to locate any comparable sites in order to determine market rent for the Leases such that the application of the direct comparison method could not be used as primary evidence of market rent (see at T 60.37-38); and he accepted that he ought not to have, in the circumstances of this case, used such rental values as a check valuation (see at T 61.31 and T 68.43-50 and T 69.1-2). 17. The Chief Commissioner says that Mr Dyson's assessment of rent based on 10% of the Valuer General's value should also be rejected because it does not assist in determining the market rent for the land the subject of the Leases. It is said that this approach by Mr Dyson does not address the question which arises in this case, namely, the market rent that an hypothetical willing but not anxious lessor (not necessarily the government) would accept for the Leases and that which an hypothetical willing but not anxious lessee would pay. In that respect, it is noted that Mr Dyson accepted under cross-examination that: not every government lease calculates rent at 5% to 10% of the assessed land value; rather, the amount of rent charged depends on the circumstances of each case (see at T 63.3-15); he was aware of instances where a government grants a lease to a private business where there is an "upfront premium paid" such that the rent payable under the lease becomes a "peppercorn rent" (see at T 57.9-27 and T 61.39-50); a government may have reasons to set rent at a rate that was below market value (see at T 62.4-23); the government did not use the "assessed land value" method to calculate the rent under the Leases (see at T 63.10-36); he did not check the correctness of the valuer general's assessment of the land the subject of the Leases (see at T 64.19-21); and he was unable to reconcile the statutory assessed land value with the rent under the Leases for Burrinjuck and Keepit particularly in circumstances where the business conducted on the land the subject of those leases forecast profits of $12 million per annum for Burrinjuck (see at T 64.6-37) and $825,000 per annum for Keepit (see at T 68.10-41) in the 2018 financial year. 18. The Chief Commissioner notes that, ultimately, Mr Dyson accepted that he: had "great difficulty" in determining the market rent for the Burrinjuck Lease such that he could not have much confidence that the market rent that he assessed was accurate (see at T 65.1-20); was unable able to determine the market rent for the Keepit Lease (see at T 69.4-6); and did not have a high degree of confidence in his market valuation of the Hume Site (see at T 70.117-23). 19. The Chief Commissioner says that in light of those concessions Mr Dyson's opinion as to market rent should not be accepted; and hence his evidence as to the value of the Leases using the "profit rental approach" should also not be accepted. 20. In reply submissions, Meridian responds to the criticisms of Mr Dyson's evidence as follows. 21. Meridian says that the criticism by the Chief Commissioner (in [56], [57] and [62](a) of the submissions) of Mr Dyson's reference to cl 13.5 of the Leases is unjustified. Meridian says that Mr Dyson expresses his opinion as to the market value, as does Mr Kepler for the Chief Commissioner, of the "bare land" element of the Leases; and that the fact that Mr Dyson has referred to cl 13.5 of the Leases in the context of carrying out the scope of his instructions (see par 4 of the transaction summary forming an appendix to Mr Dyson's letter of instruction, which is itself Appendix B to Mr Dyson's reports, see, for example, Ex E) does not render his opinions any less reliable. With respect to the Power Station assets installed prior to the Vesting Order, Meridian says that cl 13.5 merely records the effect of the 2014 Vesting Order; and, with respect to assets installed by GSP on and from the date of the 2014 Vesting Order, cl 13.5 records the intention of the lessor and lessee. 22. Insofar as there is criticism (at [59](a) and [60] of the Chief Commissioner's submissions) of Mr Dyson's methodology for working out the market rent for the Burrinjuck Lease and Keepit Lease, Meridian notes that this methodology is explained in [55] of Mr Dyson's Burrinjuck Report (Ex E) and [55] of Mr Dyson's Keepit Report (Ex F) as a "Return on Assessed Land Value with a check comparison to rentals in the surrounding regional area". 23. It is noted that the Return on Assessed Land Value methodology is explained in [49] of Mr Dyson's Burrinjuck Report and [49] of Mr Dyson's Keepit Report, which is to apply a range between 5% to 10% of the Statutory Land Value (being a reference to the Register of Land Values maintained by the Valuer-General pursuant to the Valuation of Land Act 1916 (NSW) (Valuation of Land Act)). Meridian complains that the Chief Commissioner has led no evidence and made no submission as to why ascertaining market rent for the "bare land" component of a lease of this kind by reference to a percentage return on registered land values is not a valid methodology. It is noted that the registered value of land is a measure of the value of land in its unimproved state (see s 6A of the Valuation of Land Act). 24. Insofar as the Chief Commissioner (at [59](b), [60], and [62](b) of the submissions) criticises Mr Dyson's cross-check which compares the Burrinjuck Lease and Keepit Lease to other rental property in the area, Meridian says that this method was orthodox; that Mr Dyson obtained the gross rental for other property in the area (see Mr Dyson's Burrinjuck Report, being Ex E, at [45] and Mr Dyson's Keepit Report, being Ex F, at [45]); that Mr Dyson made a deduction from the gross rental on account of outgoings (such as water and sewerage rates) (see Mr Dyson's Burrinjuck Report at [46]; see also Mr Dyson's Keepit Report at [46]); and Mr Dyson made an allowance for the value of the improvements to arrive at the market rental for the bare land element (see Mr Dyson's Burrinjuck Report at [47] and Mr Dyson's Keepit Report at [47]). 25. As to [61] of the Chief Commissioner's submissions, in which the Chief Commissioner criticises Mr Dyson's methodology for obtaining the market rent for the Hume Lease, which is to obtain the passing rent for other properties in the area and make an allowance for outgoings and improvements (see Mr Dyson's Hume Report at [53]-[55]), Meridian says that, in each case, Mr Dyson's opinion that at least half the rent in the comparison properties is attributable to their improvements is a matter upon which he is able to inform himself using his training, study and experience. It is said that the Chief Commissioner has led no evidence as to why taking the prevailing rent for improved land and making allowances for outgoings and improvements is not a valid methodology. 26. Meridian says that the Chief Commissioner's submission at [62](b) (that Mr Dyson's conclusions should not be accepted because Mr Dyson makes reference to comparable properties that are in no sense comparable) should not be accepted. It is said that, although Mr Dyson uses as a starting point the prevailing rent of residential cottages, as Mr Dyson was required to value the bare land component of the Leases, Mr Dyson made the appropriate adjustments to account for the outgoings and discount for the improvements so that he was able to compare the rent of the bare land component of leases in the local area. Mr Samuel 1. Meridian also relied on two reports prepared by Mr Samuel, a chartered accountant, those reports dated 3 December 2020 and 5 July 2021 (as noted above). Mr Samuel leads the forensic accounting and valuation team at Sapere Research Group Limited. 2. Mr Samuel primarily adopted a "residual" valuation method, which both he and the expert called by the Chief Commissioner (Mr Kepler) agree is the appropriate approach to valuing assets in a company that are otherwise difficult to value (as is the case here, given the difficulty of valuing the Leases – as evidenced by the above discussion in relation to Mr Dyson's report). The residual approach involves (see the Joint Report at [29] and [35]) starting with the market value of all the entity's assets; deducting the value of the assets owned by the entity where that value is known; and allocating the "residual value" to the asset that is not otherwise known. Relevantly, Mr Samuel's opinion is that the approach is effective only where there is only one asset whose value is unknown, and not where two such assets have an unknown value (see at T 83.11-33). 3. The Chief Commissioner notes that Mr Samuel was instructed to assume that, by reason of the Vesting Orders, the Power Stations are not fixtures forming part of the leased land (see Mr Samuel's second report dated 5 July 2021 at [11]). On that basis, Mr Samuel said the Pacific Hydro Methodology was not applicable (with one exception – see below) and valued the Leases as if they did not include the right to use the Power Stations (and separately allocated a value of $131 million to the Power Stations) (see Mr Samuel's second report at [47] and [48]). 4. The one exception Mr Samuel identified relates to the "skids" in the switchyard on the Hume Dam site which are bolted into concrete footings that are embedded in the soil and which contain a series of electrical equipment mounted on them; those skids having been installed after the Vesting Orders were made. Mr Samuel accepted that the Pacific Hydro Methodology ought to apply to those skids (with the result, the Chief Commissioner says, that the value of the right under the Leases to use the Power Stations is $2.93 million being the value of the skids alone); and the separate value that Mr Samuel allocated to the Power Stations is reduced by $2.93 million (from $131 million to about $128 million) (see Mr Samuel's second report at [92]ff). 5. In the present case, Mr Kepler and Mr Samuel agree that the market value of all GSP's assets is $172.2 million (based on the sale price of GSP to Meridian) (see the Joint Report at [22](b)) and that GSP owned assets which had the following values (see the Joint Report at [22](a)): portable buildings plant and equipment ($0.5 million); accounts receivable ($3 million); unsold renewable energy certificates ($1.2 million); connection agreements ($8.5 million); and the assembled workforce ($0.4 million). Both experts agree that: Mr Dunsford correctly valued the fixed buildings, plant and equipment (namely, the Power Stations) at $131 million (see the Joint Report at [24](a)(i)); no material value should be attributed to goodwill (see the Joint Report at [22](d)); and the residual that results is about $27.7 million (allowing for a rounding error) (see the Joint Report at [30](a)). The areas of disagreement between the experts are considered in due course. Relevant, for present purposes is that, in his first report Mr Samuel calculated the residual at between $27.7 million to $29.9 million (which is within the range of Mr Kepler's view). 6. Mr Samuel attributed the whole of the residual to the Water Agreements, thus valuing them at between $27.7 million and $29.9 million (see the Joint Report at [17] and [19]). Mr Samuel cross-checked this against the application of a multi period excess earnings methodology (MEEPM) which produced a value of $26.9 million (see Mr Samuel's first report at [134], [136] and [141] and the Joint Report at [38](a)). On this method, the Leases were valued at $nil. 7. Thus, on the basis that the eponymously named Pacific Hydro Methodology approach (deriving from SPIC Pacific Hydro see below) is not applicable, Mr Samuel values the Leases at $nil, finding a $nil value for the PPE element of the Leases and adopting a $nil value for the Bare Land element of the Leases (see the Joint Report at [17]). Mr Kepler 1. The Chief Commissioner relies upon a report of Mr Kepler, who valued the Leases on the basis of the methodology described by Payne JA in SPIC Pacific Hydro at [170] (albeit which Mr Kepler modified in its application at [86]-[90] of Mr Kepler's Report dated 24 November 2021) (the Pacific Hydro Methodology). Mr Kepler attributed a value to the Leases that includes the net present value of the hypothetical lease of the PPE of the Power Stations for the equivalent term of the Leases (see Mr Kepler's Report at [129]-[130]). 2. Mr Kepler's opinion is that leases over Bare Land are most appropriately valued under alternative valuation methodologies (other than by allocating residual) and particularly the conventional lease valuation methodology (see Mr Samuel's commentary in his second report at [52](c)). Mr Kepler describes what he means by conventional valuation methodology in [81] and [82] of his report (and see Mr Samuel's second report at [51](d)(i)). 3. In addition to attributing the value of the PPE to the Leases, Mr Kepler attributed 50% of the "unallocated residual" between the Water Agreements and the Leases (see Mr Kepler's Report at [192]). This valued the Water Agreements at $13.85 million (half the value attributed to them by Mr Samuel) and attributed an additional $13.85 million to the value of the Leases (as 50% of the unallocated residual of $27.7 million) on account of the "Bare Land" element of the lease (see Mr Kepler's Report at [192]; see also the Joint Report at [17] and [19]). 4. Mr Kepler then added the PPE element and the Bare Land Element of the lease to reach a total value for the Leases at between $144.85 million (if GSP has no remediation liability at the end of the Leases) and $129.85 million (if GSP does have a $30 million remediation liability) (see the Joint Report at [19]). Joint Report of Messrs Samuel and Kepler 1. Mr Samuel and Mr Kepler prepared a joint report identifying their areas of agreement and disagreement (Joint Report, marked as Ex L in the hearing). I have identified above the areas in which the two experts are in agreement. 2. The three principal areas of disagreement between Mr Kepler and Mr Samuel (see the Joint Report at [31]) are as follows. First, Mr Kepler valued the Leases, using the Pacific Hydro Methodology, on the assumption that the Leases included the right to use the fixtures (being the Power Stations); whereas Mr Samuel assumed that the Power Stations were not part of the leased land, so did not use the Pacific Hydro Methodology. Second, Mr Kepler assigned no value to expected removal and remediation costs; whereas Mr Samuel has proceeded on the basis that those costs will be incurred and will cost $30 million. Third, Mr Kepler valued the right under the Leases to use the unimproved leased land at $13.85 million; whereas Mr Samuel gave the same right a nil value or a value of negative $2.2 million (this third area of disagreement relating to how the "residual" is to be applied). I address each of those areas of disagreement below. 3. In submissions, I was provided with an aide memoire which helpfully calculates the value of the Leases depending on the outcome of those issues. The aide memoire outlines the Chief Commissioner's calculation of landholder duty as follows: the Leases (being the right to use fixed plant and equipment) are valued at $131 million; the Bare Land Leases are valued at $13.85 million; the total landholdings are thus valued at $144.85 million; goods are valued at $0.5 million, bringing the total landholdings and goods to $145.35 million. Thus, the Chief Commissioner calculates the duty on landholdings and goods (at 5.5% of $145.35 million) as $7.979740 million. 4. In terms of the joint experts' calculation of residual, the aide memoire sets out that: assuming all plant and equipment is part of the land, the Leases (being the right to use fixed plant and equipment) is valued at $131 million and the fixed plant and equipment is valued at $nil; assuming all plant and equipment is severed from land, except the skid, the Leases are valued at $3 million, and the fixed plant and equipment at $128 million; and assuming all plant and equipment is severed from land, the Leases are valued at $nil, and the fixed plant and equipment at $131 million. 5. Finally, in terms of the allocation of the residual, Mr Kepler allocates the residual evenly between the Leases and the Water Agreements, whereas, assuming that all plant and equipment is part of the land, Mr Samuel allocates the residual as -$2.2 for the Bare Land Leases, and $29.9 for the Water Agreements; and, assuming all plant and equipment is severed from the land, $nil for the Bare Land Leases, and $27.7 for the Water Agreements. Pacific Hydro Methodology 1. The first area of disagreement between the experts is as to whether the Pacific Hydro Methodology should be applied. As adverted to above, this is a reference to the approach to valuation adopted by Payne JA in SPIC Pacific Hydro. 2. I note that in reply to the Chief Commissioner's submissions at [50] (in particular, the statement that Meridian also accepts that the Pacific Hydro Methodology applies), Meridian acknowledges that it has instructed Mr Samuel to provide valuation opinions in the alternative by reference to the Pacific Hydro Methodology. However, Meridian says that the Pacific Hydro Methodology is only one valuation methodology endorsed in the specific context of the valuation question in SPIC Pacific Hydro. Meridian says that SPIC Pacific Hydro does not lay down a principle of law for the valuation of leases (referring to Valuer-General Victoria v AWF Prop Co 2 Pty Ltd [2021] VSCA 274 at [126] per McLeish JA, Emerton JA, as her Honour then was, and Delany AJA). 3. It is relevant to note what the so-called Pacific Hydro Methodology comprises. 4. At [157], Payne JA accepted the approach of SPIC's expert, who valued the leasehold interest on the assumption that the plant and equipment constituted fixtures that may be removed at any time and must be removed at the end of the lease. 5. Payne JA at [169] in SPIC Pacific Hydro said that: In valuing the Holdco Land Trust's land holding, the hypothetical willing but not anxious vendor for the purposes of the Spencer test is the tenant. I have found that the Holdco Land Trust's land holding interest in land is comprised by its rights under the leases including the right to remove, during or at the end of the leases, the plant and equipment affixed to the land. … 1. The methodology adopted in SPIC Pacific Hydro (at [170]) was: first, to determine the actual rental paid under the lease at a per annum rate for the right to use the plant and equipment during the term of the lease; second, to calculate the value to the tenant over the unexpired term of the lease, discounted to the present value at the time of acquisition; and, third, to deduct from this the expected costs to the tenant to remediate the site (also discounted to present value). 2. Meridian says that the valuation methodology described by Payne JA in SPIC Pacific Hydro (at [170]) is not appropriate for the present case in circumstances where: GSP's interest in the Power Stations is vested in it by force of par 2 of Sch 1 of the 2014 Vesting Order and not by reason of the leases granted by WAMC; and WAMC did not have, nor ever had, an interest in the Power Stations at the time that WAMC granted the leases to GSP. Meridian argues that the Pacific Hydro Methodology is a lease valuation methodology that is applicable to assets that are the property of the landlord and leased pursuant to a lease (whereas in the present case the vested assets were not leased, but rather were owned by GSP) (see Mr Samuel's second report dated 5 July 2021 at [11](b)). 3. Meridian notes that SPIC Pacific Hydro concerned the valuation of leases of land on which wind farms had been constructed by or on behalf of the lessee during the period of the lease (SPIC Pacific Hydro at [17]); the wind farms thus constituting tenant's fixtures (SPIC Pacific Hydro at [127]). It was there argued that the tenant had an equitable interest in the fixtures. Payne JA considered that a tenant's interest in unsevered leasehold improvements is a legal interest in land which arises from and is governed by the terms of the particular lease and rights under the common law (SPIC Pacific Hydro at [155]). 4. Meridian says that it follows that the position of the tenant in SPIC Pacific Hydro is not comparable with that of GSP, since in SPIC Pacific Hydro the lessee's right to enjoy and possess the wind farms which it constructed on the lessor's land was attributable exclusively to the lease; whereas in the present case, the Power Stations were vested in gross in GSP (whose interest in the Power Stations is not dependent on the continuity of the lease). Meridian emphasises that the right to access the land on which the Power Stations are situated derives from the licence under the Water Agreements and easement over the owner's land (see T 13.31-38); distinguishing between a right of access and a right of use. Meridian says that its right to use the Power Station assets was a result of the statutory Vesting Orders. (Meridian refers to cl 13.5 as amounting to a recognition by the lessor that the Power Station assets are owned by the lessee). Thus, Meridian contends that the Leases merely give the lessee a right to use the land underneath the Power Stations and that (unlike tenants' fixtures) ownership of the Power Stations remains vested in the lessee (GSP). (Meridian suggests that this provides a plausible explanation for the fact that there is a fixed rent under the Leases and that the "true" charge raised is via the Water Agreements, under which the charge is referable to gross revenue.) 5. Meridian argues that, critical to the validity of the Pacific Hydro Methodology set out in [170] of SPIC Pacific Hydro, is the explanation given by his Honour at [169] as to the application of the Spencer test (a reference to Spencer v The Commonwealth (1906) 5 CLR 418; [1907] HCA 82). Meridian says that, applied to the present case, in valuing GSP's land holding, the hypothetical willing but not anxious vendor for the purposes of the Spencer test is GSP. As discussed earlier, Meridian's contention is that, by virtue of the 2014 Vesting Order, GSP's interest in the Power Stations is held in gross and WAMC as lessor does not have an interest in the Power Stations. Meridian says that it follows that, in the hypothetical assignment of the Leases, the assignee does not, without a concurrent assignment of the Power Stations, acquire any interest in the Power Stations. It is said that an assignee of GSP's right, as against WAMC, to remove fixtures from the land is not comparable to the assignee of Holdco Land Trust in SPIC Pacific Hydro; and thus that a valuation methodology that attributes use and right to remove fixtures to the lease is not appropriate to the Leases in the present case. 6. Meridian says that the Pacific Hydro Methodology should not be applicable even if GSP installed fixtures on the land after the commencement of the Leases because cl 13.4 of each of the Leases confirms that GSP has the right at all times to remove or replace an asset as it considers necessary or desirable in the proper conduct of its business and title to any parts so removed or replaced remains with the GSP and GSP may deal with those assets in any manner it sees fit. It is said that the interest in any asset replaced or installed remains with GSP; and does not form part of WAMC's interest in land so as to enure for the benefit of assignees of any Lease. 7. Meridian says that it is therefore unreasonable to postulate that the hypothetical willing but not anxious vendor would be willing to pay the value of the Power Stations twice: once for the conveyance of the Power Station assets and again for the assignment of the Lease. 8. The Chief Commissioner notes that the first area of difference between Mr Kepler and Mr Samuel (whether GSP's right to use the Power Stations is included in the value of the Leases or accounted for separately) arises from their instructions and is not a dispute about the value of the Power Stations themselves (both experts accepting that Mr Dunsford correctly valued the Power Stations at $131 million). 9. The Chief Commissioner says that Mr Kepler proceeded on the orthodox basis that fixtures are part of the leased land (using the Pacific Hydro Methodology to value the right under the Leases to use the Power Stations at $131 million) and maintains that the Pacific Hydro Methodology is a lease valuation methodology that is applicable to assets such as fixtures that are the property of the landlord and leased pursuant to a lease. 10. As noted, the difference between Mr Kepler and Mr Samuel arises out of their assumptions. The Chief Commissioner contends that the Power Stations remain vested in WAMC as the owner of the leased land. The Chief Commissioner says that if that contention is accepted then the Pacific Hydro Methodology is applicable; but if that contention is not accepted then the question remains how to characterise the Power Stations. The Chief Commissioner says that this depends on how the Power Stations were vested in GSP. The Chief Commissioner says that if the Power Stations were conveyed from the landlord to GSP or its predecessors, then the Power Stations remain an interest in land and part of GSP's landholdings for the purpose of Ch 4 of the Duties Act. Removal/remediation costs 1. Meridian submits that any item that contributes to the value of GSP's interest in land must also take into account projected remediation costs (referring to the Kepler Report at [87](d)), noting that Mr Dunsford has estimated the "end of life demolition costs" at $29,950,850 and that GSP's internal accounts estimate its possible remediation obligations at $30 million. It is noted that the present value of expected remediation costs can be calculated by multiplying the present value of remediation costs by the probability that the remediation costs will be incurred (see the Joint Report at [25]). 2. As to the second area of difference between Mr Kepler and Mr Samuel (the probability adjusted removal and remediation costs payable on the expiry of the Leases), the Chief Commissioner points out that this issue arises because the third element of the Pacific Hydro Methodology is the discounting of the value of the relevant lease for those expected removal and remediation costs (see SPIC Pacific Hydro at [170]). 3. The Chief Commissioner contends that there is insufficient evidence to find that any removal and remediation costs are payable on the expiry of the Leases; and that Meridian has not discharged its onus in this regard. 4. It is noted that Mr Kepler's position is that the remediation and removal costs are unlikely to be material (see at [124]-[125] of Mr Kepler's report dated 24 November 2021 and at [66] of the joint report dated 13 August 2021). Mr Samuel has proceeded on the basis that the remediation and removal costs are estimated to be about $30 million (see at [78]-[83] of Mr Samuel's report dated 5 July 2021 and at [62]-[65] of the joint report). 5. The Chief Commissioner points out that GSP's obligations to remediate and remove the Power Stations from the leased land are governed by the Water Agreements, under which there are three possible scenarios on termination of those Agreements: first, that SWC may elect to purchase the Power Stations from GSP (i.e., now Meridian) for $1; second, that if SWC does not purchase the Power Stations, GSP may elect to leave the Power Stations on the leased land; or, third, that GSP may elect to remove the Power Stations from the land. 6. As to the first scenario, it is noted that the only costs payable by Meridian are the costs of remediating any contamination (see cll 14.5, 14.6, and 14.10 of the Keepit Water Agreement; cll 14.5, 14.6, and 14.10 of the Burrinjuck Water Agreement; cl 7.7 and 7.12 of the Hume Water Agreement). The Chief Commissioner says that the expected cost of the first scenario cannot here be assessed as there is no evidence of the costs of remediating contamination, if any (see T 115.46-49, T 116.1). Further, it is noted that there is no evidence of the probability of Water NSW (SWC's successor) electing to purchase the Power Stations for $1. 7. As to the second scenario, it is noted that if Water NSW does not purchase the Power Stations on termination of the Water Agreements then GSP (now Meridian) may elect to keep the Power Stations in place but in that event, Meridian is obliged to pay the ongoing site costs of maintaining its plant and equipment (see cll 14.7 and 14.9 of the Keepit Water Agreement; cll 14.7 and 14.9 of the Burrinjuck Water Agreement; and cll 7.9 and 7.11 of the Hume Water Agreement). The Chief Commissioner says that the expected cost of the second scenario also cannot be assessed, noting that there is no evidence of the ongoing costs of maintaining the plant and equipment on site or the probability of GSP electing to leave the Power Stations in place; and that Mr Samuel agreed he could not evaluate the cost or likelihood of this scenario (T 116.28-35). 8. As to the third scenario (namely, that Water NSW elected not to purchase the Power Stations on termination and Meridian then elected to remove the Power Stations) it is noted that in that event Meridian will be obliged to pay the removal costs and any costs to remediate any contamination (see cll 14.8 and 14.10 of the Keepit Water Agreement; cll 14.8 and 14.10 of the Burrinjuck Water Agreement; and cll 7.10 and 7.12 of the Hume Water Agreement). Again, the Chief Commissioner says that the expected cost of the third scenario cannot be assessed, noting that there is no evidence of the probability of Meridian electing to remove the Power Stations (and that Mr Samuel agreed this was so – see at T 117.22-46). 9. The Chief Commissioner says that there is also no admissible and persuasive evidence about the cost of removing the Power Stations, pointing to the following matters. First, that Mr Samuel relies on a report dated 16 November 2018 produced by RHAS for insurance purposes which estimates costs of demolition and removal from site of the Power Stations at $30 million (the RHAS Insurance Report) but that there is no stated basis for that opinion and it was only admitted for the limited purpose of proof of the basis upon which GSP prepared the notation in GSP's 2018 financial reports referred to below. Second, that the GSP Completion accounts did not recognise any remediation liability (see the joint report at [66](c) and see Annexure 7 to Mr Samuel's report dated 3 December 2020). Third, that the financial model developed by Meridian that was used when purchasing GSP did not make any allowance for remediation costs (see the joint report at [66](b) and Ex ABS-1 to the affidavit of Mr Samuel affirmed on 3 February 2022). Fourth, that a file note prepared by Meridian on 10 June 2018 (headed "Asset Retirement Obligation for GSP Energy") records that "no asset retirement obligations were recognised by Trustpower in GSP's FY17 financial statements", that Meridian "is committed to extending the agreement to a total term of 60 years at the very minimum as it is in our financial interests to do so"; and that "[d]ue to numerous factors at play, it is difficult to know at the present moment whether GSP will be required to remove the assets or pay the ongoing site costs if the agreement is terminated". The note recorded that the obligation is a contingent liability (as defined by International Accounting Standard (IAS) 37) and said that an estimate of the costs of removal will be obtained and disclosed in the notes to the financial statements in accordance with IAS 37. Fifth, that there is a notation in GSP's 2018 financial year's financial report that: Lease agreements between GSP Energy Pty Ltd and Water NSW permit the Company to situate generation assets at each of the 3 dams owned by Water NSW. Although not probable, the Company may be required to remove the generation assets from the dams at the discretion of Water NSW at the end of the initial term of the agreement (17 July 2044) under the terms of the lease. Management's assessment of the present value of this asset retirement obligation is $30m. 1. The Chief Commissioner says that this notation misstates GSP's obligations (in that GSP cannot be required to remove the Power Stations under the Water Agreements) but says that in any event it is notable that GSP did not consider it probable that it would be required to remove the assets. 2. Sixth, that Meridian did not, in its financial reporting for FY2018 or FY2019, recognise a liability or contingent liability to account for the possibility that it would be required to remove the assets (see the joint report at [66](d)). 3. The Chief Commissioner says that there is therefore no persuasive evidence of the cost of demolition and removal and no evidence at all of the probability that GSP may elect to remove the Power Stations, other than that GSP thought it was unlikely. The Chief Commissioner emphasises that Meridian has the burden of proving the cost and probability of it being required to remove the Power Stations and/or to remediate for contamination at the end of the Leases; and that, absent evidence of the probability of each of these three scenarios and the cost of each of them, there is no evidentiary basis on which to discount the value of the Leases for any of these costs. 4. The Chief Commissioner thus says that no reduction in the value of GSP's landholdings should be made (and argues that Mr Samuel appeared to agree with this assessment), referring to Mr Samuel's acceptance in cross-examination (at T 117.34ff): that in order properly to evaluate the expected recovery costs he would need to know the probability and cost of each of the three scenarios; that he did not have that information; and that he could not make that assessment. It is noted that Mr Samuel said that in his report he "just put a range between zero and 100% of incurring remediation costs". 5. The Chief Commissioner submits that in the event that (contrary to the above submissions) it is found that there is sufficient evidence of the present cost of remediation and removal of the Power Stations, then that cost should be allocated equally between the Water Agreements and Leases because the remediation and removal obligations exist within both agreements (referring to cl 13.1ff of the Hume, Burrinjuck and Keepit Leases). Application of residual as between Leases and Water Agreements 1. Mr Kepler valued the right under the Leases to use the unimproved leased land at $13.85 million; whereas Mr Samuel gave the same right a nil value (or negative $2.2 million value). 2. Mr Samuel disagrees with Mr Kepler's methodology for valuing the Bare Land component of the Leases (see the Joint Report at [39](c)). Based on Mr Samuel's opinion, Meridian says that conventional valuation principles require that 100% of the residual value of GSP should be accounted for in the Water Agreements rather than being split 50% between the Water Agreements and the Bare Land component of the Leases (see the Joint Report at [38]). 3. Meridian argues that Mr Kepler's methodology relies on an arbitrary allocation of 50% of the residual to the Bare Land (see the Joint Report at [39](a), [42](c) and [42](d)). It is said that, for Mr Kepler to find that the Leases at the time of Acquisition on 29 March 2018 were worth $13.85 million, that would assume that the market rent for the Leases has increased 300% from when the Leases first commenced on 18 July 2014 (see the Joint Report at [41](c)). Meridian maintains that the improbability of that assumption casts doubt upon Mr Kepler's methodology. 4. As to the third difference between the two experts (the market value of the unimproved leased land), the Chief Commissioner says that Mr Samuel's primary position (that the unimproved leased land has a nil value) (see Mr Samuel's report dated 5 July 2021 at [13], and the Joint Report at [36](b) and see Mr Samuel's alternative position when utilising the Pacific Hydro Methodology at [36](c) and [44] of the Joint Report) necessarily followed from his instructions (noting that Mr Samuel was instructed that the value of the Leases was nil (see Mr Samuel's report dated 3 December 2020 at [120]). It is noted that in Mr Samuel's first report, using the residual approach, Mr Samuel applied the residual of $27.7 million to the only asset that had not been valued, namely the Water Agreements (see at [134] and [135]). (The Chief Commissioner points out that, given Mr Samuel's assumption that the Leases had a nil value, Mr Samuel could not apply the residual to the value of the Leases. Pausing here, Mr Samuel in his oral evidence made clear the basis on which the residual was allocated to the Water Agreements so I do not accept that this was a conclusion mandated in some fashion by his instructions.) 5. As to Mr Samuel's alternative position (that the unimproved value of the right to lease the unimproved leased land is negative $2.2 million) it is noted that this derived from his instruction to apply the Pacific Hydro Methodology (see Mr Samuel's report dated 5 July 2021 at [12]); and that Mr Samuel adopted the market rent that was assessed by Mr Dyson as the value of the right to lease the unimproved leased land (see Mr Samuel's report of 5 July 2021 at [12](b) and [76]). Since the market rent was less than the rent contracted to be paid under the Leases, Mr Samuel assessed the value of the right to lease the unimproved leased land as negative $2.2 million (see at [86] of Mr Samuel's report dated 5 July 2021). The Chief Commissioner says that as Mr Samuel's assessment was based upon an assumption that Mr Dyson had correctly valued the right to lease the unimproved leased land and Mr Dyson's valuation ought not be accepted, it follows that Mr Samuel's valuation of negative $2.2 million also ought to be rejected. I agree. 6. The real issue here is as to allocation of the residual, namely whether all of the $27.7 million residual should be allocated to the Water Agreements or whether that amount should be allocated equally as between the Water Agreements and the Leases of the bare land. The Chief Commissioner emphasises in this context that Meridian has the onus of establishing that the Assessment is wrong. 7. It is noted by the Chief Commissioner that both Mr Kepler and Mr Samuel agreed: first, that a residual approach involved identifying the market value of all but one asset, but in this case there were two assets that could not be otherwise valued and that required a judgement (T 83.1-43, T 84.3-15, T 112.13-25) and that the residual needed to be allocated to assets (T 95.41-48); second, that the appropriate methodology to value any contract, including the Leases and Water Agreements, was as set out in their Joint Report (see at [28]) (namely that "a contract can have 'value' if the terms documented in the subject contract are more favourable (resulting in an asset) or less favourable (resulting in a liability) than the terms that would be agreed if the contract were negotiated 'to market' at the relevant valuation date" (and see T 93.15-30)); and, third, that assuming Mr Dyson had not accurately valued the right to lease the unimproved leased land, it was possible that the Leases have value (T 87.25-39) but that they were not able to determine market rent of the Leases or the current market rate of the Water Agreements, so could not directly determine the value of those contracts (see at T 94.4-12, T 110.50, T111.1-25, and T 112.45-50). 8. The Chief Commissioner says that Mr Samuel's opinion that the Leases had no value in March 2018 was provisional in the sense that it rested on two assumptions (i.e., that the rent was not mispriced in 2014 and that the circumstances relevant to the leased land had not changed in that period – see at T 110.40-44), which Mr Samuel said in cross-examination were matters for the Court to determine (see at T 111.15-26). The Chief Commissioner maintains that if it cannot be determined whether those assumptions are correct, then Meridian fails in this part of the case. 9. It is noted that Mr Samuel assumed that the Leases were priced at market rent in 2014 when the Leases were executed (see at T 77.35-41), saying that he had no reason to believe that the parties to the Lease were not at arms' length (see at T 89.40-44). The Chief Commissioner contends that this assumption should not be accepted. The Chief Commissioner emphasises that, while it may be accepted that the parties were at arms' length and the overall consideration was at market, there were at least three elements to the privatisation: the payment of $125 million by GSP to the NSW Government for the acquisition of the assets comprising the Power Stations' business, including the Leases (see at [184] of Mr Kepler's report dated 24 November 2021); the grant or assignment of the Water Agreements by a NSW Government instrumentality to GSP at an agreed royalty rate; and the grant of the Leases by a NSW Government instrumentality to GSP at agreed rents. 10. The Chief Commissioner points out that both Mr Kepler and Mr Dyson were of the opinion that governments enter into privatisations where they accept a large upfront payment and a nominal future income stream. It is noted that Mr Dyson said that he had examined over 50 government leases and was aware of a number of occasions where the government grants a lease to a private business where there is an "upfront premium paid" such that the rent payable under the lease is reduced going forward or even becomes a "peppercorn rent" (T 57.9-27, T 61.50 and T 62.1-7); and that Mr Kepler said that, from his experience advising governments on the sale of assets, governments were not interested in trailing commissions (rather, they are interested in headline values). Mr Kepler observed that the press release for the sale in 2014 mentioned the upfront purchase price with no mention of the ongoing rent and that the upfront price was proposed to be spent on infrastructure (T 130.5-13). The Chief Commissioner notes that Mr Samuel said he had no expertise in the subject and could not express an opinion on this (T 88.22) and that Mr Samuel agreed that he did not know "whether a premium was paid in exchange for a lower rent running into the future" (T 90.7-9). As such, the Chief Commissioner says that it cannot be assumed that the agreed rent under the Leases was at market rates in 2014. 11. As to the second assumption (that there had been no change from 2014 to 2018 that had affected the rent that applied in 2014) (see T 77.35-41), it is noted that Mr Samuel was aware that the value of the Power Stations business had increased from $125 million to $184 million over that period (see at [184] of Mr Kepler's report dated 24 November 2021) but he said that none of that increase in value of the overall assets of the business ought be attributed to the Leases; instead, Mr Samuel's view was that the entirety of the increase in value ought to be attributed to the Water Agreements and on that basis the bulk of the residual (see at T 112.21-25) ought to be allocated to the Water Agreements. 12. The Chief Commissioner notes that one reason that Mr Samuel gave for this conclusion was that payment under the Water Agreements was linked to the financial performance of GSP (about 5% of gross revenue for Keepit and Burrinjuck) whereas the rent agreed under the Leases was at a flat rate only indexed by the Consumer Price Index (CPI) (see at T 89.3-17 and T 99.15-21). The Chief Commissioner argues that this does not support the conclusion that the Water Agreements (and not the Leases) have value; rather, that it means that if the revenue of the business increases, a proportion of that increased revenue will be allocated under the Water Agreements to SWC. The Chief Commissioner says that the Water Agreements will have value if their agreed terms (5% of gross revenue for Keepit and Burrinjuck) are less favourable than the terms that could be negotiated at the valuation date (see at T 99.41-49). It is said that the fact that the agreed terms are expressed as a proportion of gross revenue does not inform that analysis. Reference is also made in this context to the Joint Report at fn 62, where Mr Kepler notes that "the charges for the Leases are levied as a fixed amount plus CPI increases, whereas the charges under the Water Agreements were based on a percentage of revenues" and that Mr Kepler's view was therefore that the counter party to the Water Agreements captured some of the value increment that otherwise would occur as a result of higher revenues, and as such, provides less scope for the Water Agreements to become mispriced. 13. Insofar as Mr Samuel gave as a further reason for his conclusion that the Water Agreements were a "driver" of income in the sense that Power Stations could not function without them (see at T 92.20-34, T 102.7-12, T 103.3-7), the Chief Commissioner maintains that this is not relevant. It is noted that the Power Stations could also not function without the plant and equipment or the leased land upon which the Power Stations are situated; and that the Water Agreements could be terminated by SWC 90 days after the Leases terminated (see, for example, cl 13.4(d) of the Burrinjuck Water Agreement). The Chief Commissioner points to Mr Samuel's acceptance of the proposition that the efficiency (and therefore the profitability) of the Power Stations was enhanced by the features of the leased land, being their proximity to the dam wall (T 108.3, T 110.1-4); and the Chief Commissioner argues that in that sense the leased land also was a "driver" of value. It is noted that Mr Samuel cavilled with that proposition but ultimately accepted it was a "contributor to value" (see at T 108.15-18). Pausing here, Mr Samuel's evidence at T 110.25-35 that there was no logic to the argument that, given that there is value in the combination of the assets – and that both the Water Agreements and Leases are difficult to value and are scarce – it was reasonable to allocate the residual equally between them, emphasising that one was a fundamental driver of revenue and the other was not. 14. However, the Chief Commissioner argues that whether or not the leased land is a "driver" of value is irrelevant to the experts' agreed analysis of determining value (namely that a contract can have value if the terms are more or less favourable than would be agreed if the contract were negotiated to market at the relevant valuation date). 15. It is noted that Mr Samuel gave some other reasons in support of his analysis, as follows. First, that Mr Samuel said that if $13.85 million were attributed to the Leases of the unimproved leased land, that implied an increased rent of over 200% of the agreed price (see at T 139.16-21). The Chief Commissioner points to Mr Kepler's observations in response to that proposition, namely that: Mr Samuel's analysis assumed that the agreed price was a market rent (see at T 138.41-43); the increase in implied rent was approximately $600,000 per annum in a business generating earnings of $30 million per year (see at T 139.16-21); the business was worth about three times more than when the Leases were executed (see at T 140.1-3) and that, if the entirety of the residual were allocated to the Water Agreements, as Mr Samuel suggests, that implies a royalty rate of 17% which is over 320% higher than the agreed royalty rate. 16. Second, that Mr Samuel also said that his methodology has been cross-checked against the MPEEM methodology (see Mr Samuel's report dated 3 December 2020 at [57]-[62] and [136]). The Chief Commissioner says that the cross-check against the MPEEM is of no utility because it assumes that the Leases have no value, which is the question at issue, referring to the entries in rows 37, 38 of Appendix E of Mr Samuel's report dated 3 December 2020, that show nil values; and also to [85](c) of the Joint Report) (and that Mr Samuel agreed that the cross-check was based on this assumption) (see at T 82.6-9). 17. The Chief Commissioner says that for these reasons Mr Samuel's view that the Leases had no value in March 2018 should be rejected; and that Mr Samuel's opinion rests on assumptions which are unsupported. The Chief Commissioner points to Mr Samuel's acknowledgement at T 110.50ff that he had not himself conducted an investigation into the market rent for the land; and to Mr Samuel's acceptance that, ultimately, the market rent of the land informs the value of the lease (and that he was not in a position to say what the market value of the lease was but could give an indicative value of the lease, which he had done, based on assumptions that were for the Court to determine). 18. The Chief Commissioner notes that, on the other hand, Mr Kepler expressed the view that it is likely that the Leases did have value in March 2018 because the lessee was able to generate greater profit from the leased land in March 2018 than the lessee could generate in 2014. It is noted that both Mr Kepler and Mr Dyson expressed the view that, in a commercial site, the value to the lessee derives from the lessee's ability to generate profit from the site, so that the more profit that can be generated from a site the more valuable is the lease of that site (see at T 59.33-47 and T 138.16-21); and that Mr Samuel agreed that were true if the business and land are inextricably entwined (see at T 107.6-11). It is also noted that Mr Samuel accepted that the efficiency and therefore the profitability of the Power Stations was enhanced by the features of the leased land, being their proximity to the dam wall (see at T 108.4-7, 110.1-4). 19. The Chief Commissioner says that there is no dispute that the Power Stations generated greater profit in 2018 compared to 2014; the evidence being that in that period, the long-term price of electricity had increased substantially (see Mr Kepler's report of 24 November 2021 at [185]). It is noted that this increase in electricity prices coincided with an increase in the overall value of the business of operating the Power Stations from $125 million to $184 million (see Mr Kepler's report at [184]). 20. The Chief Commissioner says that Mr Kepler's view is supported by Mr Dyson and ought to be accepted. The Chief Commissioner says that the correlation between the agreed rent of the leased land and the profits generated by the Power Stations for each site is unmistakeable, noting that: the Hume Power Station had a forecast of earnings before interest, taxes, depreciation and amortisation of $21.4 million (see Annexure ADH-1 to the affidavit of Mr Holcombe affirmed 3 December 2020) and the agreed rent was $210,754 (see the expert valuation report of Mr Dyson of the Hume Power Station dated 29 March 2019, marked Ex F in the hearing); the Burrinjuck Power Station had a forecast of earnings before interest, taxes, depreciation and amortisation of $12.5 million (see Annexure ADH-1 to the affidavit of Mr Holcombe affirmed 3 December 2020) and the agreed rent was $84,407 (see the expert valuation report of Mr Dyson of the Burrinjuck Power Station dated 29 March 2019, marked Ex E in the hearing); and the Keepit Power Station had a forecast of earnings before interest, taxes, depreciation and amortisation of $825,000 in 2018 (see Annexure ADH-1 to the affidavit of Mr Holcombe affirmed 3 December 2020) and the agreed rent was about $29,611 see the expert valuation report of Mr Dyson of the Keepit Power Station dated 29 March 2019, marked Ex G in the hearing). 21. The Chief Commissioner argues that, given that the value of the Power Station business increased so substantially in the four years until 2018 and the value of the Power Station business is inextricably entwined with the leased land, it is reasonable to allocate a substantial proportion of the unallocated residual to the leased land; and that Mr Samuel's allocation of no residual value to the unimproved leased land ought to be rejected. It is noted that, during his cross-examination, Mr Samuel said that "by far the bulk of the value" ought to go to the Water Agreements and noted that his opinion "would have to come with a caveat because you just don't have enough information to say what the lease agreement is actually worth" (T 112.16-25). 22. The exchange to which the Chief Commissioner refers was as follows: in response to the hypothetical I had posed as to appropriate valuation practice where, for whatever reason, a valuer is in the position where it is not possible to attribute a market value to either of two assets (the Lease and the Water Agreement) (see from T 111.30ff) and whether in those circumstances, having regard to what was considered to be the fundamental driver of the overall business, it would be an evaluative judgment as to how to apportion the residual. Mr Samuel said (at T 112.16-31): It would be totally – at that point, totally judgemental. So, the way you should properly do it is determine the market rent for the lease first and then do the residual for the water agreement. That would be the ideal way, in your hypothetical in which you can't value either, and you are forced into making a judgement, by definition it's a judgement and it's a judegment based on the fundamentals of the assets, and you're right, I would say the water agreement is Go/No-Go asset, it's the key asset, whereas a lease is not more than a contributory like the PPE is, and therefore I would, in my judgement be putting certainly by far the bulk of the value onto the water agreements. … But it would have to come with a caveat because you just don't have enough information to say what the lease agreement is actually worth. 1. Mr Kepler, asked for his comment on the logic behind an equal apportionment of residual, said (at T 112.45-50, T 113.1-20): … I think, to agree with Mr Samuel, ideally the leases would be valued by reference to market rents. That's just not available. Similarly, I would prefer that we were able to refer to market rates for the water agreements, to value the water agreements as a comparison of the market rates versus those that are implicit in the water agreements. Again, that's not available to us. There needs to be some other basis. So, to agree with Mr Samuel, it is going to be a judgement. There needs to be some allocation of this 27.7 million dollars. I had considered what I thought were the factors that would assist me in making a judgement on that; things such as the interdependency of the assets, the leases and the water agreements both refer to one another; the necessity of the assets, you do need all three to operate this hydroelectricity business efficiently; thirdly, that there was no ready alternative or next best uses for these assets, the water agreements without the other assets is relatively useless, the plant equipment - you might get scrap from the turbines but apart from that, the plant and equipment is actually mostly the concrete substructure and superstructure that's got limited to no use alternatively. Similarly, the land is probably not much use to any other operator other than a hydroelectricity operator. Faced with that, my view was that we've got a reliable market reference point for the buildings, plant and equipment. It's the other two, it's the water agreements and the leases that we don't have a reliable reference point for. Considering those factors that I took into account; I thought an even distribution of that residual was appropriate. 1. Pressed as to how he would have proceeded had he formed the view that the Water Agreement was the "No-Go asset" and that should be reflected in an apportionment of the residual (a proposition that Mr Kepler did not accept because he could not see how one of the assets was fundamentally more important than the others, given the importance of the sites), Mr Kepler said (at T 113.45ff): I think, delving into the hypothetical, there would need to be some sort of weighting, considering the relevant factors, in the absence of actually having to do that for the purposes of today, I'm not sure where we might get to on that. There would need to be some sort of weighting, but ultimately, I think there would need to be, in the back of my mind at least, that in my view, there are these three key assets that contribute symbiotically this operation. I couldn't see a situation where all of the value would be attributed to one asset or the other. 1. The Chief Commissioner says that, in circumstances where good reasons can be identified as to why the leased land and Water Agreements have substantial value, if there cannot be determined with any confidence how the value should be distributed between the two assets (because they are unique assets with no comparable sales), it is reasonable to allocate the residual between the two classes of assets that work in combination to give value to GSP's business (referring to Mr Kepler's report dated 24 November 2021 at [166]-[192]; and the Joint Report at [45]-[57]). Meridian's submissions in reply as to the second issue 1. As to the allocation of the residual (as between the Leases and the Water Agreements), and the Chief Commissioner's submissions (at [63]-[98]) relating to the areas of disagreement between Mr Samuel and Mr Kepler, in its submissions in reply Meridian addressed the following issues as to the attribution of the residual as between the Leases and the Water Agreements. 2. Meridian points to the agreement between the experts that, if the Leases were not mispriced when they were originally struck on 11 July 2014 and if there were no substantial changes in market conditions that affect the market value of the Leases at the valuation date, then the value of the Leases would be nil (T 97.21-50, T 98.1 and T 99.41-49). 3. First, as to the issue whether the rent struck between WAMC and Green State Power on 11 June 2014 (the Lease commencing 18 June 2014) was reflective of market rents, Meridian argues that the starting point is to assess or to consider whether there is any reason why, as at 11 July 2014, each Lease did not have a market value rent (referring to the evidence of Mr Samuel at T 119.27-32). 4. It is noted that, for willing but not anxious parties acting at arms' length, the best comparable transaction for working out market rents is the actual transaction entered into between the parties (see the Joint Report [41](a); T 78.37-38 (Mr Samuel); T 89.28-38 (Mr Samuel)). Meridian points out that this is recognised by Spigelman CJ in MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 at [55] and Wigney J in Federal Commissioner of Taxation v Miley (2017) 106 ATR 779; [2017] FCA 1396 at [81]. 5. It is noted that Mr Kepler: agrees that the Leases were entered into between arms' length, well-resourced parties who were under no compulsion to act (T 129.1-11); says that because the transaction was "a privatisation there is incentive for a larger headline number" by the government (T 131.3-4); but admits that he could not "point to anything" to substantiate that speculation (T 131.4-5). 6. Meridian notes that the vendor under the Privatisation Agreement is Green State Power and that WAMC (the lessor) is not a party to the Privatisation Agreement. Meridian points out that there is no evidence that WAMC was paid a premium for the granting of the Leases by Green State Power or that WAMC disregarded its obligation prudently to manage government land by depressing the rent for land leased by it. Meridian says further that whether WAMC was directed to depress the rent payable for the Leases is purely within the knowledge of the government. 7. Second, as to whether there has been any relevant change in market rental conditions to justify an increased rent from 11 June 2014 to 29 March 2018, Meridian notes that the Leases provide for rent review by CPI (see the Burrinjuck Lease at cl 3.3; the Hume Lease at cl 3.3; and the Keepit Lease at cl 3.3); and that there is no evidence that the leased land became more scarce, unique or idiosyncratic in the period between 2014 to 2018 (see the Joint Report at [41](a)) (pointing out that this premise is accepted by Mr Kepler at T 131.19-28). 8. It is noted that Mr Kepler: contends that an increase in the actual lessee's business profits (rather than the hypothetical willing but not anxious lessee) qualifies as a relevant change to market conditions (see the Joint Report at [54](a)); admits that the improvement in volatility and electricity prices are the only examples Mr Kepler has documented in [185] of his report dated 24 November 2021 (see at T 137.29-32); and admits that neither "short term fluctuations in the markets impacting the subject hydroelectricity assets" nor "long term structural change" was a material market factor to the valuation of the Leases (see Mr Kepler's report dated 24 November 2021 at [183](b)). It is further noted that Mr Samuel explained in the Joint Report at [41](b) that the pricing model for the water usage charge in the Water Agreements and the rent under the Leases illustrates the relative ability for the SWC and the WAMC to negotiate a return on its asset based on GSP's profit. Moreover, Meridian says that the SWC did negotiate a return on its water assets based on the operator's revenue, referring to: Sch 2 of the Water Agreement for Keepit Dam dated 18 July 2014; Sch 2 of the Water Agreement for Burrinjuck Dam dated 18 July 2014; and par 1 of the Hume Dam Power Station Amending Agreement 30 June 1998. Meridian points out that WAMC does not have a rent review mechanism that increases rent with revenue; and says that the fact that WAMC did not obtain such a rent review mechanism in 2014 indicates that the type of asset it leased does not command that type of return. 9. Third, as to why Mr Kepler's application of a "composite" or "adjusted" Pacific Hydro Methodology results in the erroneous attribution of residual to a notional "bare land" use right, Meridian maintains its contention that there should not be any residual to apply to the Leases on the proper application of the Pacific Hydro Methodology. Reference is made to Mr Samuel's opinion that market rent is a necessary input to a valuation of land under the conventional lease valuation methodology and the Pacific Hydro Methodology (see the Joint Report at [38](c) and [39](a)). 10. Meridian says that Mr Kepler appears to accept that: the Pacific Hydro Methodology requires a valuation of the "hypothetical market rental for the land …" (see Mr Kepler's Report dated 24 November 2021 at [90](a)); the Pacific Hydro Methodology is broadly consistent with the conventional lease methodology outlined in [81] of Mr Kepler's Report; and the conventional lease methodology requires an assessment of market rents (see Mr Kepler's Report at [81] and [21]). Meridian says that Mr Kepler's application of the Pacific Hydro Methodology is erroneous. It is noted that Mr Kepler says that the methodology described in SPIC Pacific Hydro at [170] has a "conceptual mismatch" (Mr Kepler's Report at [89]); in that [170](1) of SPIC Pacific Hydro requires a comparison of an hypothetical lease of buildings, plant and equipment against the actual lease (which is a lease of the land with its fixtures). Mr Kepler made an adjustment to the Pacific Hydro Methodology as set out in Mr Kepler's Report at [90], insofar as Mr Kepler applied what he said to be the "conceptually consistent comparison" of the hypothetical market rental for the land, and the actual rental for the land. 11. However, Meridian says that Mr Kepler did not apply the methodology he set out in the Kepler Report at [90]; instead Meridian says that Mr Kepler applied a composite methodology in which he separately valued a lease of the Power Stations (see Mr Kepler's Report at [130]), observed an overall residual, then attributed part of the residual to a lease of the bare land underneath the Power Stations (see the Kepler Report at [166], [173] and [179]). Meridian points out that Mr Kepler admits that SPIC Pacific Hydro does not support the separate valuation of a PPE element and a bare land element (see at T 121.24-34, T 123.1-10 and T 125.1-8). 12. Meridian says that Mr Kepler's actual methodology leads to an erroneous result because it obtains a result which necessarily attributes increases in business value, quantified in the residual, to the "bare land" component of a lease, irrespective of whether or not: the lease caused that appreciation in value for the business; a willing but not anxious lessor is able to extract an increase in the value of the lessor's business in the form of increased rent; and a willing but not anxious lessee would be prepared to submit to an increase in rent merely because it has greater capacity to pay. 13. Finally, as to the issue of whether, if there must be some allocation of residual between the Water Agreements and the Leases, substantially the whole of the residual should be allocated to the Water Agreements, Meridian's position is that there should not be any allocation of the residual to a contributory asset. 14. Meridian says that the Water Agreements are an income generating asset, and so are the primary asset, whereas the Leases are only contributory to GSP's business operations (referring to Mr Samuel's second report dated 5 July 2021 at [52]). It is noted that in Mr Samuel's opinion the Water Agreements were recognised as being the "go, no-go" or "fundamental asset" (see T 102.7-12); and that the Water Agreements are the driver of profit (see at T 103.3-7). Meridian points to Mr Samuel's evidence that it is only when the business and the land are "inextricably entwined" or when it is "the land itself that is the business" that it would be reasonable to expect that rent increases with profitability (T 107.15-23). 15. Meridian emphasises the following two facts which it says distinguishes this case from SPIC Pacific Hydro, and which it says point to the Water Agreements as the key asset. First, that GSP owns all the Power Station Assets located on the land the subject of the Leases (except for the 66KW skids which are said to be relatively insignificant) and consequently GSP has the right to use them by virtue of its ownership of them and not the Leases; whereas in SPIC Pacific Hydro all the wind generator assets on the land were owned by the lessor and the lessee's right to use them was derived solely from the right to use the land conferred by the lease. Second, that SWC has the right under the Water Agreements to acquire the Power Station assets at termination for $1. Hence, it is said that WAMC as lessor does not benefit from having the Power Station assets on the land at termination (and it is submitted that this indicates the primacy given by the parties to the Water Agreements over the Leases). 16. Meridian says that it follows that the Leases merely confer an ancillary right (being to keep the things which GSP owns on the land and then to allow the SWC to acquire them at termination) which it maintains is a further factor supporting Mr Samuel's view that the Leases are mere contributory assets and that the primary asset is the Water Agreements. 17. Meridian argues that the water usage charges under Water Agreements were possibly mispriced when GSP acquired them on 17 July 2014, by reference to the fact that on 22 September 1955 the Hume Power Station had a royalty of eight one-thousand parts of one penny (0.008d) per kwh, and on 30 June 1998 the royalty rate for Hume Power Station was amended to 5% of revenue per kwh; and that there is an inference that the royalty benchmark set by Hume Power Station, of 0.008 pennies per kwh until 30 June 1998 and 5% of revenue thereafter, means its water usage charge was not a "commercial" royalty rate (as to which see Mr Holcombe's first affidavit affirmed 3 December 2020 at [51]). Meridian says that the same inference applies to the 5% royalty rate for the Keepit Power Station and the 5% first bracket royalty for the Burrinjuck Power Station. 18. However, Meridian says that in any event it is irrelevant whether the Water Agreements were mispriced in 2018 because the residual methodology applied by both experts to value the Water Agreements does not require the identification of the market water usage charge if they were renegotiated. It is said that that is the purpose of the residual methodology being applied to the Water Agreements, namely, to allocate the residual to the prime asset. Summary of the second issue 1. In summary, Meridian says that the Leases have nil value because the rent paid under the Leases is comparable to market rent. Meridian accepts that each Water Agreement is an intangible asset of GSP and has material value but says (and the Chief Commissioner does not cavil with this) that the Water Agreements are not interests in land and should be excised from the calculation of the dutiable value if the Acquisition were a relevant acquisition for the purposes of Ch 4 of the Duties Act. 2. Meridian says that the Pacific Hydro Methodology is inappropriate (for the reasons set out above) and that, to the extent that there is a difference between the market value of GSP's shares at the time of Acquisition and GSP's assets and liabilities other than the Water Agreements and the Leases (the "residual"), the whole of the residual should be allocated to the Water Agreements and not the Leases. 3. If (contrary to its primary submission) the Pacific Hydro Methodology is applicable, Meridian says that it is logical that any cost of remediating the environment arising by reason of occupying the Leases and operating the Power Stations be allocated wholly to the Leases and for none of the remediation cost to be allocated to the Water Agreements (see the Joint Report at [70]). 4. The Chief Commissioner, on the other hand, contends that the Leases ought to be valued at $144.85 million, using the Pacific Hydro Methodology; that Meridian has failed to discharge its burden of proving that the Chief Commissioner's assessment was incorrect; that the criticisms by Mr Samuel should be rejected; and that Mr Kepler's opinion of the value of the Leases should be accepted. Based on Mr Kepler's valuation, the Chief Commissioner says that that the total value of GSP's landholdings was $144.85 million (comprising $13.85 million for the Lease of the unimproved land and $131 million for the right to use the Power Stations); and that GSP also owned goods (being portable plant and equipment) worth $500,000 (see the Joint Report at [19]). Determination of the second issue 1. In relation to the issues raised as to the value to be ascribed to the Leases and the Water Agreements, I have concluded as follows. 2. First, as to Mr Dyson's report, I accept that Mr Dyson was not qualified to express an opinion on the legal effect of cl 13.5 (and that cl 13.5, however it be read, is no more than an acknowledgement by the parties as to the ownership of the Power Station Assets and does not have the legal effect contended for by Mr Dyson). More problematic, in my view, is that Mr Dyson accepted that the profit rental approach requires the ability to identify relevant comparables (not possible here) and was not appropriate where there was a business on the land that was inextricably linked to the lease (as is here the case). Therefore, with no disrespect to Mr Dyson, I cannot place weight on his opinion that the Leases were at nil value. 3. That brings me to the areas of disagreement as between Mr Samuel and Mr Kepler. 4. As to the first of those issues, I consider that this is not a case where it is appropriate to apply the Pacific Hydro Methodology because of the conclusions I have drawn as to the nature of the interest held by Meridian in the Power Stations; and I consider, by reference to his Honour's reasons, that Payne JA was not purporting to lay down some inflexible rule as to valuation of such assets in SPIC Pacific Hydro. 5. As to the position of the skids, however, the position is different in that they were installed after the 2014 Vesting Order and they have the features of something that would ordinarily be seen as a tenant's fixture (see my remarks (with which Bathurst CJ, and Beazley P (as Her Excellency then was) agreed) in Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (2017) 93 NSWLR 765; [2017] NSWCA 8 at [102] and [151]). In those circumstances I consider that the Pacific Hydro Methodology would here be appropriate to apply. 6. As to the second of those issues, I consider that, while application of the Pacific Hydro Methodology would require account to be taken of removal and/or remediation costs likely to be incurred on termination of the relevant Leases, the difficulty here is that there is insufficient evidence on which to form a conclusion that those costs are likely to be incurred or as to the likely quantum of those costs in any of the three scenarios. The provision made in Meridian's accounts is of little assistance in those circumstances. 7. As to the third of those issues, it is relevant to note that there is broad agreement between them as to the appropriate valuation methodology (where it is not possible to place a market value on an asset) is the residual valuation approach; and both were candid as to the difficulties of applying that approach where there are two assets the market value of which cannot be readily ascertained (as I accept is here the case). Both appear to accept that in those circumstances there is an evaluative judgment to be carried out. To my mind, the rationale for Mr Samuel's opinion that the residual should be allocated wholly (or at least substantially) to the Water Agreements has logical force. I understand the position of Mr Kepler to be that it is not reasonable to ascribe none of the residual to the Leases in circumstances where the unique position of the land on which the Power Stations are located is a contributor to the profits of the business. However, ultimately I am persuaded that the fundamental driver (the go, no-go asset) is the Water Agreement, without which the Lease could have no value. 8. I set out in the section dealing with the fifth issue the outcome that follows from the above conclusions. Issue 3 – Whether the Power Stations were goods 1. On the conclusions that I have reached above, the third issue does not strictly arise but I deal with it for completeness. Meridian's submissions as to the third issue 1. Meridian says that, even if GSP were a landholder, the Power Stations were not goods within the meaning of s 155 of the Duties Act because they are sui generis interests in property vested in GSP by statute and, alternatively, form part of a continuous system of electricity reticulation connected to a mass electricity distribution network. Therefore, it is said that the value of the Power Stations should be excluded in working out the dutiable value of the acquisition. 2. Meridian notes that the expression "goods" is left undefined in the Duties Act save that s 163K(1) expressly excludes a number of categories of things from falling within the category of "goods". Section 163K is not expressed to be prescriptive but appears to be intended to exclude a number of things that would otherwise be goods (such as goods that are stock-in-trade) from being caught by the expression. Section 163K relevantly states that: (1) In this Chapter— goods does not include the following— (a) goods that are stock-in-trade, (b) materials held for use in manufacture, (c) goods under manufacture, (d) goods held or used in connection with land used for primary production, (e) livestock, (f) a registered motor vehicle, (g) a ship or vessel. (2) For the purposes of this Chapter, goods are goods of a landholder if the landholder has any interest in the goods, other than an interest as mortgagee, chargee or other secured creditor. 1. It is noted that the meaning of the word "goods" has been said to be of very general and quite indefinite import which depends upon the context in which it is found (reference being made to The Noordam (No 2) [1920] AC 904 at 908-909 per Lord Sumner). 2. Meridian points out that the expression "goods, wares, and merchandise", as it appeared in the proviso in the Second Schedule to the Stamp Duties Act 1920-1933 (NSW), was considered in North Shore Gas Company Limited v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7 (North Shore Gas (No 1)), which concerned the mains and service pipes of the North Shore Gas Company which had been laid in the ground. Dixon J, as his Honour then was, there considered that the expression "goods, wares, and merchandise" should be taken to include all tangible movables (at 67). His Honour described the pipes as "part of a continuous system of gas reticulation which runs under the earth and is attached to plant and buildings fixed to the soil" (at 67) and that they are "interconnected and radiate from a plant consisting of fixtures" (at 70). For those reasons, his Honour found that the mains and service pipes were analogous to fixtures and not chattels personal (at 70) despite the company's statute having the effect of preventing the consequences which would ordinarily ensue from affixing things to the land (at 68). 3. Meridian submits that the Power Stations or part of the Power Stations are not goods for the following reasons. 4. First, it is noted that the Power Stations were granted to Green State Power as "assets, rights and liabilities of Eraring Energy" and then granted to GSP as "assets, rights and liabilities of Green State Power". Reliance is again placed on the explanation by Windeyer J in North Shore Gas (No 2) at 133, that where Parliament confers innominate statutory rights, "there is no need for lawyers to insist on finding an old name for them, when they are in fact sui generis". Meridian says that the 2014 Vesting Order grants innominate statutory rights, which in the present case is constituted by immovable physical generator assets affixed to the land but statutorily severed and held in gross; and says that it would therefore be erroneous to attempt to assimilate the Power Station assets to either category of goods or land. 5. Further, it is said that the connection from the generator through the electricity cabling to the distribution network constitutes a continuous system of electricity reticulation attached to plant and buildings fixed to the soil, analogously to the position in North Shore Gas (No 1) per Dixon J, as his Honour then was, at 67. It is noted that in each Power Station a powerhouse houses the turbines and generators whose components are in turn connected through a series of tubes to the dam structure (Mr Wilkins' second affidavit affirmed 18 June 2021 at [39]). The generators are in turn connected through a series of continuous cabling to the switchyard and into the electricity distribution network (Mr Wilkins' second affidavit at [84]). 6. Meridian says that it also follows that, as in North Shore Gas (No 1), the quasi-fixture quality of the Power Stations or parts thereof do not meet the description of goods as a tangible movable. Thus, Meridian contends that the Power Stations do not constitute "goods" within the meaning of the Duties Act. Chief Commissioner's submissions as to the third issue 1. As to Meridian's third contention (i.e., that, even if GSP were found to be a land holder within the meaning of the Duties Act (that is, GSP has an interest in land worth at least $2 million), the Power Stations were not goods within the meaning of s 155(1) of the Duties Act and are not to be taken into account in applying s 155(1) of the Duties Act (see Meridian's Amended Appeal Statement at [29] and [30]), the Chief Commissioner notes that the particulars for this contention were set out in a letter dated 3 February 2021, as follows: 1. Paragraph 29 pleads in the alternative that: (a) if contrary to the primary contentions advanced at paragraphs 23 to 26, GSP is a landholder for the purpose of s 155(1) of the Duties Act 1997 (NSW) (the Act) because its interests in the Leases and Freehold Land have a value equal to or greater than $2 million, (b) the Power Station Assets nonetheless do not meet the description of goods for the purpose of section 155(1) of the Act because either: (i) the relevant Vesting Order vests the Power Station Assets in GSP as sui generis property rights pursuant to the terms of the Vesting Order and their enabling legislation and for that reason are not goods within the definition in s 163K(1) of the Act; or (ii) alternatively, the Power Station Assets which are affixed to land or structures on land are not tangible movable property and therefore not goods within the definition in s 163K(1) of the Act (North Shore Gas Company Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52). 2. To the extent that the Power Station Assets do not satisfy the definition of goods, their unencumbered value is not to be taken into account in applying section 155(1) of the Act. 1. The Chief Commissioner notes that Meridian's third contention arises only in circumstances where: the Court has found that the effect of the Vesting Order was to sever the Power Stations from the leased land; the Power Stations were not otherwise held by GSP as an interest in land; and GSP's landholdings had a value of at least $2 million. In those circumstances, the question raised by Meridian's third contention is whether the Power Stations are goods for the purposes of s 155 of the Duties Act. 2. The Chief Commissioner says that the contention that the Power Stations are not goods but some other sui generis property right or, alternatively, not tangible movable property (referring to Meridian's submissions at [99]-[106]) should be rejected for the following reasons. 3. First, by reference to the analysis of the Vesting Orders summarised above in respect of the first issue, the Chief Commissioner says that Meridian has not established that the Power Stations are sui generis interests in property vested in GSP by statute; maintaining his position that the effect of the Vesting Orders was not to sever the Power Stations from the land. It is contended that the Power Stations are properly characterised as fixtures and, as such, are an interest in the leased land; and that they are not goods (the Chief Commissioner here repeating Meridian's submission that the Power Stations are "so connected with their respective dams which is in turn embedded into the land that they became part and parcel of the land" (referring to Meridian's submissions at [62])). I have rejected this submission under issue 1 above. 4. Moreover, and even if the Vesting Orders did create a sui generis property interest in GSP in the Power Stations, the Chief Commissioner repeats his submission that those orders only apply to assets that were part of the leased land up to the date of the first Vesting Order; and that those assets which were installed after the date of the first Vesting Order in July 2000 remain as fixtures, forming part of the leased land. (I accept this submission only in relation to assets installed after the 2014 Vesting Order; i.e., the skids.) 5. Insofar as Meridian relies on North Shore Gas (No 1) in support of the submission that the Power Stations are not goods by reason of forming "part of a continuous system of electricity reticulation connected to a mass electricity distribution network" (see Meridian's submissions at [98] and [104]-[106]), the Chief Commissioner notes that in that case the High Court was called upon to consider whether certain gas mains and service pipes which were embedded in the ground were "goods, wares, and merchandise" and therefore liable to nominal duty under the Stamp Duties Act 1920-1933 (NSW). It is noted that, in finding that the mains and service pipes were fixtures and not chattels personal, Dixon J (McTiernan J agreeing) said at 70: The right to remove the pipes arises from a particular statutory power. Unless it is exercised the pipes must remain in situ as part of a widespread system or apparatus which can be transferred only as an entirety. It is interconnected and radiates from a plant consisting of fixtures. Every physical characteristic, therefore, tends to place the mains and service pipes in the same category as the soil from which, without disintegration or disconnection, they are inseparable. Two legal qualities belong to the pipes which ordinarily do not belong to part of the soil, viz., the existence of independent ownership in another person and removability. But these qualities arise from statutory provisions, and removability at all events is a well-known characteristic of tenants' fixtures, which until removal are considered part of the realty. I do not think that these statutory legal qualities are enough to put the buried apparatus out of the classification to which otherwise it would belong. The mains and service pipes are fixtures, and in my opinion are not chattels personal. 1. The Chief Commissioner says that his Honour's comment applies with equal force to the facts of the present case. It is said that the component parts of the Power Stations form part of a going concern, were transacted together and operate as an integral whole to produce electricity; and that, likewise, the Vesting Orders do not put the Power Stations "out of the classification [as fixtures] to which otherwise it would belong". The Chief Commissioner says that North Shore Gas (No 1) is an authority for the proposition that a power network embedded into the ground is properly classified as a collective of fixtures, not goods; and that this is consistent with the Chief Commissioner's primary position that the Power Stations are fixtures. If that is the case, then it is said that Meridian's third contention does not arise. 2. Alternatively, if it is held (as the Chief Commissioner submits) that the Power Stations are not a sui generis property interest and it is held (contrary to the Chief Commissioner's submissions) that they are not fixtures, then it is said that the Power Stations must, necessarily and in the context of s 155 of the Duties Act, be goods. 3. The Chief Commissioner (as does Meridian) refers to The Noordam, where it was said that the word "goods" was of very general "and quite indefinite import" and primarily derived its meaning from the context in which it was used. 4. Reference is also made to Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) (2013) 97 ATR 904; [2013] NSWCA 470 at [131], where Gleeson JA (Beazley P, as Her Excellency then was, agreeing) applied The Noordam in support of a finding that "goods" in the Duties Act included coins and banknotes, noting that the definition of "goods" depended entirely on the context in which it was used. The Chief Commissioner also refers to Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43, where McMurdo P said at [6] that the ordinary meaning of "goods" is "possessions, especially moveable effects or personal chattels". 5. The Chief Commissioner says that, in the present case, the relevant context is s 155 of the Duties Act which stipulates how duty is charged on relevant acquisitions (private landholders), in the following terms: How duty is charged on relevant acquisitions--private landholders (1) If an acquisition statement that discloses a relevant acquisition in a private landholder does not disclose any other acquisitions during the statement period, duty is chargeable, at the general rate, on the amount calculated by multiplying the unencumbered value of all land holdings and goods of the landholder in New South Wales (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition. 1. It is said that the purpose of s 155 is to provide the methodology by which duty is to be calculated on a relevant acquisition in a private landholder; that the section presupposes a relevant acquisition and calls for the identification of "the unencumbered value of all land holdings and goods of the landholder"; and that the purpose of the section appears to be to determine the value of all assets of the landholder that may be classified as land or otherwise be in a tangible form (goods). 2. In those circumstances, the Chief Commissioner submits that the term "goods" is of sufficient breadth to capture the Power Stations, if they are not otherwise classified as land. It is said that Power Stations are comprised of many items which would individually be classified as goods; and that the only reason to remove them from that classification is if the Power Stations are classified as land. The Chief Commissioner argues that, if they do not fall within that classification, then it is consistent with the text of s 155 and the ordinary meaning of "goods" that the Power Stations be classified as goods. 3. The Chief Commissioner thus says that Meridian's third contention should be dismissed; that it does not arise because the Power Stations are part of the leased land; but that if it be held that the Power Stations are not part of the leased land, and are not otherwise an interest in land, then the Power Stations ought to be classified as goods under the Duties Act. Determination of the third issue 1. I accept that, as recognised in The Noordam, the word "goods" is of very general "and quite indefinite import" and primarily derives its meaning from the context in which it is used (here, s 163K of the Duties Act) and that it may be accepted that the intent of the legislature was to levy tax on "the unencumbered value of all land holdings and goods of the landholder" requiring a determination of the value of all assets of the landholder that may be classified as land or otherwise be in a tangible form. However, I have great difficulty in seeing the Power Stations as being "goods" under any ordinary meaning attributed to tangible personal property. The fact that the Power Stations (formerly fixtures or items "part and parcel of the land" if that classification be correct) have been statutorily severed from the land (and exist as an innominate sui generis property interest) does not transmute them into goods simply because it might be thought that this should be treated as part of the assets on which an impost for landholder duty should be made. 2. In the circumstances were it to have arisen I would have concluded that the Power Stations or Power Station assets in the ownership of Meridian are not goods. Issue 4 – Exercise of the s 163G "discretion" Meridian's submissions as to the fourth issue 1. Meridian says that, in the event that the Acquisition is found to be a relevant acquisition (about which there is no dispute – it is) and it is found that the Power Stations were goods and the value of GSP's goods at the time of the Acquisition is not less than 90% of the total unencumbered value of all land holdings and goods, then the power in s 163G of the Duties Act should be exercised and the value of goods should be disregarded in determining the duty chargeable to Meridian. Given my conclusion above, this issue does not arise but, again, for completeness I deal briefly with it. 2. It is noted that, in the case of a power which may be exercised by the Chief Commissioner, the Court must itself consider the correct application of the Duties Act to the materials before the Court, including how any power conferred by those provisions should be exercised (reference being made to Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462; [2011] NSWCA 325 at [168] per Sackville AJA (with whom Giles and Macfarlan JJA agreed); Winston Smith v Chief Commissioner of State Revenue [2019] NSWCA 75 at [2] per Meagher JA (with whom Payne JA and Sackville AJA agreed)). 3. Meridian says that, on its proper construction, s 163G of the Duties Act should be construed as prescribing a mandatory rule whereby, if the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales of the landholder, the Chief Commissioner must disregard the value of the goods in determining the duty chargeable under Ch 4. 4. It is noted that when a statute uses the expression "may" there is a question whether the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised, so that in those events the "may" becomes a "must" (Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 at 134-135 per Windeyer J). 5. Meridian says that the textual indicator that s 163G of the Duties Act is mandatory is that s 163G prescribes a singular criterion for when the power is enlivened, which is when the unencumbered value of all goods comprises not less than 90% of the total unencumbered value of all land holdings and goods; and that it does not require the Chief Commissioner to make any evaluative judgment. Meridian says that the mandatory nature of s 163G is also confirmed by its legislative history. 6. Meridian notes that s 163G was introduced by the State Revenue Legislation Further Amendment Act 2009 (NSW), which introduced wholesale amendments to the charging of duty on the acquisition of entities holding interests in land by repealing former Ch 4A and substituting in its place Ch 4; and that s 163G is the policy equivalent of former s 163B(1)(b) which provided that for the purposes of former Ch 4A an entity is "land rich" if it had land holdings in New South Wales with an unencumbered value of $2 million or more and its land holdings in all places comprise 60% or more of the unencumbered value of all its property. Thus, it is noted that s 163G substitutes a former 60% rule with the current 90% rule. 7. Further, Meridian notes that s 163G is also the Ch 4 analogue of s 26 found in Ch 2 of the Duties Act and Meridian says that the legislative history of s 26 also confirms the mandatory nature of current ss 26 and 163G. 8. Prior to 30 June 2013, s 26 provided: The Chief Commissioner, if satisfied that it would not be just and reasonable in the circumstances to charge duty on the dutiable value of all the dutiable property in a dutiable transaction involving goods and other property, may disregard the value of the goods, or any of them, in determining the dutiable value of the property involved. 1. It is noted that in this form it was substantially similar to s 43A(2) of the Stamp Duties Act 1920 (NSW) which provided that certain conveyances or agreements were chargeable with ad valorem duty "except in so far as the Chief Commissioner is satisfied that it would not be just and reasonable in the circumstances"; and that the statutory language in s 43A(2) and former s 26 called for an evaluative judgment in the exercise of the discretion conferred on the Chief Commissioner. 2. Meridian points out that the uncertainty as to the scope of s 26 of the Duties Act gave rise to Revenue Ruling DUT 004, which expressed the Chief Commissioner's view that the discretion fell to be exercised where goods comprised 90% or more of the value of the property the subject of the dutiable transaction (see McDonald's Australia Ltd v Chief Commissioner of State Revenue (2005) 58 ATR 260; [2005] NSWSC 6 (McDonald's Australia) at [91] per Gzell J); and that the prescriptive application of Revenue Ruling DUT 004 led to criticism by Gzell J in McDonald's Australia at [91] and [94]. 3. Subsequently, the present form of s 26 was introduced by the Duties Amendment (Abolition of State Taxes) Act 2006 (NSW) which enacted a new s 26A(1) as follows: If a dutiable transaction involves goods and other dutiable property, the Chief Commissioner may disregard the value of the goods in the transaction if satisfied that the dutiable value of the other property does not exceed 10% of the dutiable value of all the dutiable property in the transaction. 1. Section 26 was amended and s 26A was repealed by the State Revenue and Other Legislation Amendment (Budget Measures) Act 2013 (NSW). From 1 July 2013, s 26 provided: If a dutiable transaction involves goods and other dutiable property, the Chief Commissioner may disregard the value of the goods in the transaction if the dutiable value of the other property does not exceed 10% of the dutiable value of all the dutiable property in the transaction. 1. Meridian says that the modern form of the dispensation in the current s 26 and s 163G of the Duties Act evidences a deliberate departure from the evaluative "just and reasonable" judgments and the adoption of a discrete percentage based criterion for the dispensation of duty. 2. Accordingly, Meridian says that s 163G should be construed as a mandatory rule requiring the Chief Commissioner to disregard the value of goods in determining the duty chargeable under Chapter 4 if the unencumbered value of all goods in New South Wales of a landholder comprises not less than 90% of the total unencumbered value of all land holdings and goods in New South Wales. 3. However, Meridian says that, if s 163G is discretionary, then the discretion should be exercised consistent with the policy of Ch 4 (citing Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630; [2010] VSC 464 at [27]-[29] per Pagone J). Meridian says that even if s 163G is not construed as a mandatory direction to the Chief Commissioner, the policy purpose of s 163G is still to avoid charging duty on relevant acquisitions of entities whose value is substantially attributable to goods instead of interests in land. 4. Meridian argues in this regard that the value of GSP is substantially attributable to its capacity to sell electricity; and that, to generate electricity, GSP uses the water fuel granted to it by the Water Agreements to power the Power Stations which were vested in it by the Vesting Orders. It is said that the Leases grant GSP access to the Power Stations but are otherwise not profit leases which GSP could assign for gain. Given the separate vesting of the Power Stations, the Water Agreements and the Leases, it is said that the Leases are not commercially valuable independent of GSP's business as a going concern. Meridian says that substantially the whole of the value of GSP's business is therefore attributable to the business it conducts using its tangible and intangible assets rather than attributable to its interests in land. 5. Meridian says that landholder duty charged by Ch 4 is an alternative to transfer duty charged by Ch 2 of the Duties Act (referring to the note under s 145 of the Duties Act, as confirming this). Meridian says that, just as s 26 has the effect of excising from the duty base ad valorem duty on goods if the dutiable transaction of property other than goods does not exceed 10% of the dutiable value of the dutiable property in the transaction (i.e., that goods making up at least 90% of the value of the transaction), s 163G should be construed with the same policy of disregarding the landholder's goods where the value of those goods is not less than 90% of the value of landholder's land holdings and goods. It is submitted that the s 163G discretion should be exercised in a manner that gives an harmonious operation to the Duties Act as a whole. 6. Meridian points out that Mr Kepler's lease valuation methodology reveals that the value of GSP's interest in the lease of the bare land ($13.85 million to $28.85 million subject to up to $30 million of remediation costs) is only a small proportion of GSP's total assets ($172.2 million) (see the Joint Report at [19]). Meridian says that the fraction that GSP's leasehold interest bears to GSP's total assets is even more stark if the Pacific Hydro Methodology is applicable only by reason of GSP's recently installed 66kV switching skids at the Hume Power Station ($2.9 million to $172.2 million) (see the Joint Report at [18]). 7. Thus, Meridian says that it if is found that GSP was a landholder at the time of the Acquisition then the value of GSP's goods at $131.4 million constituted of $131 million of buildings, property plant and equipment fixed to the land (see Mr Kepler's Report dated 24 November 2021 at [92]-[93]) plus $0.5 million of portable plant and equipment (Kepler Report at [93]) should be excised from the calculation of dutiable value. 8. Accordingly, from the Chief Commissioner's assessment of dutiable value at $145,350,000 in the Further Amended Assessment, Meridian says that there should be deducted a further $131,400,000 to arrive at a dutiable value of $13,950,000 to reflect the removal of the value of GSP's goods from the Chief Commissioner's calculation of dutiable value. Chief Commissioner's submissions as to the fourth issue 1. As to Meridian's contention that, in the event that the Power Stations are found to be goods, the discretion conferred by s 163G of the Duties Act should be exercised so that the value of the Power Stations is disregarded in determining the amount of duty payable (see Meridian's submissions at [107]-[128]), the Chief Commissioner says that, for Meridian to make this contention good, it must establish that: the Power Stations are (contrary to its earlier submission) goods; the value of the Power Stations, at the time of the Acquisition, was not less than 90% of the total unencumbered value of GSP's land holdings and goods; and s 163G of the Duties Act ought to apply such that the value of the Power Stations should be disregarded in determining the duty chargeable. 2. The Chief Commissioner's primary position is that the Power Stations are not goods; rather that they are fixtures forming part of the leased land (again citing Meridian's submission that the Power Stations "are so connected with their respective dams which is in turn embedded into the land that they became part and parcel of the land" – see Meridian's submissions at [62]). On that basis it is said that s 163G has no application to the facts of this case. 3. If, contrary to the Chief Commissioner's primary submission, it is held that the Power Stations are goods, then the Chief Commissioner notes that Meridian must establish that the value of the Power Stations at the time of the Acquisition was not less than 90% of the total unencumbered value of GSP's land holdings and goods. It is said that the determination of that question will depend on the expert evidence and the impact, if any, on the obligation to remediate. It is noted that there are various possible scenarios in which the value of GSP's goods will be less than 90% of GSP's total land holdings and goods even if Meridian establishes that the Power Stations are goods. 4. The Chief Commissioner posits, by way of example, the scenario that it be found that: the total unencumbered value of GSP's land holdings and goods was $145.35 million; Mr Kepler correctly valued the Lease of the unimproved leased land at $13.85 million; the skid is an interest in land, because it was installed by GSP after the 2014 Vesting Order, and is valued at $2.9 million; the portable plant and equipment is valued at $0.5 million; and the Power Stations are goods (contrary to the Chief Commissioner's primary submission) and valued at $128.1 million (being $131 million less $2.9 million for the skid). 5. The Chief Commissioner says that, in that scenario, the value of GSP's goods at the time of the Acquisition was less than 90% of the total unencumbered value of GSP's land holdings and goods (i.e., $128,600,000/$145,350,000 or 88.48%); and, therefore, the discretion in s 163G of the Duties Act is not enlivened. 6. The Chief Commissioner accepts that if it be found that the value of GSP's goods at the time of the Acquisition was 90% or more of GSP's total land holdings and goods, then the discretion under s 163G is enlivened; and agrees that, in this case, the Court ought to disregard the value of the goods in determining the duty chargeable under Ch 4. In those circumstances, the Chief Commissioner says that it is not necessary to decide whether the discretion should be construed as mandatory. Determination of the fourth issue 1. Given the position of the Chief Commissioner that (in the event that s 163G of the Duties Act is enlivened, the discretion should be exercised) it is not necessary to entertain the debate as to whether "may" means "must"; and it is not appropriate that I here enter into debate on that issue (it should be determined after proper consideration in a case in which it is determinative). As it is, on the conclusions reached above, s 163G is not enlivened, so the question whether the discretion is or should be exercised does not arise. Issue 5 – Dutiable value of the Acquisition 1. Meridian says that the dutiable value of the Acquisition is nil because the methodology in SPIC Pacific Hydro is inapplicable to valuing GSP's Leases, the value of GSP's leasehold interest is nil and the Acquisition is not a relevant acquisition. 2. If the Acquisition is a relevant acquisition because the methodology in SPIC Pacific Hydro is applicable and s 163G of the Duties Act applies, then Meridian says that the dutiable value of the acquisition should be $2.9 million as set out in Mr Samuel's calculations at [18] of the Joint Report. 3. If the Acquisition is a relevant acquisition because the methodology in SPIC Pacific Hydro is applicable and s 163G does not apply, then Meridian says that the dutiable value of the acquisition is $99.3 million as the net of $131 million (being the PPE leases) plus $0.5 million (being the portable plant and equipment), plus negative $2.2 million (being the bare land Leases) plus negative $30 million (being the remediation costs) set out in the second column of Mr Samuel's calculations at [19] of the Joint Report. 4. Meridian says that the Further Amended Assessment is also excessive because the Chief Commissioner has undervalued the Water Agreements by at least $13.85 million when their actual value is $27.7 million (if the Pacific Hydro Methodology does not apply) or at least $29.9 million and up to $59.9 million (if the Pacific Hydro Methodology applies) as valued by Mr Samuel (see the Joint Report at [17] and [19]). 5. Meridian thus contends that the Further Amended Assessment should be set aside in whole or, in the alternative, set aside in part and an assessment issue for a lesser amount of duty on the basis that the dutiable value of the acquisition exclude the value of GSP's interest in goods or, in the further alternative, on the basis that no amount of the residual is allocated to the value of GSP's Leases. Meridian wishes to be heard on costs in any event. 6. The Chief Commissioner submits that the summons filed on 31 July 2020 be dismissed; and that the Court should, pursuant to s 101(1)(a) of the Taxation Administration Act confirm the assessment issued to Meridian. Determination of the fifth issue 1. Having regard to the conclusions reached above, and the calculations set out in the aide memoire (set out above), the Further Amended Assessment should be set aside in whole. I find that the dutiable value of the Acquisition is nil on the basis that the Power Stations were not landholdings in the relevant sense, nor is the Pacific Hydro Methodology applicable in valuing GSP's Leases (although it does apply to the skids), and that therefore the Acquisition was not a relevant acquisition within the meaning of the Duties Act. Costs 1. Both parties sought to be heard on costs, so I will make directions for that to occur. Orders 1. On the basis of the foregoing, I make the following orders: 1. Set aside the defendant's Further Amended Assessment, dated 25 August 2021, in whole. 2. The parties are to file and serve submissions on the question of costs within 14 days of the publication of these reasons (including whether, and if so why, an oral hearing on costs is sought or that issue can be dealt with on the papers). ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 August 2022