Dann v Chief Commissioner of State Revenue

REASONS FOR DECISION 1 The objection decision under review is the disallowance (by notice dated 29 September 2004) of an objection by the Applicant, received on 3 August 2004, in respect of land tax assessed in respect of the property at 29 Baker St, Kensington, Sydney ("Kensington") for the 2000 and 2001 land tax years (collectively the "relevant years" and each a "relevant year"). A preliminary question as to jurisdiction is dealt with later in these reasons. 2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; it accepted in addition the tender of exhibits as follows: Exhibit A1 is a letter dated 9 February 2005 by the Crown Solicitor's Office to Ms Jennifer Lindsay; Exhibit A2 is a letter dated 10 February 2005 by the Crown Solicitor's Office to Michael Dann; Exhibit A3 is a letter dated 15 March 2005 by the Crown Solicitor's Office to Michael Dann; Exhibit R1 is a search paper and other documents (and including a transfer) referable to the property situate at 11A Alexander Street, Coogee, Sydney ("Coogee"); Exhibit R2 is a search paper referable to Kensington. 3 The Respondent's Outline of Submissions ("RS") dated March 2005 was of particular assistance to the Tribunal. Causes 1 to 8 (inclusive) under the headings "Introduction" and "Facts" read as follows: Introduction 1. This application relates to land tax assessments for the land tax years 2000 and 2001 (the "Re-assessment"). The Re-assessment was, together with the assessments for 2002 and 2004, notified to "Estate of Late Michael Dann c/- Trust Company of Aust Ltd" by the Land Tax Notice of Assessment with issue date of 3 June 2004 (the "June Notice"). 2. The substantive issue before the Tribunal is whether, in the 2000 and 2001 land tax years, the property known as 29 Baker Street, Kensington ("Kensington") qualified for the "principal place of residence" exemption conferred by s.10(1)(r) of the Land Tax Management Act 1956 (the "Act"). 3. By Land Tax Notice of Assessment with issue date 19 February 2004 the Chief Commissioner notified a land tax assessment for the land tax years 2000 to 2004 ("Assessment") to "The Union-Fidelity Trustee Co of Aust Ltd" - the former name of the Trust Company of Australia Ltd (the "Trustee"). 4 The Applicant (Alfred Michael Dann) lodged a written objection to the Re-assessment with the Chief Commissioner - the letter of objection was received on 3 August 2004. The objection was disallowed by notice dated 29 September 2004. The Applicant's application for review was filed with the Tribunal on 25 October 2004. Facts 5. The relevant land (the subject of the Re-assessment) comprises Kensington and the property known as 11 Alexander Street, Coogee ("Coogee"). At all relevant times the registered proprietor of each of Kensington and Coogee was the Trustee - as Trustee for the Estate of the Late Michael Dann ("the Estate"). 6. The information provided to and relied upon by the Chief Commissioner in making the Re-assessment is included with the Section 58 ("Docs"). According to the Trustee's letter of 3 May 2004- (a) Kensington was owned by Michael Dann (the "Deceased") at the time of his death on 19 December 1949. (b) The Deceased's widow (Pauline Joyce Dann) occupied Kensington as her residence until her death in December 1997. (This occupation was pursuant to a life interest.) (c) Following the death of the Deceased's widow, Kensington remained unoccupied until July 2001 when the Applicant and his family took up occupation. (The Applicant claims to have entered into occupation in June 2001.) (d) Coogee was purchased by the Trustee in 1985 for occupation by the Applicant. (e) Coogee was occupied by the Applicant and his family as their residence until May 2001 when it was sold by the Trustee. 7. Under the terms of the Deceased's will (the "Will"), a portion of the net income of the Estate is to be held as a fund to provide for the Applicant's education and advancement in life and his establishment in a business; the Trustee may in its discretion apply the whole or part of the balance of the net income for the maintenance, support and benefit of the Applicant during his life, and may in its discretion apply the whole or part of the capital for the benefit or advancement in life of the Applicant. The Will provides that "On the cessation of all life interests in favour of" the Deceased's son (the Applicant), widow, and daughter (Caroline Honor Dann), the capital of the Estate is to be held on trust for "the children or child of my son [the Applicant] who attain or attains the age of twenty one years" with a gift over in default. 8. The Applicant asserts in his letter of 2 December 2004, that his son Stewart (said to be aged 29 years at that time) lived at Kensington with his grandmother until her death in December 1997 and continued to live there until April 1999. 5 Having regard to the fact that the Applicant was self-represented and a layman, I asked him, at the commencement of the hearing, whether (and by way of assistance to him) he would like me to invite Dr Sorensen to commence with a brief statement as to relevant facts and applicable law. In the same context, I pointed out that this might not be necessary if the Applicant had considered and understood RS. Although the Applicant replied that he had considered and understood RS, the later proceedings served only to confirm my doubts that this was in fact so. I asked him (at a later stage) whether he did not feel he should be legally represented; he replied that he did not. It also became clear that the Applicant did not, in certain relevant respects, agree with the facts set out in RS. In particular in this regard the Applicant sought to contend that his son Stewart Dann ("Stewart") resided in Kensington, after it was severely damaged in a hailstorm in 1999, and so that it could be contended that Kensington was used by Stewart, after the hailstorm, as his, Stewart's, principal place of residence ("PPR") in the relevant years. Those contentions resulted in the Applicant giving oral evidence and being cross-examined (briefly) in respect of that evidence. 6 In this clause 5 (and in succeeding clauses) I use the abbreviations contained in those provisions of RS. included (in accordance with clause 3) in these reasons. 7 The Deceased, who died on 19 December 1949 left a document entitled "Rough Draft Will of Michael Dann", dated 1 December 1948; it received probate as an "Exemplification" and is referred to in these reasons as "the Will". In accordance with clause 2 of the Will the Trustee (under a previous name and being "Union Trustee Company of Australia Limited") was appointed sole executor and Trustee of the Estate. The provisions of the Will are in some respects complex; clause 5 provided for the establishment of a number of trusts in the following terms: "5. DIRECTS Trustee to hold the residue of the Estate as follows: (a) To set aside one-quarter of the net income arising from the residuary estate so long as it is legally permissable (sic) to do so as a fund for the purpose of maintaining all properties in a good state of repair including structural alterations or for the purpose of altering or demolishing or rebuilding any properties … so that ultimately my beneficiaries shall receive the maximum return from such properties (b) As to another one-quarter of the net income to hold the same as a fund to provide education and advancement of my of my son and on the completion of such trust any balance remaining to be applied by my Trustee in or towards establishing my son in his business or profession. (c) As to a further one-quarter of the remaining net income and time to time to pay the same to my wife during her life or until she marries whichever event shall first happen, and (d) As to the balance of the net income from time to time apply the same or so much as my Trustee shall in its discretion think fit for the support and benefit of my daughter, Caroline Honor Dann and son in the absolute and unfettered discretion of my Trustee until my said daughter marries or dies, and upon her marriage to pay to her the sum of $500 free of all death and Federal Estate duties and other charges and on the marriage or death of my said daughter then subject to the trust in favour of my wife and the reservation for the upkeep of my properties to hold the balance of the income from time to time and apply the same or so much as my Trustee in its absolute and unfettered discretion determines for the maintenance support or benefit of my son during his life with power in the absolute and unfettered discretion of my Trustee to apply the whole or any part of the capital for the benefit or advancement in life of my said son and (e) to hold any surplus of income not applied by my Trustee in connection with the discretionary trusts abovementioned in the fund for the improvement of my properties so long as it is legally permissable (sic) to do so." 8 On 2 July 1953 the Supreme Court of New South Wales in Equity, on application by Pauline Joyce Dann, (also referred to in these reasons as the "widow") granted certain orders in her favour expressed to be "in lieu of the provisions made by the said deceased in his said will for the applicant". Orders (3) and (4) read as follows: "(3) The applicant to take an estate for her life in the property known as No 29 Baker St Kensington the said respondent to pay all rates, taxes, insurances, and maintain the said property in first class repair (4) The respondent pay to the applicant an annuity of 12 pounds a week such annuity to be charged firstly upon the share of income given to the applicant by the Will of the deceased and secondly in equal proportions upon the shares in the income respectively given by the said Will to Alfred Michael Dann and to Alfred Michael Dann and Caroline Honor Dann ..." 9 The Deceased's daughter Caroline Honor Dann married many years ago; in consequence of her marriage the trust established for her in terms of clause 5 (d) of the Will continued but for the benefit of the Applicant. The life interest of the widow in Kensington created in accordance with order (3) of the court order referred to previously in these reasons ended with the death of the widow in December 1997. Following her death the Estate has been held and is being held in trust by the Trustee in accordance with the trusts referred to in clauses 5 (b) and 5 (d) of the Will; the Trustee is vested with a discretion as to the utilisation of income of the benefit of the Applicant; the Trustee is moreover and in addition vested with a discretion to draw upon capital. Clause 7 of the Will provides that upon the cessation of the Applicant's life interest the Estate is to be held in trust for the Applicant's children. There are two such children; Stewart has been referred to previously; another son, Graeme Dann, resides with the Applicant and his wife. 10 Kensington is one of the assets of the Estate. Exhibit R2 indicates that the registered owner is the Trustee (there referred to under a previous name "The Union-Fidelity Trustee Company of Australia Limited). Exhibit R1 establishes that Coogee which was an asset in the Estate was transferred by the Trustee to one William David Ashcroft in May 2001. 11 The provisions of the Will are such that it is clear that the Applicant and for that matter Stewart, has an interest in the Estate. The exact nature of that interest is not altogether clear. Clauses 5 (b) and 5 (d) of the Will in relation to the Applicant refer in their terms to trusts which are discretionary in their nature; Clause 7 of the Will provides for the devolvement (put in broad terms) of the Estate on the Applicant's children on his death and on the cessation of his interest (referred to as a "life interest"). Stewart has an interest in the Estate but only upon the Applicant's death. As to whether Stewart's interest is contingent is not altogether clear; it is certain however that Stewart did not during the relevant years and does not have any "estate of freehold in possession" within section 3 (a) (i) of the Land Tax Management Act 1956 (the "Act"). The provisions of the Will make it clear also that the Applicant did not and does not have an interest in the Estate or any of its assets which constitutes an "estate of freehold in possession". (This latter aspect is relevant in particular in relation to Coogee). During the Applicant's lifetime the estate of freehold in possession both legal and equitable is in the Trustee: Glenn v CLT (1915) 20 CLR 490 at 498; see too Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 CA at 310-311; 2000 ATC 4001 at 4009 12 The evidence as to Kensington since the widow's death proved (having regard to the written evidence and then the oral evidence of the Applicant) to be quite remarkably inconsistent. T10 contains a letter by the Applicant to the Respondent dated 2 December 2004. The second page of that letter reads as follows: " As you are aware my mot her passed away in December 1997 and Stewart remained in the house until that violent hailstorm in 1999. To verify that Stewart did in fact occupy the premises, you could check with Maroubra Police who came to the premises and arrested Stewart for writing graffiti on the neighbour's wall. The neighbour just happened to be Mr Laurie Brereton the MP There is a lot more I could add to this incident but the point that I am raising is that my son Stewart is in fact a beneficiary of my late father's Estate and as such has every right to occupy the dwelling." 13 T5, a fax by the Applicant to the Respondent sent in August 2004 reads as follows: "I wish to lodge an objection regarding the amended assessment for tax on the above property. As already pointed out, the property was purchased in 1944 AND has remained the family residence for the entire period. The ONLY time it was unoccupied was as a result of the violent hailstorm that occurred in April 1999. The damage caused by the storm made the house UNINHABITABLE. This can be confirmed by Maroubra Police, Energy Australia, and also the SES. It took a period of 18 months for the insurance claim, replacement of roofs and ceiling and other major repairs to be COMPLETED. Once the house was liveable AGAIN my family moved back in." 14 T6 is a letter by the Applicant to the Respondent dated 9 July 2000; it reads relevantly as follows: "At the time of my mother's death my wife and I, along with our two (2) sons were living at Coogee. My mother had a red cattle dog (Lucy) and at that time of my mother's death the dog was about six years old. My wife was of the opinion that the dog had been very good to my mother (both company and protection) and as a result we should keep the dog and allow it to remain at 29 Baker St Kensington property. Either my wife or I would come each day to feed and walk the dog. The family (Screnci) living next door (number 27 Baker St) have resided there for over 50 years and. kept an eye on both the property and the dog. When that severe hailstorm struck Sydney in approximately 2000 the Baker Street Property was badly damaged. As a result I obtained an owner builder's license and with the consent of Randwick Council carried out renovations on the property. Those renovations took roughly 18 months. On completion of the renovations being June 2001 my wife children and myself moved back to 29 Baker Street Kensington as our family residence" 15 T9 includes the Applicant's application for review. Clause 7 (reasons for application) reads "The property (29 Baker Street Kensington) was purchased by my family in 1944 - and has remained the family home for a part of my family ever since. The only time it has been unoccupied was as a result of the violent hailstorm in 1999. As a result the house was destroyed. (Copies of insurance claim, SES report, Energy Australia's report and Maroubra Police Report sent to land tax) 16 The documents and correspondence (prepared by the Applicant) make it clear that following the violent hailstorm in 1999 Kensington was so severely damaged that it was uninhabitable and in fact uninhabited, (except by the dog Lucy). Lucy was in fact cared for by the Applicant or his wife one of whom visited Kensington on a daily basis. Some assistance was provided by neighbours. 17 The Applicant's oral evidence related in the main, but not only, to his contention (advanced for the first time in the hearing) that in respect of the relevant years Kensington was occupied by Stewart as his, Stewart's, PPR. The Applicant said that at the time of the hailstorm Stewart was 24 years old. He had lived in Kensington with the widow (his grandmother) and remained at Kensington after her death. He said that after the hailstorm and even though Kensington was condemned by inter alia the Fire Brigade "Stuart lived there and he lived in the street. Stewart was squatting there". 18 The Applicant said that Stewart was born on 28 February 1975. From the time when he was in school he had severe behavioural problems caused by drugs and which resulted in his becoming schizophrenic. He had his 21st birthday in 1996 at the William Booth Rehabilitation Centre in Albion Street, Sydney. In 1996 he was transferred to a farm in Morisset but left after six months and then joined his parents and brother in Coogee in February or March 1997. The Applicant and Stewart clashed and in consequence Stewart went to live at Kensington. He stole valuables from his grandmother and his parents and pawned them. The Applicant spoke feelingly of having to redeem stolen items from pawnbrokers. Stewart was in addition part of a group which committed robberies in homes. 19 The Applicant insisted that Stewart stayed in Kensington after the hailstorm, and even though it had no gas or electricity and even though it was "condemned". The Applicant said repeatedly that Stewart stayed in Kensington as a "squatter". It was put to the Applicant that the letter in T 10 was couched in terms which would indicate that Stewart did not stay in Kensington after the hailstorm. The Applicant's reply was that, despite the terms of that letter, the graffiti incident involving Mr Brereton took place after the hailstorm. The Applicant was asked whether he had any police evidence to this effect. He said that he did not, but that the Respondent could consult the police if he, the Respondent, wished to do so. 20 After the hailstorm the Applicant repaired Kensington; it took his some 18 months to achieve the completion of the repairs. For this purpose he entered into contracts with sub-contractors. Stewart was employed in connection with the building work. The Applicant was asked why if Stewart was living in Kensington it was necessary for the Applicant and his wife to go to Kensington to feed the dog, Lucy. The Applicant said Stewart was not reliable. It was at this stage that he said that both he and his wife went to Kensington every day, and in contrast with other written evidence that one or other of them did so. He went on to say that "as far as he was aware" Stewart stayed at Kensington every night but he could not be sure that this was so. The Tribunal notes that having regard to the evidence as a whole it is highly unlikely that Stewart lived at Kensington after the hailstorm which rendered the house, per the Applicant, UNINHABITABLE. 21 On the contrary the evidence before me indicated that that Kensington was indeed unoccupied after the hailstorm; that this is so appears clearly from the Applicant's own correspondence and his application for review. His evidence as to Stewart's use of Kensington as his PPR during the relevant years was an afterthought; his evidence in this regard was inconsistent and unreliable. 22 The Applicant brought this application on his own behalf. In respect of the relevant years he received the PPR exemption in respect of Coogee and so that it follows, as a matter of law that he could not possibly be entitled in addition to the PPR exemption for Kensington in respect of the relevant years. This arises from the provisions of the Act which make it clear that the exemption is available to an owner for one property only. (As to whether the PPR exemption was correctly allowed to the Applicant in respect of the relevant years for Coogee is unclear having regard to the fact that the Applicant was not an owner as defined in the Act in relation to Coogee but this is not an aspect which need concern the Tribunal) 23 As the Applicant sees it, and he made statements to this effect repeatedly, Kensington has for many years been the home of the family; he was referring of course in this context to the family as a whole. When it became clear to him that he personally could not claim the PPR exemption for Kensington for the relevant years he sought to claim it in respect of Stewart. Leaving aside the fact that Stewart did not give evidence, and made no claims of any kind as to such an exemption, and leaving aside also the fact that there was no suggestion that the Applicant was empowered to represent Stewart, the probabilities strongly favour the view that after the hailstorm, no person and whether Stewart or anyone else, occupied Kensington in such manner that it constituted that person's PPR during the relevant years. In any event and even if Stewart did occupy Kensington as his PPR; he was not an owner of Kensington. He was not the registered owner, and he was not an owner within either of sections 3 (a) (i) or 3 (a) (ii) of the Act. The PPR exemption is available only to an owner (as defined) of property and then in relation to one property only. 24 The Respondent raised in RS. and as a preliminary issue, a question as to the jurisdiction of the Tribunal in this matter. Clauses 11 to 13 of RS provide: "Jurisdiction 11. Ex facie the Tribunal has no jurisdiction to deal with this application. The Applicant is not a person who, pursuant to s.86(1) and s.96 of the Taxation Administration Act 1997 ("TAA"), is permitted to object to the Re-assessment or apply to the Tribunal for a review of the Re-assessment. The requirements of Part 10 of the TAA not having been satisfied, there is no jurisdiction in the Tribunal: see McDonald's Australia Ltd v FC of T 2000 ATC 4607; C of T (NT) v Tangentyere Council Inc (1992) 92 ATC 4313. 12.The Applicant is not a "taxpayer" for the purposes of the Act - the Applicant was not at any relevant time, as required by the definition of "taxpayer" in s.3 of the Act: "a person who has been assessed as liable to pay an amount of tax, who has paid an amount as tax or who is liable or may be liable to pay tax." The Applicant was not at any relevant time, an "owner" of any interest in land (namely, Kensington) - no interest in land is conferred on the Applicant by the Will. 13. The Applicant's lack of standing to apply for a review is not a matter which may be overcome by the Chief Commissioner consenting to the application proceeding regardless of the jurisdiction impediment." 25 The Tribunal considers that the Respondent's contentions as to jurisdiction are correct; the Applicant was not entitled to make this application before this Tribunal. If an application by the Applicant fails for want of jurisdiction, similarly an application by Stewart (if he had made one) would fail. I note that despite my finding as to jurisdiction I am dealing with the substantive issue in some detail, and as if I had jurisdiction, and in case my view as to jurisdiction is incorrect. 26 Section 10 (1) (r) of the Act reads relevantly as follows: "Except where otherwise expressly provided in this Act the following lands shall … be exempted from taxation under this Act: … (r)... land …that has a land value ... of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose ..., being: ... (ii) a parcel of residential land". (The Tribunal notes that no issue under section 10(1) (r) can arise in this case because the Applicant was not, within the meaning of the Act, an "owner" of Kensington). 27 For the purposes of the Act, s.3 defines the term "owner" as: "includes: (a) in relation to land, every person who jointly or severally, whether at law or in equity: (i) is entitled to the land for any Estate of freehold in possession, or (ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, Trustee, mortgagee in possession, or otherwise, (c) in relation to any leasehold Estate in land, whether legal or equitable (other than under any lease to which section 21C or 21D applies), a person, or a person who is a member of a class or description of persons, prescribed for the purposes of this paragraph, and (d) a person who, by virtue of this Act, is deemed to be the owner." (The Tribunal notes that the definition of "owner" is inclusive.. It is clear enough that it includes the registered owner. See in this regard New South Wales Aboriginal Land Council v Chief Commissioner of State Revenue [2004] NSWADT 58 ; Union Trustee Company of Australia and the Federal Commissioner of Land Tax 20 C.L.R. 526 ; and Adele Grace Pty Ltd v Commissioner of Land Tax (N.S.W.) 78 ATC 4075 .) 28 The Applicant complained repeatedly as to certain aspects referable to the Respondent. He referred in particular to the fact that on 2 February 2004 the Respondent sent a questionnaire to the Trustee at 29 Baker St Randwick, an address which does not exist. (The Questionnaire was shortly thereafter sent to 29 Baker St Kensington). He complained that the land tax assessment was paid by the Trustee without reference to him for permission to do so. (The terms of the Will are such that the Trustee did not need his permission and in fact his permission would have been irrelevant). The fact that the assessment in question made it clear that an exemption was allowed to him for Coogee in respect of the relevant years did not mollify him. He tendered exhibits A1 A2 and A3 as examples of what he perceived as incompetence on the part of the Respondent. Exhibit A1 was simply a letter destined for someone else and sent to him in error; there was nothing malign in that mistake. Exhibit A3 ends with a sentence reading "In that regard please forward copies of any such documents to my Office as soon as practicable prior to the hearing on 15 April 2005". This matter was originally set down for hearing on 15 April 2000; at the request of the Respondent it was rescheduled to be heard on 22 March 2005. The concluding sentence of exhibit A3 should have referred to the latter date; the reference to the former date was simply erroneous but again hardly malign. That the Applicant was in no way prejudiced was demonstrated by his presence at the hearing. When asked how this came to be answered that it was simply "common sense". 29 Dr Sorensen explained the manner in which land tax is levied; I need not deal with the specific sections in detail. It is the duty of each landowner to submit a return within a specified period after the commencing date of the relevant land tax year. Thereafter land tax is assessed in accordance with the return until a variation notice is sent. I was informed, and have no reason to doubt, that interest was paid at the market rate and in other words without any premium or penalty element. Numerous decisions of this Tribunal have established that the market rate is calculated so as to compensate the Respondent for the fact that he did not receive the tax on due date. It is only in exceptional circumstances that the market rate will be reduced. See in particular clause 23 of Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21. There are no such exceptional circumstances in this case. The owner had an obligation in respect of the relevant years to provide returns within the statutory period provided but did not do so. 30 The evidence before me indicates that the Applicant has some reservations in relation to the Trustee. I refer by way of example, to the third page of the letter in T6. This is, assuming that there is any basis for those reservations, not a matter which can concern this Tribunal. 31 In summary then the Tribunal considers that it does not have jurisdiction to review this objection decision in respect of which review has been sought by the Applicant. If this view as to jurisdiction is incorrect the objection decision under review must be affirmed. 32 This case was scheduled to be heard in the afternoon only on 22 March 2005. The afternoon session is normally 2 hours from 2 p.m. to 4 p.m. It became clear that that period of time would not be sufficient and accordingly the matter was allowed to proceed until nearly 5 p.m. I consider that the Applicant did not fully appreciate the legal issues involved and he had difficulty also with the facts. Had he obtained legal advice before bringing this application or had he done so even at the time when he received RS he would surely have been advised that his application was without merit. However the Respondent did not ask for costs and no order for costs is thus made.