Question: nsw but doesnt particularly matter 1000 words question the...
NSW: but doesn't particularly matter.
1000 words - Question: The Commissioner claims the three mill components form part of the land. Tia claims they are chattels. With reference to legal authorities, discuss the relative merits and shortcomings of each parties' claims in regard to whether the mill components are fixtures or chattels.
Please note: no need to comment re: stamp duty issues and in scenario all statute and caselaw in scenario are fictitious.
Margaret owned an organic grain farm near the rural town of Farmidale in New South Wales. Her farming enterprise was becoming unviable because of rising costs and cheaper organic grains imported from Canada. Margaret decided to expand her operations and value-add her grain by milling it into flour on her farm. She promoted her product as boutique, organic, carbon-neutral, stone-ground bakers’ flour, and sold it to artisan bakers in the hipster suburbs of Sydney.
Margaret’s intended market required packaged flour, to ensure that the flour was not mixed with conventional, non-organic flour.
Margaret arranged for contractors to construct a flour-mill on her farm, comprising three main parts:
- A large metal windmill, 30 metres high, and weighing 120 tonnes, which stood on a metal framework bolted onto concrete pylons embedded 5 metres into the ground. The whole structure was incorporated into a brick millhouse with a concrete floor. The windmill provided the carbon-free power to the milling mechanisms in the millhouse. The windmill and millhouse could not be removed without causing considerable damage to whole structure and the land. The windmill also fed energy into a store of batteries, so that the flour-mill could operate at times when the wind was not blowing. Although the windmill propellers, turbine and battery system are thoroughly modern, the brick millhouse was built in the style of historic Dutch windmills, which Margaret hoped would be a drawcard for the farm-stay and café enterprises, which she conducted concurrently on the land.
- A stone grinding machine. The grinding process generated a considerable amount of vibration that could dislocate the components of the grinding machine if it were not adequately bolted to the concrete floor of the millhouse. But otherwise, the machine was mostly free-standing, except for the connections to the gears and turning mechanism of the windmill, which could be easily disconnected. Although the grinding machine was heavy, it could be unbolted from the floor relatively easily and moved around with a small forklift for cleaning and maintenance purposes. Due to the cumbersome shape of the machine, it had to be installed before the millhouse was completely built, and although it could be removed without damage to the machine or the millhouse, the costs of removal would likely outweigh its re-sale value.
- A bagging machine on castors (wheels). The bagging machine took freshly ground flour from the grinding machine, bagged the flour in paper bags, sealed and labelled the bags, and conveyed the bags to a waiting truck for transport. The bagging machine could be freely wheeled around the millhouse by a single human operator. When in operation, the machine was powered by the windmill through a drive-shaft mechanism and was attached to the grinding machine by a series of straps and stays. It was steadied by a set of brakes attached to the castors. The bagging machine could be quickly attached or disconnected from the grinding machine by one person with ease.
The three parts formed a complete integrated operation, which depended on the effective integration of all three components.
A few months ago, Margaret sold her farm with the working mill to Tia. Margaret and Tia agreed to sell the land and mill in seperate agreements for sale.
In order for the transfer of title in the land to proceed, Tia, as purchaser, must pay stamp duty (or ‘transfer duty’) to the government. Section 45AA(1) of the Stamp Duty and Miscellaneous Taxes Act 1956 (NSW) provides that:
The Commissioner of State Revenue must charge stamp duty at 3% of the following, whichever is greater:
(a) The market value of the land being transferred;
(b) The purchase price for the land being transferred.
Land is not specifically defined by the Act, but you may assume that a line of case law in the New South Wales Supreme Court has concluded that land carries the same meaning as in the general law.
The Commissioner of State Revenue assessed stamp duty based on a market valuation of the land that included all three of the major components of the mill.