TaxTalk
High Court to hear Lend Lease
development case on stamp duty
On 15 August 2014, the High Court granted special leave in the case of the Commissioner of State Revenue
(Victoria) (VSRO) and various Lend Lease entities.
Why is the case important?
The case will not only be important for property developers and development agreements from a stamp
duty perspective, but for any agreement with interdependent rights and obligations where consideration
is provided for a variety of matters such as relevant to the infrastructure industry, public private
partnerships and retirement villages.
What is it about?
The case is about a development agreement over the Docklands area. Broadly, the arrangement was that
Lend Lease would buy land in stages by entering into specific land sale contracts. Identifiable amounts
were payable for the specific parcels of land. Lend Lease also agreed to pay other amounts pursuant to the
development agreement which broadly included contributions for infrastructure, site remediation, public
art and other amounts which would improve the land (Other Contributions).
The key issue was whether the Other Contributions constituted “consideration” for the land transfers, and
therefore subject to duty in Victoria.
Supreme Court decision
Relying on two key cases, the Supreme Court focused on that which “moved” the transaction (the
consideration) and the nexus between the consideration and transfer (what the payments were for). The
court focused its attention on the development agreement as the comprehensive document which dealt
with the total basket of rights and obligations between the parties. The Other Contributions were all part
of, or ancillary to, the land acquired. They were required to be paid before title to the land was transferred.
Much of the development work to which the payment related was to improve the land or its enjoyment
before the transfer of the land. The integrated and interdependent nature of the rights and obligations
under the development agreement led the court to conclude that the Other Contributions were part of the
consideration “for” the transfer of land and therefore should be dutiable.
Court of Appeal decision
In a comprehensive judgment, the Court of Appeal disagreed with the Supreme Court. It said the Supreme
Court wrongly started its analysis with the development agreement instead of the land transfer contract
and didn’t fully appreciate the ongoing nature of the relationship between the parties. The Court of Appeal
focused on the land transfer documentation and then asked what the Other Contributions were for. On
that basis, the Other Contributions should have been properly characterised as payments for matters that
were separate and distinct from the transfer of the land. The integrated and interdependent nature of the
rights and obligations under the development agreement did not detract from this analysis.
www.pwc.com
Special leave hearing
In the special leave hearing, the Commissioner said the Court of Appeal was wrong to focus on the land
transfer contract, as the Duties legislation was no longer an instrument based tax, but a transaction tax. It
should have focused on what the vendor (Docklands Authority) received and if it had done so it would
have reached the same conclusion as the Supreme Court. The Commissioner also said the Court of Appeal
erred by focusing on the state of the land at the time of sale. It should have considered the land in its
improved state because the arrangement was essentially about Lend Lease obtaining and benefitting from
the land in its developed state. A substantive causative relationship existed between the Other
Contributions and the transfer of land to say that the Other Contributions were consideration for the
transfer of land.
In contrast, Lend Lease said the case raised no new principles of law. It was simply about the application
of established principles and the language of the statute to a complex set of agreements, as set out in the
Appeal Court decision. That is, the case was really about looking at the character and purpose of each of
the payments and asking the question of what they were for.
Conclusion
The High Court decision will be important about understanding what “consideration is for” and therefore
what is caught in the duty net (or not). From a broader commercial perspective, it will be about the duty
implications of entering into agreements containing ongoing, integrated and interdependent rights and
obligations. From a pure legal perspective, it is about asking the right questions, approaching the analysis
in the correct way and understanding the nexus requirements between consideration and the transaction.
We welcome the High Court’s decision on these matters.
For further information, please contact your usual PwC advisor:
Barry Diamond, Melbourne
Phone: 03 8603 1118
[email protected]
Costa Koutsis, Sydney
Phone: 02 8266 3981
[email protected]
Zoe Chung, Melbourne
Phone: 03 8603 2372
[email protected]
James Puchlenko, Melbourne
Phone: 03 8603 1193
[email protected]
Stefan DeBellis, Brisbane
Phone: 07 3257 8781
[email protected]
Chris McLean, Sydney
Phone: 02 8266 1839
[email protected]
Matt Budge, Perth
Phone: 08 9238 3382
[email protected]
© 2014 PricewaterhouseCoopers. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers a partnership formed in Australia,
which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This publication is a
general summary. It is not legal or tax advice. Readers should not act on the basis of this publication before obtaining professional advice.
PricewaterhouseCoopers is not licensed to provide financial product advice under the Corporations Act 2001 Cth). Taxation is only one of the
matters that you need to consider when making a decision on a financial product. You should consider taking advice from the holder of an Australian
Financial Services License before making a decision on a financial product.
Liability limited by a scheme approved under Professional Standards Legislation.
PwC
Page 2