Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VSC 127

Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VSC 127 - VSC 2004 case summary — Zoe

[9]

"3. On 1 October 1999 Greg Hargrave entered into an agreement with the vendor of the Windsor property. It revealed that the vendor was prepared to sell the property for $2.3 million. There was a special condition that Greg Hargrave was purchasing the property as agent for other parties and that the contracts to be signed, if the matter proceeded, would be entered into with the parties nominated by him. This was the first such deal that Greg Hargrave had participated in. 4. On 8 October 1999 the three effective purchasers - Frank Hargrave, Adrian Field and Russell Small - executed a document authorising Greg Hargrave to enter into a contract of sale to purchase the property in his name but subject to the right to nominate substitute purchasers. The document recorded that 'We, the undersigned, authorise you [Greg] to enter into a contract of sale in your name but subject to the right to nominate substitute purchaser/s to purchase the above-mentioned property' subject to terms and conditions that were stipulated and went on to say that 'as between us the underlying beneficial interests in the property will be in the following proportions' - interests representing the Frank Hargrave family - 50%; interests representing the Adrian Field family - 25%; and interests representing the Russell Small family - 25%. 5. On 12 October 1999 Greg Hargrave executed a contract of sale to purchase the property for $2.3 million. The purchaser was referred to as 'Greg Hargrave and/or nominee'. 6. On 20 December 1999 a sale of real estate nomination form was executed under which Prilo, AJF Investments and Viewbank were nominated as purchasers of the property. The nomination was signed by Greg Hargrave personally, by Russell Small on behalf of Prilo, by Adrian Field on behalf of AJF Investments, and by Greg Hargrave on behalf of Viewbank. 7. On 20 December 1999 a transfer of land was executed by Viewbank, Prilo and AJF Investments as transferees as to one half share, and one quarter share and a one quarter share respectively as tenants in common. 8. On 14 February 2000 the National Australian Bank acting as an agent of the Commissioner with authority to endorse the transfer with the appropriate amount of stamp duty, stamped the transfer with duty of $9,460. On 23 July 2001 the SRO issued an assessment for the amount of $171,987.10 constituted by two lots of duty, $126,500, one part of which had been paid, plus penalty duty of $12,117 and interest of $6,870.10. 9. At the hearing each of the four people involved in the purchase referred to above gave evidence and was cross-examined, together with Mr Efklides. He acted for the Hargrave interests. Kligers acted for the other 'purchasers'. The Hargraves were used to getting advice from Mr Efklides and their accountant and they in turn had a professionally qualified accountant operating in house. 10. One thing that is quite clear from the evidence is that it was never intended that Greg Hargrave would be the purchaser. Another thing that is quite clear is that from a time before the contract of sale was entered into, the property was in substance being brought for the three families in the proportions I have referred to above. It is also clear that there was a lot of discussion between the parties and their various advisers and consultants about the various ways in which the transaction might be structured. It is I think also clear that the parties regarded the corporate or trust structure, or proposals for co-ownership, as incidental - that is, as matters of form rather than substance. Finally, it is clear that the three effective purchasers armed Greg Hargrave with complete moral authority to enter into the contemplated contract on their behalf and on behalf of the corporate entities that would become the legal as distinct from the beneficial owners of the property."

[11]

"13. At all times relevant to the assessments, it was the intention of all of the parties engaged in purchasing the property (in addition, I think, to the vendor) that although the contract showed Greg Hargrave as the nominal purchaser, the property would in truth be acquired by interests representing the three families in the proportions I have described. This is what happened. The authority of Greg Hargrave of 8 October 1999 correctly reflected the intentions of the ultimate purchasers and was an adequate and accurate authority to enable Greg Hargrave to enter into the contract that he did in order to achieve the mutually sought after result. 14. It is therefore clear that in entering into the contract of sale, Greg Hargrave did so as the agent for others. He had the authority in writing of the transferees at least in the sense that he had a written authority from each of the three people who could bind 'any interests' representing his family. He had authority from the people who did or would control any relevant corporate entity. To the extent to which he was going to rely on an authority from a corporation, it was more likely than not that any such authority would only be given by an agent of the corporation since corporations normally only act through agents 15. The question then is whether the statutory provision (ss. (3)(a)(i)) should be interpreted literally so that it only applies if the authority is in writing form the transferees directly, or whether it should be interpreted more liberally so that it applies if the authority is in writing from either the transferee or an authorised agent of the transferee (whether or not the transferee had by then been formally created). The first interpretation would not further be (sic) expressed purposes of the law and would not to my mind operate by reference to a rational premise in the context of the extensive and recognised use of corporate and trust entities in the acquisition of real property in this state. The second interpretation would further the expressed purpose of the exemption and is to my mind consistent with the scheme of the exemptions generally, especially the references to companies yet to be incorporated and trusts recorded in writing on or before the entering into the agreement. 16. I do not think it would be right to treat the requirement of written authority in this head of exemption (section 67A(3)(a)(i)) as if it were latter day Statute of Frauds that could and should be invoked in all its strictness - section 127 as well as section 126 of the Instruments Act - by the Crown against its loyal subjects so as to double the levy of tax in circumstances where it is impossible to say that the parliament - the one organ of ours constitutionally capable of making a law to levy a tax - would have intended to do so. This is not in my opinion, an appropriate case for the Crown to put pedantry over equity. Once this statutory requirement of authority in writing of the transferee is interpreted to include an authority from an authorised agent of the transferee - as it appears to me must most usually be the case with corporations - then in my view the exemption is satisfied in this case. 17. The problem arises here not just because of the use of the nominee clause but because of the delay in selecting the appropriate corporate vehicle... 20. In truth, the Parliament chose a very blunt weapon when it passed s. 67A to attack a form of tax-avoidance. Instead of attacking the abuse of the device, it imposed a double tax on the device itself, but gave exemptions to the sort of family arrangements it thought would not be exercises in tax avoidance. Unless those exemptions are sensibly operated, taxpayers may suffer undue collateral damage. In my view the language is sufficiently opaque or openly textured to permit a standard method of interpretation of statutes to be invoked in order to avoid that result. 21. Since the case may not stop here, I will briefly state my views on the other issues. * Greg Hargave was in my view the first purchaser in terms of the law. * I have an open mind on whether apportionment of an assessment of tax can be effected in this context. * The exemption in (a)(iii) does not apply because there was no relevant trust recorded. * The exemption in (d) does not apply because there was no separately dutiable instrument for the purposes of Exemption (17)."

[88]

(a) a person ("the vendor") agrees to transfer any real property ("the agreement") to Duty in respect of 2 or more transactions2another person ("the first purchaser") (whether or not the agreement provides for that other person to nominate another person as purchaser); and

(b) the conveyance of the real property executed by the vendor conveys the whole or any part of the real property not to the first purchaser but to another person ("the transferee") who has acquired, whether directly or indirectly, the whole or any part of the rights and interest under the agreement of the first purchaser in the real property--

the conveyance shall not be charged with duty in respect of the transfer from the vendor to the transferee but shall be separately and distinctly charged with duty in respect of--

(c) the value of the real property in the agreement (whether or not the agreement has been discharged by performance, novation or agreement or has otherwise ceased to exist); and

(d) the value of the real property conveyed to the transferee; and

(e) if the transferee did not acquire those rights and interest directly from the first purchaser, the value of the real property in each other transaction or agreement as a result of which the rights and interest of the first purchaser in the real property were acquired.

(2) ...

(3) A conveyance referred to in sub-section (1) is not required to be separately and distinctly charged with duty in accordance with that sub-section if--

(a) the agreement was entered into by the first purchaser--

(i) as agent for another person and with the authority in writing of the transferee to enter into the transaction on behalf of the transferee; or

(ii) in anticipation of the incorporation of the transferee and, at the time of the transfer, the first purchaser or a relative of the first purchaser holds a bona fide beneficial interest in the transferee or in a holding company (within the meaning of the Corporations Law) of the transferee; or

(iii) as trustee for the transferee under a trust recorded in writing on or before the entering into of the agreement; or

(b) the transferee is a body corporate and the first purchaser was a director of the body corporate when the agreement was entered into; or

(c) the transferee is a relative of the first purchaser; or

(d) the first purchaser was a related corporation of the transferee when the agreement was entered into; or

(e) a conveyance executed in respect of the agreement would be exempt from duty under another provision of this Act.

(4)...

(5)...

(6) For the purposes of this section but without limiting the ways in which a person may be taken to acquire the rights and interest of another person in real property, a person who has rights or an interest in real property ("the first person") acquires the rights and interest of another person ("the second person") in that real property if, as a direct or indirect result of an agreement, arrangement or understanding involving those persons (with or without other persons)--

(a) the second person acquires rights or an interest in the real property; and

(b) the rights or interest of the first person in the real property are increased.

(7) In this section--

At a glance

Court

Decision date

Before

Source

Judgment (117 paragraphs)

Parties

Cases Cited (17)