Commissioner of State Revenue v Di Sipio & Anor [2015] QCA 198

SUPREME COURT OF QUEENSLAND

CITATION: Commissioner of State Revenue v Di Sipio & Anor [2015] QCA 198

PARTIES: COMMISSIONER OF STATE REVENUE (applicant) v CHRISTOPHER DI SIPIO VANESSA MARY ROTOLONE (respondents)

FILE NO/S: Appeal No 11241 of 2014 / QCAT Appeal No 169 of 2014

DIVISION: Court of Appeal

PROCEEDING: Application for Leave Queensland Civil and Administrative Tribunal Act

ORIGINATING COURT: Queensland Civil and Administrative Tribunal at Brisbane – [2014] QCATA 301

DELIVERED ON: 20 October 2015

DELIVERED AT: Brisbane

HEARING DATE: 12 June 2015

JUDGES: Holmes CJ and P Lyons and Burns JJ / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: The application for leave to appeal is granted.The appeal is dismissed.The appellant is to pay the respondents’ costs of the application and appeal.

CATCHWORDS: TAXES AND DUTIES – STAMP DUTIES – CONCESSIONAL RATES OF DUTY – GENERALLY – where the respondents purchased a property subject to an existing tenancy and obtained a first home concession under s 92 Duties Act 2001 (Qld) – where the Commissioner of State Revenue reassessed the duty under s 154 Duties Act 2001 (Qld) – where the Appeal Tribunal of the Queensland Civil and Administrative Tribunal found that s 154 did not apply, as the respondents had not leased the land to the tenants nor given them exclusive possession – where the Commissioner argues that the Appeal Tribunal misconstrued s 154(2) in so finding – where the Commissioner argues that the respondents became lessors to the existing tenants – where the respondents argue that they received only the reversionary estate, the leasehold interest having already passed to the tenants – where the respondents argue that they did not grant exclusive possession of the property as the tenants were already in exclusive possession – whether s 154(2) should be construed so that a buyer’s acquisition of a property subject to an existing lease constitutes a disposal of the property – whether leave to appeal should be granted – whether the appeal should be allowed / Acts Interpretation Act 1954 (Qld), s 14B, s 35A, s 35C / Duties Act 2001 (Qld), s 86, s 88, s 89, s 92, s 154, Sch 6 / Land Title Act 1994 (Qld), s 62 / Property Law Act 1974 (Qld), s 117 / Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 150(3) / Residential Tenancies and Rooming Accommodation Act 2008 (Qld), s 8, s 242 / Chief Executive, Department of Natural Resources and Mines v Kent Street Pty Ltd [2011] 2 Qd R 417; [2010] QCA 56, cited / Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17, cited / Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14, cited

COUNSEL: M K Conrick for the applicant / D W Williams for the respondents

SOLICITORS: Crown Law for the applicant / PHV Law Solicitors and Consultants for the respondents

HOLMES CJ: The Commissioner of State Revenue seeks leave to appeal against a decision of the Appeal Tribunal of the Queensland Civil and Administrative Appeal Tribunal (QCAT) setting aside the decision of a Tribunal member, and in turn, the Commissioner’s decision to disallow the respondents’ objections to reassessment of transfer duty on their purchase of a property at Aspley, on which they had received a concessional rate as first home buyers. The Appeal Tribunal held that the continuation of an existing lease, subject to which the respondents had bought the property, did not amount to a disposition of the property within the meaning of s 154 of the Duties Act 2001. That section provides for reassessment of duty where a purchaser has not complied with occupancy requirements.

The appeal lies to this Court only on a question of law and by leave.¹ The proposed appeal grounds concern the Appeal Tribunal’s construction of s 154(2), which deals with what constitutes a disposition of land, and plainly pose questions of law. The construction question is one of general importance warranting the grant of leave.

The Duties Act provisions

Chapter 2, Pt 9 of the Duties Act provides for concessions for transfer duty for, among other things, the acquisition of a residence as the buyer’s first home. A residence will have the status of a “home” if the person’s “occupation date” (the date the person starts occupying it as his or her principal place of residence²) is within one year after “the transfer date” (the date on which the person is entitled to possession under the relevant transaction³). Section 92 of the Act provides for a concessional rate of duty to be imposed where the home is the buyer’s first home.⁴

Section 154 of the Act, however, provides for reassessment of duty originally assessed on the basis of various concessions, including the s 92 concession, in the event of non‑compliance with the occupancy requirements. Relevantly for present purposes, s 154(1) specifies the following as events constituting relevant non-compliance:

“(b)either of the following happens other than because of an intervening event⁵—

(i)a transferee, lessee or vested person for land disposes of the land before the occupation date;

(ii)a transferee’s, lessee’s or vested person’s occupation date for the residence on the land is not within—

if the dutiable transaction related to residential land—1 year after the transfer date for the land …”

What constitutes a disposition of land is explained by s 154(2):

“(2)For subsection (1)(b)(i), a transferee, lessee or vested person for land disposes of land if the lessee of a home or vacant land lease surrenders the lease or the transferee, lessee or vested person transfers, leases or otherwise grants exclusive possession of, part or all of the land, to another person, other than if—

(a)another person (the occupier) has exclusive possession of the land before the occupation date; and

(b)the occupier—

(i)is the transferor of the land, or the owner of the land immediately before the vesting; or

(ii)has exclusive possession of the land under a lease granted before the transfer date; and

(c)the occupier—

(i)if paragraph (b)(i) applies—vacates the land as soon as reasonably practicable or within 6 months after the transfer date, whichever is the earlier; or

(ii)if paragraph (b)(ii) applies—vacates the land on the termination of the current term of the lease, or within 6 months after the transfer date, whichever is the earlier.”

“Lease” is defined in sch 6 to the Act as meaning:

“(a)a lease, or agreement for lease, of land in Queensland; or

(b)an offer for the grant of exclusive possession of land in Queensland.”

The factual background and the Commissioner’s decision

In July 2011, the respondents entered a contract to buy a residence at Aspley, with the settlement date in August of 2011. The contract was expressed to be subject to a 12 month tenancy expiring in April 2012. One of the terms of the contract assigned the tenants’ covenants and any guarantees or bonds to the respondents at settlement. Because the property was tenanted, the respondents were unable to move into it until 7 April 2012, more than six months after the settlement date, which on the Commissioner’s view was the “transfer date” as defined by s 89. The Commissioner reassessed the transfer duty payable on the basis that the respondents had disposed of the property by leasing or otherwise granting exclusive possession of it to the tenants, so that they were not entitled to the benefit of a first home concession.

The QCAT review and appeal

A QCAT member sitting at first instance confirmed the Commissioner’s decision. The Tribunal member found that the respondents as owners of the property had granted exclusive possession of the property to the tenants before their occupation date; the purchase of the property was subject to a condition to that effect. The tenants not having vacated within six months of the transfer date, the respondents were not entitled to have duty assessed at the concessional rate.

That decision was set aside on appeal. The QCAT Appeal Tribunal took the view that the Tribunal member had erred by relying on s 154(2)(b)(ii) and (c)(ii) to determine whether the respondents had granted exclusive possession. (I am not sure that that was a correct characterisation of what the Tribunal member did, but it does not matter for present purposes.) The members of the Appeal Tribunal considered that the proper course was to decide whether there had been a disposal of the property and, only if there had been, to go on to consider whether the exception constituted by the existence of all of the factors in ss 154(2) (a), (b)(ii) and (c)(ii) applied. They concluded that the respondents had not leased the land to the tenants nor given them exclusive possession, because their (the respondents’) interest was confined to the reversionary estate. No privity of contract existed between the tenants and the respondents; the tenants already had exclusive possession under the lease granted to them by the transferor; and they continued in possession after the transfer by attornment with the respondents.

The Commissioner had argued before the Appeal Tribunal that the reference in the first paragraph of s 154(2) to “otherwise” granting exclusive possession was wide enough to cover the position where a transferee took the property subject to an existing lease. The Appeal Tribunal rejected that proposition. It would involve reading the section as contemplating disposal by a grant of exclusive possession to tenants holding under a lease granted before the transfer date, with an exception (in s 154 (b)(ii)) where tenants had exclusive possession under a lease granted before the transfer date; effectively rendering s 154(b)(ii) meaningless. In any event, the provision ought to be read according to the reddendo singula singulis maxim, as though the word “respectively” appeared after the words “another person”, so to as to deal with the distinct positions where a transferee transferred the land, a lessee leased the land, or a vested person otherwise granted exclusive possession. The respondents had not granted exclusive possession by taking the property with an existing lease.

Having concluded that the respondents had not disposed of any interest in the property by lease or other grant of possession, the Appeal Tribunal held that s 154 did not apply.

The Commissioner’s submissions in this Court

Firstly, the Commissioner argued that the Appeal Tribunal had erred by construing the definition of “disposes of land” in s 154(2) out of its context, giving the exception which formed part of the subsection no work to do. The Appeal Tribunal’s construction effectively rendered s 154(2)(b)(ii) and (c)(ii) meaningless, because there was no conceivable circumstance in which before the transfer date a transferee would have granted a lease under which the tenant would have exclusive possession. The exception could only sensibly be read as providing for the situation where the transferee permitted the continued occupation of an occupier or became the lessor under an existing lease; in the former case, the occupier must vacate as soon as reasonably practicable or not later than six months from the transfer date and, in the latter, as soon as the existing lease ended or within six months of the transfer date at the latest. That being the nature of the exception, it enlarged the notion of what was meant by “leases or otherwise grants exclusive possession” in s 154(2), reinforcing a construction of the words as including the continuation of an existing lease.

It was contended that the Appeal Tribunal’s construction of s 154(2) by reference to the reddendo singula singulis maxim as contemplating transfer by a transferee, a lease by a lessee, and so on, was erroneous. Firstly, it would produce the absurd result that a transferee, for example, could lease the land or give exclusive possession of it to another for as long as he chose without being said to have disposed of it. Secondly, the provision as enacted read:

“For subsection (1)(b), a transferee disposes of land if the transferee transfers, leases or otherwise grants exclusive possession of, part or all of the land, to another person, other than if— …”

By later amendment, the concession was extended to certain lessees and s 154(2) was correspondingly broadened to include the reference to “lessee”.⁶ Later provisions in relation to “vested person[s]” were inserted,⁷ giving rise to the current form of s 154(2). That legislative history demonstrated that the provision was designed to capture a disposal by any of the identified means by any recipient of a concession.

The Appeal Tribunal should have found that the respondents began to lease the property to the existing tenants from the transfer date. That was, by virtue of s 89, the date on which the respondents were entitled to possession of the land. Possession of land was defined in sch 1 of the Acts Interpretation Act 1954 as including “the receipt of income from the land”. In the present case, then, the transfer date was the settlement date. From that date the respondents were the lessors and leased the premises to the tenants.

Schedule 6 to the Duties Act defined “lessor” as including an assignee of the lessor, as did s 35A of the Act Interpretation Act 1954. The Commissioner took issue with the Tribunal’s observation that the seller of the property had assigned only the reversion, not the lease, to the respondents, contending that the distinction between the lease as a demise and its essential covenants was untenable. The covenants had been expressly assigned by the contract of sale to the respondents. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd,⁸ the High Court had held that the ordinary principles of contract applied to leases, Deane J observing that “the lease should be seen as ‘resting on covenant’ (or contractual promise)…”⁹. The view that the respondents became lessors to the existing tenants was consistent with s 62 of the Land Title Act 1994, which provides for vesting on registration of the transferor’s “rights, powers, privileges and liabilities” in the transferee.

Section 8(1) of the Residential Tenancies and Rooming Accommodation Act 2008 provided that a lessor was “the person who gives the right to occupy residential premises under a residential tenancy agreement”. Section 8 contained a note drawing attention to s 35A of the Acts Interpretation Act. The combined effect, it was argued, was to make it clear that the successor in title to a lessor, also being a lessor, was then to be regarded as the person giving the right to occupy the premises under a residential tenancy agreement. Other provisions of the Residential Tenancies and Rooming Accommodation Act plainly contemplated that obligations imposed and benefits conferred on the lessor (for example to maintain premises or to give notice to remedy breach) were intended to apply to the transferee of land subject to a residential tenancy.

If it were accepted that the relationship of lessor and lessee should be regarded as existing between the respondents and their tenants, the absence of privity of contract was irrelevant; there was privity of estate. Section 242(1) of Residential Tenancies and Rooming Accommodation Act required a lessor transferring an interest in premises subject to a tenancy to give an attornment notice to the tenant, which would operate as an attornment by the tenant to the buyer on the existing terms of the rental agreement. In any event, the tenants had attorned by their continued occupation and payment of the rent. Attornment had the effect of estopping the tenant from denying the existence of the lessor/lessee relationship with the respondents. Notwithstanding the absence of privity of contract between the respondents and their tenants, the relationship of lessor and lessee should be regarded as existing between them.

The respondents’ submissions in this Court

The respondents argued that they had done nothing which amounted to leasing or granting exclusive possession; the tenants were already in exclusive possession of the property. All that the respondents were assigned were the covenants, guarantees and bonds under the tenancy. They held the reversion, not the leasehold interest, which the transferor had already granted to the tenants. The transferor remained the lessor at common law. Section 117 of the Property Law Act 1974 modified the position by conferring on a transferee of a reversion of a leased land the right to sue for rent and for breaches of other covenants which touched and concerned the land, while in the case of registered leases, s 62(1) of the Land Title Act 1994 conferred the rights and imposed the liabilities of the transferor under the lease on the transferee; but neither of those provisions converted the transferee into a lessor. If the phrase “otherwise grant exclusive possession” applied to the purchase of the reversion, s 154 would conflict with those provisions.

The respondents contended that they had not given the tenants the right to occupy residential premises so as to fall within the definition of “lessor” in s 8(1) of the Residential Tenancies and Rooming Accommodation Act. There was no evidence as to whether an attornment notice was ever served on the tenant, but in any case, an attornment under s 242 did not create a tenancy; it operated as an estoppel only, not as a demise creating rights in rem. It was merely the mechanism by which certain incidents of the lessor’s rights became available to the respondents. There was plainly a distinction between a lease as a demise and the covenants in the lease. A lease was a contract giving rise to both privity of contract and privity of estate. The Tribunal was correct in stating that there was no privity of contract between the respondents and the tenants. The Duties Act did nothing to alter that position.

Section 154(2)(b) was capable of applying where the transferees had granted exclusive possession of land in some way other than sale or lease, such as, for example, entering an agreement with an existing tenant to extend the lease beyond the settlement date. Section 154(1) was directed to a transferee who made a decision to alienate the property after its acquisition, not to a transferee who could not occupy the property until another legal interest had expired.

Construction of section 154(2)

It is desirable that s 154(2) be given its ordinary meaning; which would in my view, entail reading the words “leases or otherwise grants exclusive possession” in s 154(2) as requiring a positive act in that regard, not the mere continuation of an existing state of affairs. What may stand in the way of that construction is a reading of the exception constituted by subsections (a) – (c) in the way for which the Commissioner contends. On any view, that part of the provision is ambiguous and its meaning obscure. Recourse may properly be had, therefore, to the explanatory notes.¹⁰

Those notes explain the intended application of the clause in the Duties Bill 2001 which became s 154:

“Clause 154 applies if a transferee transfers, leases or otherwise grants exclusive possession of all or part of the residential land before taking up occupation, or fails to take up occupation within 1 year of the transfer of the land other than because of an intervening event (a natural disaster, a person’s death or incapacity, or other prescribed events). In these circumstances, any concession benefit received for that transferee on the original assessment is removed. Exceptions are permitted under clause 154(2) where the land is leased to the vendor of the land or a sitting tenant prior to occupation by the transferee.”¹¹

(Emphasis added.)

One of the first difficulties facing a reader seeking to understand the purpose and effect of s 154(2) is the use of the expression “another person” in the first paragraph of the subsection in a way which may suggest that that person is distinct from “another person (the occupier)” in sub-paragraph (a). But it would make little sense to frame an exception by reference to the position and activities of the occupier where that person had no connection with the disposition of land contemplated in the body of the subsection. I am reinforced in that view by the explanatory notes. Referring as they do to the position of the vendor of the land or a sitting tenant, they make it clear in the first instance that “another person” throughout the subsection is the occupier, whether vendor or existing tenant.

The explanatory notes also shed light on the intended operation of the exception as designed to make some accommodation for the previous owner or existing tenant. Thus the exception can be understood as follows. The buyer of the property, having become entitled to possession of the property, may nonetheless grant possession to the previous owner, provided the latter leaves as soon as reasonably practicable or within six months after the transfer date (usually settlement¹²), whichever is the earlier. That is the combined effect of s 154(2)(b)(i) and (c)(i). The buyer may also grant a further lease to an existing tenant who holds under a lease granted (by the transferor) before the transfer date, provided the tenant vacates on the termination of the current term of the lease granted by the buyer or within six months after the transfer date, whichever is the earlier. That is the effect of s 154(2)(b)(ii) and (c)(ii). (In argument, counsel for the Commissioner contended that “current term of the lease” must relate to the lease referred to in s 154(2)(b)(ii). I do not think that is so. I would construe “the lease” as the operative lease; that is the one given by the transferee, which, but for the exception, would constitute a disposition of land.)

That construction of the exception is, in my view, consistent with the evident purpose of s 154 in placing constraints on how a transferee may deal with the land if he or she is to retain entitlement to the concession. It maintains a temporal limit: the buyer must in any event be in occupation within 12 months after the transfer date in order to obtain the concession.¹³ It is also consistent with the intention evinced in the explanatory notes, of giving some latitude to the position of the existing occupiers.

That being the case, there is no warrant for construing s 154(2) as contemplating that a lease or grant of exclusive possession can occur merely by the transferee’s acquisition of a property subject to an existing lease. The fact that for many purposes the transferee may stand in the shoes of the lessor does not mean that a disposition of land has occurred. While the Act defines “lessor” as including an assignee of the lessor, nothing suggests that the conferral of that status in any way gives rise to an implication that the assignee has actually leased or otherwise granted possession of the land to the lessee. Nor do s 8(1) of the Residential Tenancies and Rooming Accommodation Act and s 35A of the Acts Interpretation Act operate in conjunction so as to make an assignee a person who gives the right to occupy the residential premises. As it seems to me, the effect is simply to make the word “lessor” where it appears in the former Act extend beyond the person giving the right to occupy premises, to that person’s successors and assigns, so as to impose and confer on them the statutory obligations and entitlements. And attornment by the tenant is the tenant’s acknowledgement of obligations now owed to a new owner; it does not amount to a disposition by the latter.

It is apparent that my construction of s 154(2) is more broad than the Appeal Tribunal’s. This seems to me clearly an instance in which the reddendo singula singulis maxim cannot have application without producing absurdity, for the reasons given by the Commissioner. Counsel for the respondents conceded as much. But that does not alter my conclusion, that the respondents did not merely by acquiring land subject to a tenancy dispose of that land or any interest in it.

Orders

I would: Grant leave to appeal. Dismiss the appeal. Order that the appellant pay the respondents’ costs of the application and appeal.

PETER LYONS J: I have had the advantage of reading in draft the reasons of Holmes CJ, with which I agree. I also agree with the orders proposed by her Honour.

BURNS J: I have read the draft reasons and proposed orders of the Chief Justice. I respectfully agree with those reasons, as well as the orders proposed by her Honour. I only wish to add some brief observations of my own.

As the Chief Justice has observed, s 154 of the Duties Act 2001 (Qld) provides for the reassessment of duty originally assessed on the basis of a concession under ss 91, 92, 93 or 93A. It is also useful to observe when construing s 154 that no such reassessment can take place unless there has been subsequent noncompliance with the occupancy requirements which were originally necessary to attract a concessional rate of duty.¹⁴ So much is made clear by the heading to s 154 as well as its terms.

The heading to s 154 – “Reassessment – noncompliance with occupancy requirements” – forms part of the provision.¹⁵ As such, it constitutes part of the context within which s 154 is to be construed, and may be taken into consideration in determining the scope of that provision as well as its meaning in the case of ambiguity.¹⁶ When the heading is considered with the terms of the section, it is apparent that s 154 is premised on the relevant transaction having already attracted the concessional rate of duty, and been assessed as such. Thus, s 154(1) refers in paragraph (a) to duty having been “assessed” at the concessional rate and, in paragraph (b), to the two alternative triggers for reassessment if “either … happens”.¹⁷ Section 154(3) then provides for a “reassessment” of the duty “as if the concession had never applied” to the transaction. It follows that s 154 only allows for the reassessment of duty where there has been, after the transfer, noncompliance with the occupancy requirements that were necessary at the time of transfer to attract a concessional rate of duty under s 92.¹⁸

If, then, it is accepted that s 154 is only concerned with an event happening¹⁹ (or not happening)²⁰ after the point of transfer, the construction advanced on behalf of the Commissioner, relying as it does on a lease that was already in existence at the time of that transfer, must be rejected. Indeed, if a transfer taken subject to such a lease was not meant to attract the concessional rate of duty, one would have expected that limitation to have been expressed within the terms of s 92 (which operates by reference to the transfer) rather than s 154 (which operates by reference to subsequent events).

Footnotes

1. Queensland Civil and Administrative Tribunal Act 2009 s 150(3). ↩

2. Section 88. ↩

3. Section 89. ↩

4. Section 86(2) specifies the relevant requirements. ↩

5. “Intervening event” is defined in sch 6 to the Duties Act as meaning a natural disaster, the death or incapacity of the relevant transferee, lessee or home borrower or another event prescribed by regulation. ↩

6. Revenue and Other Legislation Amendment Act 2010. ↩

7. Revenue and Other Legislation Amendment Act 2011. ↩

8. (1985) 157 CLR 17. ↩

9. At 53. ↩

10. Acts Interpretation Act 1954 s 14B. ↩

11. Explanatory notes Duties Bill 2001 at p 41. ↩

12. It is not strictly necessary to decide what the expression “entitled to possession” in s 89 means, but I would regard a meaning entailing legal rather than actual possession as better serving the purposes of the Act. ↩