FEDERAL COURT OF AUSTRALIA

YTL Power Investments Limited v Commissioner of Taxation of the Commonwealth of Australia [2025] FCA 1317

ORDERS

THE COURT ORDERS THAT:

1.    Further to the orders made on 19 March 2025, the preliminary questions as set out in Annexure A to those orders be answered as follows:

Question 1

Answer: As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land not belonging to TLC or ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

Question 2

Answer: As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land belonging to TLC did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

Question 3

Answer: As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease, or as landowner, in relation to Relevant Assets situated on land belonging to ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth) and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

2.    Subject to order 5 below, the respondent is to pay the applicant’s costs of the proceedings to date.

3.    Either party may seek a variation of the orders for costs in order 2 by filing and serving within seven (7) business days any evidence and a written submission of no more than three pages, 1.5 spacing, 12 point font, in which event:

(a)    the other party may within five (5) business days after being served file and serve any evidence and a responding written submission of no more than three pages, 1.5 spacing, 12 point font; and

(b)    any reply evidence and a reply submission of no more than two pages, 1.5 spacing, 12 point font, is to be filed and served within three (3) business days of being served with the responding written submissions and evidence.

4.    Any application for variation of the orders for costs will be determined on the papers.

5.    The matter be listed for a case management hearing on a date to be agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

HESPE J:

INTRODUCTION

1    The applicant, YTL Power Investments Limited (YTL), appeals from a decision of the Commissioner disallowing its objection against an amended assessment which included in its assessable income a capital gain on the disposal of its membership interest in ElectraNet Pty Ltd (ElectraNet). The issue in the proceeding is whether sub-s 855-10(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) applies to disregard the capital gain made by the applicant in respect of its disposal of its membership in ElectraNet.

2    The applicant is a non-resident of Australia. It was common ground that any capital gain made on the disposal of its membership interest in ElectraNet would be taxable in Australia only if that membership interest was “taxable Australian property” as defined in Item 2 of the table in s 855-15 of the ITAA 1997, which relevantly provides:

3    The essential issue is whether the applicant’s membership interest in ElectraNet is “an indirect Australian real property interest”. In the circumstances of this case, the resolution of that issue in turn depends on whether those membership interests pass the principal asset test in s 855-30 (set out below at [45]).

FACTS

4    The following facts were agreed.

Relevant Entities

The Applicant

5    The applicant is and was at all material times a duly incorporated company.

6    At all material times during the financial year ended 30 June 2022, the applicant was a foreign resident, as defined in s 995-1 of the ITAA 1997.

ElectraNet Pty Ltd

7    ElectraNet (formerly named Bluemint Pty Ltd) is and was at all material times an Australian proprietary company limited by shares and registered in Australia with Australian Company Number 094 482 416.

8    At all material times, ElectraNet has held:

(a)    an electricity transmission licence; and

(b)    an electricity system control licence,

each of which was issued on 31 October 2000 and varied on 16 October 2019 under Part 3 of the Electricity Act 1996 (SA) (Electricity Act).

9    Consequently, ElectraNet is and was at all material times:

(a)    licensed under the Electricity Act to carry on operations in the electricity industry; and

(b)    an “electricity entity” within the meaning of s 4 of the Electricity Act.

Transmission Lessor Corporation

10    Transmission Lessor Corporation (TLC):

(a)    was a public corporation, established under the Public Corporations (Transmission Lessor Corporation) Regulations 1995 (SA) as a continuation of the entity formerly known as ETSA Transmission Corporation; and

(b)    now continues in existence as a public corporation and subsidiary of the Treasurer of the State of South Australia (SA Treasurer) under regulation 5(1) of the Public Corporations (Transmission Lessor Corporation) Regulations 2010 (SA).

11    TLC is and was at all material times:

(a)    an “electricity corporation” within the meaning of s 3 of the Electricity Corporations (Restructuring and Disposal) Act 1999 (SA) (Disposal Act);

(b)    a “State-owned company” within the meaning of s 3 of the Disposal Act;

(c)    licensed under Part 3 of the Electricity Act to carry on operations in the electricity industry; and

(d)    an “electricity entity” within the meaning of s 4 of the Electricity Act.

12    At all material times since about October 2000, TLC has owned assets of the following types comprising or relating to South Australia’s electricity network:

(a)    powerlines, substations for converting, transforming or controlling electricity, wires and other equipment used for or in connection with the transmission of electricity (being “prescribed electricity assets” within the meaning of sub-s 13(6) of the Disposal Act);

(b)    licences and other contractual rights to access land belonging to third parties for the purpose of accessing some prescribed electricity assets situated on the property of the third parties; and

(c)    land or interests in land, on, over or under which some prescribed electricity assets are situated, or by which access is obtained to those assets.

The Agreements

13    Between 20 September 2000 and 31 October 2000, ElectraNet (operating under its former name, Bluemint Pty Limited) entered into the following four agreements (together, the Agreements):

(a)    an agreement with TLC, the SA Treasurer, ABB Group Holdings Pty Limited, Queensland Electricity Transmission Corporation Limited and Macquarie Bank entitled the “Electricity Transmission Business Sale Agreement” dated 20 September 2000 (Business Sale Agreement);

(b)    an agreement with TLC and the SA Treasurer entitled the “Transmission Network Lease” (Network Lease) dated 31 October 2000;

(c)    an agreement with TLC and the SA Treasurer entitled the “Transmission Network Land Lease” (Land Lease) dated 31 October 2000; and

(d)    an agreement with the SA Treasurer entitled the “Transmission Sale/Lease Agreement” (Sale/Lease Agreement) dated 31 October 2000.

14    The Sale/Lease Agreement, the Network Lease and the Land Lease together, and individually, were a “sale/lease agreement” within the meaning of sub-s 13(3) of the Disposal Act.

15    The relevant terms of the Agreements are detailed in [88]-[102]. The following matters were agreed facts.

16    The “Leased Assets” the subject of the Network Lease included assets that are and were at all material times:

(a)    “electricity infrastructure” as defined in the Electricity Act; and

(b)    situated on, over or under the following three categories of land:

(i)    land not belonging to either TLC or ElectraNet;

(ii)    land belonging to TLC; and

(iii)    land belonging to ElectraNet.

17    The “Leased Assets” (or some of them) are and were at all material times:

(a)    constructed for or installed for operation by an electricity entity within the meaning of s 36A of the Electricity Act. Some of the “Leased Assets” were constructed or installed before 11 November 1999 and some of the “Leased Assets” were constructed or installed after 11 November 1999; and

(b)    the subject of a “sale/lease agreement” for the purposes of s 30 of the Disposal Act.

18    It was an agreed fact that for the purposes of each of s 36A of the Electricity Act and sub-s 1(2) of sch 1 of the Disposal Act, there is no “agreement in writing to the contrary”.

19    As at 8 February 2022:

(a)    under the Land Lease, the “XBL Term” had expired and the “Post XBL Term” had commenced;

(b)    under the Network Lease, the “Final XBL End Date” had passed; and

(c)    under and in accordance with cl 2.5 of the Network Lease, TLC leased the “Undivided Interests” (as defined in the Network Lease) to ElectraNet.

20    At all material times from around 31 October 2000, ElectraNet has operated, maintained and augmented the electricity transmission system in South Australia.

The Applicant’s Shareholding in ElectraNet

21    On 22 December 2000, the applicant acquired 3,300 fully paid ordinary shares in ElectraNet.

22    On 21 March 2001, the applicant acquired a further 50 fully paid ordinary shares in ElectraNet.

23    During the period from 21 March 2001 until 23 March 2022, the applicant held 3,350 fully paid ordinary shares in ElectraNet (the Shares) which represented a 33.50% interest of the total paid-up share capital of ElectraNet.

24    By an agreement executed on 8 February 2022, the applicant agreed to sell the Shares to Australian Utilities Pty Ltd (the Buyer) as trustee for the Australian Utilities Trust (Share Purchase Agreement).

25    On 23 March 2022, the Share Purchase Agreement was completed and the Buyer was then registered as the owner of the Applicant’s former shareholding in ElectraNet.

Agreed Taxation Matters

26    The following matters were agreed.

27    The Applicant’s Shares in ElectraNet were “CGT assets” within the meaning of s 108-5 of the ITAA 1997.

28    The entry into the Share Purchase Agreement and disposal of the Shares in ElectraNet by the applicant resulted in “CGT Event Al” happening in respect of the Shares under s 104-10 of the ITAA 1997. The applicant made a capital gain of $947,738,854 in respect of that disposal.

29    The issue in the proceeding is whether sub-s 855-10(1) of the ITAA 1997 applies to disregard the capital gain made by the applicant in respect of its disposal of the Shares. That issue:

(a)    depends on whether the Shares were “taxable Australian property”, as defined in s 855-15 of the ITAA 1997; which

(b)    in turn, depends on whether the Shares were “indirect Australian real property interests” for the purposes of Item 2 of the table in s 855-15 of the ITAA 1997 and as defined in s 855-25 of the ITAA 1997; which

(c)    in turn, depends on whether the Shares passed the “principal asset test” in s 855-30 of the ITAA 1997; which

(d)    in turn, depends on whether, at the time of the relevant CGT event that happened in respect of the disposal of the Shares, the sum of the market values of ElectraNet’s assets that were “taxable Australian real property” exceeded the sum of the market values of its assets that were not “taxable Australian real property”.

THE PRELIMINARY QUESTIONS

30    The parties were also agreed that central to the resolution of the issue above, is the question of whether, as at 8 February 2022, the rights conferred on ElectraNet under the Network Lease in relation to “Leased Assets” (or some of them) constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the ITAA 1997, and hence “taxable Australian real property” under s 855-20 of the ITAA 1997.

31    The parties disagree as to the effect (if any) of s 30 and sch 1 of the Disposal Act, s 36A of the Electricity Act, and the terms of the Agreements, on the resolution of that question.

32    Prior to the commencement of the hearing, it was common ground that the membership interests in ElectraNet would not satisfy the definition of “indirect Australian real property interest” if the following questions were answered affirmatively:

Question 1

As at 8 February 2022, was the effect of s 30 and Schedule 1 of the Electricity Corporations (Restructuring and Disposal) Act 1999 (SA) (Disposal Act) and/or s 36A of the Electricity Act 1996 (SA) (Electricity Act) and the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land not belonging to Transmission Lessor Corporation (TLC) or ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

Question 2

As at 8 February 2022, was the effect of s 30 and Schedule 1 of the Disposal Act and/or s 36A of the Electricity Act and the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land belonging to TLC did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute ‘taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

Question 3

As at 8 February 2022, was the effect of s 30 and Schedule 1 of the Disposal Act and/or s 36A of the Electricity Act and the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease, or as landowner, in relation to Relevant Assets situated on land belonging to ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

33    Prior to the commencement of the hearing, the parties were agreed on the following chapeau to the preliminary questions:

The “Relevant Assets” referred to in the questions below are “Leased Assets” (as defined in, and subject to, the “Transmission Network Lease” referred to below, including any improvements and replacements to those assets) which, as at 8 February 2022, (and assumed for the purposes of the below questions only), would have been “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth) leaving aside any relevant operation of s 30 and Schedule 1 of the Electricity Corporations (Restructuring and Disposal) Act 1999 (SA) (Disposal Act), s 36A of the Electricity Act 1996 (SA) (Electricity Act) and the terms of the following agreements (the Agreements):

•    the “Transmission Network Lease” between ElectraNet Pty Ltd (ElectraNet) (operating under its former name, Bluemint Pty Limited), Transmission Lessor Corporation (TLC) and the Treasurer of the State of South Australia (Treasurer) dated 31 October 2000;

•    the “Transmission Network Land Lease” between ElectraNet (operating under its former name, Bluemint Pty Limited), TLC and the Treasurer dated 31 October 2000;

•    the “Transmission Sale/Lease Agreement” between ElectraNet (operating under its former name, Bluemint Pty Limited) and the Treasurer dated 31 October 2000; and

•    the “Electricity Transmission Business Sale Agreement” between ElectraNet (operating under its former name, Bluemint Pty Limited), TLC, the Treasurer, ABB Group Holdings Pty Limited, Queensland Electricity Transmission Corporation Limited and Macquarie Bank Limited dated 20 September 2000.

34    The Court requested the parties further explain the chapeau to the preliminary questions. The essence of the explanation was that in determining the preliminary questions, the Court was to proceed on the assumption that but for the legislation and the Agreements, there would be facts that rendered the Leased Assets “taxable Australian real property”, and that the parties request the Court determine whether the effect of the legislation and the terms of the Agreements is that the Leased Assets “do not or no longer answer the description” of “taxable Australian real property”.

35    On 10 May 2024, the Court ordered the above three questions be heard and determined as preliminary questions on the basis of the agreed statement of facts. This order was made on the basis that if answered affirmatively, the answers would be dispositive of the proceedings without the need for a lengthy trial involving competing valuations and potentially detailed findings of fact relating to individual items of property. In those circumstances, the Court was satisfied that it was in the interests of the efficient administration of justice that the agreed questions be determined as a preliminary matter.

36    After hearing the oral submissions of the applicant, the Commissioner contended that the preliminary questions no longer encapsulated the issues in dispute. The essence of the complaint appeared to be that for the purposes of the preliminary questions, the parties had agreed that but for the operation of s 30 and sch 1 of the Disposal Act, s 36A of the Electricity Act and the terms of the Agreements, the “Leased Assets” (or some of them) would have been “real property situated in Australia” within the meaning of s 855-20(a) of the ITAA 1997. Through its oral submissions, the applicant had gone further and sought to draw upon the history and broader legislative context relating to the electricity industry in South Australia in support of its contention that the Leased Assets were not “real property situated in Australia”.

37    The hearing was adjourned whilst the parties engaged in discussion, following which the parties presented the following revised chapeau and questions:

The “Relevant Assets” referred to in the questions below are “Leased Assets” (as defined in, and subject to, the “Transmission Network Lease” referred to below, including any improvements and replacements to those assets) which, as at 8 February 2022, (and assumed for the purposes of the below questions only), would have been “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth) leaving aside any relevant operation of the Electricity Corporations (Restructuring and Disposal) Act 1999 (SA) (Disposal Act), Electricity Act 1996 (SA) (Electricity Act), the predecessor legislation to each of those Acts (being the Adelaide Supply Company’s Act 1897 to 1931 (SA), the Electricity Trust of South Australia Act 1946 (SA) and the Electricity Corporations Act 1994 (SA) (collectively, with the Disposal Act and Electricity, Act, the SA Legislation), and the terms of the following agreements (the Agreements):

•    the “Transmission Network Lease” between ElectraNet Pty Ltd (ElectraNet) (operating under its former name, Bluemint Pty Limited), Transmission Lessor Corporation (TLC) and the Treasurer of the State of South Australia (Treasurer) dated 31 October 2000;

•    the “Transmission Network Land Lease” between ElectraNet (operating under its former name, Bluemint Pty Limited), TLC and the Treasurer dated 31 October 2000;

•    the “Transmission Sale/Lease Agreement” between ElectraNet (operating under its former name, Bluemint Pty Limited) and the Treasurer dated 31 October 2000; and

•    the “Electricity Transmission Business Sale Agreement” between ElectraNet (operating under its former name, Bluemint Pty Limited), TLC, the Treasurer, ABB Group Holdings Pty Limited, Queensland Electricity Transmission Corporation Limited and Macquarie Bank Limited dated 20 September 2000.

Question 1

As at 8 February 2022, was the effect of the SA Legislation and/or the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land not belonging to TLC or ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

Question 2

As at 8 February 2022, was the effect of the SA Legislation and/or the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land belonging to TLC did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

Question 3

As at 8 February 2022, was the effect of the SA Legislation and/or the Agreements that the rights conferred on ElectraNet under the Transmission Network Lease, or as landowner, in relation to Relevant Assets situated on land belonging to ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth), and hence did not constitute “taxable Australian real property”, under s 855-20(a) of the Income Tax Assessment Act 1997 (Cth)?

38    The chapeau to the questions is premised on an assumption that the conferral of rights in relation to a structure affixed to land would have, absent certain South Australian legislation, also conferred an interest in the land to which the structure was affixed and that such an interest would be “real property”. As the analysis set out below demonstrates, that assumption is questionable because whether an interest in land amounting to real property is conferred through the conferral of rights in relation to a structure depends on more than whether the structure is affixed to the land. The questions have been answered on the basis of an analysis of the rights conferred on ElectraNet in relation to the Relevant Assets, under the Network Lease, having regard to the statutory context governing the electricity supply industry in South Australia.

STATUTORY CONTEXT

Income Tax Assessment Act 1997

39    Subdivision 855-A of the ITAA 1997 is entitled “Disregarding a Capital Gain or Loss by Foreign Residents”. Section 855-5 describes the objects of the Subdivision as follows:

(1)     The objects of this Subdivision are to improve:

(a)    Australia’s status as an attractive place for business and investment; and

(b)     the integrity of Australia’s capital gains tax base.

(2)     This is achieved by:

(a)    aligning Australia’s tax laws with international practice; and

(b)    ensuring interests in an entity remain subject to Australia’s capital gains tax laws if the entity’s underlying value is principally derived from Australian real property.

40    Section 855-10 relevantly provides for the circumstances in which a capital gain or capital loss from a CGT event is to be disregarded. There are two relevant criteria which must be satisfied:

(1)     Disregard a *capital gain or *capital loss from a *CGT event if:

(a)     you are a foreign resident… just before the CGT event happens; and

(b)     the CGT event happens in relation to a *CGT asset that is not *taxable Australian property.

41    As outlined above, it was agreed that a CGT event happened in relation to the applicant’s membership interest in ElectraNet (being CGT event A1) and the applicant was a foreign resident just before the CGT event happened. Whether the applicant’s resulting capital gain is to be disregarded depends on whether the applicant’s membership interest in ElectraNet is “taxable Australian property”.

42    There are five categories of “taxable Australian property”. These categories are set out in the table in s 855-15. As set out above, it is Item 2 of that table that is relevant, namely an “indirect Australian real property interest”.

43    The term “indirect Australian real property interest” is ascribed the following meaning by s 855-25(1):

(1)     A *membership interest held by an entity (the holding entity) in another entity (the test entity) at a time is an indirect Australian real property interest at that time if:

(a)     the interest passes the *non-portfolio interest test (see section 960-195):

(i)     at that time; or

(ii)     throughout a 12 month period that began no earlier than 24 months before that time and ended no later than that time; and

(b)     the interest passes the principal asset test in section 855-30 at that time.

44    It was agreed that the membership interests held by the applicant in ElectraNet passed the non-portfolio interest test at the time of the CGT event. Whether the applicant’s membership interest in ElectraNet was an “indirect Australian real property interest” depends on whether that interest passed the principal asset test in s 855-30 at the time of the CGT event.

45    The principal asset test is set out in s 855-30. It is in the following relevant terms:

855-30    Principal asset test

(1)     The purpose of this section is to define when an entity’s underlying value is principally derived from Australian real property (see paragraph 855-5(2)(b)).

(2)     A *membership interest held by an entity (the holding entity) in another entity (the test entity) passes the principal asset test if the sum of the *market values of the test entity’s assets that are *taxable Australian real property exceeds the sum of the *market values of its assets that are not taxable Australian real property.

Note: The market value of any of the latter kind of assets that are duplicated within the test entity’s corporate group could be disregarded (see section 855-32).

(3)     For the purposes of subsection (2), treat an asset of an entity (the first entity) that is a *membership interest in another entity (the other entity) as if it were instead the following 2 assets:

(a)     an asset that is *taxable Australian real property (the TARP asset);

(b)     an asset that is not taxable Australian real property (the non-TARP asset).

(4)     For the purposes of subsection (2), treat the *market value of the TARP asset and the non-TARP asset according to the following table.

46    The “test entity” is ElectraNet. The principal asset test thus requires the identification of those assets of ElectraNet that are “taxable Australian real property”.

47    The term “taxable Australian real property” is relevantly defined in s 855-20:

855-20 Taxable Australian real property

A *CGT asset is taxable Australian real property if it is:

(a)     real property situated in Australia (including a lease of land, if the land is situated in Australia) …

48    Having regard to the matters agreed between the parties, the application of the principal asset test requires determination of whether the “Leased Assets” under the Network Lease are “taxable Australian real property”.

South Australian Electricity Supply Industry Regulation

49    ElectraNet’s business operations owe their existence to the privatisation of the electricity industry in South Australia.

50    The legislative background to the South Australian electricity industry commenced with the enactment of The Gas and Electric Lighting Act 1891 (SA) which, amongst other things, authorised local municipal authorities to supply electricity for any public or private purposes within the limits of its district. Local authorities were authorised to acquire lands by agreement and construct the works necessary and incidental to supplying electricity: s 52. Local authorities were authorised to enter into contracts for the execution and maintenance of works needed for the supply of electricity: s 53. Sections 66 and 67 provided:

66.     Any officer appointed by the local authority supplying electricity may at all reasonable times enter any premises to which electricity is or has been supplied by such local authority, in order to inspect the electric lines, meters, accumulators, fittings, works, and apparatus for the supply of electricity belonging to the said local authority, and for the purpose of ascertaining the quantity of electricity consumed or supplied, or where a supply of electricity is no longer required, or where the local authority is authorised to take away and cut off the supply of electricity from any premises, for the purpose of removing any electric lines, accumulators, fittings, works, or apparatus belonging to the local authority, repairing all damage caused by such entry, inspection, or removal.

67.    Where any electric lines, meters, accumulators, fittings, works, or apparatus belonging to the local authority are placed in or upon any premises not being in the possession of the local authority, for the purpose of supplying electricity under this Act, such electric lines, meters, accumulators, fittings, works, or apparatus shall not be subject to distress or to the landlord’s remedy for rent of the premises where the same may be, nor to be taken in execution or distress under any process of any court or justices, or any proceedings in insolvency against the person in whose possession the same may be, or to be taken by the trustee of’ any assignment executed by such person.

51    The effect of s 67 was to prevent electricity works that were placed on private premises from being liable to be seized by creditors or landlords of the occupier of those premises.

52    The enactment of The South Australian Electric Light and Motive Power Company’s Act 1897 (SA) (1897 Act) conferred on a company incorporated as the South Australian Electric Light and Motive Power Company Limited the rights necessary or convenient for the construction of works for the lighting by means of electricity of within South Australia.

53    Relevantly, by that Act:

(a)    It was lawful for that company to construct and maintain electric works “upon lands belonging to the [the South Australian Electric Light and Motive Power Company Limited]”: s 4.

(b)    The South Australian Electric Light and Motive Power Company Limited was permitted to “open and break up the soil and pavement of any streets” and “lay down thereunder pipes, mains, service lines, wire conduits and other works” and “place along or across such streets” such works. However, that company was not authorised to “lay down or place any electric line or any works into, through, or against any building, or in any land not dedicated to public use, without the consent of the owners and occupiers thereof” except for replacing or repairing or altering existing electric lines that had been lawfully placed: s 5.

(c)    The company was permitted to enter into contracts with any local authority, person or other company for the supply of electricity or for providing electric fittings and things “in such manner and upon such terms as shall be agreed upon between the company and the said local authority, person, or other company”: s 15.

(d)    Individuals appointed by the company were permitted, between 8am and 10pm, to (s 17):

…enter any building or place lighted with electricity supplied by the Company in order to inspect the electric lines or wires, meters, accumulators, transformers, lamps, and all fittings, apparatus, and works connected therewith, for producing or regulating the supply of electricity, and for the purpose of ascertaining the quantity of electricity consumed or supplied, or where a supply of electricity is no longer required, or where the Company are authorised to take away and cut off the supply of electricity from any premises for the purpose of removing any electric lines or wires, meters, accumulators, transformers, lamps, and all fittings, apparatus, and works belonging to the Company…

54    The 1897 Act thus conferred no rights to lay wires, poles and related works on private land in the absence of an agreement with an electricity customer.

55    By The Adelaide Electric Supply Company’s Act 1922 (SA) (1922 Act), the rights granted to The South Australian Electric Light and Motive Power Company Limited had been assigned to The Adelaide Electric Supply Company Limited.

56    Presumably as the electricity network expanded, it became necessary to enable The Adelaide Electric Supply Company Limited to erect or lay electric lines and related works through districts outside of the original permitted area in order to supply customers in the original permitted area. The 1922 Act amended the 1897 Act to permit this type of works. The 1922 Act also gave the Adelaide Electric Supply Company Limited power to run its works over private lands. Section 7 of the 1922 Act relevantly provided:

(1)    It shall be lawful for the Company, for the purposes of the supply of electricity to any municipality, district, or locality to which the Company may lawfully supply electricity, to erect, carry, or lay its instrumentalities of supply on, over, through, under or across any land or any navigable river, and to maintain, alter, repair, remove, or replace the same.

(2)    Whenever the Company desires to exercise the power conferred by subsection (1) hereof –

(a)    ….

(b)    as regards any land which is land belonging to the Crown, the Company shall obtain the written consent of the Commissioner of Crown Lands, and if such land is subject to any agreement, lease, or licence granted by or on behalf of the Crown, shall also give to the purchaser, lessee, or licensee thereof a written notice of the Company’s intention, specifying the land affected, which notice shall contain a request for the consent of such purchaser, lessee, or licensee to the Company erecting, carrying, or laying its instrumentalities of supply on, over, through, under, or across such land, and particulars of the price which the Company is willing to pay for such consent and for any easement, right, or privilege in over, or affecting any land, which the Company desires to acquire:

(c)    as regards any land which is not land belonging to the Crown, the Company shall give to the owner and also to the occupier of the land such written notice containing such request as mentioned in subdivision (b) hereof.

(3)    If the purchaser, lessee, or licensee, or the owner or occupier [of the relevant land] fails for a period of one month after the service upon him of such notice …to consent to such request, and to agree to grant to the Company for the price mentioned in the notice such easement, right, or privilege in, over, or affecting such land… the Company may compulsorily acquire any easement, right, or privilege in, over, or affecting such land: Provided that the power of compulsory acquisition hereby conferred shall not be exercised with regard to any easement, right, or privilege in, over, or affecting any land, which is, or forms part of –

(a)    a garden, orchard, or plantation attached to a dwelling house; or

(b)    a park, planted walk, or ground ornamentally planted; or

(c)    the site of any building of the value of more than One Hundred Pounds, or the site of any dwelling-house.

57    The 1922 Act thus enabled the company to define by agreement “any easement, right, or privilege in over, or affecting any land” which it desired to acquire in respect of land owned or occupied by third parties.

58    By the Electricity Trust of South Australia Act 1946 (SA) (1946 Act), the undertaking of The Adelaide Electricity Supply Company Limited was vested in a new body, The Electricity Trust of South Australia. Unlike the boards of the predecessor companies, the seven members of what was essentially the board of the Trust were appointed by the Governor. The Trust was thus a body under government control.

59    Section 16 of the 1946 Act provided:

(1)     Notwithstanding any other Act—

(a)     land and buildings of the Trust are ratable property within the meaning of the Local Government Act, 1934-1941;

(b)     the Trust is liable to pay rates under the Local Government Act, 1934-1941, the Waterworks Act, 1932-1936, and the Sewerage Act, 1929-1936, and land tax under the Land Tax Act, 1936-1942.

60    By s 36 of the 1946 Act, the provisions of the 1897 Act, the 1922 Act, and the Adelaide Electric Supply Company’s Act 1931 (SA) (cited together as the Adelaide Electric Supply Company’s Acts, 1897 to 1931), apart from ss 32, 33 and 38 of the 1897 Act, applied to the Trust.

61    The 1946 Act was amended by the Electricity Trust of South Australia Act Amendment Act 1988 (SA). Section 37(1) of the 1946 Act was amended to impose a duty on the Trust to “as far as practicable maintain the electricity supply though the distribution system”. By the amendments made in 1988, the “distribution system” was defined in s 3 to mean:

(a)    the network of cables by which the Trust transmits and distributes electricity;

(b)    the associated transformers and equipment of an electrical or other kind;

(c)    structures for the support of any such cables, transformers or equipment,

and includes any cable, transformer, equipment or structure used on a temporary basis for purposes related to the maintenance, repair or replacement of any part of the distribution system…

62    The amendments made in 1988 included the addition of s 16(2), which provided:

(2)     For rating purposes under the Local Government Act, 1934, the following does not constitute ratable property:

(a)    plant or equipment used by the Trust in connection with the generation, transmission or distribution of electricity (whether or not the plant or equipment is situated on land owned by the Trust);

(b)    easements, rights of way or other similar rights (including such rights arising by virtue of a licence) granted in favour of the Trust in connection with the generation, transmission or distribution of electricity.

63    By the 1988 amendments, a new division entitled “Statutory Easement” was added in Part IV of the 1946 Act. That division was in the following terms:

DIVISION III – STATUTORY EASEMENT

40.     The purpose of this Division is–

(a)     to legitimize informal arrangements under which parts of the distribution system have been established on, above or under land of which the Trust is not the owner;

and

(b)     to ensure that the Trust has the necessary powers to enter any such land for the purpose of examining, repairing, modifying or replacing the relevant parts of the distribution system.

41.     (1)     Where, at the commencement of this section, any part of the distribution system is on, above or under land (other than land belonging to the Trust in fee simple) the Trust has an easement over that land.

(2)     The easement entitles the Trust–

(a)     to maintain the relevant part of the distribution system on, above or under the land affected by the easement;

(b)     to enter the land, by its agents or employees, at any reasonable time, for the purpose of examining, maintaining, repairing, modifying or replacing the relevant part of the distribution system;

(c)    to bring onto the land any vehicles or equipment that may be reasonably necessary for any of the above purposes.

(3)     The powers conferred by the easement must be exercised so as to minimize, as far as reasonably practicable, interference with the enjoyment of the land by other persons.

(4)     If there is any inconsistency between this section and an instrument to which the Trust is a party, the terms of the instrument prevail to the extent of the inconsistency.

(5)     An easement under this section need not be registered.

64    In the Second Reading Speech relating to the Bill for the 1988 amendments, the relevant Minister provided the following explanations for those provisions (South Australia does not have a practice of issuing explanatory memoranda). The s 40a referred to in the Second Reading Speech became s 41 of the 1946 Act):

Clause 4 inserts a new subsection in section 16 of the principal Act. This provides that the value of equipment for the generation, distribution or supply of electricity will not be taken into account for the purpose of local government rating.

…

New section 40 sets out the purposes of the new statutory easements proposed in Division III.

New section 40a creates a statutory easement in relation to those parts of the distribution system that exist on land that does not belong to the trust. This easement is displaced, to the extent of any inconsistency, by any actual easement or other relevant instrument.

65    At about the time the 1946 Act was amended in 1988, amendments were also made to the Local Government Act 1934 (SA) (Local Government Act). Following amendments made by the Local Government Act Amendment Act 1988 (SA), the term “ratable property” was defined in s 5 of the Local Government Act to mean “land that is ratable under Part X”. “Land” in turn was defined to include:

“land” includes—

(a)    all buildings and structures on land;

(b)    all other improvements to land;

(c)    a strata lot under the Community Titles Act 1996.

66    By amendments made in 1988 to the Local Government Act, rates imposed on land were a charge on the land: s 182. Rates were recoverable as a debt from the owner, as the principal rate payer or any person who was an owner or occupier of the land. If rates were recovered from a person who was not the principal ratepayer, that person could in turn make a claim to recover that amount from the principal ratepayer: s 183.

67    By the amendments made to the Local Government Act in 1988, “owner” was defined as follows:

“owner” of land means—

(a)    where the land has been granted in fee simple—

(i)     the holder of an estate in fee simple, or a life estate, in the land;

(ii)     the holder of a leasehold estate in the land who is not in occupation of the land;

(iii)     a mortgagee in possession of the land (or a receiver appointed by such a mortgagee);

(b)     where the land is held from the Crown under a lease, licence or agreement to purchase – the lessee, licensee or purchaser; or

(c)    any person who has arrogated to himself or herself (lawfully or unlawfully) the rights of an owner of the land,

and includes the executor of the will, or administrator of the estate, of any such person

68    The effect of s 16(2)(a) of the 1946 Act was therefore to ensure that plant or equipment used by the Trust in connection with the generation, transmission or distribution of electricity on land was not regarded as land for ratings purposes, and therefore not included in the assessment of rates payable by the holder of the estate in fee simple (or life estate), whether or not the holder of that estate was the Trust.

69    As part of the establishment of the national electricity market, reforms were made to the electricity supply industry in South Australia. By the Electricity Corporations Act 1994 (SA) (1994 Act), corporations were established for the generation, transmission and distribution of electricity. A new company, ETSA Corporation, was established and had the functions of electricity distribution and generation. The 1994 Act provided for the future establishment (by regulation) of an electricity generation corporation and an electricity transmission corporation, at which respective points in time ETSA Corporation would cease to have electricity generation functions and electricity transmission and control functions (respectively).

70    The 1994 Act repealed, amongst other Acts:

(a)    the Electricity Trust of South Australia Act 1946;

(b)    The Adelaide Electric Supply Company Act 1944;

(c)    The Adelaide Electric Supply Company’s Aas 1897 to 1931; and

(d)    the Electricity Act 1943.

71    ETSA Corporation was deemed to be the same body corporate as the Electricity Trust of South Australia, established under the repealed Acts.

72    Clause 5 of sch 2 of the 1994 Act provided:

Statutory easement

5.     (1)     An electricity corporation has an easement over land where—

(a)     a part of the transmission or distribution system operated by the corporation is on, above or under the land and the land does not belong to the corporation; and

(b)     that part of the transmission or distribution system was as at 1 November 1988 on, above or under the land and the land did not then belong to the Trust.

(2)     The easement entitles the electricity corporation-

(a)     to maintain the relevant part of the transmission or distribution system on, above or under the land affected by the easement;

(b)    to enter the land, by its agents or employees, at any reasonable time, for the purpose of examining, maintaining, repairing, modifying or replacing the relevant part of the transmission or distribution system;

(c)    to bring on to the land any vehicles or equipment that may be reasonably necessary for any of the above purposes.

(3)     The powers conferred by the easement must be exercised so as to minimise, as far as reasonably practicable, interference with the enjoyment of the land by other persons.

(4)     If there is any inconsistency between this clause and an instrument to which the electricity corporation is a party, the terms of the instrument prevail to the extent of the inconsistency.

(5)     An easement under this clause need not be registered.

(6)     In this clause—

“cable” includes any kind of electrical conductor;

“transmission or distribution system” means—

(a)     the network of cables by which an electricity corporation transmits or distributes electricity;

(b)     the associated transformers and equipment of an electrical or other kind;

(c)     structures for the support of any such cables, transformers or equipment,

and includes any cable, transformer, equipment or structure used on a temporary basis for purposes related to the maintenance, repair or replacement of any part of the transmission or distribution system.

73    The effect of cl 5 of sch 2 was to confer on an electricity corporation a similar statutory easement as had been conferred on the Trust by the amendments made in 1988.

74    Section 34 of the 1994 Act provided for the possible establishment of a separate electricity transmission corporation:

Establishment of corporation

34.    (1)    An electricity transmission corporation may be established by the Governor by regulation.

(2)    The regulations must name the corporation.

(3)    ETSA ceases to have electricity transmission and system control functions on and from the date specified for that purpose in the regulations.

75    Assets and liabilities could be transferred between electricity corporations (including between the ETSA Corporation and an electricity transmission corporation established under the 1994 Act) by Ministerial Order: sch 3 of the 1994 Act. Instruments or documents “applicable to a transferred asset or liability” were to be construed as though a reference to the transferor were a reference to the transferee: sch 3 cl 7(a). If the transferred asset consisted of rights to the possession or use of property under an agreement, the transferee was permitted to exercise those rights: sch 3 cl 7(g).

76    With effect from 1 July 1995, ETSA Transmission Corporation was established as a subsidiary of ETSA by regulations made pursuant to the Public Corporations Act 1993 (SA): Public Corporations (ETSA Transmission Corporation) Regulations 1995 (SA).

77    Further regulation of the electricity supply industry was provided for in the Electricity Act 1996 which established a system of licensing for “electricity entities”. Pursuant to s 46 of that Act, an electricity entity was permitted to “acquire land” in accordance with the Land Acquisition Act 1969 (SA). Compulsory acquisition required the authorisation of the Minister. “Land” was defined in s 4 of the Electricity Act to include:

(a)    an estate or interest in land (including an easement); or

(b)    a right or power over or in respect of land…

78    Rights of entry were conferred on electricity officers to enter land where electricity infrastructure of the entity is situated to operate, maintain, repair, alter, add to, remove or replace that infrastructure: s 48 of the Electricity Act.

79    A series of legislative amendments were made in 1999 to facilitate the privatisation of the South Australian electricity industry, including the Disposal Act, the Electricity (Miscellaneous) Amendment Act 1999 (SA) and the Statutes Amendment (Electricity) Act 1999 (SA).

80    The Electricity (Miscellaneous) Amendment Act 1999, amongst other things, inserted a new Division 3A of Part 3 in the Electricity Act. That new Division provided:

DIVISION 3A—PROTECTION OF PROPERTY IN INFRASTRUCTURE

36A—Electricity infrastructure does not merge with land

    Subject to any agreement in writing to the contrary, the ownership of electricity infrastructure constructed or installed for operation by an electricity entity is not affected by its affixation or annexation to land.

36B—Prevention of dismantling of electricity infrastructure in execution of judgment

(1)     Electricity infrastructure owned or operated by an electricity entity cannot be dismantled in execution of a judgment.

(2)     This section does not prevent the sale of an electricity generating plant or a transmission or distribution network as a going concern in execution of a judgment.

81    The explanation given for these clauses in the Second Reading Speech was:

Proposed new section 36A—Electricity infrastructure does not merge with land

The proposed new provision makes it clear that powerline poles and other infrastructure of electricity entities do not pass into the ownership of the owner of the land on which they are installed because they are affixed or annexed to the land.

Proposed new section 36B—Prevention of dismantling of electricity infrastructure in execution of judgment

The dismantling of electricity infrastructure in execution of a judgment is prevented.

The Disposal Act

82    Pursuant to s 8 of the Disposal Act, the Minister was given power to make a transfer order to, amongst other things, transfer to a “State-owned company, Minister, electricity corporation or any instrumentality of the Crown or statutory corporation, or the Crown” the assets or liabilities (or both) of an electricity corporation or grant to a State-owned company, Minister, electricity corporation or any instrumentality of the Crown or statutory corporation, or the Crown, a lease, easement or other rights in respect of assets of or available to an electricity corporation.

83    Section 13 of the Disposal Act relevantly provided:

13—Disposal of electricity assets and limitations on disposal

(1)     The Crown, an instrumentality of the Crown or a statutory corporation must not sell or transfer prescribed electricity assets.

(2)     If a prescribed company or a subsidiary of a prescribed company owns prescribed electricity assets, shares in the prescribed company-

(a)     must not be issued; or

(b)     if owned by an instrumentality of the Crown or a statutory corporation-must not be sold or transferred.

(3)     Subject to the limitations under subsections (1) and (2), the Minister may by agreement (a sale/lease agreement) with another (the purchaser) do one or more of the following:

(a)     transfer to the purchaser assets or liabilities (or both) of an electricity corporation;

(b)     grant to the purchaser a lease, easement or other rights in respect of assets of or available to an electricity corporation;

(c)     transfer to the purchaser assets or liabilities (or both) of a State-owned company;

(d)     transfer to the purchaser shares in a State-owned company;

(e)     grant to the purchaser a lease, easement or other rights in respect of assets of or available to a State-owned company;

(f)     transfer to the purchaser assets or liabilities (or both) that have been acquired by a Minister, any instrumentality of the Crown or a statutory corporation under this Act;

(g)     grant to the purchaser a lease, easement or other rights in respect of assets that have been acquired by a Minister, any instrumentality of the Crown or a statutory corporation under this Act.

84    Sections 14(1) and (4) provided:

14—Provisions relating to sale/lease agreements     

(1)    If-

(a)    an electricity corporation or State-owned company has an easement in relation to electricity infrastructure on, above or under land; and

(b)     the Minister, by a sale/lease agreement, transfers part of the infrastructure, or grants a lease or other rights in respect of part of the infrastructure, to a purchaser,

the Minister may, by the sale/lease agreement, transfer to the purchaser rights conferred by the easement but limited so they operate in relation to that part of the infrastructure (which rights will be taken to constitute a separate registrable easement) and may, by a subsequent sale/lease agreement, transfer to the same or a different purchaser rights conferred by the easement but limited so they operate in relation to another part of the infrastructure, whether on, above or under the same part or a different part of the land (which rights will also be taken to constitute a separate registrable easement).

…

(4)    A sale/lease agreement effects the transfer and vesting of an asset or liability or shares, or the grant of a lease, easement or other rights, in accordance with its terms by force of this Act and despite the provisions of any other law or instrument.

85    Section 30 of the Disposal Act provided:

30—Electricity infrastructure severed from land

Electricity infrastructure or public lighting infrastructure the subject of a transfer order, vesting order, sale/lease agreement or special order is to be taken to be transferred, vested or leased (as the case may be) by the order or agreement as if the infrastructure were personal property severed from any land to which it is affixed or annexed and owned separately from the land.

86    Sections 32 and 33 of the Disposal Act relevantly provided:

32—Stamp duty

(1)     No stamp duty is payable under a law of the State in respect of—

(a)     a transfer, grant or extinguishment effected by a transfer order;

(b)     any transfer or assignment of assets or liabilities by an electricity corporation to a State owned company.

(2)     No person has an obligation under the Stamp Duties Act 1923—

(a)     to lodge a statement or return relating to a transaction referred to in subsection (1); or

(b)     to include information about such a transaction in a statement or return.

33—Interaction between this Act and other Acts

(1)    This Act has effect despite the provisions of the Real Property Act 1886 or any other law.

(2)     A transaction under this Act is not subject to—

(a)     the Land and Business (Sale and Conveyancing) Act 1994; or

(b)     the Retail and Commercial Leases Act 1995; or

(c)     Part 4 of the Development Act 1993.

87    Schedule 1 to the Disposal Act was entitled “Special provisions”. Following amendments made by the Statutes Amendment (Electricity) Act 1999 (SA), it relevantly provided:

1—Electricity infrastructure taken not to have merged with land

(1)     This clause applies to electricity infrastructure that is or was owned or operated by an electricity corporation or State-owned company and is situated on, above or under land that does not or did not belong to the electricity corporation or State-owned company.

(2)     Subject to any agreement in writing to the contrary, the ownership of electricity infrastructure to which this clause applies will be taken never to have been affected by its affixation or annexation to the land.

2—Statutory easement relating to infrastructure

(1)     A body specified by proclamation for the purposes of this clause will have an easement over land where

(a)     electricity infrastructure owned or operated by the body is on, above or under the land and the land does not belong to the body; and

(b)    that infrastructure was, before a date specified in the proclamation, owned or operated by an electricity corporation or State-owned company and the land did not belong to the electricity corporation or State-owned company.

(2)     The easement entitles the specified body—

(a)     to maintain the relevant electricity infrastructure on, above or under the land affected by the easement;

(b)     to enter the land, by its agents or employees, at any reasonable time, for the purpose of operating, examining, maintaining, repairing, modifying or replacing the relevant electricity infrastructure;

(c)     to bring on to the land any vehicles or equipment that may be reasonably necessary for any of the above purposes.

(3)     The powers conferred by the easement must be exercised so as to minimise, as far as reasonably practicable, interference with the enjoyment of the land by persons lawfully occupying the land.

…

(5)     The specified body must make good any damage caused by the exercise of powers under this clause as soon as practicable or pay reasonable compensation for the damage.

(6)     If the specified body has an easement relating to electricity infrastructure over another person’s land otherwise than by virtue of this clause, the application of the easement under this clause or clause 5 of Schedule 2 of the Electricity Corporations Act 1994 to the land is excluded to the extent necessary to avoid the same part of the land being subject to both easements.

(6a)     If the specified body is an electricity corporation, the application of any easement that the body has under clause 5 of Schedule 2 of the Electricity Corporations Act 1994 is excluded.;

….

(7a)     Nothing prevents more than one body from having an easement under this clause over the same land or in relation to the same electricity infrastructure.

(8)     An easement under this clause need not be registered.

(9)     However, the Registrar-General must, on application by the specified body, note an easement under this clause on each certificate of title, or Crown lease, affected by the easement.

…

3—Liability of certain bodies to council rates or amounts in lieu of rates

(1)    The following provisions apply in relation to the liability of a State-owned company to pay rates under the Local Government Act 1934, despite the provisions of that Act:

(a)     a State-owned company is liable to pay rates;

(b)    land and buildings of a State-owned company are rateable property within the meaning of that Act;

(c)     the following are not rateable property within the meaning of that Act:

(i)     plant or equipment used by a State-owned company in connection with the generation, transmission or distribution of electricity (whether or not the plant or equipment is situated on land owned by the corporation);

(ii)     easements, rights of way or other similar rights (including such rights arising by virtue of a licence) that have been granted or operate in connection with the generation, transmission or distribution of electricity.

(2)     Despite the Local Government Act 1934, the following are not rateable property within the meaning of that Act:

(a)     plant or equipment (other than electricity generating plant and substations for converting, transforming or controlling electricity) used by a body specified by proclamation for the purposes of this clause in connection with the generation, transmission or distribution of electricity (whether or not the plant or equipment is situated on land owned by the body);

(b)     easements, rights of way or other similar rights (including such rights arising by virtue of a licence) that have been granted or operate in connection with the generation, transmission or distribution of electricity.

(3)     Despite the Local Government Act 1934, the Governor may, by proclamation, declare that the rates payable under that Act in respect of specified land on which is situated any electricity generating plant, or substation for converting, transforming or controlling electricity, used by a body specified in the proclamation are reduced to a specified amount or an amount determined in a specified manner.

…

88    The terms of the Disposal Act were considered by a Standing Committee of the Legislative Council. The explanation for the provisions which became s 36 of the Disposal Act was largely repetitive of the terms of the legislation:

Electricity infrastructure severed from land

19A.     Electricity infrastructure or public lighting infrastructure the subject of a transfer order, vesting order, sale/lease agreement or special order is to be taken to be transferred, vested or leased (as the case may be) by the order or agreement as if the infrastructure were personal property severed from any land to which it is affixed or annexed and owned separately from the land.

New clause 19A provides that electricity infrastructure or public lighting infrastructure that is transferred, vested or leased under the Act is to be treated as if it were personal property severed from any land to which it may be affixed.

89    By amendments made with effect from 20 January 2000:

(a)    The Public Corporations (ETSA Transmission Corporation) Regulations 1995 were renamed the Public Corporations (Transmission Lessor Corporation) Regulations 1995; and

(b)    ETSA Transmission Corporation continued in existence as a subsidiary of RESI (formerly ETSA Corporation) as Transmission Lessor Corporation.

TERMS OF THE AGREEMENTS

Business Sale Agreement

90    The Electricity Transmission Business Sale Agreement was a “sale/lease agreement” for the purposes of the Disposal Act.

91    Pursuant to the Electricity Transmission Business Sale Agreement, ElectraNet (then known as Bluemint Pty Ltd) accepted a transfer of the TLC Assets and TLC Liabilities, with effect from Completion (cl 2.2) and agreed to pay the TLC Purchase Price. “TLC Assets” was defined to mean all the assets of TLC other than the “Excluded TLC Assets”.

92    The Excluded TLC Assets were listed in sch 2. The excluded assets included:

(1)    The Transmission Network. This was defined to mean the “Leased Assets” and the “XBL Assets”.

(2)    The Transmission Network Site (defined in the Land Lease).

(3)    Any Prescribed Electricity Assets (defined in s 13(6) of the Disposal Act).

(4)    Any rights (whether actual, contingent or prospective) of TLC arising under or constituted by any easement which TLC has over land by virtue of being a body that is specified by a proclamation made under cl 2 of sch 1 to the Disposal Act.

(5)    Any rights (whether actual, contingent or prospective) of TLC arising under or constituted by any easement which TLC has over land by virtue of being an electricity corporation to which cl 5 of sch 2 to the 1994 Act applies.

(6)    Except as otherwise provided in cl 6.5, any rights (whether actual, contingent or prospective) of TLC arising under any “Commencing Private Easements”. Clause 6.5 granted ElectraNet an equal undivided share in “Private Easements” held by TLC immediately prior to Completion. “Private Easement” was defined to mean “any right, entitlement or interest granted or conferred by a person holding an interest in land (whether or not in the nature of or expressed to be an easement) that enables the location of or access to the Transmission Network on that land “and includes” a Service Easement” (being an easement existing by virtue of s 2231g(3) of the Real Property Act 1886 (SA)) and the licences described in sch 7 of the Land Lease.

(7)    Any rights (whether actual, contingent or prospective) of TLC under the “Existing Licences” (being the licences referred to in sch 6 of the Land Lease as supplemented pursuant to cl 2.3(d) of the Sale/Lease Agreement).

93    Clause 8.9 of the Business Sale Agreement provided:

8.9 Statutory Easements

As soon as reasonably practicable after Completion, the Treasurer will cause a proclamation to be made which declares [ElectraNet] to be a body specified for the purposes of clause 2 of Schedule 1 of the Restructuring and Disposal Act and will cause a proclamation to be made which declares TLC to be a body specified for the purposes of clause 2 of Schedule 1 of the Restructuring and Disposal Act (in each case the specified date referred to in clause 2(l)(b) of Schedule 1 to the Restructuring and Disposal Act will be the Completion Date).

94    Apart from acquiring an equal undivided interest in certain Private Easements, ElectraNet did not acquire ownership of the transmission network pursuant to the Business Sale Agreement. Instead, ElectraNet acquired rights in respect of the transmission network pursuant to the terms of two lease agreements – the Network Lease and the Land Lease.

95    Pursuant to the Network Lease, the Transmission Network was leased to ElectraNet.

96    The “XBL Assets” were defined as being those assets described in sch 2 of the Network Lease. The XBL Assets included the plant and equipment comprising the system for transmitting electricity from its point of generation to local distribution systems. That “plant and equipment” was identified as being substation equipment, transmission lines (including the supporting structures), protection and metering systems, communications and protection signalling systems and the systems control and data acquisition systems, located in South Australia. As explained further below, the XBL Assets were subject to a financing arrangement at the time the Network Lease was executed.

97    The “Leased Assets” were described in sch 1 of the Network Lease as follows:

(1)    All the prescribed electricity assets (as defined in s 13 of the Disposal Act) held by TLC (other than land or any interests in land) but excluding the XBL Assets, any of the Undivided Interests and any other interest in the XBL Assets.

(2)    With effect from the time at which the relevant Undivided Interest is leased to ElectraNet, that Undivided Interest. The “Undivided Interest” related to the “XBL Assets”. The XBL was a financing arrangement that had been entered into by TLC. The XBL financing arrangement involved tranches. As each came to an end, part of the financier’s lessor interest came to an end and that “undivided interest” ceased to be subject to the XBL arrangement. As and when these interests reverted to TLC, they became subject to a lease to ElectraNet. It was an agreed fact that as at 8 February 2022, the date the Share Purchase Agreement was executed, the XBL arrangement had expired.

(3)    Replacements, modifications, alterations, additions, changes and substitutions to, and all Parts incorporated or installed in or attached to, the assets referred to in the above items (other than on a temporary basis).

98    Pursuant to the Land Lease, ElectraNet was granted the “Licensed Rights” for the XBL Term and a lease of the Transmission Network Land and TLC’s interest in the Private Easements for the Post XBL Term.

99    Transmission Network Land was defined in the Land Lease to mean “all the land and improvements described in schedule 1”, and:

(a)    excluded anything that is leased to ElectraNet under the Network Lease;

(b)    included all accretions to such land and improvements as permitted or required by the Land Lease; and

(c)    excluded all land and improvements disposed of as permitted by the Land Lease.

100    Schedule 1 contained the following description of Transmission Network Land:

1.    All those assets consisting of a freehold interest in land (other than a Private Easement), or a right of exclusive occupation of land (including such rights conferred under a Dedication or Trust Grant), held by TLC as at the Commencement Date.

2.    All replacements, modifications, alterations and additions (other than on a temporary basis) to the land referred to in item 1 or in this item 2 other than any Non Transmission Asset Land

3.    All improvements (including any Improvements) that are on or made to or constructed on the land. referred to in item 1 or item 2 during the Term other than any Non Transmission Assets.

101    As a result of the agreements, at the end of the XBL financing arrangement, ElectraNet held:

(a)    an undivided 50% interest in the Commencing Private Easements;

(b)    a lease of the “Transmission Network Land”;

(c)    a lease of TLC’s 50% undivided interest in the Private Easements; and

(d)    a lease of the plant and equipment comprising the electricity transmission system.

SUBMISSIONS

Applicant’s Submissions

102    The applicant submitted that the Network Lease and the Land Lease provided a “distinct demarcation” between “interests in land”, addressed in the Land Lease, and “transmission assets”, addressed in the Network Lease. The Network Lease was, the applicant submitted, concerned with the lease of assets other than land or interests in land.

103    The applicant referred to s 30 and sch 1 of the Disposal Act, which were said to “sever” electricity infrastructure from the land and should be given “their full effect”. The rights granted to an electricity entity by the Electricity Act over third party land were limited and not consistent with the rights to the Leased Assets constituting real property. Section 36A of the Electricity Act and s 30 and c1 1 of the Disposal Act were “statutory severance provisions”, which, when taken together with the Agreements, had the result that the Leased Assets had the character of personal property, despite their affixation to land. The terms of the legislation provided that the leasing of the infrastructure was to occur on the basis that such infrastructure is “personal property severed from any land to which it is affixed or annexed and owned separately to the land”. The statutory rights relating to the Leased Assets were not apt to confer an interest in land.

104    The applicant submitted that the rights in relation to the Leased Assets granted by the Network Lease, as affected by the Disposal Act and Electricity Act were in the nature of personal property and not in the nature of real property. The “statutory severance provisions” in this case did not effect a deeming for a limited purpose but applied for all purposes.

105    The applicant submitted that Div 855 of the ITAA 1997 applied to the taxable facts, which included the effect of the relevant South Australian legislation: MacFarlane v Commissioner of Taxation (1986) 13 FCR 356 at 367; Stewart Dawson and Co (Vic) Pty Ltd v Federal Commissioner of Taxation (1933) 48 CLR 683 at 691 (Dixon J); Executor Trustee and Agency Company of South Australia v Deputy Federal Commissioner of Taxes (1939) 62 CLR 545 at 561 at 361-363 (Latham CJ), cf Federal Commissioner of Taxation v Thomas (2018) 264 CLR 382.

106    The result of the “statutory severance provisions” was said to be that the rights conferred by the Network Lease in relation to the Leased Assets were not “real property”.

107    The applicant contended that tracing through the legislative history, it was apparent that the Relevant Assets never answered the description of “real property” in s 855-20 of the ITAA 1997. The effect of the South Australian legislation and the Agreements was to “declare, confirm, or make clear that the Relevant Assets were not real property” but were instead in the nature of personal property.

Commissioner’s Submissions

108    The Commissioner contended that Div 855 of the ITAA 1997 was to be construed in a broader context that included the former Div 136, which it replaced. Under former Div 136, a non-resident made a capital gain from CGT event A1 (the CGT event relevant in this case) if the CGT asset had the “necessary connection with Australia”. There were nine categories of CGT assets. The first category of assets was “land, or a building or structure in Australia”. This was said to be indicative of an intention that the term “real property’ should be taken to include reference to the physical attributes of an item of property and included an item that was a structure that was physically affixed to land.

109    In support of his contention that “real property” bore its “ordinary meaning”, the Commissioner also referred to the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No 4) Act 2006 (Cth) which states at [4.28] (emphasis added):

Taxable Australian real property generally refers to real property, within the ordinary meaning of that term, that is situated in Australia [Schedule 4, item 2, paragraph 855-20(a)]. Consistent with Australia’s tax treaty practice, this meaning has been expanded to include a mining quarrying or prospecting right (to the extent that the right is not real property), where the minerals, petroleum or quarry materials are situated in Australia [Schedule 4, item 2, paragraph 855-20(b)]…

110    The Commissioner contended that the application of the ordinary meaning of the term “real property” involved a practical inquiry. It was contended that “real property” included tangible and immovable property, such as structures that were physically on land. The application of the ordinary meaning of the term meant that technical matters such as the operation of statutory severance provisions were “not determinative” of whether the relevant assets were “real property”.

111    The Commissioner contended that the term “real property” did not bear a single technical meaning, and the technical meanings of that term were anachronistic. It was therefore not an “attractive” criterion for determining a liability for taxation.

112    The Commissioner further contended that if the term “real property” bore a technical meaning, it was not necessary for an interest to travel with the land in order to be regarded as real property. It was not necessary for ownership of the interest to be with the owner of the land. It was possible for ownership of fixtures to be separately owned from the land. It followed that “severance provisions” providing for the ownership of fixtures to be separately owned from the land did not prevent the fixture from being “real property”.

113    The Commissioner submitted that s 855-20(a) of the ITAA 1997 extended to a “lease of land” and the concept of “land” extended to buildings and other structures on land. It was to follow that a lease of a structure that sits on land is necessarily a lease of land.

114    The Commissioner contended that each of s 30 and cl 1 of sch 1 of the Disposal Act and s 36A of the Electricity Act were no more than deeming provisions to be given a legal operation that was to be limited by its purpose. The provisions of the Disposal Act had the effect that ownership of certain assets did not travel with the land and did not have the effect of deeming electricity infrastructure to not be “real property”.

115    The Commissioner’s submission was that as structures on land, the Leased Assets were real property or leases of land. The deeming in s 30 of the Disposal Act was for the limited purpose of facilitating separate transfers of the infrastructure from the surface and did not have the effect of denying the infrastructure the character of real property.

CONSIDERATION

History of Div 855

116    At the outset, it is observed that Div 855 was not a rewrite of former Div 136 of the ITAA 1997. The objects of Div 855 are described in s 855-5(1) as being to “improve”:

(a)    Australia’s status as an attractive place for business and investment; and

(b)    the integrity of Australia’s capital gains tax base

117    According to s 855-5(2), this so-called improvement was to “be achieved by”:

(a)    aligning Australia’s tax laws with international tax practice; and

(b)    ensuring interests in an entity remain subject to Australia’s capital gains tax laws if the entity’s underlying value is principally derived from Australian real property.

118    The explanatory memorandum to the Bill which resulted in the enactment of Div 855 states at [4.1]:

Schedule 4 to this Bill inserts Division 855 and Subdivision 960-GP into the Income Tax Assessment Act 1997 (ITAA 1997). This Schedule also repeals Division 136 of the ITAA 1997 and makes changes to various provisions of the Income Tax Assessment Act 1936 (ITAA 1936). The changes narrow the range of assets on which a foreign resident will be liable to Australian capital gains tax (CGT) to Australian real property and the business assets (other than Australian real property) of a foreign resident’s Australian permanent establishment. To complement this change, the integrity of the CGT regime is strengthened by including foreign resident indirect holdings of Australian real property. This ensures that capital gains and capital losses on a foreign resident’s indirect, as well as direct, interests in the targeted assets are subject to Australia’s CGT regime

119    By the enactment of Div 855, there was an intentional narrowing of the classes of CGT assets gains on which were to be taxable to non-residents. To the extent that the Commissioner seeks to draw upon the wording of former Div 136 as informing the construction of Div 855, that contention is not accepted.

The meaning of real property

120    The Commissioner’s contention that the term “real property” has an ordinary meaning is not accepted. To the extent that the contention is based on an isolated statement in the explanatory memorandum to the Bill for the introduction of Div 855, the contention is based on an unsound premise. First, there is a danger in assuming that explanatory memoranda are drafted with the same precision as legislation. The reference to “an ordinary meaning” in the context of the explanatory memorandum may be taken to refer to “ordinary meaning in general law”. This is particularly so given that Australia’s international tax agreements, when using the phrase “real property” generally contain a clause which provides that the term has the meaning which it has “under the law of the Contracting State” and then specifies a number of matters that are included. The Explanatory Memorandum refers to Australia’s tax treaty practice. Second, if the Legislature assumed that the term “real property” has “an ordinary meaning”, that assumption was misconceived. It is contrary to High Court authority. The term “real property” bears a technical meaning in the general law: TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576 at [14].

121    The Commissioner sought to support the contention that “real property” had “an ordinary meaning” by reference to the fact that the Macquarie Dictionary has a definition of “real property”. The entry for that definition is in the following terms:

real property

/ril ˈprɒpəti/ (say reel ‘propuhtee)

noun Law tangible and immovable property such as land and houses, buildings or any such structures on the land, and any rights attached to the ownership of the land, such as mineral rights (but excluding leasehold interests).

Compare personal property. Also, real estate.

122    The definition commences with the words “noun” and “Law”. The definition concludes with a comparison reference to “personal property”. “Personal property” in turn is defined as:

noun Law one of the two main classes into which English law has divided property, comprising all form of property other than interests in freehold land.

123    The explanatory notes at the beginning of the Macquarie Dictionary explain how an entry in that dictionary is constructed. The defined term is called the headword. In the present case the headword is “real property”. Following the grammatical category of the headword (in this case “noun”) appears “inflected forms” and “restrictive labels”. “Inflected forms” appear if a headword has “irregularly inflected forms”, which in the case of nouns would be where the nouns forming a plural have a form other than by adding “s” or “es”. In the present case, no inflected form appears. The next part of the entry is the “restrictive label”, which is explained in the explanatory notes at the beginning of the Macquarie Dictionary in the following terms (bold emphasis added):

Entries that are limited in usage to a particular style, region, time or subject, are marked with such labels as Colloq. (Colloquial), Archaic, US, Agric. (Agriculture), etc.

If the restrictive label applies to the entire entry, it appears before the definition(s) at the beginning of the entry….

124    In the case of the headword “real property”, the “restrictive label” of “Law” is used. This indicates that the term “real property” is “limited in usage” to the subject of law. As such, the definition in the Macquarie Dictionary is not ascribing an “ordinary meaning” to the term but is the layman’s attempt at describing a legal term of art. The fact that the Macquarie Dictionary contains a definition of “real property” does not support the Commissioner’s contention that the phrase has an ordinary, rather than technical, meaning.

125    The Oxford English Dictionary, as part of the definition of the headword “real”, in the grammatical category of adjective, contains the subheading:

II. 6. Law (Opposed to Personal)

126    The term “real property” has a technical meaning in law: City Mutual Life Assurance Society Ltd v Smith (1932) 48 CLR 532 at 539 (Starke J). As Dixon J explained in his dissenting judgment in that case (at 541):

“Real property” is an expression of known legal import equivalent to “real estate,” which is a term of art. Unless the context or subject matter requires some other interpretation, it should be understood in a statute according to its legal meaning.

127    The distinction between real and personal property has its roots in the ancient classification of actions, originally under Roman law, which divided actions between actions in rem and actions in personam. The distinction in English law was based on nature of the remedy that could be obtained. In English law, a distinction was drawn between proceedings involving a process of execution dealing directly with a thing, in the form of specific restitution (real actions) and proceedings where what could be obtained was pecuniary compensation, in the form of damages (personal actions). The common law regarded leaseholds as personal contracts between lessor (landlord) and lessee (tenant), with the lessee having no recourse to the real actions. Although the lessee only had in personam rights against the landlord, the landlord had rights of repossession of the land in the event of tenant default.

128    The distinction became further complicated by a difference in the way property passed after death. Real property descended directly to the heir (hereditament) and personal property passed first to the executor. There were certain interests in land that did not pass directly to the heir.

129    Leaseholds became known as “chattels real”. They did not pass directly to the heir and the common law had not recognised tenant rights as giving rise to rights of execution against the land.

130    Strictly speaking, real property was therefore limited to things that were specifically recoverable and descended directly to the heir.

131    Over time, the foundations of the distinction vanished. The law came to recognise the trust for sale and realty ceased to go directly to the heir as a result of statute. Some differences remained, such as the fact that at common law, land was held by tenure whereas chattels were not the subject of tenurial rights with limited interests, and the methods by which interests could be created and transferred. Although the historical reasons for the distinction may have vanished, the distinction nonetheless remains.

132    The law in Australia has long recognised that real property is not to be equated with immoveable property: Haque v Haque (No 2) (1965) 114 CLR 98 at 130. For the purposes of determining which laws were to apply to an estate (for the purpose of the conflict of laws), the concept of moveable property was critical. The general principle of private international law applied by English and Australian courts was that the law of a deceased person’s domicile was followed for the purposes of determining succession to moveable property (as recognised by the laws of that state), and the law of the state applied to immoveable property located in that state.

133    The fact that many of Australia’s double taxation agreements and Div 855 of the ITAA 1997 deploy the concept of real property rather than immovable property must be taken to be a deliberate choice to invoke the concept of real property. The Full Court in Commissioner of Taxation v Lamesa Holdings BV (1997) 77 FCR 597 at 606 observed (emphasis original):

Given the general private international law concern with the distinction between movable and immovable property, rather than between real and personal property, the latter being a distinction more relevant to the common law, one might have expected that Art 13 would be concerned with immovable property rather than real property: cf In re Hoyles [1911] 1 Ch 179 at 183 The use of the expression ”real property” with its antithesis ”personal property”, raises immediately the query whether leasehold interests, treated as personalty for English law purposes, should be so treated for the purposes of the Agreement. To ensure that they were not, it was necessary to extend the term ”real property” specifically to include leases. But the use of the word ”lease” without more would be very narrow. It would raise then in English law the relevance of the test of exclusive possession. 

134    A conclusion that it is the legal concept of real property to which that definition refers is also supported by the fact that the definition of “taxable Australian real property” specifically includes a lease of land. The specific inclusion was made because the technical meaning of “real property” does not extend to leasehold interests. As the Full Court observed in Federal Commissioner of Taxation v Resource Capital Fund IV (2019) 266 FCR 1 at [194]:

In the context of Div 855, in our view the term “lease of land” should bear its ordinary technical legal meaning. Inferentially, s 855-20 was amended to expressly include a lease of land precisely because at common law a leasehold interest is not real property: City Mutual Life Assurance Society Ltd v Smith (1932) 48 CLR 532 at 539…

135    Contrary to the submissions of the Commissioner, the term “real property” in the context of s 855-20 does not refer to the physical attributes of an item. In context, it refers to the estate or interest of an entity. The phrase “taxable Australian real property” is used in reference to a “CGT asset” and forms part of a test for determining when an entity’s underlying value is principally derived from assets that are taxable Australian real property. In that context, the reference to “taxable Australian real property” speaks of the interest which is vested in the entity or in another entity in which the first entity has a membership interest. It is only those interests which can be said to be an asset of the entity (cf Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [No 2] (1987) 162 CLR 153 at 163).

136    Therefore, the issue for determination is whether the rights conferred upon ElectraNet as lessee of the Leased Assets were “real property” or a “lease of land”.

137    In this respect it is observed that the word “land” is defined in s 2B of the Acts Interpretation Act 1902 (Cth) in inclusive terms:

“land” includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, whatever may be the estate or interest in them.

138    As French CJ explained in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [7], that definition of “land” (footnotes omitted):

…dates back to Lord Brougham’s Act and was included in the Interpretation Act 1889 (Imp). It found its way into colonial interpretation statutes in Australia, and into s 22(c) (now s 22(1)(c)) of the Commonwealth Interpretation Act. It includes “freehold and leasehold, corporeal and incorporeal interests of every description”.

139    Regardless of whether or not a lease is properly regarded as “real property”, the definition of “land” in the Acts Interpretation Act encompasses a leasehold interest in land: Re Lehrer and the Real Property Act (1960) 61 SR (NSW) 365 at 370 (Jacobs J).

140    The term “estate” is in turn defined in the Acts Interpretation Act inclusively:

“estate” includes any estate, interest, charge, right, title, claim demand, lien or encumbrance at law or in equity.

Character of the Leased Assets under the Network Lease

141    The Leased Assets under the Network Lease include poles and pylons affixed to the surface of land. As the three preliminary questions make clear, not all the land to which they are affixed belonged to the lessor (TLC) or to ElectraNet.

142    The Commissioner asserted that to the extent the Leased Assets were affixed to land, they should be regarded as part of the land, based on the principles relating to fixtures. Some support for the Commissioner’s contention may be found in the judgment of Basten AJA in Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCA 20 at [187]:

Pursuant to general law principles, a fixed, permanent, immoveable structure will constitute land. A person with exclusive possession will have ownership rights of that land.

143    The following statement of the basic principle relating to fixtures was quoted by the High Court in TEC Desert at [23] (footnotes omitted):

In the seventh edition of Megarry and Wade’s The Law of Real Property, the following appears:

“The meaning of ‘real property’ in law extends to a great deal more than ‘land’ in everyday speech. It comprises, for instance, incorporeal hereditaments; and it includes certain physical objects which are treated as part of the land itself. The general rule is ‘quicquid plantatur solo, solo cedit’ (‘whatever is attached to the soil becomes part of it’). Thus if a building is erected on land and objects are permanently attached to the building, then the soil, the building and the objects affixed to it are all in law ‘land,’ i.e. they are real property, not chattels. They will become the property of the owner of the land, unless otherwise granted or conveyed.”

144    As the High Court explained in The Commissioner of Main Roads v North Shore Gas Co Ltd 120 CLR 118 (The Second North Shore Gas Case) at 127, the principle expressed in the maxim quicquid plantatur solo, solo cedit is primarily applied to determine the rights of the owner of land to things affixed or embedded in the soil.

145    So understood, when it is said that whatever is fixed to the freehold is said to become part of it, it is to convey the idea that whatever is fixed to the freehold becomes subject to the property rights of the landowner. The law of tenant’s fixtures concerns the rights of persons who have limited interests, such as life tenants and leases for a term, or their personal representatives, to sever and remove from the land that which has become a fixture attached to the land. Unless and until that right of severance is exercised, the fixture forms part of the realty and must be left for the landlord at the end of the lease: TEC Desert at [25]-[26]. The law of fixtures does not result in the conferral of an interest in land on the person who affixes the item to the land. Where a tenant affixes an item, the affixation does not result in the creation of an interest in the land during the term of the lease that is separate from the interest of the tenant as a leaseholder. At common law, upon the expiry of the lease, the tenant has a right to remove the fixture. Although Hill J in Lees & Leach Pty Ltd v Commissioner of Taxation (Cth) (1997) 73 FCR 136 described the right of the tenant to come upon the land after the expiration of the lease and remove the fixture as “a right in equity in the land” (at 149), it is not an interest in the land and not a real property interest. It is a limited right of entry for a limited purpose exercisable for a limited reasonable period after the expiry of the lease.

146    As s 36A of the Electricity Act and cl 1 of sch 1 to the Disposal Act made clear, any presumption that parts of the electricity network affixed to land became subject to the rights of the landowner was rebutted. As the High Court said in The Second North Shore Gas Case (at 127):

The presumption is said to be rebuttable and, it seems to us, it must be so when a statute empowers someone other than the owner of land to affix to or embed things in the soil and yet retain ownership of the things so affixed or embedded.

147    In TEC Desert, the High Court rejected the characterisation of the mining tenement interests as having the character of realty. Accordingly, the High Court eschewed the proposition that items affixed by the holder of the mining tenement to land the subject of a mining tenement took the character of realty: TEC Desert at [27]. (By way of observation, although not referred to in the decision of the High Court in TEC Desert, the reasoning of the High Court is difficult to reconcile with the statement of the Full Federal Court in Lamesa to the effect that although “mining leases, whether from the Crown or private leases, might not be ”leases” in a technical sense, they may be said to grant a profit à prendre with a right of entry”, they “are clearly direct interests in or over land to be assimilated to real property.”)

148    Items affixed to land do not become, merely because of their affixation, “fixtures” in the technical sense: TEC Desert at [38]. If the rights enjoyed by ElectraNet as lessee of the Leased Assets are to be characterised as “real property” or a “lease of land” it is by reference to the nature of the rights applicable to those assets rather than by recourse to general law principles applicable to tenant’s fixtures. Put another way, the Leased Assets affixed to land the subject of rights held by ElectraNet may have the character of real property if the rights held by ElectraNet have themselves the character of real property.

149    It is necessary to turn to a consideration of the nature of the rights conferred upon ElectraNet by reference to the Agreements and any statutory rights. That consideration is not to be substituted by assigning a label, such as “statutory severance provisions”, to any of those provisions. Statutory provisions which separate ownership of the infrastructure from ownership of the freehold land do not of themselves define or precisely identify the nature of the rights enjoyed by the owner of the infrastructure.

150    As the history of the legislation relating to the electricity industry in South Australia demonstrates, those operating electricity networks needed to place infrastructure on land that was owned or occupied by others. Where that land was privately owned, the legislature initially required access arrangements to be privately negotiated. Over time, the legislature conferred statutory easements in relation to those parts of the network that existed on third party land. The statutory easements were displaced to the extent of any inconsistency with the terms of a documented privately negotiated access arrangement.

The nature of the statutory easement

151    Not all rights conferred by statute in relation to land satisfy the definition of “estate” or accordingly “land”, notwithstanding the breadth of the definition of those terms given by the Acts Interpretation Act. So much is made clear by The Second North Shore Gas Case.

152    The rights in The Second North Shore Gas Case concerning the laying and vesting of ownership of gas pipes were subject to the right of the Council to require the position of the pipes to be altered in the public interest. The statutory right was less than exclusive and absolute.

153    The statutory rights in relation to the transmission infrastructure that was, before the Completion Date, specified for the Business Sale Agreement, on land not owned or operated by TLC were conferred on ElectraNet in accordance with sch 1 of the Disposal Act. Those statutory rights had the following attributes:

(a)    They were given the statutory label of an “easement”.

(b)    They included a right to “maintain” (which should be understood in context as a right to leave in position) a part of the transmission system on the land affected by the easement.

(c)    The rights were required to be exercised in a manner which minimises, as far as reasonably practicable, interference with the enjoyment of land by others.

(d)    The rights were not exclusive in the sense that more than one body could have an easement over the same land or in relation to the same electricity infrastructure.

154    The rights are to be construed in the context of a regime conferring the right and obligation to conduct the business of transmitting electricity. They are rights that are conferred for and to be exercised for the purpose of enabling that business to operate. The rights cease should the transmission business cease. The right to occupy the land on which a pylon rests or is affixed ceases if the pylon is no longer part of the system for the transmission of electricity. It is not an absolute right of occupation for a term.

155    As the High Court explained in TEC Desert at [14], the nature of a right created by statute is not determined by the label ascribed to the interest by the statute (footnotes omitted):

Further, of terms such as “real property”, “lease” and “fixture” should be emphasised that, not only does each bear a technical meaning in the general law, but also when they appear in statutory regimes creating rights and imposing obligations it is not to be assumed that they are used simply and exclusively in the sense understood by the general law. Thus in Western Australia v Ward Gleeson CJ, Gaudron, Gummow and Hayne JJ, with reference to an earlier statement by Toohey J, treated the term “mining lease” as an example of looseness of terminology and said that the rights and obligations of the holder of an interest so described in particular legislation would not necessarily be determined simply by application of the nomenclature “lease”. Earlier, in Commissioner of Main Roads v North Shore Gas Co Ltd Barwick CJ, McTiernan, Kitto and Taylor JJ, when considering the particular statutory right of the respondent to lay and maintain gas pipes, remarked:

“[W]hy should it be assumed that the exercise of a specific statutory right to lay and maintain pipes, as in the present case, operates to vest in the donee of the power an interest in the land in which the pipes have been laid? The conclusion that it does seems to us to result from a lawyer’s inherent tendency to assimilate such a right to some category known to the common law.”

156    Although called an easement, the statutory rights conferred on ElectraNet to maintain transmission network assets on land belonging to third parties are not easements as understood at common law. They are not rights in servitude of a dominant tenement.

157    Given the above attributes, the statutory easement enjoyed by ElectraNet in respect of land not owned by ElectraNet but bearing electricity infrastructure operated by ElectraNet, did not confer on ElectraNet an estate or interest in land. The rights were not rights of exclusive and unrestricted use, but were for a limited specified statutory purpose.

The source of ElectraNet’s rights to the statutory easement

158    The preliminary questions require the Court to address the “the rights conferred on ElectraNet under the Network Lease in relation to Relevant Assets”. It is far from clear that the statutory easements conferred on ElectraNet in relation to electricity infrastructure on land that was not owned by it or by TLC were rights conferred on ElectraNet under the Network Lease. Compliance with cl 6.5 of the Business Sale Agreement, would result in the making of a proclamation declaring ElectraNet to be a body specified for the purposes of cl 2 of sch 1 of the Disposal Act. By virtue of such a proclamation, ElectraNet would have an easement over land on which there is transmission infrastructure operated by it. Although it would be a right associated with the Leased Assets, and ElectraNet’s entitlement to the easement would be a consequence (in a causal sense) of its right to operate the transmission network, that easement would not be conferred on it under the Network Lease.

Private easements

159    For the purposes of the Agreements, the term “Private Easements” is ascribed to the access arrangements the subject of private arrangement between the electricity infrastructure operator (ElectraNet) and a private third party landowner.

160    The Land Lease provided:

Private Easement means any right, entitlement or interest granted or conferred by a person holding an interest in land (whether. or not in the nature of or expressed to be an easement and whether existing as at the Commencement Date or subsequently created during the Term) that enables the location of or access to the Transmission Network on that land and includes:

(a)     the easements described in schedule 4;

(b)     any easement acquired in the manner referred to in clause 5.3(a)(ii);

(c)     a Service Easement [meaning “an easement arising or that has arisen and remains extant during the Term by virtue of section 223Lg(3) of the Real Property Act 1886 (SA”)]; and

(d)     the licences described in schedule 7.

161    Where TLC held a Private Easement over third party land, ElectraNet acquired an equal undivided share in that Private Easement and obtained a lease of TLC’s undivided interest in that Private Easement. Any statutory easement was displaced to the extent of any inconsistency with the terms of the documented Private Easement.

162    The terms of the Private Easements were not before the Court. It is possible that at least some of the access arrangements conferred an interest in land that constituted real property.

163    Pursuant to the terms of the Disposal Act and the Electricity Act, the electricity infrastructure was not owned by the third party landowner. Any rights conferred by the Private Easements were rights of access to third party land and did not carry with them the right to use, lease, or operate the electricity transmission infrastructure that had been placed on that land.

Lease of Land

164    The definition of “land” includes “messuages” and includes buildings on land. However, it does not follow that a structure alone affixed to land is itself land. An estate in a building may be granted separately from an estate in the soil and the estate in that building may constitute land within the extended definition of land: Re Lehrer. However, as TEC Desert demonstrates, much depends on the connection between the conferral of the interest or rights in the structure affixed to land (in that case, a power station), and the holder of an ownership or leasehold interest in the land on which the structure sits. The grant of a bundle of rights described as a lease over a structure by a grantor who does not hold an interest in the land on which the structure sits does not result in the conferral of a lease of land. Absent a statutory extension of the concept of a lease, at common law a conferral of a right to use a structure, termed by the parties as a lease of the structure, does not result in a lease of land if the so-called lessor does not hold an interest in the land: cf Asciano Services Pty Limited v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602 at [31].

165    TLC did not have an interest in the land owned by third parties outside of the access arrangements and statutory easements. Those access arrangements and statutory easements did not confer an interest in the land. They conferred at most a statutory right of occupation for statutory purposes. The statutory right did not extend to giving another a lease of land not owned by TLC: Asciano at [29]-[30].

Other Authorities

166    The issues for determination concern the construction and application of Div 855 of the ITAA 1997 and the rights conferred by the Network Lease, in the context of the statutory regime governing the South Australian electricity supply industry. In their submissions, the parties referred to a number of authorities decided in other contexts. Decisions concerning other taxing statutes and other regulatory regimes need to be understood in their own context.

167    The New South Wales Court of Appeal’s decision in Conexa concerned the rights of an owner of a water carrying pipeline, most of which was buried under Crown land. The issue was whether Conexa’s interest in the pipeline was an interest or goods for the purposes of the Duties Act 1997 (NSW). The Court of Appeal concluded that Conexa’s interest in the pipeline was an interest in land for the purposes of the Duties Act.

168    The following observations are made concerning that decision.

169    First, the decision was not concerned with the characterisation of rights in respect of land where the pipeline was laid that was subject to registered leases, registered easements or access rights agreements. It was concerned with the character of rights in the case of the Crown lands through which the vast bulk of the pipeline travelled: Conexa at [11].

170    Second, the issues in that case concerned the construction of the Duties Act and the statutory regime governing the water industry in New South Wales. The statute in that case provided for water infrastructure to be owned by the person who installed it, irrespective of whether or not the land in, on, under or over which it is situated is owned by that person. It did not have an equivalent of s 30 of the Disposal Act.

171    Third, the issue in Conexa did not concern the concept of “real property”.

172    Fourth, as the Court in Conexa observed, it is necessary to identify the nature of any power or interest conferred on a statutory authority pursuant to its constituting regime and to identify the consequences flowing from that regime: Conexa at [63]. Unlike Conexa, the statutory rights conferred on ElectraNet in relation to the land on which transmission infrastructure was affixed did not confer on ElectraNet an exclusive right of possession of any part of the land.

173    Similar observations may be made of Asciano, which concerned the definition of lease in s 164A(a) of the Duties Act. That definition included “an agreement (such as a licence) by which a right to use land …is conferred”. The criteria did not require a consideration of the rights to use land by reference to principles relevant to land and interests in land under the general law. The taxing criteria were therefore quite distinguishable from those provided for in Div 855 of the ITAA 1997.

174    Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186 concerned the construction of a specific definition of “land” in the Stamp Act 1921 (WA). The specific definition of land in that case included a physical object or thing that is attached or fixed to land in the physical sense. That definition has no equivalent in the present case.

Answer to first preliminary question

175    Given that the preliminary questions are drafted in the negative, for the avoidance of doubt, for the reasons set out above, the first preliminary question is answered as follows:

As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land not belonging to Transmission Lessor Corporation (TLC) or ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

Second Preliminary Question

176    The second preliminary question concerns the rights conferred on ElectraNet under the Network Lease in relation to Relevant Assets situated on land “belonging to TLC”.

177    There are two potential categories of land “belonging to TLC”.

178    The first category is land that was owned by TLC in fee simple. Land owned by TLC was not the subject of the statutory easements. Where the land was owned by TLC, ElectraNet obtained a lease of the land on which the infrastructure was situated pursuant to the Land Lease. The lease of the land conferred on ElectraNet an interest that was real property in Australia.

179    The second category of land belonging to TLC is where the terms of a Private Easement confer upon TLC an interest in land. The lease of TLC’s undivided interest in the Private Easements (irrespective of whether that undivided interest constituted an interest in land at law) was conferred on ElectraNet by the Land Lease.

180    The network infrastructure assets were leased by ElectraNet pursuant to the Network Lease.

181    By virtue of s 30 of the Disposal Act, the transmission infrastructure was taken to be leased to ElectraNet “as if the infrastructure were personal property severed from any land to which it is affixed or annexed and owned separately from the land”.

182    It is important to understand the context in which s 30 of the Disposal Act was enacted. The Disposal Act was part of and facilitative of the privatisation of the South Australian electricity industry. Maximising the realisable value of the leasing of that infrastructure required potential lessees to be given as much certainty and clarity as possible in relation to precisely what assets they were leasing and on what terms. Some of the assets were on land owned and controlled by the lessor; some were not.

183    Section 30 of the Disposal Act had two consequences:

(1)    ElectraNet did not obtain rights to the use of the transmission infrastructure as an incident of the Land Lease.

(2)    The lease to ElectraNet of the transmission infrastructure pursuant to the Network Lease on land owned by TLC did not confer on ElectraNet an interest or estate in the land of TLC. The lease of the electricity infrastructure is taken to be a lease of personal property.

184    It was the enactment of s 30 of the Disposal Act that both facilitated and made necessary the separation of the Land Lease and the Network Lease. This is not a case where a private owner of land, having affixed a structure on that land, has sought by agreement with a lessee to artificially bifurcate a lease of the land from a lease of the structure affixed to the land.

185    The Commissioner’s contention was that s 30 of the Disposal Act did not have the effect of deeming electricity infrastructure to not be “real property”. That contention is not accepted. Whatever the metes and bounds are of the concept of “real property”, the term “real property” is used in law as a contradistinction to “personal property”. By deeming an item to be personal property, an item is deemed to be denied the character of “real property”.

186    The Commissioner submitted that s 30 of the Disposal Act was a deeming provision that should not be given an operation beyond that which is required to achieve its purpose: Minister for Immigration and Border Protection v Makasa (2021) 270 CLR 430, at [51]. The purpose was said to be limited to “allow for sale and vesting or transfer of assets”.

187    That submission is not accepted. Section 30 of the Disposal Act is not drafted as a deeming provision for a limited purpose and by its terms, applies to a sale or a lease of the assets. It was, of course, open to the Commonwealth legislature to provide a definition of real property that denied the effect of s 30 of the Disposal Act. The Commonwealth has not displaced the effect of the South Australian legislation.

188    By virtue of s 30 of the Disposal Act, a lease of the electricity infrastructure was taken to be a lease of personal property severed from the land. ElectraNet did not obtain any rights to real property or land as a result of the rights conferred under the Network Lease in relation to Relevant Assets situated on land “belonging to” TLC.

189    The Commissioner contended that it is not the case that the Leased Assets under the Network Lease excluded “land or interests in land”. The Commissioner submitted that that could only be said of the assets in item 1 of the definition of Leased Assets in Schedule 1 of the Network Lease.

190    The Commissioner’s contention is misdirected because at the time of the applicant’s disposal of the Shares in ElectraNet, it was only item 1 of Schedule 1 of the Network Lease (and to the extent that improvements had been made to those items, item 3) that was relevant. The XBL arrangement had come to an end, so item 2 was of no application.

191    The second preliminary question is to be answered in the following terms:

As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease in relation to Relevant Assets situated on land belonging to Transmission Lessor Corporation (TLC) did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

Third Preliminary Question

192    The third preliminary question concerns the rights conferred on ElectraNet under the Network Lease in relation to Relevant Assets situated on land belonging to ElectraNet.

193    Pursuant to the Network Lease, ElectraNet did not obtain any rights to real property on land it owned. Nothing in the terms of the Network Lease conferred additional rights in the nature of real property on ElectraNet. First, as explained above, TLC as the owner of the transmission infrastructure did not have an interest in land owned by others, including ElectraNet. ElectraNet, as owner of the land, did not, by the Network Lease, acquire any additional rights to land it already owned. Second, as explained above, the effect of s 30 of the Disposal Act was that the transmission infrastructure was taken to be leased to ElectraNet “as if the infrastructure were personal property severed from any land to which it is affixed or annexed and owned separately from the land”.

194    In the alternative, the third preliminary question asks about rights conferred by the Network Lease on ElectraNet as landowner, in relation to the Relevant Assets, situated on land belonging to ElectraNet. ElectraNet did not obtain rights in relation to the Relevant Assets by virtue of it being the landowner. An owner of land did not obtain rights to the use of transmission assets affixed on its land. Those assets belonged to the electricity corporation. ElectraNet had rights to use the Relevant Assets conferred upon it by the Network Lease. By virtue of s 30 of the Disposal Act, a lease of the electricity infrastructure was taken to be a lease of personal property severed from the land. ElectraNet’s rights to use the electricity infrastructure as lessee of the electricity infrastructure did not merge with its rights as landowner.

195    The third preliminary question is to be answered in the following terms:

As at 8 February 2022, the rights conferred on ElectraNet under the Transmission Network Lease, or as landowner, in relation to Relevant Assets situated on land belonging to ElectraNet did not constitute “real property situated in Australia (including a lease of land)” within the meaning of s 855-20(a) of the Income Tax Assessment Act 1997 (Cth).

CONCLUDING OBSERVATIONS

196    The answers to the preliminary questions posited in this case are a function of the particular statutory regime that applied to the privatisation of the South Australian electricity industry (especially s 30 of the Disposal Act) and of the statutory rights conferred on the operator of the transmission infrastructure in respect of third party land.

197    The terms of s 30 of the Disposal Act go further than separating ownership of the infrastructure from the ownership of the fee simple in the land on which the infrastructure exists and go further than displacing the presumption of ownership in the principles relating to fixtures. The terms of s 30 separate a lease of the infrastructure from any interest in land and have the effect that a lease of the structure is a lease of personal property only.

198    It was open to the Commonwealth legislature to displace the effect of that State legislation but the terms of Div 855 of the ITAA 1997 do not do so.

Associate:

Dated:    30 October 2025