New South Wales Supreme Court CITATION : McDonald's Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 HEARING DATE(S) : 6/12/04, 7/12/04 JUDGMENT DATE : 1 February 2005 JUDGMENT OF : Gzell J DECISION : Commissioner's challenge to the jurisdiction of the court dismissed except as to the exigibility of transactions entered into after the decision the subject of objection. Matter remitted to Chief Commissioner to determine whether to exercise the discretion under the Stamp Duties Act 1920, s 43A(2)(b) and the Duties Act 1997, s 26(1) ignoring the value of tenant's fixtures "sold" and without fettering the discretion by the application of Revenue Ruling DUT 004 alone. CATCHWORDS : TAXES AND DUTIES - Stamp duties - Whether a document that fails to identify the duty assessed on each instrument can be a notice of assessment under the Stamp Duties Act, 1920 - Whether the subsequent service of a schedule identifying the duty combined with the original document constitutes a notice of assessment - Whether the exigibility of transactions entered into after the decision the subject of objection can be considered by the court on review - Whether a surrender of the balance of the term of a lease is a conveyance for the purposes of the Stamp Duties Act 1920 and a dutiable transaction for the purposes of the Duties Act 1997 - Whether the "sale" by a tenant to his landlord of tenant's fixtures is a waiver of the right of severance and neither a contract for sale of goods nor a contract for sale of an interest in land - Whether the application of Revenue Ruling DUT 004 alone is a fetter upon the discretion not to exact duty on the value of goods under the Stamp Duties Act 1920, s 43A(2)(b) and the Duties Act 1997, s 26(1) - Whether subservience of items of plant and equipment to the business conducted on land should be allowed to dominate the determination whether such items are fixtures - Whether operational interconnection of items is a relevant factor in determining whether such items are fixtures. Stamp Duties Act 1920 Taxation Administration Act 1996 LEGISLATION CITED : Duties Act 1997 Conveyancing Act 1919 Fineglow Pty Ltd v Anastasopoulos (2003) 57 NSWLR 39 Robinson v Kingsmill (1954) 71 WN (NSW) 127 National Dairies WA Ltd v Commissioner of State Revenue (WA) 99 ATC 5,155 Benjamin's Sale of Goods, 6th ed, Sweet & Maxwell, London, 2002 Palmer and McKendrick, Interests in Goods, 2nd ed, LLP, London, 1998 Hallen v Runder (1834) 1 CM & R 266 (149 ER 1080) Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27 CASES CITED : Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150 Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150 Metal Manufactures Ltd v Federal Commissioner of Taxation 99 ATC 5,229 Holland v Hodgson (1872) LR 7 CP 328 Australian Joint Stock Bank v Colonial Finance Mortgage Investment and Guarantee Corporation (1895) 11 WN (NSW) 105 Palunberi v Palunberi (1986) NSW ConvR 55,287 Commissioner of State Revenue (Vic) v Uniqema Pty Ltd 2004 ATC 4,579 McDonald's Australia Ltd - Plaintiff PARTIES : Chief Commissioner of State Revenue - Defendant FILE NUMBER(S) : SC 1643/03 Mr B Sullivan SC/ Mr J O Hmelnitsky - Plaintiff COUNSEL : Mr H R Sorensen /Mr R L Seiden - Defendant Baker & McKenzie Solicitors SOLICITORS : I V Knight Crown Solicitor LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J TUESDAY 1 FEBRUARY 2005 1643/03 McDONALD'S AUSTRALIA LTD v CHIEF COMMISSIONER OF STATE REVENUE JUDGMENT 1 The plaintiff, McDonald's Australia Ltd, sought review of a decision of the defendant, the Chief Commissioner of State Revenue. The Chief Commissioner sought a declaration that the court had no jurisdiction to grant the relief claimed by McDonald's and an order dismissing its proceedings. The issues were as to the competency of the proceedings and, if they were, as to the validity of the Chief Commissioner's determination. Background 2 At the times relevant to these proceedings, McDonald's was known as McDonald's Properties (Australia) Ltd. Its holding company was then known as McDonald's Australia Ltd. It became McDonald's Australia Holdings Ltd at the time McDonald's acquired its present name. 3 McDonald's and its holding company operated their restaurants under franchise under licence and lease agreements. If a franchise was to determine prematurely, a deed of termination was executed with respect to the unexpired term of the lease. 4 The deeds of termination were in standard form. They recited the grant of the lease and the desire of McDonald's, its holding company and the lessee to terminate the lease prior to the expiation of its term. By cl 2.1 McDonald's and the lessee agreed to terminate the lease without penalty. Clause 2.2 provided that from the close of business on the termination date there should be no further obligations upon McDonald's or the lessee to perform any obligations under the lease except such obligations as were expressly provided to be continuing obligations after the termination of the lease. 5 Clause 1.4 of the deed of termination defined plant and equipment to mean all the items of plant and equipment used by the lessee in connection with the restaurant as at the termination date and included the items of equipment specified in a schedule. A purchase price in a specified amount was defined in cl 1.6. 6 Materially for present purposes the deeds of termination contained the following provisions: "3.1 On or prior to the Restaurant handover date Properties shall pay to the Lessee in consideration of the transfer to it of the Plant and Equipment the Purchase Price. 3.2 In consideration of the payment of the Purchase Price to the Lessee in accordance with clause 3.1 the Lessee hereby transfers title to and delivers to Properties free from all mortgages, charges, encumbrances and other security interests the Plant and Equipment and Properties hereby takes possession of the Plant and Equipment." 7 Between October 1995 and October 1998, McDonald's either alone or with its holding company entered into 23 deeds of termination with former franchisees in standard form. 8 The former Stamp Duties Act 1920, s 43A(2)(b), which applied to 21 of the deeds of termination, provided that an agreement for sale of goods, wares and merchandise and other property should be charged with ad valorem duty on all the property unless the Chief Commissioner was satisfied that it would not be just and reasonable in the circumstances. It was in the following terms: "If: … (b) one agreement for the sale or conveyance of property (being goods, wares and merchandise) and other property is made; or … the conveyance or the agreement shall, except in so far as the Chief Commissioner is satisfied that it would not be just and reasonable in the circumstances, be charged with ad valorem duty… on the whole of the property to which the conveyance or the agreement relates and shall be stamped accordingly." 9 The Duties Act 1997 came into force on 1 July 1998. It applied to the remaining deeds of termination executed before 15 July 1999. Section 11(1)(j) defined dutiable property to include goods in New South Wales if the subject of an arrangement that included a dutiable transaction over any other dutiable property with exceptions irrelevant for present purposes. Section 26(1) enabled the Chief Commissioner to disregard the value of the goods if it would be just and reasonable in the circumstances to do so. The provision was as follows: "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." 10 By letter dated 15 July 1999, John Roberts for the Chief Commissioner wrote to McDonald's referring to discussions concerning the deeds of termination. He set out the assessment of stamp duty considered payable on the deeds. With respect to the 21 deeds subject to the earlier legislation, Mr Roberts argued that the surrender of the lease constituted a sale or conveyance of other property as did the sale of items of plant and equipment that constituted fixtures as law. He stated that in the circumstances duty was payable on the purchase price in the deeds described in an attached schedule under the Stamps Duties Act 1920, s 43A(2)(b) in the amount of $278,301.00. Mr Roberts stated that an objection to the assessment should be in terms of Part 10 of the Taxation Administration Act 1996. 11 The Duties Act 1997, s 8(1)(b)(i) charged duty on an agreement for sale or transfer of dutiable property. Section 8(1)(b)(iii) charged duty on a surrender of an interest in land in New South Wales. 12 Only one of the two deeds of termination executed after 1 July 1998 and before 15 July 1999 was considered in the letter. It was said that the surrender of the balance of the lease was a dutiable transaction under the Duties Act 1997, s 8(1)(b)(iii) and the agreement to transfer fixtures was an agreement for the sale or transfer of dutiable property in terms of s 8(1)(b)(i). The letter sought a further specified sum in relation to this deed and concluded with a reference to objections under Part 10 of the Taxation Administration Act 1996. 13 McDonald's submitted that the attached schedule was not served with the letter. On 12 November 1999, Mr Roberts sent a copy of the schedule by facsimile. It stated the purchase price in each of the 21 deeds and a stated amount of stamp duty with respect to that price. The purchase price and stamp duty for deed numbered 22 was inserted in handwriting. 14 McDonald's did not lodge notices of objection to the letter of 15 July 1999. In March 2000, the duty on the 22 deeds of termination was paid under protest. McDonald's said it was paid subject to the exercise by the Chief Commissioner of his discretion. The letter stated: "I confirm that this amount is paid under protest and subject to exercise by the Chief Commissioner of discretion under sec 43A(2) of the Stamp Duties Act 1920 and sec 26 of the Duties Act 1997 ." Having referred to the Chief Commissioner's rulings on the topic, the letter continued: "Our client seeks the exercise of the Chief Commissioner's discretion under sec 43A(2) for any assessments in respect of the Stamp Duties Act 1920 and under sec 26 for any assessments in respect of the Duties Act 1997." The letter went on to assert that in accordance with the Chief Commissioner's rulings, there was no value in the balance of the lease and the plant and equipment comprised 90% or more of the value of the property the subject of each transaction. The writer stated that he understood that the Chief Commissioner would like to inspect representative properties to form a view as to whether the plant and equipment in question constituted fixtures or goods and that arrangements would be made for such a visit. 15 The lodgement of further deeds of termination followed under covering letters enclosing the duty calculated on the basis of the earlier assessments. In each case it was stated that the duty was paid under protest and the writer understood that the Chief Commissioner would hold the amount subject to the exercise of discretion under the Duties Act 1997, s 26. 16 By facsimile of 5 July 2001, the solicitors for McDonald's confirmed that it had been agreed that McDonald's was not required to make further payments on deeds of termination, those payments being postponed until such time as the Chief Commissioner had exercised a discretion under the Duties Act 1997, s 26 and that no penalties or interest would be charged on duty, if any, ultimately assessed. 17 On 9 July 2001, Mr Roberts responded on behalf of the Chief Commissioner confirming the arrangement: "I refer to your facsimile transmission of the 5 July, concerning a number of further Deeds of Termination entered into recently, and confirm my previous telephone advice that McDonald's will not be required to make payment of possible duty payable thereon until the review of previous assessments of documents of a like nature has been concluded and a determination of the duty exigible in these circumstances is made. That is, payment of any duty subsequently found to be payable is postponed until such time as a final assessment has been made of the amount of duty payable. No interest or penalties will be imposed in respect of any late payment of duty pending the determination of the duty payable. The duty paid on Deeds of Termination already lodged is being held in abeyance pending the determination of the correct amount of duty payable thereon." 18 On 16 July 2001, the solicitors for McDonald's provided a detailed argument as to why the plant and equipment were goods rather than fixtures. 19 On 13 August 2001, Mr Roberts responded on behalf of the Chief Commissioner with a detailed argument that the plant and equipment constituted fixtures. The letter concluded with the assertion that it was only incumbent on the Chief Commissioner to identify more than 10% of the relevant property that was not goods not to exercise the discretion and that it was considered that more than 10% of all property transferred or agreed to be transferred was not goods. It was then stated that if McDonald's disagreed with the basis of the decision its attention was drawn to Part 10 of the Taxation Administration Act 1996. 20 By 13 August 2001, 46 deeds of termination had been lodged with the Chief Commissioner. 21 On 11 October 2001, McDonald's objected to the Chief Commissioner's decision of 13 August 2001. On 30 December 2002, David Martin on behalf of the Chief Commissioner disallowed the objection and invited McDonald's within 60 days to request a review. These proceedings were commenced on 27 February 2003. By then, 64 deeds of termination had been lodged with the Chief Commissioner. 22 Termination Deeds numbered 51 to 63 were stamped on 3 June 2002. The deeds numbered 1 to 47 were stamped between 8 April 2003 and 10 April 2003. The deeds numbered 48 to 50 were stamped on 1 May 2003. Competency of Review 23 The Taxation Administration Act 1996, s 97(1) enabled the court to review a decision of the Chief Commissioner that has been the subject of an objection. Section 103A(1) provided that no court had jurisdiction or power to consider any question concerning an assessment or other decision of the Chief Commissioner under a taxation law except as provided by Part 10. Since McDonald's did not lodge notices of objection with respect to the letter of 15 July 1999 dealing with deeds numbered 1 to 22, the Chief Commissioner argued that there could be no review of the assessments of those deeds of termination. 24 The Taxation Administration Act 1996, s 9(1) provided that the Chief Commissioner might make one or more reassessments of a tax liability of a taxpayer. There are limitations upon the Chief Commissioner making a reassessment more than five years after an initial assessment in s 9(3). McDonald's submitted that while not mentioning s 9, its letter of 15 March 2000 was a request for a reassessment and was treated as such by the Chief Commissioner in his letter of 9 July 2001. It followed, in McDonald's' argument, that the letter of 13 August 2001 was a notice of reassessment to which a notice of objection was lodged in time and, upon its rejection, McDonald's was entitled to seek the review by this court under the Taxation Administration Act 1996, s 97(1). 25 The Chief Commissioner's response to this argument was threefold. First, it was submitted that McDonald's could not lodge a notice of objection because the decision was not to reassess McDonald's and objections in those circumstances were limited to those lodged within 60 days of the service of the initial notice of assessment. 26 Section 86(1) of the Taxation Administration Act 1996 provided that a taxpayer who was dissatisfied by an assessment that was shown in a notice of assessment served on the taxpayer or any other decision of the Chief Commissioner under a taxation law might lodge a written objection with the Chief Commissioner. Section 86(2)(d) was in the following terms: "However, a taxpayer may not lodge such an objection in respect of the following: … (d) a decision not to reassess the taxpayer's tax liability where the taxpayer seeks to lodge the objection more than 60 days after the date of service of the notice of the initial assessment." 27 In the second place, the Chief Commissioner argued that the termination deeds numbered 47 to 64 could not be considered on review because they were all lodged subsequent to the decision of 13 August 2001. 28 Thirdly, the Chief Commissioner submitted that the letter of 13 August 2001 was merely the Chief Commissioner's indication of his view, did not constitute a decision under a taxation law and gave rise to no entitlement to object. In consequence, the court lacked jurisdiction to deal with the review. Decision not to reassess 29 The first argument of the Chief Commissioner depended upon there being a notice of assessment served on McDonald's more than 60 days before the Chief Commissioner's decision of 13 August 2001. McDonald's made three attacks on the 15 July 1999 document. It was pointed out that duty was charged upon the several instruments and matters described in the Stamp Duties Act 1920, s 4 and upon a transfer of dutiable property and other specific transactions under the Duties Act 1997, s 8(1). It was submitted that a document that did not identify an amount of duty with respect to each separate deed of termination was not a notice of assessment for the purpose of either the piece of legislation. It was argued that the letter of 15 July 1999 without the annexed schedule could not satisfy the statutory requirements. 30 On 15 July 1999, Mr Roberts sent by facsimile to McDonald's a copy of the letter of 15 July 1999 signed by Mr Roberts. What was sent was the two page letter. On 12 November 1999, Mr Roberts sent to McDonald's by facsimile a copy of the schedule of four pages. I was asked to draw the inference that the schedule did not accompany the original document. 31 It was pointed out on behalf of the Chief Commissioner that the two page document sent by facsimile did not bear the Chief Commissioner's letterhead and the evidence was silent as to whether the original letter included the schedule. 32 It is the Chief Commissioner's case that the document constituted a notice of assessment and McDonald's was thereby denied the right to lodge a notice of objection to the Chief Commissioner's decision of 13 August 2001. The onus is upon him to make good his case. 33 I am not satisfied that the Commissioner has established that the letter of 15 July 1999 contained an accompanying schedule when it was served on McDonald's. In my view the inference to be drawn from the two facsimiles is to the contrary. The first facsimile clearly excluded the schedule and the only reason for the subsequent facsimile was that a schedule had not been included with the original document when served. 34 In my view, the failure of the original document to identify an amount of duty with respect to each notice of termination rendered it not to be a notice of assessment. In my view McDonald's was not denied the right to lodge a notice of objection against the Commissioner's decision of 13 August 2001 under the Taxation Administration Act 1996, s 86(2)(d) by reason of the service of the original letter of Mr Roberts of 15 July 1999. 35 The second attack of McDonald's related to the facsimile of 12 November 1999. It was submitted that this copy schedule could not be coupled to the letter of 15 July 1999 to constitute a notice of assessment dated 12 November 1999. I accept that submission. In my view the Taxation Administration Act 1996, s 86(2)(d) required a specific notice of specific date to deny a taxpayer the right to object to a decision not to reassess. 36 McDonald's' third attack on the document of 15 July 1999 was based upon the Taxation Administration Act 1996, s 14(5) which required a notice of assessment to be in a form approved by the Chief Commissioner. 37 A notice to produce documents evidencing the form or forms of notices of assessment approved by the Chief Commissioner pursuant to this provision was served on him. His counsel announced that there was nothing to produce. 38 The Taxation Administration Act 1996, s 118 contained a presumption of regularity with respect to documents issued on behalf of the Chief Commissioner. It provided: "A document or a copy of a document bearing the written, printed or stamped signature or name of the Chief Commissioner or a person described in the document as a delegate of the Chief Commissioner is, in the absence of evidence to the contrary, taken to have been lawfully issued by the Chief Commissioner." 39 In Fineglow Pty Ltd v Anastasopoulos (2003) 57 NSWLR 39, Palmer J held that it was not necessary to recite the words "as delegate of the Chief Commissioner" to invoke the operation of the provision. It was necessary only that the document represent, in effect, that it had been signed by a person who had been delegated by the Chief Commissioner with authority to sign it. 40 It was submitted on behalf of the Chief Commissioner that the letter of 15 July 1999 being thus taken to have been lawfully issued by the Chief Commissioner its issue must have been in a form approved by him for the purposes of the Taxation Administration Act 1996, s 14(5). 41 In view of my findings in relation to the non-service of the schedule, it is unnecessary for me to determine this issue. There is, however, a short answer to the Chief Commissioner's submission. Even if the terms of the letter of 15 July 1999 should be taken to constitute a form approved by the Chief Commissioner for the purposes of the Taxation Administration Act 1996, s 14(5), the document served on McDonald's did not comply with that form in that it omitted the attached schedule. 42 It was argued on behalf of the Chief Commissioner, in the alternative, that the stamping of the deeds of termination constituted notices of assessment. It was submitted that all that was required of a notice was the amount of the assessment. The Taxation Administration Act 1996, s 14(1) provided: "The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment)." 43 I would have thought if the only information required of a notice of assessment was the amount of the assessment, the section would have been couched in a different form. That the amount of the assessment was included in brackets was suggestive of a requirement for other information as well. 44 It was pointed out that the Duties Act 1997, s 297 provided that the stamping of an instrument was taken to be evidence of an assessment of the duty payable under the Act in respect of the instrument. But that does not deem the stamping to be a notice of assessment. The legislation draws a clear distinction between an assessment and a notice of it. 45 In any event, since the deeds of termination numbered 1 to 50 were stamped in 2003, they could not constitute an alternative to the document of 15 July 1999 for the purposes of the Chief Commissioner's application. Deeds numbered 47 to 64 46 So far as termination deeds numbered 47 to 64 are concerned, I am of the view that the court lacked jurisdiction to review any decision with respect to them. Each of those deeds was lodged after 13 August 2001 and that determination could not have related to them. Hence McDonald's could not have been dissatisfied with an assessment or decision constituted by that document with respect to those termination deeds. Void decision 47 The third basis submitted by the Commissioner was that the determination of 13 August 2001 was emphasised to be a decision and not an assessment and only an assessment involved the exercise of discretion under the Stamp Duties Act 1920, s 43A(2)(b) and the Duties Act 1997, s 26(1). It was submitted that only a decision with duty consequences entitled a taxpayer to lodge an objection under the Taxation Administration Act 1996, s 86(1)(b) because otherwise it was not a decision under a taxation law. In effect, the Chief Commissioner submitted that his determination of 13 August 2001 had no effect and McDonald's was not entitled to lodge an objection. 48 I reject the submission. So far as the Stamp Duties Act 1920 and the Duties Act 1997 are concerned, assessments have duty consequences. But under the Taxation Administration Act 1996, s 86(1)(b) a taxpayer is entitled to lodge an objection to any other decision of the Chief Commissioner under either Act. There is no limitation in the legislation other than to a decision made under the Stamp Duties Act 1920 or the Duties Act 1997. By his determination of 13 August 2001, Mr Roberts on behalf of the Chief Commissioner decided not to reassess termination deeds numbered 1 to 22. In my view that decision fell within s 86(1)(b). McDonald's was entitled to lodge an objection. It did so in accordance with the invitation set out in the document itself. 49 The document of 13 August 2001 also constituted a decision with respect to the deeds of termination held in abeyance in terms of earlier correspondence. The deeds numbered 23 to 64 fell into this category. The letter of 13 August 2001 gave notice that the Chief Commissioner would not exercise a discretion under the Duties Act 1997, s 26 with respect to those instruments. If the letter was not a notice of assessment because it did not specify the amount of duty exigible on each of those deeds of termination or because it was not in an approved form, it nonetheless constituted a decision under the Duties Act 1997 and entitled McDonald's to lodge an objection. Validity of Determination 50 McDonald's raised an argument before me that had not been raised with the Chief Commissioner. It was entitled to do so because the Taxation Administration Act 1996, s 100(2) provided that the applicant's and respondent's cases on an application for review are not limited to the grounds of the objection. 51 The submission was that the deeds of termination comprised three transactions: a surrender of the lease, an agreement for sale of goods and a waiver of the right to removal of fixtures. It was submitted that neither the first nor the last transaction was dutiable and, in consequence, the deeds of termination ought to have been assessed at $10 and there was no need to call in aid the Stamp Duties Act 1920, s 43A(2)(b) or the Duties Act 1997, s 26(1). Lease surrender 52 In my view, the submission that the surrender of the balance of the lease was not a dutiable transaction was misconceived. The Stamp Duties Act 1920, s 43A(2)(b) was enlivened upon an agreement for sale or conveyance of goods and other property. Section 65 defined a conveyance to include a surrender or release whereby any property in New South Wales was transferred to or accrued to any person. 53 In support of his contention that the surrender of the balance of the lease constituted a conveyance, the Chief Commissioner relied upon Robinson v Kingsmill (1954) 71 WN (NSW) 127 at 133 where Brereton J concluded for the purposes of the Conveyancing Act 1919 that the surrender of a lease involved a contract and reconveyance of the estate. 54 It was submitted on behalf of McDonald's that this was not a stamp duty case. But, in my view, at the least, property in New South Wales accrued to McDonald's on execution of the deeds of termination such that the surrender fell within the definition of a conveyance under the Stamp Duties Act 1920, s 65. 55 The Duties Act 1997, s 8(1)(a) charged duty on a transfer of dutiable property. As already mentioned, s 8(1)(b)(iii) charged duty on a surrender of an interest in land in New South Wales. Transfers and the transactions specified in s 8(1)(b) were defined as dutiable transactions under s 8(2). Section 11(1)(j) defined dutiable property to include New South Wales goods if the arrangement included a dutiable transaction over any other dutiable property. The section was in the following terms: " Dutiable property is any of the following: … (j) goods in New South Wales, if the subject of an arrangement that includes a dutiable transaction over any dutiable property (other than intellectual property) elsewhere referred to in this section …." There followed a series of exclusions irrelevant for the present purposes. 56 Section 11(1)(l) of the Duties Act 1997 included as dutiable property an interest in any dutiable property referred to in the preceding paragraphs of the section, subject to exceptions irrelevant for present purposes. Section 11(1)(a) included land in New South Wales as dutiable property. A lease of land in New South Wales was thus other dutiable property for the purposes of s 11(1)(j). 57 It was submitted on behalf of McDonald's that the reference to a dutiable transaction over other dutiable property in the Duties Act 1997, s 11(1)(j) should be limited to transfers of dutiable property within s 8(1)(a). But s 11(1)(j) is not limited to transfers. It speaks about a dutiable transaction over any dutiable property and a dutiable transaction includes specified transactions in s 8(1)(b). 58 It was submitted that the legislative intent was to confine the Duties Act 1997, s 11(1)(j) to transfers of dutiable property. I do not agree. There is nothing on the face of the legislation that would lead to that result. Indeed, its terminology deliberately expands the concept of a dutiable transaction beyond a transfer of dutiable property. 59 In my view, therefore, once a deed of termination included both goods in New South Wales and a surrender of the balance of the term of a lease, the Stamp Duties Act 1920, s 43A(2)(b) was enlivened and, with respect to the later deeds, the Duties Act 1997, s 11(1)(j) was enlivened. Waiver of removal rights 60 The Duties Act 1997, s 11(1)(j) made goods in New South Wales dutiable property only if they were the subject of an arrangement that included a dutiable transaction over other dutiable property. McDonald's submitted that if some plant and equipment became fixtures, their sale to McDonald's did not constitute a dutiable transaction over dutiable property. 61 In National Dairies WA Ltd v Commissioner of State Revenue (WA) 99 ATC 5,155 at [19], in a passage cited with approval by the Full Court, 2001 ATC 4,280 at [26], Murray J described the reconversion of a tenant's fixture to a chattel upon severance: "Briefly put, a tenant's fixture is a chattel which the tenant annexes to the land for purposes of trade or domestic convenience or ornament in such a way that, applying the ordinary tests, the thing becomes a fixture and therefore loses its identity as a chattel and during the period of its annexation is probably to be regarded as part of the land. It will therefore be the property of the owner of the land, subject to the right which may be secured by agreement to the tenant to remove the chattel and thus sever its annexation to the land during or upon the expiration of the term, or within a reasonable time thereafter. That capacity has been developed by the law in mitigation of the strict application of the general rule that what becomes annexed to the land is a fixture to be treated as being part of the land and the property of the owner. The rule is to make severable and again a chattel that which would otherwise be part of the land and incapable of severance as a matter of law." 62 Since the plant and equipment was that of tenants of McDonald's and, if affixed, affixed for the purpose of the tenant's trade, it was submitted that they were trade fixtures which the tenant had the right to sever on the expiration of the term. 63 It was submitted that the sale of unsevered tenant's fixtures by a tenant to his landlord, as would be the case here if any items of the plant and equipment were held to be fixtures, is to be regarded as a surrender or abandonment of the right to sever and not a sale of goods or an interest in land. 64 In Benjamin's Sale of Goods, 6th ed, Sweet & Maxwell, London, 2002 at [1-095] the authors say: "A sale of unsevered tenant's fixtures by a tenant to the landlord or to an incoming tenant or purchaser was regarded at common law as merely a surrender or abandonment of the right to sever them, and was not a sale of goods." 65 To the like effect is Palmer and McKendrick, Interests in Goods, 2nd ed, LLP, London, 1998 at 292: "The position is different again where a tenant disposes of unsevered tenant's fixtures. The true nature of such a sale by a tenant to his landlord was described by Parke B in Hallen v Runder as a contract "that the [tenant] should waive his right of removal, and thereby give up to the [landlord] all his interest in and right to enjoy these effects as chattels." Such a contractual abandonment of the right of severance is viewed as neither a contract for the sale of goods nor a disposition of any interest in land." 66 In Hallen v Runder (1834) 1 CM & R 266 (149 ER 1080) the tenant had purchased fixtures which he had a right to remove during his tenancy. He agreed with the landlord to refrain from removing the fixtures, the landlord agreeing to take them at a valuation to be made by two brokers. The tenant was held entitled in his action for the price. It was held that the action was not one for goods sold and delivered and no note or memorandum in writing was required. It was also held that it was not a sale of any interest in land and writing was not required under the Statute of Frauds. Having observed that the chattels, once affixed, became part of the freehold, Parke B said at 276 (ER 1084): "The plaintiff, therefore, cannot recover the price fixed for these effects as for goods sold and delivered; but the question is, whether he cannot as for fixtures bargained and sold, or sold and delivered. The real nature of the contract between the plaintiff and the defendant was, that the plaintiff should waive his right of removal, and thereby give up to the defendant all his interest in and right to enjoy these effects as chattels." And at 277 (ER 1084): "We are quite satisfied that this is not a sale of any interest in land, for the reasons given in the course of the arguments." 67 It was argued for the Chief Commissioner that these authorities were no longer good law in light of the decisions in Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27 and Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150. Both cases involved a sale and lease back arrangement. 68 In Eastern Nitrogen, the taxpayer sold its industrial plant, but not the land to which it was affixed. At [47] Carr J said that since there was an intention of the parties that property in the ammonia plant was to pass to the financiers followed by a lease-back of the plant and valuable consideration had been paid and received, equitable remedies would have been available to the extent necessary to protect the financier's equitable interest in the ammonia plant. 69 In Metal Manufactures, the taxpayer sold portions of its plant to a bank which leased them back to the taxpayer. At first instance, Metal Manufactures Ltd v Federal Commissioner of Taxation 99 ATC 5,229 at [196], Emmett J concluded that, notwithstanding that the plant and equipment were fixtures, the purchaser obtained an equitable interest in them. On appeal at [57], it was noted that his Honour's conclusion that while the bank acquired no legal interest it obtained an equitable one, was not suggested to be erroneous. 70 In my view, Eastern Nitrogen and Metal Manufactures dealt with a different point: a sale by the owner of land of fixtures annexed to it. In the instant circumstances and in Hallen the issue was the proper characterisation of a "sale" by a tenant of tenant's fixtures to a landlord. I am of the view that the proper characterisation of the transaction is that contained in Hallen. Fixtures 71 In light of this finding, it is unnecessary for me to consider whether any of the items of plant and equipment became fixtures. If they did their "sale" price is to be ignored. In deference to the submissions on both sides, however, I set out an outline of my views. 72 In the decision of 13 August 2001, Mr Roberts explored the authorities with respect to fixtures and the objective intention of annexation. He referred to the observation in Holland v Hodgson (1872) LR 7 CP 328 at 339 that where an article was affixed, although only affixed by bolts and screws, it was to be considered as part of the land, at all events where the object of setting up the article was to enhance the value of the premises to which it was annexed for the purpose to which those premises were applied. 73 Mr Roberts went on to assert, however, that most of the plant and equipment were fixtures because the best use of the land was as a McDonald's franchise and the items of plant and equipment were subservient to that business. 74 Australian Joint Stock Bank v Colonial Finance Mortgage Investment and Guarantee Corporation (1895) 11 WN (NSW) 105 at 107 was cited in support of this proposition. There, landowners gave a mortgage over the premises together with all fixtures. The mortgagors granted a sublease to the plaintiffs. The landowners subsequently granted a second mortgage under which the defendants entered possession and removed trade fixtures. The question related to four machines less securely affixed to the land. The machines were found to be fixtures passing under the mortgage. The Chief Justice noted that the less firmly secured and heavier machines in question also passed under the mortgage: "I am of opinion that, if all these machines are subservient to the business carried on by the mortgagors, there really cannot exist any difference between them, and all alike pass under the word "fixtures" in the mortgage." 75 In my view, the Chief Justice was not espousing a principle of universal application with respect to any item of plant or equipment subservient to the business carried on upon the land. The observation was made in relation to argument for differentiation between items firmly affixed to the land and those which needed little fixing as their weight kept them steady. The observation was confined to the facts of that case. 76 Yet on behalf of the Chief Commissioner this notion was raised to a governing statement of principle. It was said: "In another example, looms, attached to the floor of a mill by nails driven through holes in their feet, easily removable and attached in this manner to keep them steady in use, were held to be fixtures because the purpose was to enhance the mills value and usefulness ( Holland v Hodgson supra at 339). It is considered that the parties conceived that in this particular instance the most profitable purpose for which they use the land was as a McDonald's franchise. It follows that, the majority of the plant and equipment, or at least (10%) of the plant and equipment, are fixtures because they are subservient to the business carried on upon the land (cf Australian Joint Stock Bank v Colonial Finance Mortgage Investment and Guarantee Corporation …)." 77 In dealing with industrial whitegoods such as grills, fryers, toasters, warmers, drink dispensers, washing machines and associated equipment a similar view was maintained: "Similarly the industrial whitegoods are considered to have been installed for the better use and enjoyment of the land, as a McDonald's franchise, rather than the better enjoyment of any particular chattel itself." 78 In my view, the Chief Commissioner's delegate fell into error in approaching his task in this fashion. If this were the correct principle, very few items of plant and equipment used in a business conducted on land would remain goods. 79 There was in evidence a videotape of the dismantling of a McDonald's restaurant. A number of items stood on wheels for easy removal and almost all of the items in question had limited degrees of affixation. There was, in some cases, a sealant required for health reasons in areas on which food was prepared. 80 For the Chief Commissioner the point was made that most appliances were affixed to an electricity supply. I would have thought, however, that that aspect was more likely to favour a view that the annexation was for the better use of the chattels rather than for the better use of the land. 81 Reference was made to National Dairies. In that case a taxpayer entered into an agreement to purchase a dairy business as a going concern. The plant included pasteurising and homogenising equipment, tanks or vats, blow moulders used to manufacture plastic bottles, various filling machines, boilers, butter printers, an evaporator, a separator, an evaporative condenser, a hot water softener, water cooling towers, a refrigeration compressor and a gram wrap machine for ice cream packing. 82 At first instance, 99 ATC 5,155, Murray J held the items to be fixtures mainly because he concluded that they had been placed on the land for the purpose of their integration into a factory system into which they were firmly incorporated. That view was upheld on appeal. Malcolm CJ at 2001 ATC 4,280 at [52] said: "As I have already mentioned, the learned trial judge decided that, first, when the relevant equipment was placed upon the land and incorporated into the dairy processing factory, it was undoubtedly readily removable and might have been removed and transferred to another place, or sold, or otherwise disposed of as required. Secondly, however, the equipment was placed on the land for the purpose of its integration into the factory system into which it was found to be "firmly incorporated". Thirdly, the equipment was not placed there for a temporary purpose, but for an indefinite period of time. Fourthly, the equipment was interconnected by piping and otherwise incorporated into the factory, although the degree of annexation to the floor was variable, and generally not otherwise than by the weight of the units. Fifthly, the operative use of the equipment was in various quite complex ways a part of the way in which the factory was structured. Sixthly, the equipment was annexed to the land for the better enjoyment of the land for the use as a milk processing plant. Finally, when the equipment was sold, it was sold as a part of the plant as a going concern." 83 Mr Roberts acknowledged that the industrial whitegoods might not be integrated to the extent of the interconnection by a system of pipes so that all played a part in an integrated system of milk processing as in the National Dairies. However, Mr Roberts took the view that the items did not stand alone without operational interconnection as the function of the manufacture of McDonald's products would appear to be severely compromised by the loss of, for example, a griller. Without a griller there would be no point in toasting buns in a toaster or frying eggs or chips in a fryer. It was submitted that the Chief Commissioner erred in placing reliance upon National Dairies. 84 A McDonald's restaurant is clearly distinguishable from the dairy business in National Dairies. In that case each item formed part of a processing plant. In the instant circumstances different appliances are used for different processes. But the dependence of one process upon another is not an irrelevant circumstance. And, in my view, the Chief Commissioner was entitled to take operational interconnection between items into account. 85 The authorities on the question whether goods have become fixtures are comprehensively analysed in National Dairies. The starting point is Blackburn J's judgment in Holland at 334 that the question which must depend on the circumstances of each case but mainly on two circumstances indicating intention i.e. the degree of annexation and the object of annexation. 86 In Palunberi v Palunberi (1986) NSW ConvR 55,287 at 56,672, Kearney J observed that there was a swing from the significance of the mode of annexation towards its purpose or object: "It would seem from perusal of these and other authorities in the field that there has been a perceptible decline in the comparative importance of the degree or mode of annexation, with a tendency to greater emphasis being placed upon the purpose or object of annexation, or, putting it another way, the intention with which the item is placed upon land. The shift has involved a greater reliance upon the individual surrounding circumstances of the case in question as distinct from any attempt to seek to apply some simple rule or some automatic solution." 87 Reference was made to Commissioner of State Revenue (Vic) v Uniqema Pty Ltd 2004 ATC 4,579 as an instance of items of equipment of large proportion brought onto land being held not to constitute fixtures. But, as Ormiston JA acknowledged at [48], this was a unique case of electricity generating equipment being brought on to a tenant's land, not for the purpose of its activities, but to provide steam and electricity for the landlord's use on adjacent land. 88 There is no single test that will answer the question in all cases. In this case, I am of the view that Mr Roberts' emphasis upon subservience of items of plant and equipment to the business carried on upon the land, led him into error. That is one factor, but a factor that must be weighed against all others. 89 While the court has power under the Taxation Administration Act 1996, s 101(1)(b) to make an assessment or other decision in place of the assessment or other decision to which the application for review relates, there is insufficient material before me to allow me to take that course. The plant and equipment in question was not only of the type shown in the video recording, but also comprised outdoor items such as children's playgrounds. 90 Besides, a decision on the question is unnecessary for the reasons already indicated. The appropriate course is for the matter to be remitted to the Chief Commissioner for him to make a further determination according to law, should he deem it necessary to do so. The Ruling as to the discretion 91 The Chief Commissioner had issued Revenue Ruling DUT 004 with respect to the discretion under the Duties Act 1997, s 26. At [13] the Chief Commissioner had expressed his opinion that, when deciding whether to exercise the discretion in relation to a sale of business, regard should be had to the overall scheme of s 11(1)(j) that ad valorem duty is only charged on a dutiable transaction involving goods where that transaction involves other dutiable property and that would usually be the case where there was a sale of a business. The Chief Commissioner went on to say that it might not be just and reasonable in circumstances to charge duty on goods where the goods comprised the great majority measured in terms of value of the property the subject of a dutiable transaction. For this purpose, the Chief Commissioner defined the great majority as 90% or more in [14]: "While each case will be considered on its merits, the "great majority" would generally be regarded as 90% or more. The property to be taken into account in determining an aggregate value is all other property passing in connection with the sale of business, whether or not it is dutiable property." 92 In the decision of 13 August 2001, Mr Roberts, whilst stating that each case was to be considered on its merits, appeared to adopt, slavishly, the 90% concept: "Bearing in mind the guidelines set out in Revenue Ruling DUT 004, whilst each case is to be considered on its merits, the discretion under s 26 to disregard the value of "goods" will generally only be exercised where the value of the "goods" represents (90%) or more of all property transferred, or agreed to be transferred. That is, it is only incumbent on the Chief Commissioner to identify, more than (10%) of the relevant property which is not "goods", not to exercise the discretion. It is considered that in this particular instance, more than (10%) of all property transferred, or agreed to be transferred, under the various "Termination Agreements" is not "goods" at law." 93 In my view, McDonald's criticism that Mr Roberts did not give due consideration to the exercise of the discretion but fettered it by his rigid adoption of the ruling, has been made out. 94 Again, it is appropriate that the matter be remitted to the Chief Commissioner for due consideration. There is no limitation in the Duties Act 1997, s 26(1) to a "great majority", nor is there a definition of that concept which requires a 90% or more test. The discretion is generally based and depends upon the Chief Commissioner's satisfaction that it would not be just and reasonable in the circumstances to charge the duty. It is that matter which must be considered by the Chief Commissioner's delegate and not some substituted test in a ruling designed merely to assist delegates in forming a view in terms of the statutory obligation. Conclusion 95 The court has no jurisdiction to review any determination of the Chief Commissioner with respect to termination deeds numbered 47 to 64 because the decision of the Chief Commissioner of 13 August 2001, to which objection was taken, preceded their execution. 96 In other respects, the Chief Commissioner's application fails. 97 If some of the plant and equipment identified in a Termination Deed remained goods, there was, for the purposes of the Stamp Duties Act 1920, s 43A(2)(b) an agreement for sale of those goods and a conveyance of the balance of the lease. In respect of those two components, the Chief Commissioner was obliged to determine whether it would not be just and reasonable in the circumstances to charge ad valorem duty on the whole of that property. 98 For the purposes of the Duties Act 1997, s 11(1)(j), such of the plant and the equipment as remained goods together with the surrender of the balance of the lease constituted dutiable property with respect to which the Chief Commissioner should have determined, in terms of s 26(1), whether it would not be just and reasonable to charge duty on the goods. 99 In either case, the value of any items of plant and equipment that constituted tenant's fixtures must be ignored. 100 In exercising the discretion under the Stamp Duties Act 1920, s 43A(2)(b) and under the Duties Act 1997, s 26(1) Revenue Ruling DUT 004 should not be used as a fetter upon the discretion which is couched in general terms and must be exercised according to its language and depending on the facts of each case. 101 If it be relevant to determine which of the items of plant and equipment the subject of a termination deed were fixtures, the subservience of the items to the business of the franchisee should not be allowed to dominate the decision. Like operational interconnection, it is but one of the matters that should be taken into account. 102 The matter should be remitted to the Chief Commissioner for his determination according to law. 103 I will hear the parties on the appropriate form of orders and I will hear the parties on costs. McDonald's tendered a vast amount of documentation that was not referred to at hearing. That may have significance so far as a costs order is concerned. 104 I direct the parties to bring in short minutes of orders reflecting these reasons. ********** 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.