Supreme Court New South Wales Medium Neutral Citation: Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 628 Hearing dates: 26–27 February 2024, final submissions received 3 May 2024 Date of orders: 24 May 2024 Decision date: 24 May 2024 Jurisdiction: Equity - Revenue List Before: Richmond J Decision: (1) The Assessment is affirmed. (2) The Amended Summons is dismissed. (3) The plaintiff is to pay the defendant's costs on the ordinary basis, as agreed or assessed. Catchwords: TAXES AND DUTIES — landholder duty — landholdings — meaning of 'land' TAXES AND DUTIES — landholder duty — liability — inclusion of asset in valuation of acquisition — meaning of 'goods' TAXES AND DUTIES — landholder duty — liability — valuation of property Legislation Cited: Acts Interpretation Act 1901 (Cth) Dampier to Bunbury Pipeline Act 1997 (WA) Duties Act 1997 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Interpretation Act 1987 (NSW) Landlord and Tenant Act 1958 (Vic) Payroll Tax Act 2007 (NSW) Petroleum Pipelines Act 1969 (WA) Property Law Act 1958 (Vic) Stamp Act 1921 (WA) Stamp Duties Act 1920 (NSW) Stamps Act 1958 (Vic) State Revenue Legislation Further Amendment Act (No 2) 2009 No 91 (NSW) State Revenue Legislation Further Amendment Bill 2009 (NSW) Taxation Administration Act 1996 (NSW) Transport Administration Act 1988 (NSW) Water Industry Competition Act 2006 (NSW) Water Industry Competition Amendment Act 2011 (NSW) Cases Cited: AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596; [2003] VSC 453 Asciano Services Pty Ltd v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46 Ashgrove Pty Ltd v Commissioner of Taxation (1994) 53 FCR 452; (1994) 94 ATC 4,549 Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1970) 124 CLR 73 Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd (2023) 116 ATR 337; [2023] NSWCA 113 Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd (No 2) [2023] NSWCA 169 Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118 Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523 Commissioner of State Revenue (WA) v Westnet Rail Holdings No 1 Pty Ltd [2013] WASCA 110, (2013) 45 WAR 140 Cooke v Commissioner of Taxation [2002] FCA 1315 Elitestone v Morris [1997] 1 WLR 687 Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 Leedale v Lewis [1982] 1 WLR 1319 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 1074 Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712 Mills v Stokman (1967) 116 CLR 61 Mullane v Mullane (1983) 158 CLR 436 Newcastle-under-Lyme Corporation v Wolstanton [1947] Ch 92 North Shore Gas Co Ltd v Commissioner of Stamp Duties [1940] HCA 7; (1940) 63 CLR 52 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 Risk v Northern Territory (2000) 105 FCR 109 Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470 SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 395 Stow v Mineral Holdings (Aust) Pty Ltd (1977) 180 CLR 295 TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576; [2010] HCA 49 Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232 Valuer-General v AWF Prop Co 2 Pty Ltd (2021) 65 VR 327; [2021] VSCA 274 Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89; [2009] FCA 742 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 Texts Cited: B Edgeworth, Butt's Land Law (Lawbook Co, 7th ed, 2017) New South Wales Legislative Council, Parliamentary Debates (Hansard), 9 November 2011 Category: Principal judgment Parties: Conexa Sydney Holdings Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: P Solomon KC and P Turner (Plaintiff) S Balafoutis SC and T Phillips (Defendant) Solicitors: Piper Alderman (Plaintiff) Crown Solicitors Office (Defendant) File Number(s): 2023/151288 Publication restriction: Nil JUDGMENT 1. On 30 September 2019, the plaintiff, Conexa Sydney Holdings Pty Ltd (Conexa), acquired 100 per cent of the shares in SGSP Rosehill Network Pty Ltd (Rosehill). On 21 March 2022, the Chief Commissioner of State Revenue (Commissioner), assessed the plaintiff to landholder duty under the Duties Act 1997 (NSW) in the amount of $3,326,497, plus interest, on the basis that the total unencumbered value of the land holdings and goods of Rosehill at the time of the acquisition was $60,749,000. Following the disallowance of its objection, the plaintiff has by an amended summons filed on 28 July 2023 brought these proceedings for review pursuant to s 97(1)(a) of the Taxation Administration Act 1996 (NSW). 2. The critical issue raised in this appeal is whether, at the date of the assessment, a water carrying pipeline owned and constructed by Rosehill which is buried in the ground for its entire length was 'land' or 'goods' for the purposes of s 155 of the Duties Act. Background The Pipeline 1. Pursuant to an approval granted in 2009 under the Environmental Planning and Assessment Act 1979 (NSW) the Rosehill Water Recycling Scheme was established. The scheme's aim was to deliver recycled water in south-west Sydney and involved the construction by Rosehill of 19 kilometres of pipeline to facilitate the supply of recycled water (Pipeline). The Pipeline was connected to a recycled water plant in Fairfield (the Fairfield Plant). The Fairfield Plant is located on Lots 7–16 in section 1 of Deposited Plan 2728, known as 2 East Parade, Fairfield, and has a land area of 13,734 square metres (the Fairfield Property). 2. The Pipeline requires two reservoirs to operate, one contained in Rosehill on land leased from Shell Company of Australia Ltd (the Rosehill Reservoir Lease) and the other in Woodville located on land leased by Rosehill from Parramatta City Council (the Woodville Reservoir Lease). 3. Pursuant to agreements executed in August 2008, AcquaNet Sydney Pty Ltd (AcquaNet) and Rosehill, both subsidiaries of Jemena Ltd, were the entities designated to construct and execute the project. Rosehill was the asset-holding entity, and is the registered proprietor of the Fairfield Property, and owns the Pipeline. An unrelated entity, Veolia Water Australia Pty Ltd (Veolia) developed the Fairfield Plant and operated it pursuant to a plant agreement. 4. The parties agree on the following characteristics of the Pipeline: 1. The Pipeline is approximately 19 kilometres in length and is buried in the ground. 2. The Pipeline is designed to provide a permanent means of water carriage. 3. There are three reservoirs and two pumping stations along the Pipeline. 4. Rosehill constructed the Pipeline and in order to do so either laid it in an open trench, over which the displaced soil was replaced, or used directional boring through abandoned gas mains pipes. 5. Where road surfaces or footpaths were disturbed in the process of laying the Pipeline, they were restored and returned to use as roads and footpaths once the Pipeline was installed. 6. The Pipeline originates on the Fairfield Property and is connected to the Fairfield Plant. The Pipeline runs to the boundary between Yennora and Old Guildford, it then divides into two branches which comprise the remainder of the Pipeline. 7. The shorter of these branches travels west-north-west to the suburb of Smithfield and connects to the Marubeni power station. The longer branch travels through Old Guildford, Granville, Rosehill and Camellia where it eventually connects to Boral and CSR plants. 1. The vast majority of the Pipeline travels under Crown land, estimated at 95.37 per cent, and the remainder of the Pipeline travels underneath privately owned land. The only land owned by Rosehill that the Pipeline traverses is the Fairfield Property. The relevant transaction 1. Pursuant to a share sale agreement (SSA) that settled on 30 September 2019, Conexa (known at the time as WUA Sydney Holdings Pty Ltd) purchased the entirety of the issued share capital of AcquaNet and Rosehill. The vendors were Jemena Limited and SGSP (Australia) Assets Pty Ltd. WUA MidCo Pty Ltd acted as guarantor. 2. Clause 4 provided that the purchase price was $74,700,000 with provision for adjustments. The conditions for completion required that AcquaNet enter into a termination deed with Veolia in respect of the plant operation agreement (Termination Deed). Pursuant to the Termination Deed, AcquaNet paid Veolia approximately $57 million, and upon payment the plant agreement would be terminated, and all of Veolia's rights, title and interest in the Fairfield Plant assets would transfer to AcquaNet. The Commissioner submits that the price paid to Veolia is relevant to an assessment of the valuation of the assets, though it is unnecessary to determine any duty liabilities arising out of the Termination Deed. The assessment and objection determination 1. On 20 December 2019, the plaintiff's representatives provided a submission to the Commissioner regarding the assessment of duty on the transaction the subject of the SSA. An estimated duty liability of $1,275,160 was paid to the Commissioner, said to consist of $233,957 (described as being in respect of the surrender by Veolia to AcquaNet of the Fairfield Sub-Lease) and landholder duty of $1,041,203. The submission also noted that the plaintiff had commissioned KPMG to undertake an independent valuation of the land holdings and other assets of Rosehill, and that the plaintiff was not in a position to provide a finalised statement. 2. On 22 June 2020, the valuation report prepared by KPMG (KPMG Report) was provided to the Commissioner along with a landholder acquisition statement. The KPMG Report identified that the purchase consideration for both AcquaNet and Rosehill was $70.4 million, with approximately $60.8 million attributed to the market value of the share capital in Rosehill. The KPMG Report stated that the fair value of the Fairfield Property was $4,110,000, and the fair value of Rosehill's plant and equipment was $56,639,000 consisting of $46,390,000 for 'piping', and $10,249,000 attributed to the remainder. 3. On 21 March 2022, the Commissioner issued a Duties Notice of Assessment (the Assessment), which assessed the plaintiff as liable for landholder duty in the sum of $3,326,492. This was on the basis that the unencumbered value of the land holdings and goods of Rosehill, based on the KPMG Report, was $60,749,000 comprising $4,110,000 for the Fairfield Property, $46,390,000 for the Pipeline and $10,249,000 for Rosehill's other plant and equipment. 4. On 23 March 2023, the Defendant disallowed the plaintiff's objection. On 11 May 2023, these proceedings were commenced by summons. The relevant statutory regimes Duties Act 1997 (NSW) 1. Chapter 4 of the Duties Act imposes landholder duty on the acquisition of an interest in a private landholder. Specifically, s 155(1) charges duty on the 'unencumbered value of all land holdings and goods of the landholder in New South Wales'. 2. Sections 148 and 149 provide relevantly: 148 When does a liability for duty arise? A liability for duty charged by this Part arises when a relevant acquisition is made. 149 What is a "relevant acquisition"? (1) For the purposes of this Chapter, a person makes a relevant acquisition if the person— (a) acquires an interest in a landholder that is of itself a significant interest in the landholder, or (b) acquires an interest in a landholder that (when aggregated with other interests in the landholder held by the person or an associated person) results in an aggregation that amounts to a significant interest in the landholder, or (c) already having a significant interest, or an interest described in paragraph (b), in a landholder, acquires a further interest in the landholder. … 1. A person who makes a relevant acquisition is liable to pay duty chargeable under Pt 2 of Ch 4: s 154(1). 2. A landholder includes, relevantly, a private company that has land holdings in New South Wales with a threshold value of $2,000,000 or more: s 146(1). A landholder is a private landholder if it is a private company: s 146(2). 3. There is no dispute that, at the time of the acquisition through the SSA, Rosehill was a private landholder (having landholdings with a threshold value of $2 million) and the plaintiff acquired a significant interest in Rosehill within the meaning of s 150, being 100 per cent. 4. The principal dispute in the proceeding turns on the construction of s 147, which provides: 147 What are the "land holdings" of a landholder? (1) For the purposes of this Chapter, a land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor, subject to this section. (2) An interest in land is a land holding of a unit trust scheme only to the extent that the interest is held by the trustee of the unit trust scheme in its capacity as trustee of the scheme, by a custodian of the trustee of the unit trust scheme in its capacity as custodian or by a sub-custodian of the custodian of the trustee of the unit trust scheme in its capacity as sub-custodian. (3) An interest in land is not a land holding of a company if the company holds the land on trust, but only if the company is not a beneficiary of the trust. (4) This section is in aid of, but does not limit, the operation of any provision of this Chapter providing for constructive ownership of interests. 1. The Dictionary to the Duties Act relevantly contains the following definitions, each of which are inclusive rather than exclusive: interest includes an estate or proprietary right. land includes a stratum. 1. The Interpretation Act 1987 (NSW) (Interpretation Act) relevantly defines the terms 'estate' and 'land', as appearing in other NSW Acts (subject to any contrary intention in the Act concerned), as follows: estate includes interest, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity. …. land includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein. 1. This definition is not exhaustive as to what may comprise 'land' but serves as a 'point of departure': Risk v Northern Territory (2000) 105 FCR 109 at [30] per French and Kiefel JJ, referring to a cognate provision in the Acts Interpretation Act 1901 (Cth). 2. The term 'proprietary right' is not defined in the Duties Act or the Interpretation Act. In Ch 4 of the Duties Act, 'property' includes money (s 163I(2)), and 'property' is defined in the Interpretation Act as 'any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description, including money, and includes things in action'. 3. Clause 4 of the Dictionary to the Duties Act, introduced into the Act by the State Revenue Legislation Further Amendment Act (No 2) 2009 No 91 (NSW), provides: 4 Interests in land (1) For the purposes of this Act, a mining lease or mineral claim granted under the Mining Act 1992 is taken to give the holder an interest in the land to which it relates. (1A) To avoid doubt, the land includes anything that, under the authority of the mining lease or mineral claim (whether direct or indirect), is fixed to the land the subject of the lease or claim and that would be a part of the land (as a fixture) if the lease or claim were an estate in fee simple in the land. (2) For the purposes of this Act, the following do not give rise to an interest in land: (a) an assessment lease, exploration licence or opal prospecting licence under the Mining Act 1992, (b) a carbon sequestration right within the meaning of Division 4 of Part 6 of the Conveyancing Act 1919, (c) a petroleum title within the meaning of the Petroleum (Onshore) Act 1991, (d) a licence, permit, lease, access authority or special prospecting authority under the Petroleum (Offshore) Act 1982. 1. The acquisition occurred before s 147A(1) (which provides that 'land' includes anything fixed to the land, whether or not the thing constitutes a fixture at law, or is owned separately from the land or is notionally severed from the land by any other Act or law) was enacted. It was accepted that it is not relevant in construing the term 'interest in land' in s 147(1) in its form at the time of the acquisition. 2. The term 'goods' as used in s 155(1) is not defined but is subject to the limitations set out in s 163K: 163K Goods of a landholder (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. Water Industry Competition Act 2006 (NSW) 1. The Pipeline and Rosehill Water Recycling Scheme as a whole are governed by the Water Industry Competition Act 2006 (NSW) (WIC Act). 2. The WIC Act was enacted to provide for private sector persons to supply residential and industrial water to customers and for the regulation of that activity. Amongst other things, the WIC Act provided for the issuing of licences to 'network operators' on conditions and confers on network operators powers, and imposes on them duties, relating to water industry infrastructure. 3. As the holder as of the acquisition date of a network operator's licence issued pursuant to the WIC Act, Rosehill held statutory powers to perform work relating to water industry infrastructure. Under Part 6 of the WIC Act, entitled 'Work relating to water industry infrastructure', a licensed network operator was empowered '[f]or the purposes of this Act' to carry out work (in particular, any such work in or under a public road or public reserve) connected with the erection, installation, extension, alteration, maintenance or removal of any water industry infrastructure (s 58). Save 'to cope with emergencies', a licensed network operator must carry out no such work (other than routine connections, repairs or maintenance work) unless the network operator has given the local council or roads authority notice of the proposal to carry out the work, and has given that council or authority a reasonable opportunity (of at least 40 days) to make submissions to the network operator in relation to the proposal, and has given consideration to any such submissions (s 58(3)–(4)). It was required to make good damage caused to a public road or public reserve as a result of its operations (s 59). 4. Other express powers conferred on a licensed network operator under Part 6, Division 1 were: to require a land owner (subject to notice) to remove a tree believed to be destroying, damaging or interfering with the network operator's water industry infrastructure (subject to the network operator reimbursing the owner for the reasonable expenses); to recover its own costs of removing the tree should the owner fail after notice to remove it (s 60(1)-(2), (5)-(6)); and similar powers were conferred on a network operator with regard to other obstructions of water mains and sewer mains (s. 61) and to alter the position of conduits owned by a person (s 62). 5. Division 2 of Part 6 of the WIC Act was headed 'Powers of entry of authorised licensed network operators'. The central provision of Division 2 was section 65B: 65B Entry of land (1) An authorised licensed network operator may, by any of its authorised agents, enter any land in accordance with this Division for any one or more of the following purposes: (a) to carry out an inspection or maintenance work on any of its water industry infrastructure, (b) to carry out necessary repair work on any of its water industry infrastructure, (c) to carry out emergency work on any of its water industry infrastructure. (2) Except in emergencies, a power of entry may only be exercised during daylight hours. 1. Section 65A provided: … (2) A reference in this Division to the water industry infrastructure of an authorised licensed network operator (however expressed) is a reference to the water industry infrastructure that the operator is authorised to construct, maintain or operate under its network operator's licence regardless of whether the infrastructure is owned by the operator or any other person. 1. These powers were subject to various restrictions including that notice of entry, specifying the intended date of entry (at least two days hence), must be given before an authorised licensed network operator exercises a power of entry under Division 2 (s 65C); while use of force may be used to gain entry to land (save residential land) under a Division 2 power, that may only be done if authorised by the authorised network operator in writing (s 65); and entry to residential premises may only be had, under Division 2, with the consent of the occupier (or owner) or under the authority of a warrant of entry (s 65G). 2. Ownership of water industry infrastructure is dealt with by s 64, which provided at the acquisition date: (1) Except where another Act expressly provides otherwise, water industry infrastructure is owned by the person that constructs or installs it or any person that subsequently acquires title to it, whether or not the land in, on, under or over which it is situated is owned by that person. Note – Examples of provisions of other Acts that expressly provide for the ownership of water industry infrastructure by certain public water utilities include the following: (a) section 19 of the Hunter Water Act 1991. (b) section 37 of the Sydney Water Act 1994. (c) section 29 of the Water NSW Act 2014. (2) Water industry infrastructure that a network operator's licence authorises the licensee to construct, maintain or operate is not to be taken in execution of any judgment against a person (other than the owner of the infrastructure or the licensee) under any process of a court. (3) The provisions of this section have effect despite anything contained in section 42 of the Real Property Act 1900. 1. The WIC Act defines 'water industry infrastructure' to mean 'water infrastructure' and 'sewerage infrastructure'. The former is defined as: any infrastructure that is, or is to be, used for the production, treatment, filtration, storage, conveyance or reticulation of water, but does not include— (a) any pipe, fitting or apparatus that is situated downstream of a customer's connection point to a water main, or (b) any pipe, fitting or apparatus that is situated upstream of a customer's connection point to a stormwater drain. 1. 'Sewerage infrastructure' is defined as: any infrastructure that is, or is to be, used for the treatment, storage, conveyance or reticulation of sewage, including any outfall pipe or other work that stores or conveys water leaving the infrastructure, but does not include any pipe, fitting or apparatus that is situated upstream of a customer's connection point to a sewer main. 1. There was no dispute between the parties that WIC Act s 64 applies to the Pipeline. 2. Until 2011 section 64 had simply provided: 64 Ownership of water industry infrastructure (1) A licensed network operator is the owner of its water industry infrastructure, whether or not the land in, on or over which it is situated is owned by the network operator. (2) A licensed network operator's water industry infrastructure is not to be taken in executed of any judgment against a person other than the network operator under any process of a court. (3) The provisions of this section have effect despite anything contained in section 42 of the Real Property Act 1900. 1. However, s 64 was amended by the Water Industry Competition Amendment Act 2011 (NSW), to provide as it did as of the acquisition date. During the second reading speech of the Bill in the Legislative Council, the responsible minister explained the 'revised section 64 removes the incorrect assumption in the current provision that the licensed network operator is also the owner of the infrastructure': New South Wales Legislative Council, Parliamentary Debates (Hansard), 9 November 2011 at 6 (the Hon Greg Pearce, Minister for Finance and Services, and Minister for the Illawarra). 2. The plaintiff submitted that the evident purpose of s 64, in its form at the date of the acquisition, was to protect the investment outlay by a person in the private sector who had installed water infrastructure on another's land. Where the person who installed the infrastructure was other than a licensed network operator, s 64 protected the installer's interest from becoming lost to the landowner. There was an evident intention that the common law rules in relation to fixtures by which chattels become part of the land were not to apply. Further, the protection was to apply also to a licensed network operator to prevent the forfeiture of their interest in the infrastructure by means of their losing the operating licence. In either case, sub-section 2 provided a further protection by which, while the relevant water infrastructure assets were liable to execution, they were so only to enforce a judgment against the owner of the infrastructure or the licensee. Issues 1. The issues in dispute between the parties are: 1. Is the Pipeline properly characterised as an interest in land for the purposes of s 155 of the Duties Act? 2. Is the Pipeline properly characterised as an interest in goods for the purposes of s 155 of the Duties Act? 3. What was the unencumbered value of the Pipeline at the time of the acquisition? 1. I have concluded that Rosehill's interest in the Pipeline is not an interest in land for the purposes of s 155(1) of the Duties Act but is an interest in goods for the purpose of that section, and the plaintiff has failed to discharge its onus of proof that the unencumbered value of the Pipeline at the time of the acquisition was less than the amount on which the Assessment was based, being $46,390,000 The parties' submissions Plaintiff's submissions 1. The plaintiff's overarching contention is that Rosehill's interest in the Pipeline is an innominate interest that cannot be characterised as either an interest in land or goods. 2. The plaintiff submits that the intention of s 64 of the WIC Act, discerned from the second reading speech to the Water Industry Competition Amendment Act 2011 (NSW) and by comparison to the previous version of s 64, is to protect infrastructure owners from potential claims by landowners of land on which it is installed. There was no intention to prescribe infrastructure such as the Pipeline as land. Rather, the WIC Act seeks to regulate a legal relationship between water infrastructure and a person, and to prevent the separate ownership of land from affecting those rights. 3. The effect of the WIC Act is that water infrastructure, such as the Pipeline, is held separately from the holding of the land within which that infrastructure lies. In that circumstance the mere fact that the Pipeline lies within land does not mean that the Pipeline can be called a part of the land. The correct position is that the Pipeline could only be called 'land' where it was both embedded in and affixed to land and the title to that land was held by the same owner. The WIC Act denies that second criterion and means that neither the doctrine of fixtures nor the principle expressed in the maxim cujus est solum, ejus est usque ad coelum et ad inferos ('the person who owns land owns it from the heavens above to the centre of the earth below') could apply. Parliament could have provided through a deeming provision that water infrastructure was land despite the distinct ownership of land and the infrastructure. No such provision was included. 4. The purpose of s 64 of the WIC Act is to protect an investor's investment interest in infrastructure from potential claims by owners of land. The relationship between water industry infrastructure and land must have been considered by the drafters of the legislation, and s 64 is a choice to attempt to avoid the uncertainties that may arise if ordinary principles of land law were to apply to water infrastructure. 5. That position is consistent with the approach of the High Court in Asciano Services Pty Ltd v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46. There it was found that the statutory regime governing rail infrastructure facilities did not disclose an intention that the vesting of the rail infrastructure facilities in the Rail Access Corporation (RAC) conferred on it an interest in land that was subject to duty, though an access agreement was found to be caught by the statutory definition of 'lease' which applied to an agreement by which a right to use land is conferred or acquired. 6. The doctrine of fixtures does not aid the Commissioner, as where chattels affixed to land are owned by someone other than the owner of the land to which they are attached, the basis of it being a fixture is absent: Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712. Any reliance on North Shore Gas Co Ltd v Commissioner of Stamp Duties [1940] HCA 7; (1940) 63 CLR 52 (First North Shore Gas) is misplaced, as only a minority of the justices in that case positively found that the laying of gas pipelines conferred an interest in land, and the question called upon to be answered was significantly different. There, all the court was required to do was determine whether the pipes were 'goods, wares or merchandise' once they were laid in the ground, and not to positively identify them as having the character of an interest in land. 7. The determination in Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118 (Second North Shore Gas) lends further support to the plaintiff's proposition. There, Barwick CJ, McTiernan, Kitto and Taylor JJ at 126-7 doubted the correctness of the conclusion reached by some members of the Court in First North Shore Gas that the gas pipelines, or the space which they occupied, constituted an interest in land. 8. Further, the Pipeline should not be classified as 'goods' for the purpose of s 155(1) of the Duties Act. Subject to the express exclusions in s 163K, the term goods should be given its ordinary meaning. The ordinary meaning of goods is moveable property: AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596; [2003] VSC 453 at [69]. That assessment is confirmed when looking at the exceptions contained in s 163K, which all have the character of being moveable, and meet ordinary definitions of the word 'goods'. 9. Further, s 155 uses land and goods in a mutually exclusive way, but that does not mean that those words encapsulate exhaustively all things that may be described as property. 10. In the circumstances the Pipeline could not be classified as goods for the purposes of s 155 as: 1. The Pipeline as a whole is not moveable in its present condition, nor did the parties to the SSA purport to treat the Pipeline as a moveable good cf the position with tenant's fixtures considered in TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576; [2010] HCA 49. 2. While the WIC Act distinguished between ownership of water industry infrastructure and land, that does not mean that it determined the proper characterisation of the infrastructure itself. 3. First North Shore Gas is authority for the proposition that a pipeline cannot be classified as 'goods' once installed in land. 1. The decision in Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd (2023) 116 ATR 337; [2023] NSWCA 113 (Shell Energy (No 1)) that power plants situated on land were goods for the purpose of s 155 is distinguishable from the present case. There, the Court of Appeal had to deal with a legal regime unlike the WIC Act. There was no specific authorising act for the power plants, and instead the context in which the dispute arose was the execution of two vesting orders by the relevant Ministers with the object of transferring title in the component parts of the power plants to a special purpose vehicle in order to sell those assets to private entities. The Court of Appeal found that the 'legal severance' of the plants from the land through the vesting orders was sufficient to return them to their prior state as goods, even though they had not been removed from the land. 2. The absence of a specific statutory right is important and serves to differentiate Rosehill's interest in the Pipeline from the interests in the power plant considered in Shell Energy (No 1). 3. On the whole, the better characterisation of the Pipeline is that it is neither land nor goods. Even if the Pipeline were to be characterised as a good for the purposes of s 155, then the value of the Pipeline should be nil as the proper valuation would be that of Rosehill's entitlement to remove and sell the pipes that make up the Pipeline. Defendant's submissions 1. The primary contention for the Commissioner was that the Pipeline was a part of 'land' for the purposes of s 155 of the Duties Act. A pipeline underneath land falls within the ordinary legal conception of land: B Edgeworth, Butt's Land Law (Lawbook Co, 7th ed, 2017) at [2.10]; Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 at [73]. 2. The dictionary to the Duties Act defines land to include a 'stratum'. In its predecessor, the Stamp Duties Act 1920 (NSW), a further definition of stratum was included as: Being a part of land consisting of a space or layer below, on, or above the surface of the land, or partly below and partly above the surface of the land, defined or definable by reference to improvements or otherwise, whether some of the dimensions of the space or layer are unlimited or whether all the dimensions are limited. 1. It is possible for a landowner to own one part of land whilst a third party owns a separate stratum of the land, including the items fixed to it: Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1970) 124 CLR 73 at 91; Butt's Land Law at [2.450]. The Pipeline is properly characterised as land as it occupies a three-dimensional space below the surface of land and is fixed in place. The divergence in ownership of the fee simple in the land in which the Pipeline sits and the ownership of the Pipeline itself is no impediment to this conclusion, as the stratum occupied by the Pipeline may be considered on a standalone basis. 2. Further, the term 'land holdings' as deployed in s 155 of the Duties Act is not subject to limitations from general law. The term is defined in s 147(1) to mean 'an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor'. As the Court of Appeal in Chief Commissioner of State Revenue v Shell Energy Operations No 2 Pty Ltd (No 2) [2023] NSWCA 169 (Shell Energy (No 2)) stated at [7]: … the term remains to be construed purposively and in the context of the Act… as a statutory notion, it was not necessarily limited by general law concepts. 1. In the context within which the phrase, 'interest in land' appears in the Duties Act, a contrary intention appears, as: 1. The words 'interest' and 'land' are defined inclusively and not exhaustively in the Dictionary. 2. The drafting history shows that the phrase 'interest in land' was distinguishable from the phrase 'interest in real property' as both appeared in the Duties Act previously (see cf the former version of s 108 and the former version of s 184). 3. The phrase 'interest in land' must also be construed by reference to cl 4 in the Dictionary, which includes certain statutory rights as conferring an interest in land, indicating that statutory regimes can confer 'interests in land', even when those rights are not general law interests in land. The critical question in this respect, contrary to the approach of the plaintiff, is not to construe the WIC Act as a starting point, but instead to begin by analysing the types of statutory regimes that the Duties Act considers to confer an 'interest in land'. 4. Cl 4(1A) of the Dictionary indicates that items fixed to land may be 'interests in land' irrespective of whether they meet the general law definition of fixtures. Notably, this clause was introduced in response to the High Court's decision in TEC Desert, as indicated by the second reading speech. The text of cl 4(1A), which is expressed 'to avoid doubt', indicates an ongoing legislative intent to include within the scope of 'interests in land' the ownership of items affixed to land that are not fixtures. 5. The inclusion of s 163H, providing the Commissioner with the discretion to relieve a taxpayer from duty where Ch 4 brings an acquisition within its operation that the chapter was not intended to affect, indicates that a broader rather than narrower construction is to be preferred. 1. Characterising the Pipeline as an interest in land is not inconsistent with the High Court's decision in Asciano and is supported by the observations of Hodgson JA in the Court of Appeal decision from which the appeal came: Chief Commissioner of State Revenue v Pacific National (ACT) Limited (2007) 70 NSWLR 544; [2007] NSWCA 325 at [27]. Hodgson JA said at [27] (emphasis added): In my opinion, cuttings, drainage works, track support earthworks, tunnels and service roads are either themselves configurations of land, or else are so much integrated into land as not to be distinguishable from land; and the statutory vesting of ownership of these items in an owner who is not owner of the land on which they are situated does not make them other than land. 1. That conclusion, which was agreed with by Ipp JA at [49] and recorded in the High Court's decision in Asciano at [20] without any express or implied criticism, is supportive of the proposition that the Pipeline can constitute an interest in land. Beyond this observation of Hodgson JA in the decision under appeal, Asciano is of limited assistance in resolving the present dispute, particularly as the taxpayer had conceded before the High Court that their freight operations involved a use of land. 2. Similarly, the plaintiff's reliance on Second North Shore Gas is misplaced, because the nature of the right at issue in that case was not the characterisation of the Pipeline, but instead whether the company could be reimbursed for the value 'not for the pipes themselves, but for the loss of the right to use those pipes to supply customers. This point is critical to understanding the case': Shell Energy (No 1) at [107]. 3. Therefore, the Pipeline should be characterised as an interest in land by virtue of being embedded in land. Separately, the physical affixation of the Pipeline to land, despite not meeting the general law criteria for being a fixture (due to the divergence in ownership), remains capable of meeting the statutory criteria for 'land' in s 155(1). The possibility of this was adverted to by Kirk JA in Shell Energy (No 1) at [86], where his Honour stated: Before addressing this argument, it should be noted that another argument would appear to be open that even if the vesting orders did vest all the assets listed in the relevant annexures in Green State Power and then in GSP, nonetheless those interests remained "land holdings" for the purposes of the Duties Act. For example, it could have been argued that even if they were not fixtures in the eyes of the general law, nonetheless the physical affixation of the power stations to the land meant that GSP's interests in the power stations were interests in land for the purposes of the Act. That argument was not run. The Commissioner seemed to accept that if the vesting orders operated to vest the power stations in Green State Power and then in GSP then the power stations no longer constituted land holdings for the purposes of the Duties Act. The Commissioner did submit that "even if GSP owns all rights to the Power Stations, they remain properly characterised as an interest in land". But that sentence was part of the submissions on Ground 1 relating to the construction and effect of the vesting orders. 1. This point was reiterated by the Court in Shell Energy (No 2) at [7]: The term "land holdings" employed in s 155 is defined in s 147(1) of the Duties Act to mean "an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor" (subject to currently immaterial exceptions). That definition invokes general law notions by use of the phrase "an interest in land". But the term remains to be construed purposively and in the context of the Act. The point made at [86] was that, as a statutory notion, it was not necessarily limited by general law concepts 1. Even if the Court were not to accept that the interest in the Pipeline was an interest in land, it should alternatively be found that the interest is an interest in goods. That finding should be made for the following reasons: 1. The piping comprising the Pipeline can be regarded as falling within the concept of goods. In Shell (No 1) Kirk JA noted that the concept of goods was largely synonymous with chattels (at [90]) and did not find that a necessary feature of 'goods' was that they were moveable. 2. The statutory history of the Duties Act supports the proposition that fixtures removable from property are capable of being considered as goods. Ch 6 of the Duties Act when the act commenced provided for hire of goods duty on all chattels personal and fixtures severable from realty. There is no express carve-out of fixtures severable from realty from the definition of goods, and there is no indication in the text that Parliament intended a narrow meaning of the word. 3. There is no purposive reason for narrowing the definition of the word good to only moveable property. Section 155 operates for enterprise-level transactions and would not capture ordinary mercantile transactions such as stock-in-trade acquisitions or goods under manufacture. 4. Both TEC Desert and Shell Energy (No 1) confirm that goods that cease to be fixtures as a consequence of a legal regime may be regarded as chattels or goods for the purpose duties legislation. The Court of Appeal, in considering this exact issue in Shell Energy (No 1) found that because 'physical removal of a fixture returns it to being characterised as a chattel (i.e. good) [it] supports the notion that legal severance of a fixture has the same effect' at [92]. To the extent that the plaintiff suggests that the Court of Appeal is in error on this point, this Court remains bound to apply Shell Energy (No 1). The effect of the WIC Act is to sever ownership of the Pipeline from the land through which it travels and applying Shell Energy (No 1) this means that the Pipeline ought to be characterised as goods. 5. The holding in First North Shore Gas does not constrain goods to only those not affixed to land, as the use of the word 'goods' arose in the context of an exemption from duty applicable to 'goods, wares or merchandise' and the word took colour from the words which follow: see Shell Energy (No 1) at [124]. 6. The conclusion that the Pipeline constitutes 'goods' for the purposes of the Duties Act does not affect the construction of the WIC Act in any forced or artificial manner. 7. Finally, the Commissioner does not contend that all assets must fall on a spectrum of land or goods, and its submissions do not have that effect, contrary to the plaintiff's submissions. 1. The valuation of the Pipeline should be based on its ability to be deployed in the plaintiff's business, and not by reference to the value of the piping if it is removed and sold independently. The latter approach, advocated for by the plaintiff, is at odds with the requirements of the statute, and the context within which the Pipeline was acquired. There is also no indication in the text of the Duties Act that there should be a divergence in the valuation of 'land holdings' and 'goods' in s 155. Both require a valuation as a going concern. Consideration Issue one: is the Pipeline an interest in land? 1. The term 'land holding' is defined in s 147 to mean an 'interest' in land (subject to various exclusions not presently relevant). 'Interest' is capable of many meanings, and the precise meaning depends on the context in which it is used: Leedale v Lewis [1982] 1 WLR 1319 at 1324. When the term is used (as here) in the context of the phrase 'interest in land', it is regarded as referring to a proprietary right in the land and not a mere personal right: Stow v Mineral Holdings (Aust) Pty Ltd (1977) 180 CLR 295 at 311; R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342; Mullane v Mullane (1983) 158 CLR 436 at 445; Commissioner of State Revenue (WA) v Westnet Rail Holdings No 1 Pty Ltd [2013] WASCA 110; (2013) 45 WAR 140 at [85] and [151]–[153]. 2. This is not affected by the fact that the term 'interest' is defined to include an 'estate' which has an extended definition in the Interpretation Act which includes a 'right' at law or in equity, as that is a reference to a proprietary right: see e.g. Stow v Mineral Holdings at 311. That also does not mean that the term is restricted only to those interests that are recognised at general law. The precise form and type of interests in land envisaged by Duties Act s 147 and encompassed by the phrase land holdings in s 155(1) is a matter of statutory construction. That is especially so when the relevant interest is a creature of statute, as is the case here. 3. The starting point is to consider the effect of s 64 of the WIC Act. The section provides that water industry infrastructure is 'owned by the person that constructs or installs it or any person that subsequently acquires title to it, whether or not the land in, on, under or over which it is situated is owned by that person'. Three aspects of the provision may be noted. First, by the use of the present tense 'is', it operates to vest ownership of the thing or things comprising the water industry infrastructure in the person identified. Second, it does so irrespective of whether that person owns the land in, on, under or over which the thing or things are situated. Those words are designed to negate the position which would arise under the common law, which is that where chattels are affixed to the land so as to become fixtures they form part of the land and are owned by the owner of the land. Third, it treats the thing or things which comprise water industry infrastructure as items of property separate from the land in, on, under, or over which they are situated. 4. There is nothing in s 64 of the WIC Act to suggest that the thing or things to which it applies are intended to be land or an interest in land. For the reasons which follow, in my opinion, on the proper construction of s 64 it has the effect of causing the thing or things comprising of the water industry infrastructure to retain their character as chattels despite their affixation to the land in, on, under or over which they are situated. 5. First, there is a general principle that a statutory provision which vests in a person ownership of items that would otherwise be fixtures does not merely by virtue of conferring that right of ownership in the item confer an interest in the land itself: Newcastle-Under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 at 103; Second North Shore Gas at 127 and 133–4; Asciano Services Pty Ltd v Chief Commissioner of State Revenue (2008) 235 CLR 602 at [27]–[31]; Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 at [75] and [163]. It would be necessary to find in the statute some indication of an intention to take that further step of conferring an interest in the land, for example by a reference in the statute to incidents normally associated with the creation of interests in land. There is no indication of that kind in the WIC Act; indeed the contrary is indicated, given the third feature of s 64 referred to at [70] above. 6. This principle is illustrated by Asciano where the issue was whether a rail access agreement granted to the taxpayer by RAC was a 'lease' within the meaning of s 164A(b) of the Duties Act which turned on whether it conferred a right to use land. Under the rail access agreement, the taxpayer was granted access to railway lines and associated infrastructure facilities owned by RAC which formed part of the New South Wales rail network. Those railway lines and associated infrastructure facilities were located on (in the sense that they either rested upon or were embedded in) land owned by the State Rail Authority (SRA). 7. RAC's rail infrastructure facilities were owned by it pursuant to cl 2(1) of Schedule A to the Transport Administration Act 1988 (NSW), which provided as follows: RAC is the owner of all rail infrastructure facilities installed in or on land, in or on rivers and other waterways and in or on the beds of rivers and waterways by RAC and of all rail infrastructure facilities vested in or transferred to RAC (whether or not the place on which the facilities are situated is owned by RAC). 1. The Court (Gummow, Kirby, Hayne, Crennan and Kiefel JJ in a joint judgment) referred at [27]–[28] to the decision in Second North Shore Gas and approved the principle applied there which had been stated by Evershed J in Newcastle-Under-Lyme Corporation v Wolstanton Ltd [1947] Ch 92 at 103–4 that no greater rights or interests should be taken as conferred upon the undertakers of a statutory right or duty than are necessary for the fulfilment of the object of the statute. Their Honours then added (again by way of approval of what Evershed J had said in Wolstanton): Whilst it was competent for Parliament to confer or create interests in land, the absence of a reference in the statute to incidents normally associated with them suggested that the creation of such interests was not intended. 1. Their Honours then applied that principle to conclude that RAC's ownership of the rail infrastructure assets did not give it an interest in the land owned by SRA on which the facilities were situated, although that did not assist the taxpayer because it was found nevertheless to have obtained a right to use SRA's land. This is shown by the following observations of the Court (emphasis added): [29] The property owned and vested in RAC, and the rights it has with respect to land in connection with its functions, were provided by the TA Act. The Act disclosed no intention that the vesting of the rail infrastructure facilities in RAC was to carry with it rights or legal consequences other than those identified in the scheme of the Act. That scheme provided for RAC's ownership of the facilities, some of which, under the general law, might have been classified as fixtures and therefore part of the land to which they were attached or in which they were embedded. It is a distinct and separate feature of the scheme that SRA may, as here, be the owner of the lands on or in which the facilities are constructed or embedded. It was on account of SRA's ownership of that land that it was necessary that statutory authority be provided, which permitted RAC to use the land in connection with its functions. The listing of the various facilities in the definition of "rail infrastructure facilities" does not indicate that they were to be held by RAC as land, even if some might have the characteristics of land. They merely constituted part of the railway network which vested in it. Their identification was necessary to show the extent of the infrastructure spoken of, to distinguish it from the land ownership of SRA and to nominate the subjects of the protective provisions of Sch 6A, cl 8. [30] The functions and powers of RAC extended to the provision of access to the rail network to others. They did not extend to the giving of interests in the land of SRA. The TA Act made provision for access to and consequential use of that land by others. RAC's rights to use that land were stated to be for purposes connected with the rail infrastructure facilities referred to in Sch 6A, cl 2. The certificates of authority its authorised officers or employees could give to other persons, to enter and occupy SRA land, were limited to these purposes. Pacific National's right to access and use land [31] When RAC granted access rights, to the rail network and rail infrastructure facilities, it was not conferring an interest in land. It did not hold such an interest under the provisions of the TA Act by reason of its ownership of the facilities. Pacific National did acquire a right to use SRA's land because it was a party to an access agreement. Schedule 6A, cl 5(1) provided that such a person "is authorised" to have access to the rail infrastructure facilities to which the access agreement relates "even if the facilities are situated in or on SRA land", so long as access is exercised "in accordance with and as permitted by the access agreement". 1. The observations of Hodgson JA in the Court of Appeal decision below, set out at [61] above are not applicable to the present case. A chattel brought onto land may remain a chattel, become a fixture or be so affixed to the land as to become part and parcel of the land: Elitestone v Morris [1997] 1 WLR 687 at 690–1; Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd [2009] FCA 742; (2009) 258 ALR 89 at [51]. The items to which Hodgson JA referred appear to fall within the third category; the Pipeline does not. 2. Second, there are a number of decisions which have concerned statutory severance provisions of a similar kind to s 64 where the relevant items have been treated as retaining their character as chattels. 3. In Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 (Vopak) the Victorian Court of Appeal considered the operation of s 28(2) of the Landlord and Tenant Act 1958 (Vic) (LT Act). Section 28(2) provided as follows (emphasis added): If any tenant holding lands by virtue of any lease or agreement … at his own cost and expense erects any building either detached or otherwise or erects or puts in any building fence engine machinery or fixtures for any purpose whatever (which are not erected or put in in pursuance of some obligation in that behalf) then, unless there is a provision to the contrary in the lease or agreement constituting the tenancy, all such buildings fences engines machinery or fixtures shall be the property of the tenant and shall be removable by him during his tenancy or during such further period of possession by him as he holds the premises but not afterwards; notwithstanding the same consist of separate buildings or that the same or any part thereof may be built in or permanently fixed to the soil … 1. The issue in Vopak was whether a transfer of land in Victoria by Whitemark Pty Ltd (Whitemark) to the taxpayer should be assessed for duty under the Stamps Act 1958 (Vic) by reference to the purchase price of $340,000 as the taxpayer contended, or on the basis that the market value of the land was a higher amount ($15,058,569) because the land included two categories of fixtures which enhanced the value of the land: (a) the storage tanks and associated structures previously installed on the land by a lessee (Wickland Oil Terminals Pty Ltd) and (b) the storage tanks and other structures previously installed on the land by Whitemark (as owner of the land) which it had transferred to another company (Whitemark Rollover Pty Ltd) immediately before the sale of land to the taxpayer. The former category of tenant's fixtures is referred to in the judgment as 'Wickland's fixtures' and the latter category as 'Whitemark's fixtures': see at [6]. 2. The Court of Appeal held that the Commissioner's assessment of duty on the transfer of the land by adding back the value of each category of fixtures was erroneous but for different reasons. This conclusion was summarised by Ormiston JA (Warren CJ and Buchanan JA agreeing) as follows (emphasis added): [81] … As to Wickland's fixtures, I have held that they remain chattels so that their value can have no relevance to a valuation of the subject land. As to Whitemark's fixtures, I have held that they are fixtures, so forming part of the realty, but there was an interest in Whitemark Rollover in those fixtures in equity which had to be recognised for the purposes of valuing the land. To give effect to these conclusions the order of the judge will therefore be maintained in so far as it requires the question of value to be remitted to the tribunal, though, of course, that valuation will be on a significantly different basis than before. 1. Ormiston JA reached the conclusion that the Wickland's fixtures (i.e. the tenant's fixtures) had retained their character as chattels on the basis that this was the effect of s 28(2) of the LT Act. His Honour considered that this was the result of the 'plain meaning' of the words of the provision, which was confirmed by his analysis of the legislative history (including the state of the common law at the time of its original enactment and the fact that the provision was designed to protect tenant's rights). Earlier, his Honour said (emphasis added): [40] So construed s 28(2) is one which is unique in Australia and has been recognised as such. There is therefore no need to read down the plain language of the section, as the commissioner sought to do. It was his contention that the relevant fixtures should be treated as part of the realty and therefore as part of the estate to be valued for stamp duty purposes. If they remained Wickland Terminals' property and, in consequence, retained their character as chattels, then they must, as Spencer's case makes clear, be ignored for the purpose of valuing the subject land and the respondent's interest in it. [41] I would reiterate that it has only been necessary to look at the convoluted history of s 28(2) and the relevant common law rules in order to be satisfied that one may properly accept the plain meaning of its terms, despite their apparent conflict with general principle. [42] It would therefore follow that the Wickland's fixtures have not become part of the realty owned by Whitemark nor did they form part of the interest or estate therein sold and transferred by Whitemark to the appellant in the third and final transaction on 8 May 1998. … 1. It is clear that the effect of s 28(2) was to deprive the storage tanks and other tenant's fixtures comprising the Wickland's fixtures at issue in Vopak of the character of 'fixtures' at common law, because they retained their character as chattels despite their affixation to the land: see in particular, [42] quoted above. This is confirmed by subsequent cases which have considered the effect of the Vopak decision. 2. It is true that the question at issue was whether the Wickland's fixtures formed part of the freehold land to be taken into account in the determination of the unencumbered value of that land on the assessment of a transfer of that land by the registered proprietor. Hence the character of the tenant's fixtures in the hands of the tenant was not directly in issue. However, it is clear that Ormiston JA's analysis was concerned with establishing the character of the tenant's fixture in the hands of the tenant. His Honour's observation at [20] that the reference to chattels in s 63(3) of the Stamps Act 'is presently irrelevant for in para (a) it was made clear that such chattels did not include fixtures' does not detract from this conclusion. This appears to be simply a recognition that fixtures and chattels are mutually exclusive concepts, and in any event, the items at issue were not fixtures or chattels of the owner of the freehold. 3. In Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523 (Uniqema), Ormiston JA (with whom Phillips and Callaway JJA agreed) described (at 546) the effect of the Vopak decision as follows (emphasis added): In essence it was held there that, notwithstanding the common law rules as to fixtures, the Parliament of this State had by s 28(2) reformulated the principles relating to property in tenant's fixtures by explicitly providing that, whenever fixtures are erected or put in by the tenant, "property" shall ordinarily remain in the tenant, until he or she gives up possession. In other words, contrary to the appellant's submission, tenant's fixtures (of the widest description, whether trade, ornamental or whatever) do not become property of the landlord and thus part of the realty, but remain chattels capable of removal at any time by the tenant and incapable of being dealt with by the landlord as part of the land, until the tenant has departed. 1. Section 28(2) of the LT Act is now found in s 154A of the Property Law Act 1958 (Vic). In Valuer-General v AWF Prop Co 2 Pty Ltd (2021) 65 VR 327; [2021] VSCA 274 the Victorian Court of Appeal (McLeish and Emerton JJA, Belany AJA) said, after referring to the Vopak and Uniqema decisions at [143] and [154] (emphasis added): [143] Section 154A of the [Property Law Act] displaces the common law of fixtures in so far as it concerns tenant's fixtures, such that those fixtures do not become part of the landlord's realty at common law, but remain the property of the tenant, at least for the period identified. … [154] AWF Prop Co is a tenant who at its own cost and expense installed the above ground AWF Assets on the land. It follows that it continues to 'own' those assets once installed on the land. Even if they were fixtures at general law, the above ground AWF Assets would, by the operation of s 154A, remain the property of AWF Prop Co and would not form part of the land. 1. Another example is provided by Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 (Epic) where the Court of Appeal of Western Australia considered the effect of statutory provisions conferring ownership of pipelines that would otherwise be a fixture served to prevent the item from becoming part of the realty. 2. The central issue in Epic was whether gas pipelines and associated infrastructure owned by the taxpayer were 'land' for the purposes of s 76AP(2) of the Stamp Act 1921 (WA). Under that provision a corporation was a 'landholder' if it satisfied two criteria, the first relating to the unencumbered value of land situated in Western Australia to which it was beneficially entitled and the second relating to the value of all land to which it was beneficially entitled, wherever situated. The term 'land' was defined in s 76(1) as follows: 'land' includes a mining tenement, and also includes: (a) any estate or interest in land; and (b) anything fixed to the land including anything that is, or purports to be, the subject of ownership separate from the ownership of the land. 1. One of the pipelines owned by the taxpayer (the Pilbara Energy Pipeline) was situated on land the subject of easements granted under the Petroleum Pipelines Act 1969 (WA). Another pipeline owned by the taxpayer (the Burrup Extension Pipeline) was situated on land the subject of an easement granted under that Act and on land the subject of an interest arising under the Dampier to Bunbury Pipeline Act 1997 (WA) in relation to a particular area of land through which the pipeline passed. Importantly, some of the pipelines were the subject of the rights under the first statute and others under the second statute. 2. Each of those statutes contained statutory severance provisions: 1. In the case of the Petroleum Pipelines Act 1969 (WA), s 57 provided as follows (emphasis added): 57. Pipelines to remain property of owner (1) Notwithstanding any Act or rule of law to the contrary, any pipeline constructed under the authority of this Act shall remain the property of the licensee whether or not the pipeline is affixed to any land and whether or not the licence granted in respect of the pipeline has been wholly or partly cancelled. (2) The licensee, in maintaining or operating any pipeline in respect of which a licence is issued under this Act, shall do as little damage as is possible and shall make full compensation to the owner of, and any party having an interest in, land for any damage sustained by them in consequence of the exercise of any power by the licensee in maintaining or operating the pipeline, and the compensation shall in default of agreement between the licensee, the owner or other party, be determined by a court of competent jurisdiction. 1. In the case of the Dampier to Bunbury Pipeline Act 1997 (WA), s 40 provided as follows (emphasis added): 40. Property in things on the land Anything that a holder of rights conferred under section 34 or a nominee places on land in the DBNGP corridor in accordance with those rights— (a) does not become a part of the land, regardless of whether it is of the nature of a fixture; (b) is capable of being assigned separately from the land; and (c) may be removed from the land by, or with the authority of, the owner of that thing. 1. The Court of Appeal of Western Australia held that both pipelines were not within paragraph (a) of the definition of 'land' in s 76(1) as a consequence of s 57 of the Petroleum Pipelines Act and s 40(a) of the Dampier to Bunbury Pipeline Act, but were deemed to be 'land' by paragraph (b) of that definition because the taxpayer had an interest in the land to which the pipelines were affixed (and hence the pipeline was something affixed to land that is subject of ownership separate from ownership of the land). 2. McLure P (with whom Buss JA and Murphy JA agreed on this aspect) explained why paragraph (a) of the definition of 'land' was not satisfied as follows (emphasis added): [75] The issue in s 76AP(2) of the Act is whether the appellants were "beneficially entitled" to land as defined. The notion of "beneficially entitled" requires that the corporation have beneficial ownership of, or an estate or interest in, the pipelines said to constitute land. Whether and if so what type of interest the appellants have in the pipelines is answerable solely by reference to the provisions of the [Petroleum Pipelines Act]. Section 57 of the [Petroleum Pipelines Act] deals with ownership of the pipelines (the "thing"), not the land in which they are embedded. The general law cannot intrude to change the character of the pipelines from personal to real property. What is implicit in s 57 of the [Petroleum Pipelines Act] is made explicit in s 40(a) of the [Dampier to Bunbury Pipeline Act 1997]. However, Pt IIIBA of the Act can, and does, treat the pipelines as land when fixed to land in which the licensee has a beneficial entitlement. 1. McLure P regarded s 57 as having the effect of preserving the character of the pipelines as personal property despite their affixation to the land in circumstances which would make them fixtures at general law relying at [73]–[74] on the decision of the High Court in Asciano. This was said by her Honour to be a result made explicit in s 40(a) of the Dampier to Bunbury Pipeline Act by the words 'does not become part of the land', but despite the absence of corresponding words in s 57, her Honour was satisfied that this was the effect of that provision also. 2. Buss JA put the point similarly when he said: [163] The common law may, of course, be modified or abrogated by statute. By s 57(1) of the Petroleum Pipelines Act, the Parliament abrogated the common law rule in relation to the pipelines and associated pipeline infrastructure, the subject of these appeals. See also s 40 of the Dampier to Bunbury Pipeline Act. 1. Although s 57 of the Petroleum Pipelines Act does not refer to the concept of a fixture, the items in question were clearly fixtures at general law (being pipes installed underground) and s 57 operated 'whether or not the pipeline was affixed to any land'. 2. It is clear that the legislature was addressing the same concerns as s 64 of the WIC Act, i.e. to protect the interests of a licensee as against competing claims of the landowner and chose to address this concern through the same mechanism, i.e. conferral of ownership on the licensee; and the Court held that it had the same effect, i.e. to prevent the pipelines from becoming part of the land. 3. Third, the recent decision of the Court of Appeal in Shell Energy (No 1) is closely analogous to the present case as it concerned vesting orders made under statute which had the effect of legally severing the assets concerned from the land on which they were situated. While the severance here occurs by the statute itself, there is no reason in principle why the position should be different. There, the taxpayer had acquired interests in power plants that were affixed to land. At first instance, Ward CJ in Eq had held that the effect of vesting orders that severed the ownership of the power plants from the ownership of the land in order to effect a privatisation regime established an innominate sui generis interest that was not properly characterised as an interest in land: Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 1074 at [141]–[142]. 4. On the Commissioner's appeal, the Court of Appeal found that the effect of the vesting orders was to legally sever former chattels, which had become fixtures, from the land. This returned them to being characterised as chattels for the purposes of the Duties Act: see Shell Energy (No 1) at [92], [97], [110] and 113]. Kirk JA (Adamson JA and Griffiths AJA agreeing) said: [110] In this context, in my view, the primary judge erred in equating the analysis in North Shore Gas (No 2) with the situation here. The property interest relevantly being discussed there was the statutory right broadly analogous to an easement. It was not the property interest in the gas mains and pipes themselves, which might have had "some residual value as chattels". Here, there is no statutory right at issue. What is at issue here is ownership of physical things, being the items constituting the power stations. If anything, North Shore Gas (No 2) supports the conclusion that those items are chattels, just as the gas pipes and mains — which were affixed but with ownership remaining in the utility company — were seen as chattels there. [111] To the extent that some parts of the reasoning in North Shore Gas (No 1) might be seen to lend some support to the position of the respondent here they have been overtaken by the subsequent decision of the High Court. But in any event that approach would not suffice for the purposes of the respondent here, for reasons explained below at [125]. [112] It is quite right, of course, that statutory questions should not necessarily be resolved by seeking to impose general law notions. But that also does not deny that statutes may operate by reference to such notions. Statutes commonly do so. [113] Here, the 2013 vesting order did not create any new species of statutory rights or property, in contrast to the legislation authorising the laying of the gas pipes. Rather, it transferred ownership of the identified items from (relevantly) WAMC to Green State Power. In so doing it had the effect of legally severing those items from the land. That severance did mean there were new legal rights, being the rights of ownership of Green State Power in those items. The same was true, mutatis mutandis, of the 2014 vesting order. Nothing in either vesting order addressed the nature of the rights of ownership. Nothing in either created innominate sui generis property interests. Rather, the nature of those rights was left to the general law. For the reasons explained above, at general law the effect of the legal severance was that the items resumed their previous legal character, as chattels or goods. 1. As noted by both parties in their submissions, the Court of Appeal did not address the issue of whether the powerplants were land because it had not been raised below: see [86]. However, for the reasons given above, in my view, the true character of the Pipeline is that it remained a chattel despite its installation in land, a conclusion supported by the reasoning of Kirk JA set out in the above passage: see also [92], [97]. Issue two: is the Pipeline an interest in goods? 1. Both parties accepted that the key authority on this point is the decision of the Court of Appeal in Shell Energy (No 1). Kirk JA concluded that the items constituting the power stations were 'goods' for the purposes of s 155(1). Kirk JA said: [120] Nothing in this context suggests that a confined approach should be taken to the notion of "goods" as employed in Ch 4. Nor, incidentally, is there anything in Ch 2 which supports such an approach. In Ch 4 the notion was introduced to extend what was dutiable to include, in relevant transactions, not only land holdings but a significant category of property beyond that. There is no reason this should not encompass at least "goods" as that notion has been understood at general law, subject to the express exclusions in s 163K. The items constituting the power stations are thus dutiable pursuant to s 155 of the Act. [121] The respondent sought to exclude the power stations from the ambit of the word "goods" in s 155 of the Duties Act by reference to the views expressed in North Shore Gas (No 1) that the phrase "goods, wares, or merchandise" in the Stamp Duty Act 1920 (NSW) referred to tangible movable property. It submitted the notion of "goods" in s 155 in the Duties Act should be construed in the same way, such as to exclude the power stations because they are not movable. [122] I do not accept that the power stations are immovable when it is recalled that what is actually in question are the hundreds of items listed in Annexure 2 to the 2013 vesting order. It may well be very difficult to move some of those items, but they are not, like parcels of land, truly immovable. [123] In any case, I also do not accept that the notion of goods should be confined in the manner suggested by the respondent. The context in which the word "goods" was used in the legislation considered in North Shore Gas (No 1) is different from the use of the word in Ch 4 of the Duties Act. The former concerned an exemption from dutiable transactions and the word "goods" was used in the specific context of an agreement for the sale of goods, merchandise or wares. In that context the word took much of its colour from the words which follow it, being "merchandise" and "wares". As Baron Parke explained of an ancestor to the exemption, in a judgment quoted by Rich J in North Shore Gas (No 1) at 61, "the exemption was intended to protect bona-fide mercantile transactions of the sale and purchase of goods": Knight v Barber (1846) 16 M & W 66 at 70; 153 ER 1101 at 1103. [124] Section 155, on the other hand, does not concern an exemption from duty nor is it concerned with protecting bona fide mercantile transactions. Its purpose is to determine how duty is charged on the acquisition of an interest in a landholder. Further, in light of the exclusion of stock-in-trade from the meaning of "goods" by reason of s 163K, the High Court's consideration in North Shore Gas (No 1) of the phrase "goods, merchandise, and wares", which in a large part encompasses stock-in-trade, becomes even less relevant. [125] More broadly, the outcome urged by the respondent is an odd one. The items in question once were goods but became part of the land when affixed as part of the power stations. If the power stations were disassembled and the items sold then they would indisputably be goods. The object of s 155 is to tax both land and goods. The respondent urges, and the primary judge held, that when the items were legally severed from the land the items fell into a distinct category of being neither land nor goods. As explained above, parts of the judgments in North Shore Gas (No 1) appear to recognise some intermediate category between the ordinary understanding of fixtures/land and goods. Let it be assumed that that understanding should be accepted despite North Shore Gas (No 2) and, further, that ownership of the severed items should be understood to be innominate sui generis property interests (contrary to my conclusion above). Where the legislature sought to encompass both one end of the spectrum and the other, it is difficult to see why something in between the two ends of the spectrum should evade being liable to duty. For that reason, the word "goods" in ss 163K and 155 should be construed as extending to any such interests of the kind at issue here. [126] In summary, the items constituting the power stations, having been legally severed from the land, were "goods" for the purposes of Ch 4 of the Duties Act. They fall within that notion because the ordinary understanding of that notion at general law — which the statutory usage in s 155 encompasses — includes former chattels which have been legally severed from the land. The 2013 vesting order effected such a severance. The 2014 vesting order had the same effect as regards any newly affixed items. Nothing in those orders had the effect of changing the legal character of the items such as to become innominate sui generis property interests. But even if they had done so, such a property interest would still fall within the reach of the concept of goods as employed in Ch 4 of the Duties Act. 1. I consider myself bound by this reasoning to find that the Pipeline is 'goods'. I note the following additional points. 2. The Explanatory Note to the State Revenue Legislation Further Amendment Bill 2009 (NSW) (which introduced the landholder provisions, including s 155(1)) says nothing about the reason for the inclusion of 'goods' in the landholder tax base. 3. In the Second Reading Speech introducing the State Revenue Legislation Further Amendment Bill 2009 (NSW) (which included the landholder provisions including s 155(1) by John Acqualina (on behalf of the Minister for Finance), it was said that the amendments were introduced: '[in order] to provide consistency with the tax treatment of direct transactions, landholder duty will apply to the acquisition of land and goods'. 4. Prior to the enactment of the Duties Act, the expression used in the former Stamp Duties Act 1920 (NSW) was 'goods, wares and merchandise'. In relation to this expression, Dixon J stated, in First North Shore Gas Company (at 67) that 'The words are understood to include all tangible moveables; that is, they covered all chattels personal not being choses in action…'. In the same case, Starke J said (at 63) that the expression 'goods, wares and merchandise' 'comprehends all movable property', citing Blackburn on Contract of Sale, adding that 'it is well enough settled that it does not include fixtures …'. However, as pointed out by Kirk JA in the above passage at [123], the term used in the present statute is simply 'goods' and should not be limited by the construction placed on a different expression in a different statute. 5. In Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470, which concerned the use of the word 'goods' in s 32(2)(d) of the Payroll Tax Act 2007 (NSW) Gleeson JA said at [131] that the meaning of that word depends entirely on the context in which it is used. There is nothing suggested by the context or purpose of Ch 4 of the Duties Act to indicate that the word 'goods' in s 155(1) has a meaning different to its ordinary meaning. As explained by Kirk JA in Shell Energy No 1 at [90], that ordinary meaning includes chattels. 6. Where a chattel is affixed to land so that it cannot be removed without damaging it, the chattel ceases to be goods and will only regain the status of a chattel if and when it is severed from the land: Mills v Stokman (1967) 116 CLR 61 at 71; Ashgrove Pty Ltd v Commissioner of Taxation (1994) 53 FCR 452; (1994) 94 ATC 4,549 at 4,558–4,562; Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232 at [9]–[18]. However, as found by the Court of Appeal in Shell Energy (No 1), this severance can include a legal severance and the legal severance here was effected by s 64 of the WIC Act. Issue three: What was the unencumbered value of the Pipeline at the time of the acquisition? 1. As noted at [11] above, the KPMG Report stated that the fair value of the Pipeline was $46,390,000. The report stated that it had been valued on an 'in situ/as is where is basis' and that the 'highest and best use' of the property, plant, and equipment, which included the Pipeline was 'its current use as part of a going concern water treatment business based upon the projected financial performance of the business'. Mr Sean Collins of KPMG Financial Advisory Services (Australia) Pty Ltd signed the KPMG report and also provided expert evidence in these proceedings. He accepted in cross-examination that, at the time the KPMG report was prepared, he regarded the going concern valuation premise for the Pipeline to be appropriate and consistent with relevant accounting standards whereby valuations of a collection of assets that are purchased in combination are typically conducted on a going concern basis. The plaintiff accepts that if the Pipeline is to be valued as going concern, in order to establish its unencumbered value for the purposes of s 155(1) of the Duties Act, then its value is the $46.39 million attributed by the KPMG Report. 2. Mr Collins' expert report in these proceedings (Collins Report) addressed to the following question: What was the value of Rosehill['s] entitlement to remove and sell the pipes comprising the Pipeline (as defined in the Plaintiff's Appeal Statement) as of 30 September 2019? 1. In response to that question, Mr Collins opined that the value of the entitlement to remove and sell the Pipeline is nil. This was on the basis that he identified that the estimated costs of removing the Pipeline exceeded estimated proceeds from the sale of the removed piping. The cross-examination of Mr Collins established that his opinion about the value of the entitlement to remove the Pipeline was based on assumptions that he did not himself have the expertise to make and which have not otherwise been proven by admissible evidence. 2. Mr Collins confirmed in cross-examination that (a) he did not have expertise in construction methods, engineering, quantity surveying or otherwise estimating design or project management costs for construction projects; (b) the assumptions he relied on as to the design method for extracting the Pipeline from the land and the costing of the extraction process were provided by unidentified persons within KPMG, whose inputs, analysis and benchmarking are not exposed on the face of Mr Collins' report; (c) he did not have expertise in the sale of recycled PVC and was not qualified to give an opinion on the possible markets for the purchase of PVC, despite his report having contained an unreasoned assertion as to the lack of viable secondary market for piping. Mr Collins also accepted in cross examination that this last statement was not supported by any information referenced in his report and that there is a market for the sale of recycled PVC such as the piping in this case. 3. In light of these matters, I accept the Commissioner's submissions that the Collins Report is inadmissible because key facts on which the reasoning in the report have not been proved, and the report is not based wholly or substantially on Mr Collins' specialised knowledge: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [64] and [85]; Cooke v Commissioner of Taxation [2002] FCA 1315 at [38]–[40]. 4. Whether the Pipeline and its constituent parts are properly characterised for the purposes of Chapter 4 of the Duties Act as an interest in land of Rosehill and/or as Rosehill's goods, its unencumbered value under ss 155 and 162 of the Duties Act should be ascertained based on its ability to be deployed in the business of Rosehill as a going concern: see SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 395 at [166]–[168]. 5. It follows that the plaintiff has failed to discharge its onus of proof that the unencumbered value of the Pipeline was less than the amount stated in the KPMG Report. Accordingly, the Assessment should be confirmed. Conclusion 1. For these reasons, I will make the following orders: 1. The Assessment is affirmed. 2. The Amended Summons is dismissed. 3. The plaintiff is to pay the costs of the defendant on the ordinary basis, as agreed or assessed. ********** 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: 24 May 2024