Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Chief Commissioner of State Revenue v Centro (CPL) Limited [2011] NSWCA 325 Hearing dates: 8 September 2011 Decision date: 19 October 2011 Before: Giles JA at 1 Macfarlan JA at 3 Sackville AJA at 4 Decision: 1. Appeal allowed. 2. Set aside the orders made by Gzell J on 23 July 2010 and varied on 2 August 2010. 3. In lieu thereof, order that: (a) Centro's summons filed on 16 September 2008 be dismissed; and (b) Centro pay the Commissioner's costs of the proceedings. 4. Centro pay the Commissioner's costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: TAXES AND DUTIES - application to renew an assessment of duty - contract for the sale of a freehold interest subject to a 300 year concurrent lease at a nominal rental - whether grant of concurrent lease had the effect of reducing dutiable value for the purposes of the Duties Act 1997, s 24(1) - whether Chief Commissioner was correct not to be satisfied that the concurrent lease was not granted as a part of an arrangement or scheme for the purpose of reducing the duty otherwise payable Legislation Cited: Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Administrative Decisions Tribunal Act 1997 Conveyancing Act 1919 Duties Act 1997 Interpretation Act 1987 State Revenue Legislation Amendment Act 2002 State Revenue Legislation Further Amendment Act 2003 Supreme Court Act 1970 Taxation Administration Act 1996 Cases Cited: Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663; 60 ATR 1 Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353 Birch v Wright (1786) 1 TR 378 Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2010] NSWCA 326 Cole v Kelly [1920] 2 KB 106 Cole v Kelly [1920] 2 KB 123 Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; 192 CLR 226 Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; 182 CLR 51 Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43; 209 CLR 651 Commissioner of State Revenue v Bradney Pty Ltd (1996) 34 ATR 233 Commissioner of State Revenue v Purdale Holdings Pty Ltd [2003] VSC 289; 53 ATR 488 Federal Commissioner of Taxation v Peabody [1993] HCA 43; 181 CLR 359 Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; 186 CLR 404 Horn v Beard [1912] 3 KB 18 Julius v Bishop of Oxford (1880) LR 5 App Cas 214 Minister for Interior v Brisbane Amateur Turf Club [1949] HCA 31; 80 CLR 123 Neale v Mackenzie (1836) 1 M&W 747; 150 ER 635 Richardson v Landecker (1950) 50 SR (NSW) 250 Solomons v District Court of New South Wales [2002] HCA 47; 211 CLR 119 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2009] NSWSC 1007; 77 ATR 394 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41 Technical Products Pty Ltd v State Government Insurance Office (Queensland) [1989] HCA 24; 167 CLR 45 Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255; 70 ATR 505 Trust Company of Australia v Chief Commissioner of State Revenue [2006] NSWSC 792; 64 ATR 346 Texts Cited: Halsbury's Laws of England, Landlord and Tenant, vol 27 DG Hill, Duties Legislation (LBC Information Services, Looseleaf Commentary) Category: Principal judgment Parties: Chief Commissioner of State Revenue (Appellant) Centro (CPL) Limited (Respondent) Representation: V Hughston SC with I Young and E Bishop (Appellant) A H Slater QC with M L Robertson (Respondent) Crown Solicitor (Appellant) Freehills (Respondent) File Number(s): 2008/280659 Publication restriction: No Decision under appeal Citation: [2010] NSWSC 751 Date of Decision: 2010-07-23 00:00:00 Before: Gzell J File Number(s): 2008/280659 Judgment 1GILES JA: For the reasons given by Sackville AJA, s 24(1) of Duties Act 1997 applied to require that the 300 year lease granted to CPT Custodian Pty Ltd be disregarded and the Chief Commissioner was correct in not being satisfied in accordance with s 24(2). This outcome does not turn on the majority decision in Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255; (2007) 70 ATR 505, to which regard must be had rather than my dissenting view. That decision was on a s 24 in materially different terms, but the decision in the present case is consistent with it. 2I agree with the orders proposed by his Honour. 3MACFARLAN JA: I agree with Sackville AJA. 4SACKVILLE AJA : This is an appeal from a judgment of a Judge of this Court (Gzell J) revoking an assessment of duty issued by the appellant (" Commissioner ") to the respondent (" Centro ") on 25 May 2007: Centro (CPL) Ltd v Chief Commissioner of State Revenue [2010] NSWSC 751. The Commissioner assessed Centro to ad valorem duty of $9,665,492.00 plus interest of $3,424,641.02 on a contract for the sale of a freehold interest in the Bankstown Square Regional Shopping Centre (" Centre ") entered into on 22 July 2004. 5Centro applied to the Supreme Court pursuant to s 97 of the Taxation Administration Act 1996 (" TA Act ") for review of the Commissioner's decision. In revoking the Commissioner's assessment, Gzell J exercised the Court's power under s101(1)(a) of the TA Act to confirm or revoke the assessment to which the application relates. THE ISSUES 6The sale of the freehold interest to Centro was subject to a concurrent lease of the Centre for 300 years that had been granted by the vendor to another company some 20 months earlier, on terms requiring payment of a large premium to the other company, but a nominal rental. The Commissioner assessed duty not on the contract price for the freehold interest subject to the concurrent lease ($50,000), but on the value of the freehold interest if the concurrent lease were ignored ($175 million). The Commissioner's assessment was issued on the basis that s 24 of the Duties Act 1997 (" Duties Act ") entitled him, in determining the dutiable value of the freehold interest, to disregard the interest comprising the concurrent lease because it had the effect of reducing the dutiable value of the freehold interest. 7Section 24 of the Duties Act provides as follows: "(1) In determining the dutiable value of dutiable property under this Part, any interest, agreement or arrangement (other than an encumbrance) granted or made in respect of the dutiable property that has the effect of reducing the dutiable value is to be disregarded, subject to subsection (2). (2) An interest, agreement or arrangement is not to be disregarded if the Chief Commissioner is satisfied that it was not granted or made as a part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. (3) In considering whether or not he or she is satisfied for the purposes of subsection (2), the Chief Commissioner may have regard to: (a) the duration of the interest, agreement or arrangement before the dutiable transaction, and (b) whether the interest, agreement or arrangement has been granted to or made with an associated person, and (c) whether there is any commercial efficacy to the granting of the interest or the making of the agreement or arrangement other than to reduce duty, and (d) any other matters the Chief Commissioner considers relevant." 8The Commissioner identifies the issue on appeal as whether the primary Judge misconstrued s 24(1) of the Duties Act. According to the Commissioner, his Honour wrongly held that s 24(1) can apply only where, pursuant to a pre-existing arrangement, a taxpayer agrees to acquire dutiable property but this agreement is superseded by a later arrangement by which the same taxpayer acquires dutiable property of lesser value. In reaching this conclusion, his Honour is said to have misinterpreted the decision of this Court in Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255; 70 ATR 505 (" Trust Company ") (Mason P and Santow JA, Giles JA dissenting). 9Centro identifies the issue on the appeal as whether s 24(1) of the Duties Act applies to impose on Centro, duty assessed on the full market value of the freehold interest in circumstances where: * the interest acquired by Centro had been created upon the earlier grant to a separate entity of a 300 year lease at a nominal rental; * Centro itself avoided no duty since it neither acquired nor intended to acquire any more valuable interest than the (virtually) worthless reversionary interest subject to the concurrent lease; and * the other entity, by choosing to acquire a long term concurrent lease, had correctly paid duty at the lower rate applicable to long leases. 10Centro also relies on a notice of contention in which it seeks to uphold the primary Judge's decision on the ground that in any event the Court should be satisfied that the interest or arrangement was not granted or made with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. STATUTORY FRAMEWORK Duties Act: Dutiable Transactions 11Chapter 2 of the Duties Act charges duty on a " transfer of dutiable property " and on certain transactions, including " an agreement for the sale or transfer of dutiable property ": s 8(1)(a), (b)(i). Such a transfer or transaction is a " dutiable transaction " for the purposes of the Duties Act: s 8(2). 12The duty charged by Ch 2 on a dutiable transaction referred to in s 8(1)(b) is to be charged as if each such dutiable transaction were a transfer of dutiable property: s 9(1). In the case of a dutiable transaction comprising an agreement for sale or transfer, the property transferred is taken to be " the property agreed to be sold or transferred " and the transfer is taken to have occurred when the agreement is entered into: s 9(2), Table. 13Section 11 defines " dutiable property " to include: "(a) land in New South Wales ... (l) an interest in any dutiable property referred to in the preceding paragraphs". 14A liability to duty charged by Ch 2 arises when a transfer of dutiable property occurs: s 12(1). However, if the transfer is effected by a written instrument, liability for duty arises when the instrument is first executed: s 12(2). 15Section 13 states that duty charged by Ch 2 of the Duties Act is payable by the transferee, unless Ch 2 otherwise provides. In the case of a dutiable transaction comprising an agreement for the sale or transfer of dutiable property, the " transferee " is the purchaser or transferee: s 9(2)(b). 16Section 21(1) of the Duties Act provides as follows: "The dutiable value of dutiable property that is subject to a dutiable transaction is the greater of: (a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration), and (b) the unencumbered value of the dutiable property." 17The consideration for the transfer of dutiable property is taken to include the amount or value of all encumbrances subject to which the dutiable property is transferred: s 22(1). The unencumbered value of dutiable property is the value of the property determined without regard to any encumbrance to which the property is subject: s 23(1). The word " encumbrance " is not defined in the Duties Act. Duties Act: Reduction of Dutiable Value 18As originally enacted, s 24 of the Duties Act 1997, provided as follows: " Arrangements that reduce the dutiable value If any arrangement affecting the dutiable value of dutiable property that was entered into within 12 months before a dutiable transaction was brought about by any person with the intention of reducing the dutiable value of the dutiable property, the Chief Commissioner may: (a) cause a valuation of the dutiable property to be made, and (b) direct the valuer to disregard the arrangement for the purposes of the valuation, and (c) assess duty on the basis of the valuation carried out in accordance with the direction." 19The State Revenue Legislation Amendment Act 2002 (" Amendment Act 2002"), Sch 1 [4], omitted s 24 as originally enacted and replaced it with the following provision: "An arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction is to be disregarded in determining the dutiable value of the dutiable property if: (a) the dutiable transaction is between associated persons, or (b) the Chief Commissioner is satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property." Section 24 in this form commenced on 13 November 2002 and was the subject of the decision in Trust Company , to which I refer in detail later ([136]ff) . 20The 2002 Amendment Bill, as first presented to Parliament, did not include any amendment to s 24 as originally enacted. However, in the course of the debate in the Legislative Assembly, the Opposition referred to a newspaper article suggesting that there were loopholes in the legislation. The loopholes were said to involve the use of long term leases instead of transfers of the freehold to avoid substantial duties. The attraction of using long term leases was that they attracted a much lower rate of duty (0.35 per cent) than transfers of the freehold (up to 5.5 per cent): NSW Parl Deb, Leg Ass, 13 November 2002, at 6724. 21In response, the Parliamentary Secretary foreshadowed amendments to the 2002 Amendment Bill, in the following terms (NSW Parl Deb, Leg Ass, 13 November 2002, at 6724): "Since the introduction of the bill the Government's attention has been drawn to the need to make further amendment to the Duties Act to counter an increase in duty avoidance practices. The Office of State Revenue monitors business practices to identify emerging trends that may result in revenue leakage. Recent evidence suggests an escalation in the use of certain practices to avoid duty. Any delay introducing these amendments has the potential to encourage more widespread use of the practices at significant risk to revenue." Accordingly, the 2002 Amendment Bill was amended to repeal s 24 in its original form and substitute the section set out at [19] above. 22The version of s 24 introduced by the 2002 Amendment Act had a short life. The State Revenue Legislation Further Amendment Act 2003 (" Amendment Act 2003"), Sch 1 [6], repealed s 24 as enacted by the Amendment Act 2002 and replaced it with the present provisions. The Explanatory Note to the 2003 Bill merely noted that: "The substituted section clarifies that arrangements made for a collateral purpose of reducing the amount of duty otherwise payable are to be disregarded." Interpretation Act 23The Interpretation Act 1987 (" Interpretation Act "), s 21(1), contains the following definitions relevant to the present case: " land includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein. property means 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." Conveyancing Act 24Section 134 of the Conveyancing Act 1919 (" Conveyancing Act ") provides for the enlargement of a long term lease into a fee simple estate. Section 134(1) provides as follows: "Where a residue unexpired of not less than two hundred years of a term which, as originally created, was for not less than three hundred years, is subsisting in land ... without any rent, or with merely a peppercorn rent or other rent having no money value, incident to the reversion, or having had a rent, not being merely a peppercorn rent or other rent having no money value ... then the term may be enlarged into a fee simple in the manner, and subject to the restrictions, in this section provided." Among the persons entitled to enlarge the term is any person beneficially entitled in right of the term to possession of the land subject to the lease: s 134(2)(a). 25There are limitations on the statutory right of enlargement. For example, s 134(1) does not apply to any term liable to be determined by re-entry for condition broken: s 134(4)(a). Taxation Administration Act 26A taxpayer who is dissatisfied with an assessment may lodge a written objection with the Commissioner: s 86(1). The grounds for the objection must be stated and the objector has the onus of proving the objector's case: ss 87(1), 88. 27The Commissioner must consider an objection and either allow it in whole or in part or disallow it: s 91(1). The Commissioner must give notice to the objector of the determination of the objection and must give reasons, inter alia , for disallowing an objection: s 93(1), (2). 28Section 97(1) of the TA Act provides that a taxpayer may apply to the Supreme Court for review of a decision of the Commissioner that has been the subject of an objection if the taxpayer is dissatisfied with the Commissioner's determination of the objection. Section 97(4) states that a review by the Supreme Court is taken to be an appeal for the purposes of the Supreme Court Act 1970 and the regulations and rules made under that Act, except as otherwise provided: see also Supreme Court Act 1970, s 19(2). 29Section 101(1) provides that the Supreme Court, in dealing with an application for review, has the following powers: "(a) confirm or revoke the assessment or other decision to which the application relates, (b) make an assessment or other decision in place of the assessment or other decision to which the application relates, (c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid, (d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision, (e) make any further order as to costs or otherwise as it thinks fit." " Assessment " for the purposes of s 101(b) means an assessment by the Commissioner, and includes an assessment by the Supreme Court on an application for review: s 3(1). 30On an application for review, the applicant's and respondent's cases are not limited to the grounds of the objection: s 100(2). 31If a taxpayer's application for review is successful, the Commissioner must refund any amount paid in excess of a requirement for payment under the relevant taxation law: s 104. 32In Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663; 60 ATR 1 (" Affinity Health "), Gzell J held (at [58]) that the clear language of s 101 of the TA Act compelled the conclusion that the role of the Supreme Court, where a taxpayer seeks review of the Commissioner's exercise of a discretion is not limited to review in accordance with the principles laid down in Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353. In his Honour's opinion, the Supreme Court was empowered on review to exercise afresh any discretion conferred on the Commissioner. 33In Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2010] NSWCA 326 (" Tasty Chicks "), this Court overruled Affinity Health . Handley AJA, with whom Giles and Macfarlan JJA agreed, held (at [32]) that an appeal under s 97(1) of the TA Act: "is an appeal in its 'right and proper sense', that is, a right to redress error by the Commissioner on the materials that were before him at the time, and is not a rehearing or a hearing de novo." Accordingly, so the Court of Appeal held, where the legislation makes the taxpayer's liability dependent on the Commissioner being satisfied that a certain fact exists, the question on appeal is whether the Commissioner's decision was vitiated by an error of the kind identified in Avon Downs , such as error of law, taking into account irrelevant considerations or failing to take into account relevant considerations (at [33]). 34On 10 June 2011 the High Court granted special leave to appeal to the taxpayer in Tasty Chicks . The appeal was heard on 8 September 2011 and judgment reserved. Argument on the appeal in this Court also took place on 8 September 2011. 35Various possibilities were canvassed on the appeal to take account of the pending decision of the High Court in Tasty Chicks . One was to postpone handing down judgment in this appeal until after the High Court determined the appeal in Tasty Chicks . Another was to prepare a judgment addressing the alternative outcomes in the High Court. As events transpired, the High Court delivered judgment on 5 October 2011: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41. 36The High Court, in a unanimous judgment, allowed the appeal. Their Honours held (at [12]) that this Court was in error in holding that a review under s 97(1) of the TA Act of a decision of the Commissioner was constrained by the principles in Avon Downs . The Court said (at [18]) that when the relevant provisions of the TA Act and the Supreme Court Act 1970 were read together: "it becomes readily apparent that Gzell J correctly proceeded on the basis that the Supreme Court was empowered to set aside the disallowance by the Chief Commissioner of the objection by the appellants, allow the appellants' objection, set aside the determination of the Chief Commissioner not to exercise his ... discretion, revoke the assessments, and require reassessments by the Chief Commissioner." 37The Court approved (at [20]), subject to one qualification, the following statement of Gzell J in Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2009] NSWSC 1007; 77 ATR 394, at 413 [165]: "The powers in the [TA Act], s 101 are quite different from the powers of a court on appeal under the [Income Tax Assessment Act 1936 (Cth)]. They are specific and include the power to make an assessment or other decision in place of the assessment or decision the subject of the review. And any dichotomy between the powers of the Supreme Court and the powers of the [Administrative Decisions Tribunal] has been abrogated." The ADT on review must make " the correct and preferable decision ... having regard to the material then before it and may exercise all the functions conferred on the Commissioner " ( Administrative Decisions Tribunal Act 1997, s 63(1), (2)). 38The qualification added by the High Court (at [17], [20]) is that the Supreme Court has additional powers to those of the Administrative Decisions Tribunal. These include the power to receive further evidence and to make any assessment which ought to have been made: Supreme Court Act 1970, s 75A(7), (10). BACKGROUND FACTS 39In 2002, the registered proprietors of the Centre were the Government Superannuation Office of Victoria (" Super Office ") and GPT Management Ltd (" GPT "), as tenants in common in equal shares. The Centre was subject to a number of commercial leases, to which it is convenient to refer as the " Short Leases ". 40On 28 June 2002, Centro Property Syndicate No 8 was established by a trust deed executed by Centro, then known as Centro Properties Ltd, and CPT Manager Ltd (" CPT Manager "), a wholly owned subsidiary of Centro, as trustee. 41On 9 August 2002, the Chief Executive Officer of Centro wrote on behalf of CPT Manager expressing interest in purchasing the Centre on terms set out in the letter. The terms included payment of a deposit of $1 million on exchange of contracts, with the balance of the price to be payable 30 days after exchange. The letter said that CPT Manager was willing to purchase the Centre for a price that produced a yield of between 7.75 per cent and 8 per cent per annum. The letter also said that the purchaser would be CPT Manager or its nominee. No reference was made to CPT Manager acquiring a leasehold, as distinct from a freehold interest. 42Mr Nenna, then the Chief Financial Officer of Centro, gave evidence of the negotiations that subsequently took place with GPT. Mr Nenna, whose evidence appears to have been accepted by the primary Judge, recounted a conversation with Mr O'Brien of GPT that took place between August 2002 and 30 October 2002, as follows: "Centro only want to acquire a long term lease in the Property. We are looking at a 300 year lease. This interest will be sufficient for us to use and manage the property in the way we want to. We do not need to acquire the freehold interest to do this. That will only add to the stamp duty costs and we do not need it. This is the most cost effective way for us to go ahead. We are looking to sell this to an unlisted property syndicate." 43Mr O'Brien said words to the following effect: "GPT wants to sell its freehold interest. We are not interested in granting a lease. However if you can come up with a structure that won't result in GPT being disadvantaged, we are prepared to consider it assuming we can reach agreement on the price." 44Mr Nenna said that an issue arose in negotiations concerning GPT's liability to either capital gains tax or income tax on any premium payable by the " purchaser " of the Centre on the grant of the proposed 300 year lease. Under the relevant legislation ( Income Tax Assessment Act 1997 (Cth), s 104-114), these potential difficulties could be overcome if the agreements provided that the reversionary freehold estate not merge with the leasehold interest for at least a period of 50 years. 45Centro obtained legal advice about the manner in which it was proposed to structure the acquisition of the Centre. The structure involved Mr Nenna's idea of a concurrent lease of the Centre for a term of 300 years, with an option to acquire the reversion exercisable by a party other than the long term lessee. Advice was received that any such option should be exercisable only after the expiration of a period of 12 months from the grant of the concurrent lease, in order to avoid the operation of s 24 of the Duties Act as it then stood (see above at [18]). 46On 30 October 2002, Super Office and CPT Custodian Pty Ltd (" CPT Custodian "), another wholly owned subsidiary of Centro, entered into an agreement for the sale and purchase of Super Office's freehold interest in the Centre for a price of $167.1 million. CPT Custodian purchased the interest as trustee of the Centro Bankstown Sub Trust No 2 (" Sub Trust No 2 "). All units in Sub Trust No 2 were held by CPT Manager as trustee of Holding Trust No 2. No issue in these proceedings arises in relation to the duty payable on the sale and purchase of Super Office's freehold interest. 47A number of other transactions occurred on 30 October 2002. GPT and CPT Custodian, as trustee of the Centro Bankstown Sub Trust No 1 (" Sub Trust No 1 "), entered into an " Agreement for Long Lease ". Under the Agreement for Long Lease, GPT agreed to grant, and CPT Custodian agreed to accept, the Long Lease in the form annexed to the Agreement (cl 13.1). CPT Custodian agreed to pay a " Lease Premium " of $175,950,000 (cl 14) in respect of the Long Lease, which was to be for a term of 300 years. 48The Long Lease was to be subject to and concurrent with the Short Leases. The Agreement for Long Lease recorded that the Lessor's Interest was leased to CPT Custodians subject to the Short Leases (cl 29.1). The expression " Lessor's Interest " was relevantly defined (cl 1.1) to mean GPT's interest in the Centre as freehold owner as tenant in common subject to the Short Leases. GPT warranted that, subject to certain specified encumbrances and to existing leases, licences and occupancy rights, GPT and Super Office were the owners and registered proprietors of the Centre as tenants in common in equal shares (cl 19.5(a)). 49The Agreement for Long Lease described the contract of sale between Super Office and CPT Custodian as an " Interrelated Agreement " (cl 54(2)(a)). Completion of the Agreement for Long Lease was to occur at the same time and place as the sale of Super Office's freehold interest in the Centre to CPT Custodian (cl 54(2)(b)). 50By a document entitled " Bankstown Shopping Centre Call Option - GPT's Interest in Reversion ", (the " Call Option ") GPT granted Centro an option to purchase the " Owner's Interest " in the Centre (cl 2.1) for a price of $50,000. The " Owner's Interest " was defined to mean GPT's interest in the Centre as: "freehold owner as tenant in common in equal shares free from encumbrances other than the Specified Encumbrances and the Lease." The Call Option could be exercised during the period of one month beginning one year and one day after the commencement date of the Lease (cl 2.2(a)). The word " Lease " was to have the same meaning as in the annexed contract. However, the annexed contract merely stated " Lease means [reference to 'concurrent leases' to be inserted ]." 51By a document entitled " Bankstown Shopping Centre Put Option - GPT's Interest in Reversion " (the " Put Option "), Centro granted a put option to GPT entitling GPT to require Centro to purchase the " Owner's Interest " in the Centre, for a price of $50,000 (cl 2.1(a)). The put option could be exercised during a period commencing one year, seven months and a day after the commencement of the Lease (cl 2.2). " Lease " was defined in the same manner as in the Call Option. 52Centro, CPT Custodian and GPT entered into a " Deed of Warranty and Indemnity ". Among other warranties and indemnities, Centro and CPT Custodian agreed that they would not allow the reversionary freehold interest to merge with the Long Lease within 50 years of the grant of the Long Lease (cl 2.2). As explained earlier (at [44]), this was to overcome possible taxation issues for GPT. 53By a " Deed of Guarantee & Indemnity ", CPT Manager, as the responsible entity for the Centro Property Trust, guaranteed in favour of GPT the performance by CPT Custodian of its obligations as trustee of Sub Trust No 1. 54On 13 November 2002, the Amendment Act 2002 commenced. Apart from repealing and replacing s 24, it imposed a higher rate of duty on the enlargement of long term leases into a fee simple under s 134 of the Conveyancing Act 1919: see Duties Act, s 8(1)(b)(vi). 55The primary Judge summarised (at [33]-[34]) the effect of the documentation and the advantages to CPT Custodian of the arrangement as follows: "Thus the documentation provided for CPT Custodian as trustee of Sub Trust No 1 to obtain a 300-year concurrent lease of [GPT's] 50% interest in the Shopping Centre, for [Centro] to obtain an option to acquire from [GPT] its reversionary interest in the land through a call option and [GPT] granted a put option in the event that the call option was not exercised and it wished to rid itself of all interest in the Shopping Centre. The advantage to CPT Custodian as trustee of Sub Trust No 1 was that it acquired an interest in the Shopping Centre, tantamount to ownership, at a greatly reduced stamp duty impost. Lease duty is 0.35% under the Duties Act s 170(1) whereas conveyance duty on a dutiable value in excess of $1 million is $40,490 plus 5.5% on the excess under s 32(1)." 56Notwithstanding the commercial relationship between Centro and CPT Custodian it was common ground before Gzell J that they were not " associated persons " at the relevant time within the meaning of s 24(3)(b) of the Duties Act. (The definition of " associated persons " is contained in the Duties Act, Sch 2, cl 2). 57On 12 November 2002, CPT Custodian lodged the Agreement for Long Lease with the Commissioner for assessment and stamping. CPT Custodian paid duty of $615,825 in respect of the Agreement for Long Lease, an amount calculated by reference to the premium of $175,950,000. The Agreement for Long Lease was duly stamped on 19 November 2002. 58On 21 November 2002, GPT granted the Long Lease to CPT Custodian. On the same day, the sale of Super Office's interest to CPT Custodian was completed. 59On 25 November 2002 the Long Lease was stamped with $2 in accordance with s 171(1) of the Duties Act, as the Agreement for Long Lease had already been stamped. 60On 20 January 2003, a prospectus was issued offering units in Syndicate No 8 to the public. 61On 21 November 2003, the period for the exercise of the Call Option commenced. That period expired on 20 December 2003 without the Call Option being exercised. 62On 1 January 2004, the Amendment Act 2003 commenced. As has been seen, this inserted s 24 in its current form into the Act. 63On 21 July 2004, GPT exercised its Put Option, thereby requiring CPT Custodian to purchase the " Owner's Interest " in the Centre. 64On 22 July 2004, GPT and Centro entered into a Contract of Sale of GPT's interest in the Centre to Centro for a price of $50,000 (" Centro Contract of Sale "). GPT's interest in the Centre was described as " one half share as tenant in common ". The contract stated that the Property was sold subject to " the Lease ". I shall refer later to additional terms of the Centro Contract of Sale (see below at [110]). 65On 25 August 2004, GPT executed a transfer of the fee simple estate in the Centre to Centro. Upon registration of the transfer, Centro became registered proprietor of the fee simple estate subject to the Long Lease. 66On 3 November 2004, Centro lodged the Centro Contract of Sale for stamping on the basis that the dutiable value of the dutiable property was $50,000. Centro paid $765 in duty on that basis. 67On 25 May 2007, after considerable correspondence and other communications between the parties, the Commissioner issued a notice of assessment in respect of " Transfer Lease ". The assessment required Centro to pay duty of $9,665,492 (subject to a credit of $765) and interest of $3,424,641.02. 68On 27 July 2007, Centro objected to the assessment. 69On 6 September 2007, Centro paid $2,415,608 pending final determination of the objection, being 25 per cent of the duty assessed, less $765 duty already paid. 70On 18 July 2008, the Commissioner disallowed Centro's objection to the assessment. The notice of determination was in the following terms: "A concurrent lease granted by GPT to CPT Custodian Pty Ltd ('Custodian') on 21 November 2002 was an interest, agreement or arrangement granted or made in respect of the dutiable property the subject of the Contract, and had the effect of reducing the dutiable value of that dutiable property . In determining the dutiable value, the lease is to be disregarded under section 24(1) of the Duties Act 1997 (see Trust Company Limited v Chief Commissioner of State Revenue [2007] NSWCA 255). Section 24(1) is subject to section 24(2), which provides that an interest, agreement or arrangement is not to be disregarded if the Chief Commissioner is satisfied that it was not granted or made as a part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. I note that a Press Release dated 30 October 2002 stated: Centro Property Group announced today the acquisition of Bankstown Square ... from Government Superannuation Office of Victoria (50%) and General Property Trust (50%) for a price of $353.6 million including all acquisition costs. In this context, it would be artificial to limit identification of the scheme or arrangement by reference to the purposes of individual entities such as Custodian or CPL. The lease and put and call options granted on the same date, the agreement entered into pursuant to the put option, and the transfer pursuant to the agreement constitute an arrangement or scheme for GPT to dispose of, and for Centro Property Group to acquire, the entire 50% interest of GPT . The meaning of the term 'collateral purpose' was considered in Commissioner of State Revenue v Purdale Holdings Pty Ltd [2003] VSC 289, which held that, for the purposes of an anti-avoidance provision in section 72 of the Victorian Stamps Act 1958 , 'collateral purpose' means a 'purpose'. It is clear that, in context, the term has the same meaning in section 24, and that the purpose of reducing the duty need only be one of the purposes of the arrangement or scheme for section 24(1) to apply. In considering whether I am satisfied for the purposes of section 24(2), I have had regard to the matters in section 24(3)(a)-(c) and the matters raised in your submissions. Not all of these matters are relevant to this determination, but the evidence supports the conclusion that the purposes of the arrangements to a large extent relate to the creation of the concurrent lease as a means of transferring economic ownership and control of the property from GPT to Custodian, with consequent tax and duty benefits. However, the existence of the put and call options and the relatively short period between the lease and the agreement indicate that a transfer of the reversion was contemplated by the parties at the time as a necessary step in the arrangement or scheme. You have confirmed that duty and tax benefits were contemplated by the parties when developing the arrangements. The timing of the options to avoid the potential application of section 24 as it then applied indicates that the lesser amount of duty payable on the transfer of the reversion was also contemplated by the parties. I am therefore satisfied that reducing the duty otherwise payable on the dutiable transaction was a collateral purpose of the arrangement or scheme. Consequently, the lease must be disregarded in determining the dutiable value of the dutiable property. A balance of $7,249,119 duty remains unpaid." (Emphasis added.) 71On 15 September 2008, Centro filed a summons in the Supreme Court seeking review of the Commissioner's objection decision pursuant to s 97(1) of the TA Act. Centro sought orders under s 101 of the TA Act revoking the Commissioner's objection decision and directing the Commissioner to issue a re-assessment of duty in the amount of no more than $765. Centro also sought an order requiring the Commissioner to refund all amounts paid by it under the assessment upheld by the Commissioner. CONCURRENT LEASE 72As the Long Lease was subject to and concurrent with the Short Leases, it is as well to note the effect of a concurrent lease where the land concerned is already subject to a lease. In Cole v Kelly [1920] 2 KB 106, at 120, Lush J explained that: "Where a new lease is granted in praesenti subject to an earlier lease for a shorter term the lessee under the new lease is entitled during the continuance of the earlier lease to the immediate reversion expectant on the determination of that lease." Cole v Kelly was affirmed on appeal: [1920] 2 KB 123. See also Horn v Beard [1912] 3 KB 181. 73The grant of a concurrent lease brings about an assignment of the reversion to the extent of the concurrent lessee's interest: Neale v Mackenzie (1836) 1 M&W 747, at 760; 150 ER 635, at 640, per Lord Denman CJ; Richardson v Landecker (1950) 50 SR (NSW) 250, at 258, per curiam ; Minister for Interior v Brisbane Amateur Turf Club [1949] HCA 31; 80 CLR 123, at 148, per Latham CJ; at 162, per Dixon J. An immediate relationship of privity of estate exists between the concurrent lessee and the original lessee: Birch v Wright (1786) 1 TR 378, at 384; 99 ER 1148, at 1152, per Buller J. The concurrent lessee, as landlord of the original lessee, can enforce all covenants in the original lease capable of running with the tenancy: Horn v Beard, at 188. See generally Halsbury's Laws of England, Landlord and Tenant, vol 27, at [104]. 74In the present case, the grant of the 300 year Long Lease to CPT Custodian created an immediate relationship of landlord and tenant between CPT Custodian and each of the lessees under the Short Leases. The grant of the Long Lease operated as an assignment of GPT's reversionary estate, to the extent of CPT Custodian's interest. CPT Custodian could enforce the covenants on each of the Short Leases, to the extent that the benefit of the covenants ran with the reversion. Upon termination of the Short Leases, CPT Custodian (which had acquired Super Office's 50 per cent freehold interest in the Centre) would have been entitled to possession of the Centre. Subject to compliance with s 134 of the Conveyancing Act and to the contractual restraints on merger of the Long Lease with the freehold reversion, CPT Custodian could enlarge the residue of its long term into a fee simple estate. PRIMARY JUDGMENT 75The primary Judge noted that the Commissioner had relied on the decision of this Court in Trust Company . However, his Honour considered (at [75]-[77]) that there were clear differences between Trust Company and the present case: "There the prospective purchaser became the lessee and acquired the reversionary estate created upon entry into the long-term concurrent leases and that gave the lessee access to the valuable short-term leases. The prospective purchaser ended up with the same reversionary interests expectant on the short-term leases that it would have acquired by purchase under the heads of agreement. It obtained access to the short-term leases because the first reversionary estate created by those short-term leases ceased to exist when the later concurrent leases issued and the new reversionary estate created by the concurrent leases subsumed the first reversionary estate. Here, the prospective purchaser became the lessee but it did not acquire the reversionary interests. They were acquired by [Centro] and under a covenant against merger thereby denying it access to the valuable short-term leases for at least 50 years. What [Centro] acquired was of negligible value. CPT Custodian as trustee of Sub Trust No 1 became the lessee under the long-term concurrent lease and obtained access to the valuable short-term leases. But CPT Custodian has not been assessed. The reversionary interest holder without access to the short-term leases has been assessed instead." (Emphasis added.) 76The Commissioner had submitted that it made no difference that in Trust Company a single entity had acquired the long lease and (ultimately) the fee simple reversion while in the present case two entities (CPT Custodian and Centro) were involved. The primary Judge said (at [81]) that the position was not so simple: "[Centro] was not intended to acquire the reversion expectant upon the short-term leases and did not acquire the reversion expectant upon the short-term leases. It was intended to acquire and did acquire the worthless reversion expectant upon the 300-year concurrent lease." 77His Honour stated (at [84]-[85]) that there was nothing to indicate that s 24 of the Duties Act, as inserted by the Amendment Act 2003, was intended to introduce any significant change from s 24 in the form considered in Trust Company . On the basis of the reasoning in Trust Company , his Honour was of the view (at [87]) that the Commissioner could only succeed if: * the reversionary interest put to Centro was " transmogrified " (a word used by Santow JA in Trust Company ) by entry into the concurrent Long Lease from a prospective acquisition of dutiable property of greater value to one of lesser value; or * the entry into the Long Lease affected the dutiable value of the dutiable property that later became the subject of the dutiable transaction (as Mason P had reasoned in Trust Company ). 78Mason P's reasoning, according to the primary Judge (at [88]), rested on the fact that the concurrent long leases in Trust Company affected the value of the reversionary interests that otherwise would have been transferred to the Trust Company. There was no other dutiable property the dutiable value of which was reduced by entry in the concurrent long leases. 79The present case was different. The reversionary interest put to Centro was not " transmogrified " from other dutiable property it was to acquire. Nor was there (at [89]-[91]): "any other dutiable property that [Centro] was to acquire, the dutiable value of which was reduced by CPT Custodian's entry into the 300-year concurrent lease. There was no pre-existing arrangement, as there was in Trust Company , that [Centro] would purchase the reversion expectant on the short-term leases that was transmogrified into its acquisition of the reversion expectant upon the 300-year concurrent lease. A reduction in value calls for a comparison between what [Centro] acquired and what it otherwise would have acquired but for the impugned interest, agreement or arrangement. In this case it was never intended that [Centro] should acquire anything other than the reversion expectant upon the 300-year concurrent lease. That distinguishes this case from Trust Company and renders the Duties Act , s 24(1), inapplicable to [Centro]. The dutiable property that it acquired, the reversion expectant upon the 300-year concurrent lease, was not subject to any interest, agreement or arrangement that had the effect of reducing its dutiable value. It was always intended to acquire dutiable property that maintained its dutiable value." 80The dutiable property was the reversionary interest in the Centre expectant upon the 300 year concurrent Long Lease. It was that dutiable property that the Commissioner had assessed to duty (at [92]). Any interest, agreement or arrangement to be disregarded had to be made in respect of the dutiable property assessed to duty and not in respect of some other dutiable property, such as the Long Lease acquired by CPT Custodian (at [95]). In short (at [96]): "There was no concurrent or antecedent interest, agreement or arrangement that affected any other dutiable property that [Centro] was to acquire that could be said to be in respect of the agreement for transfer of the reversion of the Shopping Centre expectant on the 300-year concurrent lease, giving 'in respect of' a broad connotation." 81In his Honour's view, s 24(2) reinforced the conclusion that s 24(1) required a comparison to be made between the dutiable value of the dutiable property actually acquired and that which would have been acquired but for the interest, agreement or arrangement that is to be ignored (at [97]). In excepting interests, agreements or arrangements that are not part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction, s 24(2) presupposed that such arrangements or schemes with the collateral purpose were caught (at [98]). 82The primary Judge continued as follows (at [99]-[100]): "Since the collateral purpose is the reduction of duty otherwise payable, a comparison is required between the duty payable and that which would otherwise be payable on the dutiable transaction. In other words, there must be some affectation upon a proposed dutiable transaction that reduces the duty payable. Since there was no arrangement or scheme with the purpose of reducing the duty otherwise payable by [Centro] on its agreement to acquire the reversion expectant upon the 300-year concurrent lease of the Shopping Centre, there is a further reason why the Duties Act s 24(1) does not apply to [Centro's] acquisition of dutiable property." 83This was sufficient to set aside the Commissioner's assessment. It was therefore unnecessary for his Honour to consider whether the Commissioner should have been satisfied in the terms of s 24(2). SUBMISSIONS Commissioner's Submissions 84The Commissioner's submissions centred on whether the primary Judge had been correct to distinguish Trust Company . Mr Hughston SC, who appeared with Mr Young and Ms Bishop for the Commissioner, submitted that, contrary to his Honour's view, Trust Company had not turned on the presence of a pre-existing arrangement under which the taxpayer was to acquire dutiable property, which was then superseded by another arrangement whereby the same taxpayer acquired property of lesser value. Mr Hughston contended that the GPT's fee simple estate subject to the concurrent Long Lease (to which I shall refer as the " Reversionary Estate ") was created as a worthless interest to replace a much more valuable reversionary estate. This was done as part of a scheme, the purpose of which was to reduce the dutiable value of the Reversionary Estate that was ultimately transferred to Centro pursuant to the Centro Contract of Sale. 85The series of transactions involved in the arrangement to which Centro was a party could not be " dislocated " from each other. The creation of the Long Lease in conjunction with other steps clearly reduced the dutiable value of the fee simple estate transferred to Centro. 86Mr Hughston submitted that the anti-avoidance purpose of s 24 was clear on its face. That purpose would be frustrated if duty could be avoided simply by not having the lessee under a long lease become the purchaser. 87Mr Hughston further submitted that the Commissioner, in considering whether he was satisfied of the matter specified in s 24(2) of the Duties Act, could properly take into account the subjective purpose of individual parties to the scheme. However, the ultimate question for the Commissioner was whether the scheme, judged objectively, had a collateral purpose of reducing duty otherwise payable on the transaction. Mr Hughston submitted that the circumstances surrounding the scheme, when viewed objectively, made it clear that a collateral purpose of the scheme was to achieve a reduction in the value of GPT's Reversionary Estate in the Centre, with a consequent reduction of the duty on the transfer of the Estate to Centro. Centro's Submissions Section 24(1) 88Mr Slater QC, who appeared with Mr Robertson for Centro, did not resile from concessions made on Centro's behalf to the primary Judge. At the trial, Mr Slater said ( Black , 61) that it had never been in dispute that there was an arrangement by which stamp duty transaction costs were sought to be minimised. However, he qualified the concession by saying that it was not the stamp duty costs to Centro that were sought to be minimised, but the costs to CPT Custodian and unit holders in Sub-Trust No 1. 89Mr Slater drew a sharper distinction between s 24(1) and s 24(2) than Mr Hughston. Mr Slater submitted that s 24(1) applies only if an arrangement objectively has the effect of reducing the dutiable value of the interest in land transferred to a taxpayer. The concept of reduction implies a comparison between the effects of the presence or absence of the claimed arrangement upon the dutiable value of the dutiable property acquired by Centro. The " alternate postulate " contemplated by s 24(1) must be founded on a dutiable transaction involving the same dutiable property. It was therefore irrelevant that, but for the arrangement, Centro or another taxpayer (CPT Custodian) might have entered into a different transaction on which greater duty would have been payable. 90Mr Slater submitted that in cases applying the " equivalent " of s 24, the taxpayer had acquired both the long term lease and the reversion, albeit by two steps rather than one. In this case, the arrangement simply had no effect on the dutiable value of any dutiable property actually acquired by Centro. It never acquired nor proposed to acquire anything other than the reversion expectant upon the Long Lease. 91According to Mr Slater, the Commissioner's true grievance was that CPT Custodian paid less duty than it would have had it acquired the entire freehold. This was demonstrated by the Commissioner's reliance on Trust Company where the taxpayer had acquired both a long term lease and the fee simple reversion. This fact was central to the reasoning of the majority, particularly the " transmogrification " analysis adopted by Santow JA. There was nothing in s 24(1) to indicate that it was directed to imposing additional duty on a taxpayer who only ever acquires a valueless reversionary estate. Collateral Purpose 92In support of its notice of contention, Centro contended that this Court should find that there was no purpose or collateral purpose of reducing duty otherwise payable on the dutiable transaction within the meaning of s 24(2) of the Duties Act. Mr Slater submitted that the purpose had to relate to reducing the duty payable on the dutiable transaction, that is the transaction entered into by Centro. 93The contention was put this way in Centro's written submissions: "Here there was no purpose of diminishing the value of any dutiable property acquired by [Centro]. It was never the purpose of the arrangement that any dutiable property of value should be acquired by [Centro]: the purpose of the arrangement was that valuable property should be acquired by CPT Custodian, so that it could be made the subject of investment by the public investors who took up interests in the unit trust which ultimately owned the 300 year [Long Lease] (and the freehold moiety acquired from GSO). The only collateral purpose bearing upon an operation of the Duties Act was that of reducing the amount of duty payable by the lessee (CPT Custodian Ltd as trustee of the Centro Bankstown Sub Trust No 1) on its acquisition of an asset which satisfied its commercial imperatives, namely the 300 year [Long Lease] which it could, subject to the contractual obligations it had assumed to the grantor, enlarge into an estate in fee simple at its option [under s 134 of the Conveyancing Act]. To the achievement of that end (both the commercial objective and that of minimising the duty liability of the lessee) the acquisition by [Centro] of the defeasible reversion expectant upon the 300 year lease was irrelevant: it mattered not to CPT Custodian who was the owner of the reversion, for the owner of the reversion had effectively no rights and could not interfere with CPT Custodian's pursuit of its objectives." 94Mr Slater submitted that the criteria specified in s 24(3) of the Duties Act supported Centro's position: (a) the Long Lease was granted two years before the dutiable transaction and the only interest Centro was ever intended to acquire was the reversion expectant on the Long Lease; (b) Centro was not an " associated person " of any other party to the transactions of 30 October 2002; (c) the Long Lease was commercially efficacious because it granted to CPT Custodian all the benefits of a fee simple estate without having to be concerned about the identity of the holder of the reversionary estate; (d) the " other " matters to which the Court could have regard did not include the fact that CPT Custodian would pay less duty on its Long Lease than if it had acquired the fee simple estate, since s 24 was concerned only with the liability of Centro to duty in the dutiable transaction. 95Mr Slater invited the Court to approach the appeal on the basis that an application for review under ss 97 and 101 of the TA Act permits the Supreme Court to re-exercise the discretion conferred on the Commissioner by s 24 of the Duties Act, a construction now authoritatively endorsed by the High Court in Tasty Chicks . 96If it was necessary for Centro to establish that the Commissioner had erred in law, Mr Slater identified two such errors: * the Commissioner had taken into account subjective purposes and motives under s 24(3)(d), whereas the correct approach was to determine the purpose of an arrangement or scheme objectively from the acts by which it was implemented; and * the Commissioner did not confine himself to considering whether the purpose was to reduce the duty otherwise payable by Centro on the dutiable transaction, but took into account the (admitted) purpose of reducing the duty payable by CPT Custodian. REASONING Textual Comparisons 97As has been noted, the primary Judge approached the case on the basis that s 24(1) of the Duties Act in its current form is not materially different to s 24 in the form considered in Trust Company . For the most part, the parties also seemed content enough to assume that any differences were not of particular significance, although Mr Slater did point to certain textual changes in the legislation. In fact the two versions are materially different, both in structure and in language. 98First , the direction in the old s 24 is to disregard " an arrangement affecting the dutiable value of dutiable property ". The direction in the current s 24(1) is to disregard any " interest, agreement or arrangement " granted or made in respect of the dutiable property that has the " effect of reducing " the dutiable value. 99Secondly , for an arrangement to be disregarded under the old s 24, the Commissioner had to be satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property. The current s 24(1) makes no reference to the purpose of a party, or indeed to any kind of purpose. The direction in s 24(1) applies if an interest, agreement or arrangement has the requisite effect, regardless of the purpose of any party to the creation of the interest or to the making of the agreement or arrangement. 100Thirdly , the current s 24(2) qualifies the direction in s 24(1) by providing that the interest, agreement or arrangement is not to be disregarded if the Commissioner is satisfied of a negative proposition: that is, that the interest, agreement or arrangement was not granted or made as part of an arrangement or scheme with the collateral purpose of reducing the dutiable value. The old s 24 contained no equivalent provision. 101Fourthly , the current s 24(3) sets out matters to which the Commissioner may have regard in considering whether he or she is satisfied of the negative proposition. The old s 24 gave no guidance as to the matters the Commissioner was to take into account in determining whether he or she was affirmatively satisfied that a party to the arrangement had the purpose of reducing the dutiable value of the dutiable property. 102Fifthly , the old s 24 referred only to an " arrangement ". The current s 24(1) refers to an " interest, agreement or understanding ", while s 24(2) refers to an " arrangement or scheme ". The concept of an " interest, agreement or understanding " is not necessarily co-extensive with the concept of an " arrangement or scheme ". 103Having regard to these differences, it is preferable to begin with an analysis of s 24 of the Duties Act in its statutory context, rather than to commence with the interpretation of Trust Company, a decision concerned with a different form of legislation. An additional reason for taking this course is that each of the judgments in Trust Company differs in important respects from the other two. I shall return to Trust Company later (at [136]ff). Section 24(1) 104Section 24(1) gives an instruction as to how the " dutiable value " of " dutiable property " is to be determined under Pt 2 of Ch 2 of the Duties Act . The statutory instruction applies where: * an interest, agreement or arrangement (other than an encumbrance); * is granted or made in respect of a dutiable property; and * has the effect of reducing the dutiable value. 105The statutory instruction in s 24(1) is subject to s 24(2). This states that an interest, agreement or arrangement is not to be disregarded if the Chief Commissioner is satisfied that: * it (the interest, agreement or arrangement) was not granted or made as part of an arrangement or scheme ; * with a collateral purpose; * of reducing the duty otherwise payable on the dutiable transaction. Dutiable Property 106A key concept in s 24(1) is " dutiable property ". This expression is defined in s 11(1) to include land in New South Wales and an interest in land in New South Wales. If there were any doubt that the definition includes an estate or interest in land, the doubt is removed by the definition of " land " in s 21(1) of the Interpretation Act (at [23] above) . 107The Duties Act does not give express directions for ascertaining the dutiable property, where the dutiable transaction is a transfer or an agreement to transfer a freehold estate subject to a lease or other interest. In Trust Company , as will be seen, Giles JA (with whom Mason P agreed on this point) determined " dutiable property ", in the case of a contract of sale of a fee simple estate subject to a lease, by reference to general principles of property law. That analysis, which led to the conclusion that the dutiable property was the reversionary interest expectant on the lease, rather than the fee simple estate in possession, is of considerable importance to the present case. However, in my opinion the Duties Act, although not giving express directions on the point, leads to the same conclusion. 108It will be recalled that s 9(1) states that the duty on a dutiable transaction referred to in s 8(1)(b), including an agreement for the sale of dutiable property, is to be charged as if each such dutiable transaction were a transfer of dutiable property. The effect of s 9(2) is that where, as in the present case, the dutiable transaction is an agreement for sale or transfer, the property transferred is taken to be the " property agreed to be sold or transferred ". As I have noted, the Interpretation Act, s 21(1), defines " property " to include any legal or equitable estate in real or personal property. 109Section 9(2) indicates that in the case of a contract of sale of land it is necessary to identify with precision the estate or interest agreed to be transferred. In the present case, the Centro Contract of Sale stated that GPT was: "selling its interest in the Property [identified in Annexure A as the Centre] being one half share as tenant in common in the Land and the Fixtures and the other property transferred or assigned". The Contract notes that the title is the fee simple estate, as recorded in C/T 8631, Folio 74. 110The Centro Contract of Sale provided (cl 42.1) that the Property was sold subject to the " Lease " and Centro accepted the Lease on its terms. Furthermore, Centro agreed to take the Property, together with the benefit of the lessee's obligations, and assume GPT's obligations under the Lease (cl 42.2). On completion, GPT was to assign to Centro all the benefit and interest of GPT in the Lease (cl 42.3). 111Rather remarkably, Annexure B to the Contract of Sale contained an obviously incomplete definition of " Lease ", reproduced from the Put Option, as follows: " Lease means [reference to 'concurrent lease' to be completed]." No point was taken about the incompleteness of the definition and both parties proceeded on the basis that the " Lease " referred to was the 300 year Long Lease granted to CPT Custodian. 112In my opinion, the effect of s 9(2) of the Duties Act is that the dutiable property taken to be transferred under a contract for the sale or transfer of an interest in land is the interest that is the subject of the contract of sale. In the present case, the terms of the Contract of Sale make it clear that the interest was GPT's fee simple estate as tenant in common subject to the concurrent Long Lease: that is, what I have described as the Reversionary Estate. Dutiable Value 113Another key concept in s 24(1) is that of " dutiable value ". Section 23(1)(b) provides that the " dutiable value " of dutiable property the subject of a dutiable transaction is, for present purposes, the unencumbered value of the dutiable property. The dutiable transaction in the present case was the Centro Contract of Sale between GPT as vendor and Centro as purchaser. 114The unencumbered value of dutiable property is to be determined without regard to any encumbrance to which the property is subject: s 23(1). The Duties Act does not define " encumbrance ". However, it was common ground on the appeal that a lease, including a concurrent lease, is not an " encumbrance " for the purposes of the Duties Act. 115I pause to observe that the position adopted by the parties accords with the decision of O'Bryan J on similar Victorian legislation, in Commissioner of State Revenue v Bradney Pty Ltd (1996) 34 ATR 233, at 237. The High Court referred to Bradney in Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43; 209 CLR 651, at 668 [48], but did not address whether it had been correctly decided. However, Bradney is treated as correct by DG Hill, Duties Legislation (LBC Information Services, Looseleaf Commentary) , at [3.1870]. The decision is also consistent with dicta in Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; 192 CLR 226. That case was concerned with the expression " unencumbered value of the property " in s 66 of the Stamp Duties Act 1920, which provided that a conveyance of property without consideration was charged with duty on the " unencumbered value of the property ". The High Court observed (at 245 [44]) that: "'unencumbered' is used in s 66(1) not in a loose sense but to refer to security interests in, or charges or other liabilities which attach to, the property in question." It is therefore appropriate to proceed on the basis adopted by the parties. 116Ordinarily the value of a fee simple estate subject to interests such as easements or restrictive covenants will be determined after taking into account the effect of those interests on the value of the estate. In the absence of a statutory direction to ignore such interests, assessing the value of the freehold without regard to the interests would be to ignore commercial reality. 117A freehold estate in land may be subject to many kinds of interests. Section 23(1) of the Duties Act makes it clear that if the freehold is subject to an " encumbrance ", the value of the freehold is to be determined without regard to that encumbrance. Thus if the freehold is subject to a security interest, that interest, being an encumbrance, is ignored in determining the dutiable value of the freehold. 118But a lease is not an " encumbrance ". Section 23(1) therefore does not require a lease to which the freehold is subject to be ignored in determining the value of the freehold. Where a contract is for the sale of the freehold subject to a lease, the usual principles apply. That is, the value of the freehold subject to a lease is determined for the purposes of the Duties Act by taking into account the terms of the lease. Depending on the commercial terms of the lease, the effect may be to increase or decrease (or have no effect on) the unencumbered value of the freehold. In the present case, of course, the terms of the concurrent Long Lease which provided for payment of a large premium to GPT but required payment of only a nominal rental, had the effect of depressing the value of the freehold Centro agreed to purchase under the Centro Contract of Sale. 119Taking into account the effect of an existing lease on the dutiable value of the freehold reversionary estate produces symmetry in the legislation. The dutiable property in the case of a contract for the sale of the freehold subject to a lease is the reversionary interest expectant on the lease. The dutiable value of the reversionary interest is to be determined taking into account the terms of the lease. In the present case, subject to the operation of s 24, the unencumbered value of the Reversionary Estate which Centro agreed to purchase was its value taking into account the terms of the 300 year concurrent Long Lease. Operation of s 24(1) in this Case 120Section 24(1) of the Duties Act requires that, in certain circumstances, a different approach is to be taken in determining the value of a freehold estate subject to a lease than is usual. If an interest, agreement or arrangement has been granted or made in respect of the dutiable property (the reversionary interest expectant on the lease) and has the effect of reducing the dutiable value, the interest, agreement or arrangement is to be disregarded. (For convenience, I shall condense the expression " interest, agreement or arrangement " to " Interest " and use " granted " and its variants to include " made ".) 121One issue that arises under s 24(1) is whether an Interest relied on by the Commissioner must be granted at the same time as the dutiable transaction. There is nothing in the language of s 24(1) to suggest that contemporanity is required. Section 24(1) speaks of an Interest " in respect of dutiable property ". The phrase " in respect of" is sufficiently wide to encompass an Interest granted before the dutiable transaction takes place. While the expression " in respect of " must be construed in its statutory context, it has usually been given a very wide meaning, requiring only a discernible and rational link between the matters in question: Technical Products Pty Ltd v State Government Insurance Office (Queensland) [1989] HCA 24; 167 CLR 45, at 47, per Brennan, Deane and Gaudron JJ; Solomons v District Court of New South Wales [2002] HCA 47; 211 CLR 119, at [45], per McHugh J. 122Moreover, s 24(3) expressly contemplates that an Interest can be granted before the dutiable transaction takes place. If, therefore, an Interest has been granted before the dutiable transaction is entered into, and the Interest has the effect of reducing the dutiable value of the dutiable property, s 24(1) requires it to be disregarded. 123The apparent conundrum presented by s 24(1) is that if the dutiable property is the Reversionary Estate, its dutiable value reflects (and may be depressed by) the terms of the Long Lease. Entry into the Long Lease prior to the Centro Contract of Sale, on one view, did not have the effect of reducing the dutiable value of the Reversionary Estate, because the Long Lease is an inherent component of the Reversionary Estate. To put the matter another way, the Reversionary Estate (in this case, the fee simple reversion expectant upon the concurrent Long Lease) came into existence at precisely the same time as the Long Lease itself. 124In addressing this apparent conundrum, it is important to recognise that, as the primary Judge pointed out and both parties accepted, s 24(1) envisages a comparison. It is difficult to see how a judgment can be made as to whether an interest has the effect of reducing the dutiable value of dutiable property unless the dutiable value with the Interest in place is compared with something else. A question arises, however, as to the nature of the comparison envisaged by s 24(1). 125The primary Judge said (at [90], [97]) that the required comparison was between what Centro acquired and what it otherwise would have acquired but for the impugned Interest. According to his Honour, the difficulty for the Commissioner was that it was never intended that Centro should acquire anything other than the reversion expectant upon the concurrent Long Lease. The Reversionary Estate maintained its dutiable value and, in his Honour's opinion, no Interest had been granted " in respect of " the Reversionary Estate. The Long Lease could not answer that description because it did not reduce the value of the Reversionary Estate. The Reversionary Estate was always subject to the Long Lease and its value never changed. 126I differ from his Honour on two matters. The first is that in my view the grant of the Long Lease was " in respect of " the dutiable property. For the reasons I have given, it is correct that the dutiable property in the present case was the Reversionary Estate. But this does not mean that the Long Lease was not granted " in respect of " the Reversionary Estate. Given that " in respect of " is usually read widely, it does not strain language to say that the grant of a limited interest in land is " in respect of " the reversionary freehold estate that is subject to that very interest. The necessary connection is established because the grant of the limited interest, whether it be a mortgage, easement, lease or other interest, defines and delimits the freehold estate subject to that interest. 127The second point of difference is that I consider that the comparison envisaged by s 24(1) is between the dutiable value of the dutiable property and its dutiable value on the assumption that the Interest had never been granted. In the case of dutiable property consisting of the freehold estate expectant on a concurrent long lease, the comparison is between the value the freehold reversionary estate (that is, the estate subject to the lease) and the freehold estate on the assumption that the concurrent long lease had never been granted. If the dutiable value calculated on the latter basis is greater than the dutiable value of the dutiable property, the effect of the grant of the concurrent long lease is to reduce the dutiable value for the purposes of s 24(1). 128The text of s 24(1) supports this approach. The most obvious means of determining whether the grant of an Interest has the effect of reducing the dutiable value of something is to ask what would be the value of that thing without the Interest. There is no difficulty, where the dutiable transaction is the sale of a freehold estate subject to a lease, in determining the value of the freehold on the assumption that the lease was never granted. In that situation, the value is that of the freehold estate in possession, rather than the value of the freehold reversion expectant upon the lease. 129The common element in each dutiable transaction (one actual and the other hypothetical or counter-factual) is the fee simple estate. However, the fee simple estate is subject in each case to different leasehold interests which have a very different effect on the value of the freehold estate. In the present case, the comparison required is between the Reversionary Estate expectant on the concurrent Long Lease and a reversionary freehold estate expectant on the Short Leases. 130For s 24(1) to apply, it is necessary for the Interest to be granted " in respect of " dutiable property. Once that condition is satisfied, the effect of the Interest on the dutiable value is to be determined by asking what the dutiable value would have been without the Interest. If it would have been greater than the dutiable value of the dutiable property, s 24(1) is satisfied. 131I accept that, for the reasons I have given, this comparison introduces a hypothetical or counterfactual estate or interest that is different in certain respects from the estate or interest constituting the dutiable property. Clearly enough, a reversionary freehold estate expectant upon a 300 year concurrent lease at a nominal rental is not identical to a reversionary freehold estate subject to short term commercial leases. But if an interest to which the dutiable property is subject at the time of the dutiable transaction can never have the effect of reducing the dutiable value of the dutiable property, it is difficult to see how s 24(1) could have any impact on the use of long leases (or other mechanisms) to avoid duty. Perhaps it is for this reason that s 24(1) uses the expression " has the effect of reducing the dutiable value ", rather than " has the effect of reducing the dutiable value of the dutiable property ". 132If this analysis is correct, s 24(1) requires a simple comparison between the value of the dutiable property with the Interest in place and its value with the Interest notionally removed. In some cases, the comparison will not result in a reduction of the dutiable value of the dutiable property. For example, if a long lease (whether or not concurrent) provides for a market rental and regular adjustments to market, the value of the fee simple estate subject to the lease may be no different from the value of the fee simple estate in possession. In other cases, the comparison may make it obvious that the effect of the Interest has been to reduce the dutiable value for the purposes of s 24(1). 133On this analysis, the net cast by s 24(1) is potentially wide. The creation of an easement or restrictive covenant over land, for example, might reduce the dutiable value of the fee simple estate when it is subsequently sold subject to the easement or covenant. The answer provided by Parliament is that the Interest is not to be disregarded if the taxpayer satisfies the Commissioner that the Interest was not granted as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. 134In making this judgment, the Commissioner " may have regard to ", inter alia , the duration of the Interest before the dutiable transaction and whether the grant of the Interest had any commercial efficacy other than to reduce duty. If these matters are taken into account, a commercially efficacious grant of an Interest for reason unconnected with minimising of duty will not attract the operation of s 24(1). It is hardly likely, therefore, that the grant of an interest in land for commercial or other non-duty related purposes will result in the Interest being disregarded when the fee simple estate is subject to that Interest is subsequently transferred. Conclusion on s 24(1) 135It follows from what has been said that in the present case the dutiable property was the Reversionary Estate. The Commissioner, in disallowing Centro's objection to the assessment, identified the Long Lease as the " interest, agreement or arrangement granted or made in respect of the dutiable property the subject of the Contract ". The dutiable value of the Reversionary Estate (that is, of the fee simple estate subject to the Long Lease) was $50,000. The dutiable value of the Reversionary Estate without the Long Lease (that is, of the fee simple estate subject only to the Short Leases) was apparently in the order of $176 million. In determining the effect of the Long Lease on dutiable value, s 24(1) requires a comparison to be made between value of the fee simple estate subject to the Long Lease with the value of the fee simple estate subject only to the Short Leases. This comparison shows that the effect of the Long Lease was to reduce the dutiable value. Section 24(1) therefore requires the Long Lease to be disregarded in determining the dutiable value of the dutiable property. This is so even where the lessee under the Long Lease and the assignee of the reversion expectant on the Long Lease are not the same person. However, the operation of s 24(1) is subject to the operation of s 24(2). Trust Company 136I have reached these conclusions without making detailed reference to Trust Company which, as I have pointed out, was a decision on s 24 in a different form. Nonetheless, each party's argument gave prominence to the decision. Accordingly, I shall consider the reasoning to determine whether it is consistent with my own. 137In Trust Company, the taxpayer (" Trust ") entered into heads of agreement to purchase four parcels of land for a total of $66 million. Subsequently, Trust proposed that the vendors should enter into 99 year concurrent leases in its favour and that the parties should enter into put and call options in respect of the properties. Trust was to pay $65,120,125 upon commencement of the concurrent leases. The options were not to be exercised sooner than 12 months after the commencement of the concurrent leases (see s 24 of the Duties Act, in its original form, above at [18]). 138In due course documents giving effect to the proposal were executed. The options were exercised and four contracts of sale entered into between the vendor of each parcel of land and the Trust which paid $1,850,000 as the purchase price for the four parcels. Trust accepted that it was liable to pay duty on the concurrent leases, but at the very much lower rate of duty than that payable on a contract of sale of the freehold. Trust also accepted that it had to pay duty on the contracts of sale, but only in respect of the stated price of $1,850,000. 139The Commissioner, in reliance on s 24 of the Duties Act as substituted by the Amendment Act 2002 (above at [19]), assessed duty on the contracts of sale on the basis of the aggregated unencumbered value of the parcels ($66,965,625). The Commissioner identified the arrangement as the entry into the 99 year leases (at [24]). In his ruling the Commissioner stated as follows: "We are satisfied that the substance of the sale arrangement was to reduce the dutiable value of the dutiable property (being the estate in fee simple). That is, we consider that the purpose of entering into the concurrent leases was to reduce the dutiable value of the dutiable property, as the ultimate objective was to transfer the land and buildings to the Purchaser. In support of this contention, we would argue that under the arrangement the concurrent lessee/purchaser obtained rights equivalent to, or normally associated with that of an owner (such as the entitlement to receive all the rents and profits from the land)." 140The trial Judge (Gzell J) dismissed the taxpayer's summons seeking review of the Commissioner's objection decision disallowing the taxpayer's objection: Trust Company of Australia v Chief Commissioner of State Revenue [2006] NSWSC 792; 64 ATR 346. The Court of Appeal, by majority (Mason P and Santow JA; Giles JA dissenting), dismissed the taxpayer's appeal. 141Santow JA described (at [88]) the " property arrangements " entered into by Trust as follows: "property consisting of a reversionary estate in land passed in each case under an agreement for its sale. The value of what passed was depressed by a newly entered concurrent 99-year Lease on which the reversion was expectant. The new reversion brought about by the 99-year concurrent lease replaced and extinguished an earlier reversion over the same land. The latter was expectant on shorter-term existing leases. Hence the later reversion was of lesser dutiable value than the earlier one. The intended result was that less duty was payable overall than if the earlier and more valuable reversion had been sold." 142His Honour noted (at [98]) that the Commissioner had assessed each contract for sale as the relevant dutiable transaction, on the basis that the relevant " arrangement " for the purposes of s 24 comprised the 99 year leases. 143Santow JA said (at [101]) that Trust's contentions on appeal had been crystallised in these terms: "(a) the dutiable property the subject of each Contract for Sale is the vendor's reversionary estate in the land following the grant of the 99-year Lease - not, as the primary judge held ... the reversionary estate arising when the vendor granted each earlier lease over the land .... (b) the 'arrangement', being each 99-year Lease, created that dutiable property and, for that reason, did not 'affect' the dutiable property so as to reduce it; (c) consequently, it cannot be said that any party to the 'arrangement' had the reduction of the dutiable value of the dutiable property as its significant purpose." 144Santow JA observed (at [109]) that a significant purpose of Trust in entering into and registering the 99 year leases was: "to bring about a situation whereby the dutiable value of the dutiable property the result of the concurrent leases was less than it would otherwise have been, with consequent reduction in the duty payable overall." 145His Honour considered (at [110]) that those steps by Trust constituted " an arrangement affecting the dutiable value of dutiable property that is subject to a dutiable transaction " within the meaning of s 24. His Honour reasoned as follows: * Section 24 did not require that an arrangement affecting the dutiable value of a dutiable property be contemporaneous with the entry into the dutiable transaction. This arrangement could precede the dutiable transaction (at [111]). * Section 24 was capable of applying if: * (a) there was an arrangement affecting the value of dutiable property; and * (b) the Commissioner was satisfied that a significant purpose of any party to the arrangement was the reduction of the dutiable value of the dutiable property (at [112]). * Condition (b) could be satisfied if a party caused existing property to be " transmogrified " into new property of lesser dutiable value. That result had been brought about by the creation of the 99 year leases which had the effect of " bringing into being " a less valuable reversion than previously existed, so reducing the dutiable value of dutiable property (at [114]). * The only difference between the two reversions was the longer period of expectancy of the new compared to the old. Even if they were " distinct albeit connected property interests ", s 24 applied. The section encompassed a reduction in dutiable value of dutiable property brought about by its " transmogrification " into dutiable property of lesser dutiable value. It applied where the transmogrification came about because of an arrangement " affecting " the dutiable value of a dutiable transaction. * It did not matter whether the grant of the concurrent leases created revisionary estates or whether (as the trial Judge held) the concurrent lease constituted a pro tanto disposition of the revisionary estate under the pre-existing leases. Even on the first interpretation, the dutiable property came into existence at a reduced value compared to the pre-existing reversions without the 99-year lease. * The Trust's argument was that condition (b) could be satisfied only if precisely the same dutiable property suffered the reduction in its dutiable value as was the subject of the dutiable transaction. This argument would render the legislation incapable of dealing with the very mischief to which it was directed, namely duty avoidance by the use of long term leases (at [116]-[117]). 146Santow JA said that there was a alternative basis for concluding that condition (b) was satisfied. Assuming (as Trust had argued) s 24 required a reduction in the value of existing dutiable property, the dutiable property was throughout the fee simple estate " even if it was also a reversionary interest in that land ". On that analysis, there was a reduction in the dutiable value of the dutiable property, being the interest in land. It was brought about by interposing a 99 year concurrent lease in each case (at [129]). 147In any event, there was a reversion at all material times. It was over the " self-same land", whose dutiable value was reduced by the same mechanism, that is, the interposition of the lease. All that had been altered was the expectancy of the reversion. Instead of being expectant on a short term lease, the reversion was expectant on a long term concurrent lease. There was still an interest in land, albeit reduced in value (at [130]). 148Mason P adopted (at [5]) Giles JA's view (expressed in his Honour's dissenting judgment) that the dutiable property subject to the dutiable transaction in each case was the reversion created by the 99 year lease. Giles JA, in (if I may respectfully say so) a full and careful judgment, reasoned as follows on this issue: * Where duty is imposed on an instrument by reference to the value of what is transferred, it is necessary to identify the property transferred accurately (at [37]). Thus it was necessary to identify the property agreed to be transferred by the four contracts of sale (at [38]). * For certain purposes, such as an error or misdescription clause in the contract, the subject matter of a contract of sale is the land as physical property. However, the subject matter of a transfer is ordinarily the " legal construct ": that is, the interest in the land rather than the land itself (at [48]-[50]). For the purposes of the Duties Act , the property agreed to be sold or transferred by the four contracts was not the land as physical property (at [51]). * In determining the interest that was the subject of the contract, it was not necessary to choose between the fee simple estate and the reversion. Where the holder of the fee simple estate creates a lease, the fee simple remains in the lessor, and the lessee's interest is carved out of the freehold. The lessor's freehold estate subject to the lease is an interest in the land and is known as a reversion (at [63]). The distinction between the fee simple and the reversion is therefore a false dichotomy (at [64]). * In Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Ltd at 667 [44], the joint judgment clearly implied that where a fee simple estate was to be transferred, the relevant property was the fee simple estate subject to any proprietary interest qualifying the title of the transferor (at [67], [68]). It was therefore in accord with the description in the Duties Act of dutiable property as an interest in land to identify the interest to be transferred under the four contracts as the fee simple estate in the land qualified by the leases (at [74]). What was agreed to be sold was a qualified interest in the land and it would mis-identify the interest not to recognise the leasehold interest qualifying it (at [74]). * The trial Judge had erred in characterising the dutiable property as the reversions created when the short term leases were granted and not the reversions expectant on the 99 year leases. The dutiable property constituted the reversions as they stood after the grant of the 99 year leases (at [78]). 149Mason P said (at [6]) that the question remained as to whether the arrangement entered into before the four contracts of sale had been executed was capable of satisfying s 24. Section 24 contained no requirement of contemporaneity and therefore it was not fatal that the arrangement preceded the dutiable transaction, so long as s 24(b) was satisfied (at [7]). 150However, an arrangement had to affect the dutiable value of the dutiable property in order for s 24 to be satisfied. Entry into the 99 year lease did affect the dutiable value of reversionary interests later contracted to be sold (at [8], [9]), for these reasons (at [12]-[14]): "[Trust] accepts that entry into the 99 year leases created the reversions that were later contracted to be sold. Its point, in brief is that this did not mean that the arrangement affected the dutiable value of those reversions in the relevant sense of reducing that dutiable value. Giles JA would accept this submission. He has concluded that s 24 did not extend to a transaction whose purpose was that the dutiable value of the dutiable property be less than the dutiable value of other property which would have been dutiable property the subject of the dutiable transaction but for the arrangement (my emphasis). The words 'arrangement' and 'affecting' are broad in their scope and the general intent of s 24 is patent. In these circumstances, I do not see why s 24 calls to be read as restrictively as proposed by the appellant and found by Giles JA. I readily accept that s 24 requires one to remain focussed upon the dutiable transaction itself (here the contracts to sell the reversions dependent on the 99 year leases). But it does not follow, in my respectful view, that the arrangement that purposefully created the reversion for the revenue-reducing purpose and as part of a scheme that was designed to include the particular contracts is incapable of being described as 'affecting' the value of that reversion. It does so quite directly in that (a) without the leases there are no reversions; and (b) the term and terms of the leases affect and reduce the value of the reversion that comes to be sold. The dutiable value of Blackacre subject to a five year lease may or may not be different to its value subject to a 99year lease; the term and terms of the lease are highly relevant, as may be the identity of the lessee. In the present case, the Chief Commissioner was satisfied that a significant purpose of a party to the arrangement was the reduction of the dutiable value of the dutiable property. It may be taken that this satisfaction was based upon the conclusion that, for each of the four parcels of land, the 99 year lease was designed to reduce the value of the reversion that was subject to that lease and to do so in the context of the imminent sale of the reversion coupled with the other planned consequences of the total arrangement. In my opinion, this reasoning did not involve the Chief Commissioner having regard to property other than the property sold." 151As this passage indicates, the point of difference between Mason P and Giles JA was that Giles JA considered that the arrangement did not affect the dutiable value of the reversions created by the grant of the 99 year leases (at [18]). His Honour held that, once it was accepted that the dutiable property was the reversions created by the grant of the 99 year leases, the arrangement (the creation of the 99 year leases) could not affect the value of the reversions. Giles JA rejected an argument that this led to an absurd result. Parliamentary intention had to be ascertained from the words of the legislation. While " the legislature may have a target, the legislation must hit it " (at [85]). 152The following propositions were accepted by one or more members of the Court in Trust Company in relation to s 24 in its then form: (i) Section 24 did not require that the impugned arrangement be contemporaneous with the dutiable transaction (Mason P and Santow JA). (ii) The dutiable property subject to the dutiable transaction in each case was the reversion expectant on the creation of the 99 year concurrent lease (Mason P and Giles JA). (iii) Entry into each 99 year concurrent lease affected the value of the dutiable property comprising the reversion expectant on the concurrent lease, because without the lease there would be no reversion and, in any event, the terms of the lease affected the value of the reversion (Mason P; Giles JA contra ). (iv) The fee simple estate remained the dutiable property throughout even if it was also a reversionary estate, and the grant of the 99 year lease merely altered the expectancy of the reversion. Accordingly the grant of the 99 year lease affected the value of the dutiable property (Santow JA; semble Mason P and Giles JA contra ). (v) A reduction of the dutiable value of dutiable property can take place if a fee simple reversion is " transmogrified " into less value reversionary freehold by the creation of a concurrent long term lease (Santow JA; Mason P not deciding; Giles JA, contra ). 153Propositions (i) and (ii), each of which was supported by a majority in Trust Company , are consistent with the conclusions I have reached. Proposition (iii), supported by Mason P but not Giles JA, is also consistent with these conclusions. Proposition (iv) would support those conclusions, although I have not relied on it. I do not think it necessary to comment on proposition (v). Section 24(2) and (3) of the Duties Act 154The second issue in the appeal is whether, as Centro contends in its notice of contention, the Court should set aside the Commissioner's decision that he was not satisfied as to the matter identified in s 24(2) of the Duties Act. Before addressing that question specifically, it is convenient to make some observations about the structure and language of s 24(2) and (3) of the Duties Act. Not all of these matters were the subject of submissions, but they are important to an understanding of the legislation. The Structure of s 24(2) 155First , s 24(2) of the Duties Act contemplates that the Interest the subject of the Commissioner's consideration may have been granted as part of a wider arrangement or scheme. In order for the Interest not to be disregarded, the Commissioner must be satisfied that the Interest was not granted as a part of an arrangement or scheme with a specified collateral purpose. Thus the Commissioner, in considering whether he or she is so satisfied, is to direct attention to an arrangement or scheme that may be wider than the Interest itself and involve persons other than those participating in the grant of the Interest. 156Secondly , as I have noted, the Duties Act contains no definition of " scheme ". This contrasts, for example, with the anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 (Cth) (" ITAA "), which defines " scheme " broadly. The definition under the ITAA includes a unilateral course of conduct, but not conduct that is only part of a scheme: s 177A(1), (3); Federal Commissioner of Taxation v Peabody [1993] HCA 43; 181 CLR 359, at 383-384, per curiam . It would seem that s 24(2) of the Duties Act does not extend to part of a scheme: see Commissioner of State Revenue v Purdale Holdings Pty Ltd [2003] VSC 289; 53 ATR 488 (" Purdale Holdings "), a decision on comparable Victorian anti-duty avoidance legislation. Accordingly, the Commissioner, in forming the judgment required by s 24(2), must direct attention to a purpose of a scheme, rather than of part of a scheme. 157Thirdly , the negative matter as to which the Commissioner is to be satisfied if the Interest is not to be disregarded, is defined by reference to " a collateral purpose " of the relevant arrangement or scheme. This expression contrasts with Part IVA of the ITAA which adopts the concept of " dominant purpose ": ITAA, s 177A(5); Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; 186 CLR 404, at 416 per Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ. Clearly a scheme may have a " collateral purpose " even if it is not the dominant purpose of the scheme. In Purdale Holdings, Nettle J noted (at 494 [11]) that the parties in that case had agreed that a collateral purpose could include a subordinate purpose. I think that proposition is correct, although it leaves open the possibility that in a particular case a purpose may be of such minimal significance that it should not be regarded as a " collateral purpose " within s 24(2). In any event, there seemed to be no dispute in the present case that a collateral purpose can be a subordinate purpose of an arrangement or scheme. 158Fourthly , s 24(2) refers to an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. The purpose identified by the sub-section is that of the arrangement or scheme , rather than of the participants in the arrangement or scheme. 159Fifthly, s 24(1) does not state that a collateral purpose of a scheme or arrangement is relevant only if the purpose is to reduce the duty otherwise payable by the particular taxpayer assessed to duty on the dutiable transaction. Section 24(2) is expressed in the passive voice. So expressed, it is apt to refer to an arrangement or scheme with a collateral purpose of reducing the duty payable by some other taxpayer. 160Sixthly, neither s 24(2) nor s 24(3) specifically states whether the existence of a collateral purpose is to be ascertained by reference to wholly objective considerations or whether subjective factors can also be taken into account. This, too, contrasts with Part IVA of the ITAA, which specifies (in s 177D(b)) a series of objective criteria for determining whether: "it would be concluded that the person ... who entered into or carried out the scheme ... did so for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme." See also FCT v Spotless , at 424. 161Section 24(3) identifies the considerations which the Commissioner may have regard to in determining whether he or she is satisfied of the matter in s 24(2). Three of those considerations can be characterised as objective facts: the duration of the Interest (s 24(3)(a)); whether the Interest has been granted to an associated person (s 24(3)(b)); and whether the Interest has any commercial efficacy other than to reduce duty (s 24(3)(c)). The fourth matter, however, permits the Commissioner to have regard to any other matter he or she thinks relevant (s 24(3)(4)). This allows the Commissioner to have regard to the subjective purpose of those involved in the grant of the Interest, provided that the Commissioner does so in the context of forming a judgment as to whether the arrangement or scheme has a collateral purpose of reducing duty otherwise payable on the dutiable transaction: D G Hill, Duties Legislation (LBC Information Services, Looseleaf Commentary), at [3.1984]; Purdale Holdings, at 494 [11] . 162Seventhly , s 24(3) provides that the Commissioner " may " have regard to the four specified considerations. While this is permissive language, it may be that the Commissioner is bound to take into account at least the three objective criteria specified in s 24(3): see Julius v Bishop of Oxford (1880) LR 5 App Cas 214, at 235, per Lord Selborne; Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; 182 CLR 51, at 63-64, per Mason CJ; at 84-85, per Brennan J (with whom Toohey and McHugh JJ agreed); at 97-98, per Dawson J. This question was not addressed in any depth in argument and it is not necessary to resolve it in the present case. 163Eighthly, the critical question posed by s 24(2) for the Commissioner is whether an Interest was granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty " otherwise payable on the dutiable transaction ". The sub-section does not speak of a more general purpose, such as obtaining a tax or duty benefit (cf ITAA, s177D). 164The Commissioner, in a case involving the grant of a long lease, may seek to rely on the grant of the lease as a part of a scheme or arrangement having a disqualifying collateral purpose. The long lease may be a constituent element of the dutiable property the subject of the dutiable transaction (in the present case, the Reversionary Estate expectant on the Long Lease). On Centro's argument, the Commissioner is not entitled to take into account the grant of a long lease in making the judgment required by s 24(2), where the dutiable transaction involves the sale or disposal of the reversionary estate expectant on the lease. That is because (so Centro contends) the grant of the long lease, or of any other estate or interest less than the freehold, did not and could not reduce the duty payable on the dutiable transaction. The duty payable on the dutiable transaction was always to be calculated by reference to the value of the reversionary estate subject to the long lease. 165If this argument is correct, it is difficult to see how s 24 of the Duties Act could ever be effective to prevent the use of long leases as a mechanism for avoiding or minimising duty. Once the dutiable property is identified as the reversionary estate subject to the long lease, the grant of the long lease (on Centro's argument) can never have the purpose (or effect) of reducing the dutiable value of the dutiable property, nor of reducing the duty payable on the dutiable transaction involving that property. This would seem to include the case where the lessee under the long lease later acquires the fee simple reversion (as occurred in Trust Company ). Even in that case, the grant of the long lease could not have the purpose or effect of reducing the dutiable value of the dutiable property comprising the reversionary estate subject to the long lease. I shall return to this issue below. The Commissioner ' s Determination 166The Commissioner, in his determination of 18 July 2008 ([70] above) implicitly accepted that he was obliged to identify a scheme or arrangement for the purposes of making the judgment required by s 24(2) of the Duties Act. The determination stated that it would be artificial to limit identification of the scheme or arrangement by reference to the purposes of individual entities. Instead the arrangement or scheme was identified as follows: "The lease and put and call options granted on the same date, the agreement entered into pursuant to the put option, and the transfer pursuant to the agreement constitute an arrangement or scheme for GPT to dispose of, and for Centro Property Group to acquire, the entire 50% interest of GPT." 167The Commissioner, on the authority of Purdale Holdings, interpreted " a collateral purpose " in s 24(2) to mean " a purpose " of the scheme or arrangement (rather than a dominant or major purpose). Having had regard to the matters in s 24(3)(a)-(c), the Commissioner concluded that a purpose of the arrangement or scheme was to create the concurrent Long Lease "as a means of transferring economic ownership and control of the property from GPT to [CPT] Custodian, with consequent tax and duty benefits." The Commissioner considered that the relatively short period between the Long Lease and the Centro Contract of Sale indicated that a transfer of the reversion was contemplated as a necessary step in the arrangement or scheme. Furthermore, the parties also contemplated that a lesser amount of duty would be payable on the transfer of the Reversionary Estate to Centro. 168Centro did not challenge the Commissioner's identification of the arrangement or scheme. The question is therefore whether the Commissioner was correct in determining that it was a collateral purpose of that arrangement or scheme to reduce " the duty otherwise payable on the dutiable transaction ". I approach this question in accordance with the High Court holding in Tasty Chicks that an application under s 97 of the TA Act empowers the Supreme Court to exercise afresh any discretion conferred on the Commissioner. 169The critical word in the passage quoted from s 24(2) in the previous paragraph is " otherwise". Just as s 24(1) requires the Interest to be disregarded and a hypothetical situation to be considered, so the word " otherwise " in s 24(2) requires the Commissioner to consider a hypothetical or counter-factual situation. By using the word " otherwise ", s 24(2) requires the Commissioner to consider what duty would have been payable had the Interest not been granted. If, having regard to the matters identified in s 24(3), the Commissioner is not satisfied that the Interest was not granted as part of an arrangement or scheme with a collateral purpose of reducing the duty payable on the hypothetical or counter-factual dutiable transaction, the Commissioner is not to disregard the Interest. 170Consequently, in making the judgment required by s 24(2), the Commissioner is to consider the amount of duty that would have been payable on the dutiable transaction that would have taken place had the Interest not been granted (bearing in mind that I am using " Interest " to include an " agreement or arrangement "). The Commissioner must consider whether the amount of duty payable on the hypothetical dutiable transaction would have been greater than the amount of duty payable on the dutiable transaction that did take place. If the amount of duty would have been greater, the Commissioner must then consider whether it was a collateral purpose of the relevant scheme or arrangement to reduce the amount of duty that would have been payable had the Interest not been granted. 171It follows from this analysis that, as I foreshadowed earlier (at [163] ff), I do not construe s 24(2) as requiring the Commissioner to confine attention to the very dutiable transaction which is the product of the Interest that s 24(1) says is to be disregarded. The sub-section requires a comparison to be made between the actual dutiable transaction and a hypothetical or counter-factual dutiable transaction. If that comparison indicates that duty payable has been reduced, the Commissioner must consider whether a reduction of duty was a purpose of the arrangement or scheme of which the grant of the Interest was part. 172The argument on the appeal did not address whether the hypothetical dutiable transaction contemplated by s 24(2) is a purely artificial statutory construct or whether it requires the Commissioner to consider what dutiable transaction probably would have taken place had the Interest not been granted. I think that the better view is that the Commissioner must form a judgment as to what dutiable transaction would have occurred but for the grant of the Interest. The alternative is to construe s 24(2) as identifying the hypothetical dutiable transaction as the dutiable transaction that actually took place but disregarding the Interest. In the present case, this would mean that the hypothetical dutiable transaction would be a contract for the sale of GPT's reversionary interest in the Centre subject only to the Short Leases (since the Long Lease would be disregarded). I do not think that it is necessary finally to choose between these alternatives in the present case, since each produces the same result. 173The Commissioner's determination in this case is not precise as to the dutiable transaction that would have been entered into but for the arrangement or scheme identified in the determination. However, the determination states that the various documents executed on 30 October 2002 constituted an arrangement or scheme for GPT to dispose of its freehold estate (subject only to the Short Leases) to a member of the Centro Property Group. The implication is that the dutiable transaction, but for the arrangement or scheme, would have been a contract for the sale of the freehold estate subject to the Short Leases, to a member of the Centro Property Group. The obvious candidate was CPT Custodian which took the Long Lease and acquired Super Office's freehold estate in the Centre. 174Centro did not challenge the proposition implicit in the Commissioner's determination, that if the arrangement or scheme had not been entered into, GPT's freehold estate would have been transferred to CPT Custodian. In any event that inference is clearly warranted having regard to CPT Custodian's acquisition of Super Office's freehold estate and the Long Lease. Clearly, CPT Custodian had to acquire the equivalent of the freehold estate in the Centre, subject only to the Long Leases, if it was to carry out the commercial objectives of the Trust. But for the decision to use the Long Lease as a mechanism for reducing duty, it is likely that CPT Custodian would have contracted to acquire GPT's reversionary interest in the Centre: that is, the freehold subject to the Short Leases. 175Clearly, the duty payable on a contract for the sale of GPT's reversionary interest in the Centre to CPT Custodian subject only to the Short Leases, would have been very much greater than the duty payable by Centro on the Centro Contract of Sale. For the reasons I have given, it does not matter that the party liable to the larger amount of duty " otherwise" payable would have been CPT Custodian, rather than Centro. A collateral purpose of the kind identified in s 24(2) may be present even if the party liable to pay duty on the hypothetical dutiable transaction would not have been the same as the party liable to pay duty on the dutiable transaction that actually took place. 176Of course, the fact that there is a disparity between the duty payable on the hypothetical dutiable transaction and that payable on the actual dutiable transaction, does not necessarily mean that it was a purpose of the arrangement or scheme to reduce the duty that would otherwise have been payable on the actual dutiable transaction. It is necessary for the Commissioner to address whether that indeed was a purpose of the arrangement or scheme. This is to be done by reference to the matters identified in s 24(3). 177As I have explained (at [95] above), the Supreme Court on an application for review under ss 97 and 101 of the TA Act has power to reconsider the exercise of the Commissioner's discretion under s 24(2) of the Duties Act. In my opinion, however, the Commissioner was correct not to be satisfied that the arrangement or scheme was not for a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. It was not suggested that there was any commercial efficacy to the grant of the Long Lease other than to reduce the duty that otherwise would have been payable. Mr Slater accepted that a purpose of the arrangement or scheme was to reduce the duty otherwise payable by CPT Custodian. He did submit that CPT Custodian was perfectly content to accept the Long Lease rather than take a transfer of the freehold subject to the Short Leases. But its willingness to do so was an essential component of the arrangement or scheme that was carefully designed to avoid duty. CPT Custodian's willingness to accept the Long Lease does not demonstrate that the entry into the Long Lease had any commercial rationale other than the reduction of duty. 178It is true that the Long Lease was in existence for some 19 months before GPT exercised its Put Option, leading to entry into the Contract of Sale between GPT and Centro. But a delay of this magnitude was expressly contemplated by the transactions comprising the scheme and had its own taxation rationale (albeit under a different taxation regime). The delay was entirely consistent with the arrangement having a purpose of reducing the duty otherwise payable on the dutiable transaction. 179Finally, in my view it is permissible under s 24(3)(d) to have regard to the subjective purposes of the participants in the scheme provided that attention remains focussed on whether the scheme or arrangement has a collateral purpose of the kind identified in s 24(2). Mr Slater effectively conceded, as is apparent, that the participants in the scheme, with the possible exception of GPT, had the purpose identified in s 24(2). That the objective may have been ultimately to benefit unit holders in Sub-Trust No 1 is not relevant. However, if, contrary to my view, it is not permissible to have regard to subjective purposes, I would still conclude that the scheme or arrangement identified by the Commissioner had a collateral purpose of reducing the duty otherwise payable on the dutiable transaction. The overwhelming inference from the objective circumstances, including the inter-related character of the transactions entered into on 30 October 2002, is that a substantial, if not the predominant purpose of the scheme or arrangement identified by the Commissioner was to reduce the duty otherwise payable in the dutiable transaction. CONCLUSION 180The Commissioner's appeal should be allowed and the objection decision restored. I propose the following orders: 1. Appeal allowed. 2. Set aside the orders made by Gzell J on 23 July 2010 and varied on 2 August 2010. 3. In lieu thereof, order that: (a) Centro's summons filed on 16 September 2008 be dismissed; and (b) Centro pay the Commissioner's costs of the proceedings. 4. Centro pay the Commissioner's costs of the appeal. ********** 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: 19 October 2011