EDGE DEVELOPMENTS PTY LTD v COMMISSIONER OF STATE TAXATION [2023] SASCA 88

On Appeal from SUPREME COURT OF SOUTH AUSTRALIA (HONOURABLE AUXILIARY JUSTICE DART) [2022] SASC 55 First Appellant: EDGE DEVELOPMENTS PTY LTD Counsel: MR RJ WHITINGTON KC WITH DR B WALRUT - Solicitor: CAMPBELL RANKINE Second Appellant: ADABCO PTY LTD Counsel: MR RJ WHITINGTON KC WITH DR B WALRUT - Solicitor: CAMPBELL RANKINE Third Appellant: TABCO PTY LTD Counsel: MR RJ WHITINGTON KC WITH DR B WALRUT - Solicitor: CAMPBELL RANKINE Respondent: COMMISSIONER OF STATE TAXATION Counsel: MR T GOLDING KC WITH MR W AMBROSE - Solicitor: CROWN SOLICITOR (SA) Hearing Date/s: 10/03/2023 File No/s: CIV-22-008557 A SUPREME COURT OF SOUTH AUSTRALIA (Court of Appeal: Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment 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 in which it was generated. EDGE DEVELOPMENTS PTY LTD & ORS v COMMISSIONER OF STATE TAXATION [2023] SASCA 88 Judgment of the Court of Appeal (The Honourable Justice Doyle, the Honourable Justice Bleby and the Honourable Justice Nicholson) 17 August 2023 TAXES AND DUTIES - STAMP DUTIES - APPEAL, CASE STATED ETC - SOUTH AUSTRALIA TAXES AND DUTIES - STAMP DUTIES - EXEMPTIONS The first appellant, Edge Developments Pty Ltd (‘Edge’), is a proprietary company limited by shares. It is Trustee of the Edge Developments Unit Trust. The second and third appellants are unit holders in the Unit Trust. The Unit Trust was constituted by a Deed of Settlement on 6 August 2008. The second appellant, Adabco Pty Ltd (‘Adabco’), is a proprietary company limited by shares. The third appellant, Tabco Pty Ltd (‘Tabco’), is also a proprietary company limited by shares. The parcels of land owned by Adabco and Tabco respectively were contiguous. Moore Park Pty Ltd was a proprietary company limited by shares, which was deregistered on 25 November 2018. It was also a unit holder in the Unit Trust. Pursuant to the Deed of Settlement, Adabco and Tabco were jointly issued with 3,000,000 units in the Unit Trust. Moore Park was issued with 1,250,000 units. On 30 July 2014, Edge as trustee for the Unit Trust executed a Deed of Redemption, redeeming the Moore Park units. At the time, the units were valued at $2,350,000. Edge paid that amount to Moore Park and the redeemed units were cancelled. At the same time, Adabco and Tabco executed a deed of indemnity and a deed of release in favour of Moore Park. On 14 January 2015, the director of Moore Park executed a transfer of one ordinary share in Edge to Adabco. -- 1 of 27 -- The Commissioner of State Taxation issued a Stamp Duty Notice of Assessment (‘Redemption Assessment’) in respect of the redemption transaction. The appellants objected to the assessment pursuant to s 82 of the Taxation Administration Act 1996 (SA). Eventually, the Commissioner issued a further Stamp Duty Notice of Assessment dated 30 March 2021 reducing the assessment of duty and interest. That assessment was in the amount of $557,970.62, being stamp duty of $380,120.90, interest of $158,843.67 and penalty of $19,006.05. On 3 June 2022, a single judge of this Court dismissed an appeal by the appellants against a decision of the Commissioner that the redemption transaction attracted an obligation to pay stamp duty. This appeal against that decision raises two primary issues. The first is whether the Trustee, the first appellant, is a landholding entity for the purposes of the Stamp Duties Act 1923 (SA) (‘SDA’). The second is whether, if so, the redemption caused the second and third appellants, as unit holders in the Unit Trust, to increase a prescribed interest in the landholding entity. Held, per Bleby JA (Doyle JA agreeing), dismissing the appeal: 1. Sections 2(2) and 92 operate in combination such that a legal or equitable interest (not being a mortgage, lien or charge) in the proceeds of sale of a land asset is taken to be an interest of the same kind in that land asset. 2. The interest that was taken to be an interest in the land under s 2(2), and which was thereby taken to be a land asset under s 92, was the contingent, potential beneficial interest in the proceeds of sale created by cl 3.1.1.3 of the Performance Charge. 3. The interest created by cl 5 was a charge. By reason of s 92(1)(a), that was not an interest in the land. The interest created by cl 3.1.1.3 was separate from that charge, and as deemed by the Act, an interest in the land. 4. The calculation of duty under s 102A(2) attached, relevantly, to a hypothetical conveyance of the underlying assets of the Edge land as a consequence of the redemption transaction, not the Performance Charge. The relevant increased prescribed interest (as defined in s 91(1)) in the underlying local land asset (that being the deemed interest by operation of s 2(2)), was the unitholding in the Unit Trust. It was not the charge created by cl 5 of the Performance Charge. 5. Section 102F had no application. The redemption transaction caused Adabco and Tabco to increase their prescribed interest in a land holding entity. Held, per Nicholson AJA, allowing the appeal: 1. The contractual arrangement between Edge and Adabco and Tabco as at the time of Redemption was not captured by s 2(2) of the SDA, and Edge was not a land holding entity at that time. Community Titles Act 1996 (SA); Real Property Act 1886 (SA); Stamp Duties Act 1923 (SA) ss 2, 76, 91, 92, 98, 100, 102A, 102F; Schedule 2; Taxation Administration Act 1996 (SA) s 82, referred to. Commissioner of State Revenue v Snowy Hydro Ltd [2012] VSCA 145; CPT Custodian v Commissioner of State Revenue (2005) 224 CLR 98; Edge Developments Pty Ltd & Ors v Commissioner of State Taxation [2022] SASC 55, considered. -- 2 of 27 -- EDGE DEVELOPMENTS PTY LTD & ORS v COMMISSIONER OF STATE TAXATION [2023] SASCA 88 Court of Appeal – Civil: Doyle and Bleby JJA and Nicholson AJA 1 DOYLE JA: I have had the benefit of reading the draft reasons of Bleby JA and Nicholson AJA. 2 As Nicholson AJA explains, the only point of difference between the two is whether the terms of the Performance Charge, and in particular clauses 3.1.1.3 and 3.1.1.4, conferred upon Edge – as at the date of the Redemption – an interest in any future sale proceeds within the meaning of s 2(2) of the Stamp Duties Act 1923 (SA) (when read in combination with the definition of ‘interest’ in s 2(1) of that Act), and therefore an interest in the relevant land. The issue is a difficult one. 3 It may be accepted that the terms of the Performance Charge did not, as a matter of general law, create – as at the date of the Redemption – any legal or equitable interest on the part of Edge in any future sale proceeds, let alone land. However, for the reasons given by Bleby JA, I am persuaded that the notion of an ‘interest’ under ss 2(1) and (2) of the Act extends to the arrangements given effect to by clauses 3.1.1.3 and 3.1.1.4 of the Performance Charge. By reason of those clauses, Edge had a ‘legal or equitable interest [including] a potential, contingent, expectant or inchoate interest’ in any future sale proceeds, and was thereby deemed to have the same kind of interest in the relevant land. 4 I see no textual or other basis for confining the admittedly wide net cast by ss 2(1) and (2) of the Act to proceeds of the sale of a property which is extant at the time of the Redemption. To the contrary, it seems to me that the extension of an ‘interest’ to a ‘potential, contingent, expectant or inchoate interest’ comfortably extends to an interest in the proceeds of a future sale. 5 I also see no difficulty with the reference in s 2(2) to the interest in the proceeds of a future sale being an interest of the same kind in the property ‘until the property is sold’. In my view, those words operate to deem the relevant interest in property to exist during the period of time prior to the sale, and hence, relevantly in the present case, at the time the Redemption occurred. 6 I therefore agree with the reasons of Bleby JA, and would dismiss the appeal. 7 BLEBY JA: On 3 June 2022, a single judge of this Court dismissed an appeal by the appellants against a decision of the Commissioner of State Taxation (‘the Commissioner’) that a redemption of units in a Unit Trust attracted an obligation to pay stamp duty. This appeal against that decision raises two primary issues. The first is whether the Trustee, the first appellant, is a landholding entity for the purposes of the Stamp Duties Act 1923 (SA) (‘the Act’). The second is whether, if so, the redemption caused the second and third appellants, as unit holders in the Unit Trust, to increase a prescribed interest in the landholding entity. -- 3 of 27 -- Bleby JA 2 Background 8 The first appellant, Edge Developments Pty Ltd (‘Edge’), is a proprietary company limited by shares. It was registered on 28 July 2008. It is Trustee of the Edge Developments Unit Trust. The Unit Trust was constituted by a Deed of Settlement on 6 August 2008. 9 The second and third appellants are unit holders in the Unit Trust. The second appellant, Adabco Pty Ltd (‘Adabco’), is a proprietary company limited by shares. At the time the Deed of Settlement was entered into on 6 August 2008, it was the registered proprietor in fee simple of land at 9A and 11 Gilles St Adelaide. 10 The third appellant, Tabco Pty Ltd (‘Tabco’), is also a proprietary company limited by shares. At the time of the Deed of Settlement, it was the registered proprietor of land at 416 King William St Adelaide. The parcels of land owned by Adabco and Tabco respectively were contiguous. 11 The other relevant party was Moore Park Pty Ltd. This was a proprietary company limited by shares. It was registered on 14 July 1997 and deregistered on 25 November 2018. It was also a unit holder in the Unit Trust. The Deed of Settlement 12 The purpose of the Deed of Settlement was to facilitate the development of the land owned by Adabco and Tabco (‘the Edge development’). Pursuant to the Deed of Settlement, Adabco and Tabco were jointly issued with 3,000,000 units in the Unit Trust. Moore Park was issued with 1,250,000 units. The Unit Trust gave the unit holders an entitlement to share in the profits of the Edge development. The joint unit holding of Adabco and Tabco represented 70.59 per cent of the units. The holding of Moore Park represented 29.41 per cent. The Deed of Settlement provided that Adabco and Tabco were jointly entitled to 65 per cent of the development profits and Moore Park to 35 per cent. Moore Park’s involvement was as a financier of the project. 13 Two developments were undertaken on the whole of the land. On 1 October 2009, Adabco transferred a portion of its land to Tabco for consideration, to facilitate a common development on the consolidated parcel of land (‘the Edge land’). Adabco constructed a residential development on the balance of its land. This appeal is concerned only with the arrangements relating to the common development of the Edge land. The Performance Charge 14 On the same date as entering into the Deed of Settlement, the appellants and Moore Park executed a document described as a ‘Performance Charge’. Adabco and Tabco did so as ‘Grantors’ and Edge did so as ‘Grantee’. This document established the obligations between the parties by which Edge was to undertake the common development. The common development comprised an office tower on the Edge land known as the BDO Tower. The BDO Tower was the subject of -- 4 of 27 -- Bleby JA 3 community titles issued under the Community Titles Act 1996 (SA) and the Real Property Act 1886 (SA). 15 The Performance Charge had the following essential features: 1. Edge as Grantee became entitled to possession of the Edge land and all rentals and all income produced therefrom (cl 3.2.1); 2. Edge was required to construct the office tower on the Edge land at its cost and expense (cl 3.2.2.3); 3. Edge as Grantee was entitled, without the prior written consent of Adabco or Tabco as Grantors, to lodge caveats or other documents capable of being registered on any title documents (cl 3.1.1.1.2); 4. Adabco and Tabco were required to refrain from dealing with or creating any interest or encumbrance on the Edge land (cl 3.1.2); 5. Adabco and Tabco were required to execute sale contracts with respect to each community title within the development and deliver them to Edge for each part of the Edge land sold (cl 3.1.1.2); 6. Adabco and Tabco were required to hold and stand possessed on trust for Edge the sale contracts and the proceeds therefrom (cl 3.1.1.3); and 7. Adabco and Tabco were required to endorse and deliver to Edge the settlement proceeds in discharge of the trusts created by cl 3.1.1.3 (cl 3.1.1.4). Adabco and Tabco had no discretion with respect to the distribution of the property so held on trust. 16 Clause 5 then provided for a charge in the following terms: The Grantors HEREBY CHARGE the Edge Land with the Performance Obligations of the Grantors to be performed and observed under and pursuant to this Charge. 17 It was by these essential provisions that Edge was required to build the development and receive the proceeds of sale as the development was then sold, in parts, under a community title scheme. Adabco and Tabco undertook to charge the land on which the development occurred, which they owned, with their obligations under the Performance Charge. In particular, they were required to hold the proceeds of sale on trust for Edge and to deliver those proceeds to Edge. 18 Under the Deed of Settlement, Edge then held the profit from the development on trust for the unit holders. As identified above, these were Adabco and Tabco as to 65 per cent and Moore Park as to 35 per cent. -- 5 of 27 -- Bleby JA 4 The redemption and stamp duty assessment 19 On 30 July 2014, Edge as trustee for the Unit Trust executed a Deed of Redemption, redeeming the Moore Park units. At the time, the units were valued at $2,350,000. Edge paid that amount to Moore Park and the redeemed units were cancelled. At the same time, Adabco and Tabco executed a deed of indemnity in favour of Moore Park and a deed of release in favour of Moore Park. The director of Moore Park, Richard Alan Graf, resigned as a director of Edge. There is no dispute that the Moore Park units were correctly valued. 20 On 14 January 2015, Mr Graf executed a transfer of one ordinary share in Edge to Adabco. 21 On 7 January 2015, the solicitors for Edge forwarded to the Commissioner a Request for the Commissioner to Express an Opinion, together with a bundle of documents including the Redemption Deed, the Indemnity Deed, the Release Deed and the Share Transfer. 22 On 24 September 2015, the Commissioner issued a requisition in respect of the documents lodged and a reminder requisition. The solicitors for Edge responded to the requisitions on 2 November 2015. 23 On 21 November 2018, the Commissioner issued a Stamp Duty Notice of Assessment (‘Redemption Assessment’) in the aggregate sum of $570,090.39, being stamp duty of $388,370.90, interest of $162,300.94 and penalty of $19,415. On 14 January 2019, the appellants objected to the Redemption Assessment with the Treasurer, pursuant to s 82 of the Taxation Administration Act 1996 (SA) (‘TAA’). 24 On 10 May 2019, the Commissioner issued a Stamp Duty Notice of Assessment in the aggregate sum of $0.60 in respect of the Share Transfer. 25 On 9 January 2020, the appellants received the Treasurer’s determination dated 7 January 2020 denying the Objection, revoking the Assessment and making a determination. 26 On 20 January 2020, the Commissioner issued a Stamp Duty Notice of Reassessment in the aggregate sum $923,360.89, being stamp duty of $741,641.40, interest of $162,300.94 and penalty of $19,418.55. 27 On 27 February 2020, the appellants paid to the Commissioner the amount of $370,820.70, being 50 per cent of the whole tax (not including interest and penalty). 28 On 18 March 2021, the Commissioner revoked the assessment. The Commissioner issued a further Stamp Duty Notice of Assessment dated 30 March 2021 reducing the assessment of duty and interest. That assessment was in the -- 6 of 27 -- Bleby JA 5 amount of $557,970.62, being stamp duty of $380,120.90, interest of $158,843.67 and penalty of $19,006.05. 29 This final assessment was the subject of the appeal before the primary judge.1 The matter initially commenced as a judicial review of the Treasurer’s first decision but ultimately proceeded as an appeal. Relevantly, Edge was the first appellant, Adabco was the second appellant and Tabco was the third appellant. The basis of the assessment 30 It is first necessary to understand the basis of the assessment. The following references to the Act are references to the Act as in force at the date of the redemption transaction that was the subject of the final assessment described above. 31 Part 4 of the Act is concerned with land holding entities. Section 100 imposes duty on a transaction comprising an acquisition of a prescribed interest, or an increase in a prescribed interest, in a land holding entity: 100—General principle of liability to duty (1) A person or group that acquires a prescribed interest, or increases a prescribed interest, in a land holding entity notionally acquires an interest in the underlying local land assets of the entity and is liable to duty in respect of the notional acquisition. (2) The following transactions are therefore dutiable: (a) a transaction as a result of which a person or group acquires or has a prescribed interest in a land holding entity; or (b) a transaction as a result of which a person or group that has a prescribed interest in a land holding entity increases its prescribed interest in the entity. (3) A transaction is dutiable under this Part even though the person or group that has a prescribed interest, or increases a prescribed interest, in the land holding entity as a result of the transaction— (a) is not a party to the transaction; or (b) has a passive role in the transaction. (4) For example, any of the following is capable of being a dutiable transaction: (a) an allotment of shares in a company or units in a unit trust scheme; or (b) the variation or abrogation of rights attaching to shares in a company or units in a unit trust scheme; or (c) the redemption, surrender or cancellation of shares in a company or units in a unit trust scheme; or 1 [2022] SASC 55. -- 7 of 27 -- Bleby JA 6 (d) the addition or retirement of a partner in a partnership with assets comprising shares in a company or units in a unit trust scheme. (5) However, if a relevant entity acquires a local land asset and, as a result of the acquisition, becomes a land holding entity, and conveyance duty is paid in respect of the transaction, the transaction is not dutiable under this Part. (6) If a person who acquires or holds an interest in a land holding entity is a trustee for 2 or more trusts, any interest in the entity acquired or held by the person for different trusts are to be treated as if they were acquired or held by separate persons. 32 Section 91 defines ‘prescribed interest’: prescribed interest means— (a) in relation to a private company or a private unit trust scheme—a proportionate interest in the entity of 50% or more; and (b) in relation to a listed company or a public unit trust scheme—a proportionate interest of 90% or more; 33 ‘Unit trust scheme’ is defined in s 91 as follows: unit trust scheme means an arrangement under which investors may acquire rights to participate, as beneficiaries under a trust, in profits, income or distribution of assets arising from the acquisition, holding, management, use or disposal of property; 34 In the present matter, the Commissioner’s position is that by reason of their joint holding of 70.79 per cent of the units in the Unit Trust, Adabco and Tabco held a prescribed interest, being a proportionate interest in a private unit trust scheme of 50 per cent or more. The effect of the redemption was that they increased that prescribed interest to 100 per cent, as contemplated by ss 100(1) and (2)(b). 35 Section 100 applies where the prescribed interest is in a land holding entity. The Commissioner made the assessment on the basis that the Unit Trust is a land holding entity. Section 98 of the Act provides: 98—Land holding entity A relevant entity is a land holding entity if the unencumbered value of the underlying local land assets of the relevant entity is $1 000 000 or more. 36 It is necessary to visit some further definitions. The term ‘underlying’ is defined inclusively in s 91 as follows: underlying—the underlying assets of a relevant entity include both the assets held beneficially by the entity and its notional interests in the assets of related entities; 37 ‘Relevant entity’ is defined in s 91 to include a private unit trust scheme. 38 We then come to the concept of ‘local land asset’. Section 92 provides, in part: -- 8 of 27 -- Bleby JA 7 92—Land assets (1) A land asset is an interest in land other than— (a) a mortgage, lien or charge; or (b) an interest under a warrant or writ. (2) A local land asset is a land asset consisting of an interest in land in South Australia. 39 It can immediately be seen that this definition extends ‘land asset’ to an ‘interest in land’, subject to identified exceptions. ‘Interest in land’ is defined inclusively in s 91: interest in land includes any of the following, or an interest in any of the following: (a) a lease or licence granted under— (i) the Mining Act 1971; or (ii) the Offshore Minerals Act 2000; or (iii) the Petroleum and Geothermal Energy Act 2000; (b) a lease granted under the Aquaculture Act 2001, including a sublease of such a lease; (c) an interest conferred by a forestry property (vegetation) agreement (within the meaning of the Forest Property Act 2000); 40 None of these is applicable. However, as already noted, this definition is inclusive, rather than exhaustive. These inclusions are made for the purposes of Part 4, as are the other definitions set out above. This inclusive defined term effectively extends, for the purpose of Part 4, what might otherwise be considered to be an interest in land, be that on account of some other definitional section in the Act or an ordinary understanding of the term. 41 The other potential statutory contributor to the concept of an interest in land is found in s 2 of the Act, the interpretation section. Sub-section 2(1) defines an ‘interest’ in property in the following way: interest in property means a legal or equitable interest and includes a potential, contingent, expectant or inchoate interest; 42 In the context of this interpretation section, the reference to ‘property’ in this definition includes real property. This is by reason of the definition of ‘property’ in the same sub-section: property means real or personal property and includes— (a) intellectual property (except know-how and confidential information); and (b) an interest in property; -- 9 of 27 -- Bleby JA 8 43 An ‘interest in property’ therefore extends to an interest in real property. There is a conceptual correlation here with the term used in Part 4, ‘interest in land’. 44 These definitions also contain, on their face, an unsatisfactory circularity. ‘Property’ extends to an ‘interest in property’ which, as already seen, is defined. On its face, the Act seems to contemplate the idea of an interest in an interest in property, etc., ad infinitum. It will be necessary to return to this definitional oddity. 45 In any event, reading these definitions together, an ‘interest’ in property would appear to extend, for the purposes of the Act, to an ‘interest’ in real property. An ‘interest’ in real property means a legal or equitable interest in real property and includes a potential, contingent, expectant or inchoate interest (in real property). 46 Section 2(2) of the Act then provides: (2) An interest of a particular kind in the proceeds of the sale of property is, until the property is sold, taken to be an interest of the same kind in the property. Example— A beneficial interest in the proceeds of the sale of property is, until the property is sold, taken to be a beneficial interest in the property. 47 The Commissioner’s case, in the first instance, was that by the redemption transaction, whereby Adabco and Tabco increased their joint unit holding to 100 per cent of the units in the Unit Trust, Adabco and Tabco increased their joint prescribed interest in a landholding entity. On the Commissioner’s case, the unencumbered value of the underlying local land assets of the relevant entity, being the Unit Trust, was more than $1,000,000. 48 The Commissioner’s case relied on the concept encapsulated in s 2(2), as informed by the definition of ‘interest’ in s 2(1), being incorporated into the concept of ‘interest in land’ in Part 4. The essence of its case was this. Under the terms of the Performance Charge, the Grantors (Adabco and Tabco) were required by cl 3.1.1.3 to hold on trust, for the Grantee (Edge as trustee for the Unit Trust), the proceeds of the sale contracts with respect to the sale of each community title. That obligation conferred a beneficial interest on Edge in the sale proceeds. Sub- section 2(2) of the Act then operated to deem that beneficial interest in the sale proceeds to be a beneficial interest in the community titles to be sold. Edge as trustee for the Unit Trust was therefore a land holding entity. 49 The appellants disputed that these sections operated in this way. They contended that a deemed interest in (real) property under s 2(2), as informed by the definition of ‘interest’ in s 2(1), cannot constitute an ‘interest in land’ in Part 4. They further contended that even if s 2(2) is incorporated into Part 4 in this regard, -- 10 of 27 -- Bleby JA 9 on the facts of this case, all that Adabco and Tabco acquired was a bare contractual right; they did not acquire any interest at all. 50 These contentions require a careful exercise in construction and application of the provisions set out above. A further issue arises, however, from the definition of ‘local land asset’, being the term that informs the concept of an underlying interest in land. It is to be recalled that by operation of s 92(1), a ‘land asset’ is an interest in land, other than a mortgage, lien or charge. The appellants contended that the interest of Adabco and Tabco that was increased by means of the redemption transaction was a charge. If that is correct, it would follow that even if the sections are to be construed and applied in the way contended for by the Commissioner, the redemption transaction did not cause them to increase any prescribed interest in the Unit Trust within the meaning of s 100. 51 If the appellant is unsuccessful on each of its contentions on these three issues, a further issue then arises, being whether s 102F(1) of the Act applies to render the transaction exempt from duty in any event. That sub-section provides: 102F—Exempt transactions and related matters (1) A transaction under which a person or a group acquires an interest in a land holding entity is exempt from duty under this Part if it takes place in circumstances in which a conveyance of an interest in the underlying local land assets would not attract ad valorem duty. Example— Suppose that A is entitled under the will of B to 60% of the shares in X Pty Ltd, a land holding entity, owning land in the State valued at $2m. A's acquisition of the shares on distribution of the estate is exempt from duty because a conveyance of the land itself would, if it occurred in these circumstances (ie on distribution of the estate), be exempt from ad valorem duty. 52 The appellants’ contention in this regard was essentially that a conveyance of the Performance Charge itself or an interest in the Performance Charge would be exempt from ad valorem stamp duty under either of items 3(2)1 or 4(2)2 of Part 1 of Schedule 2 to the Act. This is on the basis that it was a mortgage as defined in s 76 of the Act, or otherwise. The decision of the primary judge 53 The primary judge dismissed the appellant’s appeal. His Honour held that the Unit Trust was a land holding entity. He held that the redemption transaction increased the prescribed interest of Adabco and Tabco in the Unit Trust and that the transaction was dutiable. 54 In the first instance, the judge accepted that at common law, the right to receive the proceeds of sale of land does not create an interest in the land. In this -- 11 of 27 -- Bleby JA 10 regard, he referred to Commissioner of State Revenue v Snowy Hydro Ltd.2 However, he considered that s 2(2) of the Act required a different outcome:3 The deeming effect of s 2(2) is clear. A party with an interest in the proceeds of the sale of property is taken to have an interest of the same kind in the properties. Clause 3.1.1.3 gives [Edge] a beneficial interest in the sale proceeds. It follows that it has a beneficial interest in the land being sold. The common law position would appear to have no bearing on the outcome. The interest is created by statute. The interest of [Edge] in the sale proceeds is a local land asset. The value of the interest is greater than $1 million and therefore the Unit Trust is a land holding entity. 55 The judge then turned to the appellants’ argument that s 92(1) excluded the interest of Edge in the sale proceeds from being a land asset on the basis that it was a charge. He rejected that argument, reasoning as follows:4 The Performance Charge imposes a wide variety of obligations on Adabco and Tabco with respect to the Edge development. Those obligations are secured by a charging clause found in the Performance charge. If the interest of the Unit Trust in the Edge land was solely pursuant to a mortgage, lien, or charge, then it would not hold a local land asset and would not be a land holding entity. The relevant interest of the Unit Trust in the Edge land is the interest created by the deeming effect of s 2(2). It is a beneficial interest in the Edge land. That interest is not an interest as chargee. It can be accepted that the performance charge is a charge for the purpose of s 92(1). A person may hold more than one interest in land. That is the case here. The Unit Trust is a land holding entity, notwithstanding that it may also have an interest in the land as chargee. (Emphasis added) 56 As to the appellants’ contention that the redemption transaction was exempt from duty by operation of s 102F(1), the judge held:5 The provisions of s 102F(1) are directed at transactions whereby a person acquires an interest in a land holding entity. The underlying land assets here are the land assets of the Unit Trust. The redemption transaction caused Adabco and Tabco to increase their prescribed interest in a land holding entity. That is the relevant interest. Whether the appellants increased their interest in the Performance Charge is of no moment. The subject land, if conveyed, would attract duty.6 A conveyance of the Edge land would appear to be subject to no relevant exemption. The Court is not dealing with the conveyance of an interest in the Performance Charge. The provisions of s 102F have no application. (Footnote in original) 57 Consequently, the primary judge dismissed the appeal. 2 [2012] VSCA 145 at [52]. 3 [2022] SASC 55 at [42]. 4 [2022] SASC 55 at [46]-[47]. 5 [2022] SASC 55 at [51]-[52]. 6 See Schedule 2 clause 3(1) or clause 4(1). -- 12 of 27 -- Bleby JA 11 The appeal from the decision of the primary judge 58 The Notice of Appeal, by various grounds and sub-grounds, challenges the primary judge’s conclusions as set out above and various steps in the judge’s reasoning. It is convenient to approach the appeal, as the appellants did in the oral hearing before this Court, by reference to the issues described above. Whether a deemed interest in real property under s 2(2) constitutes an interest in land within the meaning of Part 4 59 The starting point of the analysis is the scope of s 2(2), on its terms, as informed by the definitions in s 2(1). As identified above in the review of the relevant provisions of the Act, s 2(2) is concerned with ‘an interest of a particular kind in the proceeds of the sale of property’. The sub-section deems this to be an interest of the same kind in the property, until the property is sold. 60 Sub-section 2(1) extends ‘property’ to include an interest in property. As already identified, ‘interest’ in property is defined to mean a legal or equitable interest and includes a potential, contingent, expectant or inchoate interest. 61 It is necessary to be careful here. As identified above, the defined term appears on its face to be ‘interest’, rather than ‘interest in property’, by reason of that being the only word in the definition that is emboldened. This might seem to be of little consequence. It was suggested in argument that it may even have been a drafting error not to have emboldened the whole term ‘interest in property’ and that the whole phrase should be regarded as the defined term. 62 That is one possibility. However, for the following reasons, in my view the preferable approach is to read only the word ‘interest’ as the defined term, as appears on the face of the definition. 63 There are two textual observations that support this reading, in addition to the fact that only the word ‘interest’ is emboldened in the definition. First, the operative part of the definition is simply ‘a legal or equitable interest and includes a potential, contingent, expectant or inchoate interest’. That is to say, the definition does not repeat the words ‘in property’. That provides a limited textual indicator that the defined term is limited to the word ‘interest’. 64 Secondly, ‘property’ is itself a defined term. Reading the defined term simply as ‘interest’ provides some contextual coherence. The words ‘in property’ in the definition would then operate as a descriptive device, signifying that the definition applies when it is used in conjunction with anything coming within the defined term, ‘property’. This connecting of two defined terms then allows a determination, in any given case, of whether something is an ‘interest’ (as defined) in ‘property’ (as defined). Again, this is an indicator of how to read the term, not a conclusive reason for reading it in that way. -- 13 of 27 -- Bleby JA 12 65 There is then the oddity that ‘property’ is defined to include, in paragraph (b) of the definition, ‘an interest in property’. As identified earlier, this appears to create a circular aspect to the definition. However, reading ‘interest in property’ not as a defined term, but rather as a phrase used in the Act that simply conjoins two different defined terms, assists in avoiding that potential circularity. It does so in the following way. 66 ‘Property’ is defined to mean real or personal property. That is to say, the chapeau of the definition of property purports to provide the actual meaning of the term. The sub-paragraphs of the definition are then inclusive. Sub-paragraph (b) provides that ‘property’ includes an interest in property. If the phrase ‘an interest in property’ is taken not to be a defined term, but a phrase that simply conjoins two defined terms, then it need not mean anything more than: ‘a legal or equitable interest [including] a potential, contingent, expectant or inchoate interest in real or personal property’ 67 Under this reading, all the types of ‘interest’ in property, as defined, are taken to be property for the purpose of the Act. 68 To treat the phrase ‘interest in property’ as a defined term, on the other hand, would be to invite squarely a circular reading of the defined term ‘property’ to include ‘an interest in an interest in (ad infinitum) … property’. Whether that would ultimately matter in any given context is another question. As a matter of definitional coherence, however, such a reading would seem to incorporate an absurdity. 69 I consider that the text of the definition of ‘interest’ as appears on the face of s 2(1) and the immediate context of the definition of ‘property’ in s 2(1) warrant the conclusion that the phrase ‘interest in property’ is nothing more than a descriptive phrase used in the Act that conjoins two defined terms. It is not, itself, a defined term. 70 It follows that whenever the word ‘interest’ is applied to something that comes within the statutory definition of ‘property’, the definition of ‘interest’ in s 2(1) is applicable. That is subject to a qualification arising from the chapeau of s 2(1). As I will come to, this conclusion is significant when it comes to the relationship between these terms and Part 4 of the Act. 71 The next step, however, is to construe s 2(2) in light of these definitions in s 2(1). As noted above, s 2(2) is concerned with ‘an interest of a particular kind in the proceeds of the sale of property’ and deems that interest, until the property is sold, to be an interest of the same kind in the property. 72 Proceeds of sale of property are themselves a form of personal property. When the definitional terms in s 2(1) are fed into the deeming provision in s 2(2), s 2(2) on its face purports to be capable of extending to: -- 14 of 27 -- Bleby JA 13 [a legal or equitable] interest of a particular kind in the proceeds of sale of [real] property. 73 A legal or equitable interest in the proceeds of sale can include a potential, contingent, expectant or inchoate interest in those proceeds. The sub-section then deems any such interest to be, until the real property is sold, an interest of the same kind in the real property itself. 74 The question is then whether sub-section 2(2), so construed, applies to Part 4 of the Act. The appellants contended that it does not. They first pointed to the chapeau of s 2(1). This provides: In this Act, unless it is otherwise provided or there is something in the context repugnant thereto— 75 The effect of the appellant’s submission was that the scheme established by Part 4 of the Act is contextually repugnant to s 2(2), as informed by s 2(1), applying to Part 4. The starting point for this submission was that Part 4 operates as a standalone Part, addressed to the specific concern of land holding entities. In this regard, it has its own interpretation section in s 91. That section includes, as identified above, an inclusive definition of ‘interest in land’. That defined term is deployed in s 92, in the manner described earlier. Part 4 was introduced in 1990, substituted in 2000 and substituted again in 2011. The appellants submitted that as a separate Part of the Act operating in respect of a particular mischief, with its own definitions, it has ‘become disengaged’ from the definitions in s 2. 76 In this regard, the appellants relied on the observation that s 91 contained definitions of ‘unit’ and ‘unit trust scheme’ that are different from the definitions of the same terms in s 2(1). They submitted that this provided an indication that Part 4 was intended to be a standalone set of provisions. 77 More fundamentally, the appellants submitted that whether it was to be treated as contextual repugnancy or simply a case of it being ‘otherwise provided’, the fact that Part 4 of the Act was expressly concerned with and deployed the term ‘land’ rather than ‘property’ indicated its complete separateness as a regime. 78 I do not accept this submission. First, the example of the definitions of ‘unit’ and ‘unit trust’ does not aid the contention that Part 4 is a standalone Part, to which s 2 does not apply. In the case of those definitions, the chapeau to s 2(1) makes it clear that the definitions of unit and unit trust in s 91 operate in Part 4 to the exclusion of those in s 2(1). That does not support any broader conclusion that Part 4 is somehow removed from the operation of s 2. 79 Neither does the use of the word ‘land’ in Part 4 or, for that matter, the defined term ‘interest in land’ assist. First, the use of those terms is not ‘repugnant’ to the application of s 2(2) as informed by s 2(1). The fact that s 2(1) deploys, relevantly, the term ‘real property’ creates no repugnancy. Neither ‘real property’ as used in s 2, nor ‘land’ as used in Part 4 is a defined term. They are words of ordinary meaning. They refer to the same thing. -- 15 of 27 -- Bleby JA 14 80 There is then the use of the words ‘interest in land’ in s 92. This is indeed a defined term, but only inclusively, as discussed above, to include certain statutory concepts. Section 91 does not contain a definition of ‘interest’ insofar as that is applied to land or property more generally. That is, there is nothing in this section that could be said to compete with the defined term ‘interest’ in s 2(1), as used in conjunction with the defined term ‘property’ such as to attract the operation of the chapeau to s 2(1). 81 It is here that the construction of the defined term ‘interest’ in s 2(1), as set out above, assists in the exercise. The phrase ‘interest in property’ as appears in the definitions in s 2(1) of ‘interest’ and ‘property’ is not a defined term, but only a descriptive phrase that conjoins two defined terms. The phrase ‘interest in land’ in s 92 is then (relevantly) an undefined term that meets the description encapsulated in the phrase ‘interest in property’. It is an interest (by reason of the use of the same word) and it is in property, by reason of the definition of property extending to real property, which is land. 82 Far from these differences in wording creating a repugnancy between Part 4 and s 2(1), they work together. As a matter of drafting, it may not be ideal that different terms are used. That is likely a consequence of the later insertion of Part 4, concerned as it is with land holding entities. The use of the word ‘land’ rather than ‘real property’ in that context is readily understandable, if sub-optimal. However, there is no textual or contextual basis for any implication that the definitions in s 2(1) and the deeming provision in s 2(2) do not operate to cause a deemed interest in real property under s 2(2) to be an interest in land within the meaning of Part 4. Sections 2(2) and 92 operate in combination such that a legal or equitable interest (not being a mortgage, lien or charge) in the proceeds of sale of a land asset is taken to be an interest of the same kind in that land asset. 83 In the course of argument, the appellants referred to the observation made in Commissioner of State Revenue v Snowy Hydro Limited7 to the effect that a right to share in the proceeds of sale of an asset does not confer any interest in the asset itself. To the extent that the appellants deployed this observation in support of their argument on the construction exercise, above, it is of little moment. This observation in Snowy Hydro was concerned with a mere contractual right to proceeds of sale of an asset. 84 Sub-section 2(2), by contrast, is concerned with ‘an interest of a particular kind’ in the proceeds of sale of property. As discussed above, an ‘interest’ in property is defined as a legal or equitable interest. Whether Edge had, by reason of the Performance Charge, an interest (as defined) in the proceeds of sale, or merely a contractual right to those proceeds, is the subject of the second issue to be determined. 7 [2012] VSCA 145. -- 16 of 27 -- Bleby JA 15 The nature of the ‘interest’ in the proceeds of sale 85 The appellants submitted that even if s 2(2) applied, the right to receive the proceeds of sale of the community titles in the Edge land was only a contractual right. The effect of their submission, as I understood it, was that a mere contractual interest in proceeds of sale could only be converted by s 2(2) into a contractual interest in the property, which would not amount to a legal or beneficial interest in the property itself. 86 The relevant clause of the Performance Charge is cl 3.1.1.3. While the prefatory wording to the sub-clause is poorly drafted, this sub-clause provided that the Grantors, Adabco and Tabco, agreed: 3.1.1.3 on each Sold Date – duly and punctually to HOLD and STAND POSSESSED on trust for the Grantee: 3.1.1.3.1 the Sale Contract; and 3.1.1.3.2 the proceeds therefrom in respect of that Sale in full satisfaction on the part of the Grantors to be performed and observed hereunder in respect of that Sale; … 87 Sub-clause 3.1.1.4 then provided that the Grantors agreed: 3.1.1.4 on the [sic] each Sold Date – endorse and deliver to the Grantee the settlement cheque in respect of the proceeds referred to in Sub-clause 3.1.1.3.2 in discharge of the trusts created under Sub-clause 3.1.1.3.2; 88 Sub-clause 3.1.1.3 clearly created a trust over the proceeds of sale, on each Sold Date. Put briefly, a Sold Date was defined to be the date of completion of sale of a community title in the Edge land. 89 The appellants then submitted that, at best, cl 3.1.1.3 created a potential beneficial interest in land that might be sold, which cannot translate into an interest in the whole of the land. The effect of this submission was that while cl 3.1.1.3 created a trust in favour of the Grantee (Edge) over the proceeds of sale as at the Sold Date, sale would only take place when title passed at settlement, that is, the Sold Date. Sub-clause 3.1.1.4, however, required the Grantors to endorse and deliver the cheque to Edge on that date. The trust would therefore arise and be extinguished instantaneously. In this regard, the appellants characterised the sub-clause as a ‘flourish’ that created a ‘bare trust’ over the sale proceeds, rather than as creating a substantive interest in them. 90 The appellant’s submission that the sub-clause creates a contractual right is obviously enough correct. It is a contractual right to a beneficial interest in the sale proceeds upon the occurrence of a certain event. At this point, it is helpful to return to the definition of ‘interest’ in s 2(1), which not only means a legal or equitable interest, but also ‘includes a potential, contingent, expectant or inchoate interest’. -- 17 of 27 -- Bleby JA 16 91 The subject matter of s 2(2) is ‘an interest of a particular kind in the proceeds of the sale of property’. The sub-section deems that interest to be an interest of the same kind in the property ‘until the property is sold’. In most, if not all cases, sale proceeds would only be expected to be realised after sale. This raises the prospect that s 2(2) is describing future interests, rather than present interests. That it has this scope of operation is borne out by the extended definition of ‘interest’ in s 2(1) to include potential, contingent and expectant interests. 92 Sub-clause 3.1.1.3 creates a contractual right to a future (beneficial) interest in sale proceeds of the community titles to the land. It may be that this interest arises, as a matter of practicality, only momentarily. However, on a given occasion, it might not, for example if cl 3.1.1.4 is not strictly complied with. In any event, this contemplated momentary beneficial interest does not answer the observation that ‘interest’ as defined extends to potential or expectant interests. To characterise cl 3.1.1.3 as creating, as a matter of contract, a potential beneficial interest in the proceeds of sale that are to be realised on each Sold Date does no violence to the language of either the definition or the sub-clause. To the contrary, it is a characterisation that falls comfortably within the statutory framework. 93 Against this, the appellants submitted that s 2(2) can only operate when there is an actual contract for sale. They submitted it would be an absurd operation of the section if a redemption transaction were to occur, as it did here, at a time where there is no contract for sale in place with respect to the land. The deeming section is not concerned with the mere possibility of future sales. 94 I disagree. The words in s 2(1) ‘potential, contingent, expectant or inchoate interest’ are sufficiently broad to extend the reach of s 2(2) to a situation such as the present, where the future beneficial interest under cl 3.1.1.3 is also contingent on a sale of the property. Section 2(2) applied to deem that contingent, potential beneficial interest in the sale proceeds to be an interest of the same kind in the land. 95 Finally, by supplementary written submissions filed after the hearing of the appeal, the appellants submitted that the only relevant interest of Edge in the proceeds of sale was that which it held for the benefit of the Unit Trust. Edge was required to deal with those proceeds in accordance with the terms of that trust. 96 This appears to be a reference to the mechanism by which under cl 3.1.1.4 of the Performance Charge, the trust created by cl 3.1.1.3 would be discharged on delivery of the proceeds of sale to Edge, at settlement. Edge as trustee of the Edge Developments Unit Trust then would then have certain rights of exoneration and/or indemnity out of the proceeds in respect of construction, financing and the like, incurred in execution of its obligations. That is, following delivery to it of the cheques, Edge was to hold the corpus of the Trust Fund subject to the constitutive -- 18 of 27 -- Bleby JA 17 terms of the Unit Trust. The Unit Holders’ claim was merely residual. That being the case:8 Until satisfaction of rights of reimbursement or exoneration, it [is] impossible to say what the Trust Fund in question was. (Footnote omitted) 97 This submission, which went beyond the permitted written Reply, described the legal interest of Edge as trustee of the corpus of the proceeds held by the Edge Developments Unit Trust, following the sale of the community titles. However, that was not the interest to which s 2(2) attached. The interest that was taken to be an interest in the land under s 2(2), and which was thereby taken to be a land asset under s 92, was the contingent, potential beneficial interest in the proceeds of sale created by cl 3.1.1.3 of the Performance Charge. 98 At the time of the redemption transaction, s 2(2) operated on that contingent, potential beneficial interest in the proceeds of sale and deemed it to be contingent, potential beneficial interest in the land. No question of the contingencies of exoneration and indemnity operating on the Trust Fund arose. I reject the appellants’ belated characterisation of the relevant interest. Was the interest merely a charge, such that it was excluded from the definition of land asset by operation of s 92(1)(a)? 99 As set out above, the primary judge held that the ‘Performance Charge’ imposed a wide variety of obligations on Adabco and Tabco with respect to the Edge Development, those obligations being secured by the charge imposed in cl 5. However, he held that the beneficial interest of Edge in the Edge land was created by the deeming effect of s 2(2) of the Act. That was not an interest that Edge held as a chargee. The judge accepted that the charge created by cl 5 of the Performance Charge was a charge within the meaning of s 92(1)(a) but concluded that this was not the only interest that Edge held in the land. 100 The essence of the appellants’ complaint is that the primary judge here ‘bifurcated’ the right of Edge to receive the proceeds of sale and the charge in cl 5 securing that right. They submitted that if the judge’s reasoning was correct, no mortgage or charge would be exempt under s 92. It was the orthodox function of a mortgage or charge to permit the mortgagee to sell land under a power of sale as part of the mortgage document (or, in the case of an equitable charge, an order of the court). Here, by cl 3.2.2.3 of the Performance Charge, Edge was to fund the cost of construction. It was no different a situation than if Edge had lent the money to Adabco and Tabco to construct the development. Edge was entitled to be repaid and to have that entitlement secured. 8 CPT Custodian v Commissioner of State Revenue (2005) 224 CLR 98 at [51]. -- 19 of 27 -- Bleby JA 18 101 The immediate difficulty with this submission is that Edge did not simply have a contractual right to be repaid. As discussed above, the extended definition of ‘interest’ in s 2(1) interacted with the terms in cl 3.1.1.3 to cause Edge to have a beneficial interest in the proceeds of sale. This was not simply a contractual right to be paid those proceeds. The effect of the deeming provision in s 2(2) was to deem that beneficial interest to be an interest of the same kind in the land. The existence of that interest was established separately from the interest that Edge held under cl 5 of the Performance Charge as chargee. 102 Part of the appellants’ argument rested on the observation that the deemed beneficial interest in the land that arose under s 2(2) did not give Edge any security at common law. It was only a notional interest because of the operation of the Act. So much may be said to be true. Indeed, should the Performance Charge have merely provided that Edge had a contractual right to receive the proceeds of sale, and secured that right by a charging clause in the form of cl 5, then it would have been akin to an ordinary mortgage or charge. It is difficult to see that there would then have been any scope for cl 2(2), as informed by cl 2(1), to operate. 103 The appellants submitted, therefore, that the Commissioner’s position, as upheld by the primary judge, allowed s 2(2) to create an artificial construct to alter what would otherwise be considered to be a conventional mortgage that did not constitute an interest in land under s 92(1)(a). 104 Accepting that the deemed interest on which s 2(2) operates is a statutory construct, it is not for this Court to second guess the appellants’ reasons for conferring on Edge an equitable interest in the proceeds of sale by cl 3.1.1.3, rather than simply a contractual right to receive those proceeds. It may well be that it was open for the parties to structure the right to receive the proceeds differently. They did not do so. The Performance Charge that they did execute was made against the backdrop of the Act. The parties chose to confer on Edge more than a simple contractual right to receive the proceeds of sale, in circumstances where the Act then had the deeming effect that it did. 105 The interest created by cl 5 was a charge. By reason of s 92(1)(a), that was not an interest in the land. The interest created by cl 3.1.1.3 was separate from that charge, notwithstanding that the instrument by which both of these interests were created was entitled ‘Performance Charge’. This conclusion requires no bifurcation of a single concept. The instrument did not simply create a charge or mortgage over a contractual obligation to repay money. The Act deemed the interest created by cl 3.1.1.3 to be an interest in the land. However artificial that deeming may seem, that is the structure that the parties chose, presumably for their own commercial reasons. Section 102A 106 The appellants observed that once a liability for duty arises under s 100(1) as exemplified by s 100(2)(b), s 102(2) then prescribes how the duty on a dutiable -- 20 of 27 -- Bleby JA 19 transaction under which a person’s prescribed interest in a land holding entity is to be calculated. This sub-section provides: (2) If a person or group that has a prescribed interest in a land holding entity increases its prescribed interest as a result of a dutiable transaction, the value of the notional interest acquired in the entity's underlying local land assets is determined as follows: Where— NV is the value to be ascertained TV is the total unencumbered value of all the entity's underlying local land assets P1 is the fraction representing the proportionate interest in the entity before the increase P2 is the fraction representing the proportionate interest in the entity after the increase. 107 Section 102A(2) then prescribes how duty on a dutiable transaction under which a person or group increases its prescribed interest in a land holding entity: (2) Duty on a dutiable transaction under which a person or group increases its prescribed interest in a land holding entity is to be calculated as follows: Where— D is the amount of the duty d1 is the amount that would have been payable if the person or group had acquired the whole of its interest in a single transaction at the time of the increase d2 is the amount that would have been payable if the person or group had acquired its pre-existing interest in a single transaction at the time of the increase. 108 This calculation is effectively of the difference between two hypothetical calculations. The appellant submitted that in order for any liability to duty to arise, it must be implied9 that these hypothetical calculations were of the duty that would have been payable on a conveyance of land with an unencumbered value equivalent to the value of the acquirer’s notional interest in the entity’s underlying land assets. That then required the application of a head of charge in Schedule 2 Part 1 of the Act. This could either be item 3, a ‘Conveyance or transfer on sale of property not otherwise charged’, or item 4, a ‘Conveyance operating as a voluntary disposition inter vivos’. The appellants submitted that in either case, there was an 9 Specifically by the immediate context of ss 102A(1) and (3). NVD = -- 21 of 27 -- Bleby JA 20 exemption, in items 3(2)1 and 4(3)3 of Schedule 2 Part 1 respectively, that applied to a mortgage or an interest in mortgage. It would follow that as both necessary hypothetical calculations were zero, no duty could be payable. 109 It was not entirely clear whether the appellants advanced this argument simply as part of the broader third issue discussed above, or as a separate argument. In any event, as the Commissioner submitted, the calculation of duty under s 102A(2) attached, relevantly, to a hypothetical conveyance of the underlying assets of the Edge land as a consequence of the redemption transaction, not the Performance Charge. The relevant increased prescribed interest (as defined in s 91(1)) in the underlying local land asset (that being the deemed interest by operation of s 2(2)), was the unitholding in the Unit Trust. It was not the charge created by cl 5 of the Performance Charge. Section 102F 110 The appellants then submitted that if s 102A did not operate in the way for which it contended, s 102F(1) operated to provide relief for the redemption transaction from the imposition of duty. As already identified, s 102F(1) provides: (1) A transaction under which a person or a group acquires an interest in a land holding entity is exempt from duty under this Part if it takes place in circumstances in which a conveyance of an interest in the underlying local land assets would not attract ad valorem duty. Example— Suppose that A is entitled under the will of B to 60% of the shares in X Pty Ltd, a land holding entity, owning land in the State valued at $2m. A's acquisition of the shares on distribution of the estate is exempt from duty because a conveyance of the land itself would, if it occurred in these circumstances (ie on distribution of the estate), be exempt from ad valorem duty. 111 The appellant submitted, consistently with its submission on the application of s 102A, that a conveyance of the Performance Charge or an interest therein would be exempt from ad valorem duty under either item 3(2)1 or 4(2)2 of Schedule 2 Part 1, on the basis that the Performance Charge was a mortgage as defined in s 76 of the Act, or otherwise. 112 This argument fails for essentially the same reason as set out above. Sub-section 2(2) operated such that the interest in the proceeds of sale, in which Edge had an equitable interest, was taken to be an interest in the land itself. A conveyance of that land would operate either as a ‘Conveyance or transfer on the sale of property not otherwise charged’,10 or a ‘Conveyance operating as a voluntary disposition inter vivos’.11 10 Schedule 2, Part 1, item 3(1). 11 Schedule 2, Part 1, item 4(1). -- 22 of 27 -- Bleby JA 21 113 Again, whichever hypothetical characterisation is adopted, the hypothesis is not of a conveyance or transfer of a mortgage. It is of the land assets of the Unit Trust. As the primary judge found, the redemption transaction caused Adabco and Tabco to increase their prescribed interest in a land holding entity. Section 102F had no application. Conclusion 114 I would dismiss the appeal. 115 NICHOLSON AJA: I have had the considerable advantage of the analysis of the issues that arise on this appeal undertaken by Bleby JA. I agree with all that his Honour has written but for one aspect, being that dealt with under the heading in his Honour’s judgment ‘The Nature of the “interest” in the proceeds of sale’. The position I have arrived at on this aspect means that I would allow the appeal and set aside the Commissioner’s assessment. Save for this departure, I gratefully adopt Bleby JA’s statement of the facts and issues and his Honour’s analysis. I will endeavour to use terminology consistent with that used by Bleby JA. 116 According to the Commissioner: (i) Immediately prior to the time of the Redemption, Adabco and Tabco (A and T) held a ‘prescribed interested’, that is, 70.79 per cent of units in the unit trust of which Edge was the Trustee. (ii) The Redemption effected an increase of A’s and T’s prescribed interest to 100 per cent. (iii) The unit trust was a ‘land holding entity’ under the provisions of the Stamp Duties Act 1923 (SA) (SDA) in force at the time of the Redemption such that the Redemption was dutiable. (iv) The unit trust was a land holding entity because it had underlying ‘local land assets’ to the value greater than $1 million. (v) The unit trust had such underlying local land assets because, by reason of subclause 3.1.1.3 of the Performance Charge, at the time of the Redemption, Edge had an ‘interest’ (as defined) in the proceeds of the prospective sales of the land held in community title by A and T. 117 The appellants contend that as at the time of the Redemption, Edge had no more than a contractual right to acquire any such proceeds if and when they came into the possession of A and T. 118 Whether or not the Commissioner is correct in (v) turns on a proper understanding of the effect of subclause 3.1.1.3 of the Performance Charge when considered in conjunction with relevant sections of the SDA. -- 23 of 27 -- Nicholson AJA 22 119 As Bleby JA has noted, clause 3.1 of the Performance Charge, setting out the obligations of the Grantors (A and T) is poorly drafted. However, for present purposes, the critical provisions are those in subclauses 3.1.1.3 and 3.1.1.4. Sale Date Trusts 3.1.1.3 [the Grantors will] on each Sold Date – duly and punctually to HOLD and STAND POSSESSED on trust for the Grantee: 3.1.1.3.1 the Sale Contract; and 3.1.1.3.2 the proceeds therefrom in respect of that Sale in full satisfaction on the part of the Grantors to be performed and observed hereunder in respect of that Sale; and Deliver Cheque 3.1.1.4 [the Grantors will] on the each Sold Date – endorse and deliver to the Grantee the settlement cheque in respect of the proceeds referred to in Sub-clause 3.1.1.3.2 in discharge of the trusts created under Sub-clause 3.1.1.3.2; 120 These provisions established the following scheme: (i) By subclause 3.1.1.3, on each ‘sold date’ (defined as, in effect, the date of completion of a sale contract for land the subject of a community title held by A and T) the Grantors (A and T) were to become obliged ‘duly and punctually to HOLD and STAND POSSESSED on trust for the Grantee [Edge]’ of the Sale Contract (subclause 3.1.1.3.1) and ‘the proceeds therefrom’ (subclause 3.1.1.3.2) in respect of that Sale. (ii) By subclause 3.1.1.4, on each sold date (date of completion) the Grantors (A and T) were to become obliged to endorse and deliver to the Grantee (Edge) the settlement cheque ‘in respect of the proceeds’ in (i) ‘in discharge of the trusts’ over those proceeds ‘created under Sub-clause 3.1.1.3.2’. Neither ‘settlement cheque’ nor ‘proceeds’ is a defined term. 121 At common law, this scheme operated to confer on Edge a contractual right, as against A and T, to require A and T to hold, as trustees for Edge as beneficiary, the proceeds of sale of each community title later sold, but only immediately upon receipt of those proceeds on a day of completion and to discharge that trust by handing over those proceeds to Edge on that same day. 122 The A and T contractual obligations are expressed to arise ‘on each sold date’. However, the receipt of sale proceeds will occur at a specific time during that day of completion (usually when settlement in fact occurs). The trust over the proceeds will only arise and Edge will only acquire its contractual right (and right as beneficiary) to enforce the trustee’s obligations with respect to the proceeds of sale at that time of completion. -- 24 of 27 -- Nicholson AJA 23 123 In any event, at no time, according to the parties’ contractual arrangement, would Edge acquire any proprietary right or interest in the land the subject of a community title sale. Edge would acquire a proprietary right only over the proceeds of a sale and only as at the time of completion of a community title sale. It is common ground that, as at the time of the Redemption (that is, when the obligation to pay stamp duty is said to have arisen) there had been no such sales. It follows, according to the Performance Charge, that Edge had acquired no such proprietary rights. The only potentially relevant rights available to Edge at the time of the Redemption were: (i) a contractual right to insist upon a trust with Edge as beneficiary springing into existence with respect to any sale proceeds, but only if and when received by A and T; and (ii) a contractual right to enforce any such trust arising in the future by insisting on any such sale proceeds being handed over to it and the trust discharged, but only if and when any such sale proceeds were to be received by A and T. Neither (i) nor (ii) can be said, at common law or in equity, to constitute a legal or equitable interest in any future sale proceeds, as at the time of the Redemption. 124 The question becomes whether relevant provisions of the SDA served to deem the parties’ contractual arrangements to operate differently from that just set out, such that, at the time of the Redemption, and by reason of the Performance Charge, Edge had an ‘interest’, as defined, in the proceeds of sale, rather than a mere contractual or beneficiary’s right to insist on A and T performing its trust obligations with respect to the proceeds of sale once received. If so, as Bleby JA has explained, sections 2(2) and 92 would operate in combination to deem any such interest (whether legal or equitable) to be an interest of the same kind in the land asset, in this case, each land portion the subject of a community title sale. 125 Section 2(2) of the SDA provides as follows. (2) An interest of a particular kind in the proceeds of the sale of property is, until the property is sold, taken to be an interest of the same kind in the property. Example– A beneficial interest in the proceeds of the sale of property is, until the property is sold, taken to be a beneficial interest in the property. The term ‘interest’ is defined in subsection 2(1). interest in property means a legal or equitable interest and includes a potential, contingent, expectant or inchoate interest; 126 The question becomes whether or not, at the time of the Redemption, Edge had a ‘legal or equitable interest [including] a potential, contingent, expectant or inchoate interest’ in the proceeds of the sale of property. If so, then ‘until the -- 25 of 27 -- Nicholson AJA 24 property is sold’, Edge will be taken to have the same kind of interest, that is, the same ‘legal or equitable interest [including] a potential, contingent, expectant or inchoate interest’, as the case may be, in that property. 127 The definition of the term ‘interest’ is both an exclusive (‘means’) and an inclusive (‘includes’) one. In this case, the question becomes whether or not, at the time of the Redemption, Edge had a potential, contingent, expectant or inchoate equitable interest in ‘the proceeds of the sale of property’. Each of these terms is both amorphous and broad in its meaning. Together they cast a very wide net. There is no doubt that, as at the time of the Redemption, if and when a sale of land were to be settled, Edge would then acquire an equitable interest in the proceeds of sale. 128 The question is whether or not the parties’ contractual arrangements operate so as to fall within this wide net before any proceeds of sale come into existence. In my view, they do not and for this reason. 129 There is a difference between a beneficial interest in the proceeds of the sale of a property (see the example in subsection 2(2)) extant at the time of the Redemption and a contractual right to the effect that such an interest will arise at the time any such proceeds come into existence. A simple example of the former would be where a pertinent contract for sale was in existence at the time of the Redemption and the contractual arrangement was that the vendor was to hold the contractual right to the sale proceeds on trust. Strictly, this would not give rise to an equitable interest prior to completion because no trust property (the sale proceeds) would be in existence. However, the arrangement would fall within the wide net cast by one or more of a ‘potential, contingent, expectant or inchoate’ equitable interest. The parties’ contractual arrangement, as it stood, did not give rise, as at the time of Redemption, to such an equitable interest only to a contractual conditional right (if and when a sale were to settle) to acquire an equitable interest in sale proceeds as at a future date. The earliest time that a potential, contingent, expectant or inchoate equitable interest would arise would be at the time of entry by A and T into any contract of sale, none of which were in existence at the time of the Redemption. 130 Another difficulty I have concerns the timing restriction in subsection 2(2). The ‘interest’ in the proceeds of sale only operates to constitute an interest in the property the subject of the sale ‘until the property is sold’. I accept that the reference to ‘sold’ should be construed as referring to settlement and transfer of title not the entry into a contract for sale. Even so, whatever contractual rights Edge enjoyed with respect to proceeds of sale, at the time of the Redemption, they only operated or came into force at the time of a completion. At no time was any interest in proceeds of sale, no matter how broadly defined, available to Edge ‘until [any relevant] property [was] sold’. At no time was there an interest in proceeds available so as to be ‘taken to be an interest of the same kind in the [sold] property’. The relevant provisions of the SDA and their interaction with the parties’ -- 26 of 27 -- Nicholson AJA 25 contractual arrangements are difficult to construe so as to comprehensively identify what is captured by subsection 2(2). It is not the Court’s task to do this. I am satisfied that the contractual arrangement between Edge and A and T as at the time of Redemption was not captured and that Edge was not a land holding entity at that time. 131 I would allow the appeal, set aside the orders of the Master and set aside the Commissioner’s assessment. -- 27 of 27 --