Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue

The assessments

1. On 23 August 2021, the Commissioner issued a duties notice of assessment to the plaintiff which assessed for duty an agreement for lease in the sum of $2,168,696.50 and interest of $579,590.97 for late payment. The total liability of the plaintiff was therefore $2,748,287.47. No penalty amount was imposed on the plaintiff. The interest was made up of a market rate component in the sum of $60,539.35 and a premium component (at 8 per cent per annum) in the sum of $520,007.03.
2. The plaintiff paid the duty amount, but none of the interest, on 25 August 2021. Additional interest had accrued on that amount in the sum of $955.41, with the effect that the interest amount outstanding at the time of payment was $580,546.38. By letter dated 27 August 2021 the plaintiff objected to the assessment on the basis that it was the leases granted pursuant to the agreement for lease rather than the agreement for lease itself which was the relevant dutiable transaction so that interest did not arise. In the alternative, the plaintiff sought remission of the premium component of the interest under s 25 of the TAA. The plaintiff no longer presses the first ground.
3. On 12 March 2022, the Commissioner disallowed the objection and affirmed its assessment. The circumstances in which the plaintiff incurred the tax liability are outlined below.

Evidence

1. The plaintiff read the affidavits of: 1. Ms Alicia Albury (Ms Albury), a partner at the law firm Maddocks in the property group who had primary carriage of the matter within Maddocks; 2. Mr Leigh Baring (Mr Baring), a partner at Maddocks in the taxation group who was the stamp duty specialist who provided stamp duty advice on the transaction to Golden Age; 3. Ms Bianca Kelly, an employed solicitor of Maddocks; 4. Mr Trevor Bolic (Mr Bolic), the general counsel of Golden Age; and 5. Mr Tim Price (Mr Price), a director of Time & Place Management Pty Ltd (Time & Place), a property development manager engaged by Golden Age for the transaction.
2. All the plaintiff's witnesses barring Ms Bianca Kelly were required for cross examination.
3. The Commissioner read the affidavits of Ms Leah Homer.

Duties Act

1. Section 8(1)(b)(viii) read with s 8(2) of the Duties Act provides that a dutiable transaction includes: A lease in respect of which a premium is paid or agreed to be paid.
2. The term "lease" is defined in s 8(3) to mean "a lease of land in New South Wales or an agreement for a lease of land in New South Wales".
3. There is a non-exclusive definition of "premium" in subs (3), but it is not relevant in the present case.
4. Under s 9(1) of the Duties Act, the duty charged on a lease under s 8(1)(b)(viii) is charged as if it were a transfer of dutiable property, and on the basis that the lessee is taken to be the transferee, the property transferred is taken to be the leased property, and the transfer is taken to have occurred when the "lease" is entered into.
5. As to the timing of the liability to duty, where the "lease" is effected by an instrument, as in the present case, liability for duty arises when the instrument is first executed: s 12(2). By virtue of s 12(3), the liability for duty in respect of the "lease" arises even if the leased property is not in existence at the time that the transfer is taken to have occurred, or the instrument effecting the transfer is first executed, as the case requires.
6. Under s 16, the duty charged on a dutiable transaction is payable by the transferee, being in this case the lessee.
7. The concept of a "dutiable transaction" also extends to a surrender of an interest in land in New South Wales: s 8(1)(b)(iii) and s 8(2). In the case of a surrender, the liability for duty is imposed on the person to whom the property is surrendered (in the case of a lease, being the lessor) when the surrender takes place: s 9.
8. Duty in respect of a dutiable transaction is chargeable by reference to the dutiable value of the dutiable property involved in the dutiable transaction at the rates set out in s 32. The expression "dutiable value" is defined in s 21(1) to mean the greater of the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration) and the unencumbered value of the dutiable property. In the case of the dutiable transaction arising under s 8(1)(b)(viii), the dutiable value is taken to be the amount of the premium paid or payable in respect of the lease: s 21(5).
9. The person liable to pay duty in respect of a dutiable transaction must, within three months after the liability arises, lodge with the Chief Commissioner the instrument that effects the dutiable transaction: s 16(1)(a). A tax default does not occur for the purposes of the TAA if duty is paid within three months after the liability to pay the duty arises: s 17(1).

Imposition and remission of interest

1. Section 21 of the TAA provides: (1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division. (2) Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest under this Division.
2. The expression "tax default" is defined in s 3(1) of the TAA to mean "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay".
3. Section 22 of the TAA deals with the interest rate applicable to interest on tax defaults and provides relevantly as follows: (1) The interest rate is the sum of - (a) the market rate component, and (b) the premium component. (2) The market rate component is - (a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or (b) the rate specified for the time being by order of the Minister published in the gazette. (3) The premium component is 8% per annum.
4. Section 25 provided for remission of interest in the following terms prior to 1 February 2024: The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.
5. Section 25 was re-enacted by Treasury and Revenue Legislation Amendment Act 2023 with effect from 1 February 2024, so that it now reads as follows: (1) The Chief Commissioner may remit interest. (2) The Chief Commissioner may issue guidelines setting out how interest must be remitted under this division. (3) If guidelines are issued, interest must be remitted only in accordance with the guidelines. (4) The imposition or remission of penalty tax is not relevant to the imposition or remission of interest.
6. No guidelines have been issued under the new s 25(2).
7. While the claim for remission is being determined after the re-enactment of s 25 I have proceeded on the basis that there is no relevant change at the present time in the nature of the discretion conferred by that section except potentially the matter referred to in s 25(4) to which I have not had regard in any event.

Initial transaction

1. On 1 September 2014, Golden Age as purchaser entered into a contract with Sandhurst Trustees Limited as vendor to purchase the leasehold interest in the Land held by the vendor under a 99-year lease granted by PMNSW, then called the Sydney Cove Redevelopment Authority (the Original Lease). The purchase price was $50 million. The agreement was stamped with duty in the amount of $2,735,490 on 1 December 2014. At this time HWL Ebsworth acted for Golden Age. On 17 March 2015, a transfer of the leasehold interest in favour of Golden Age was executed and stamped with nominal duty of $10.
2. The Original Lease provided that the permitted use of the land was as a commercial office building with retail, restaurant, associate car parking and such other special uses as the lessor may agree to. The term of the Original Lease was 99 years, commencing on 31 October 1989, and expiring on 30 October 2088. Hence, the unexpired term at the time of the sale to Golden Age was 74 years.
3. In late 2015, Golden Age appointed Time & Place as its development manager and HWL Ebsworth as its solicitors for its redevelopment of the Land. The redevelopment which Golden Age envisaged was the demolition of the existing office building on the Land and the construction of a mixed use residential, retail and commercial development, including residential apartments that would be leased to occupiers under 99-year strata leaseholds pursuant to a leasehold strata scheme. As this redevelopment was not permitted under the Original Lease, Mr Price of Time & Place engaged in negotiations on behalf of Golden Age with PMNSW, which led to Golden Age and PMNSW entering into a heads of agreement in late August 2017.
4. The heads of agreement, which is expressed not to be legally binding, required PMNSW and Golden Age in good faith to negotiate and finalise an agreement for lease between PMNSW as lessor and Golden Age as lessee under which: 1. Golden Age would be permitted to develop the land by demolishing the existing building and replacing it with a new mixed-use development, including residential, retail and commercial uses; 2. The agreement for lease would include a mechanism under which Golden Age may subdivide the site in accordance with a proposal made by it and approved by PMNSW. A leasehold strata scheme would be created for the residential apartments. The retail and commercial components would be two separate stratum lots; 3. The form of the new long-term leases to be granted would be attached to the agreement for lease. This form of new long-term leases would be negotiated and agreed prior to execution of the agreement for lease. It was to be expected that there might be different forms of leases to cater for residential, commercial and retail components, but in any case the leases would be for a term of 99 years and provide for the payment of nominal rent (if any); 4. The Original Lease would be surrendered on the date of Financial Close (being the date when certain specified conditions were satisfied). Golden Age would indemnify PMNSW for any stamp duty payable on the surrender of the lease; 5. PMNSW would grant a licence to Golden Age for the purpose of developing the Land equal to the rent otherwise payable under the Original Lease, expiring on the date new leases were granted unto the agreement for lease; 6. Golden Age would pay PMNSW a lump-sum payment of $31 million plus GST on a date to be agreed before lease commencement; 7. PMNSW would 'grant' new leases on completion of the development works which would be included in the agreement for lease; and 8. Golden Age would be liable for all duty implications arising out of this transaction.
5. Importantly, there would be two dutiable transactions under this proposal, the surrender of the Original Lease, and the grant of new leases under the proposed new agreement for lease. Golden Age sought advice from its then solicitors, HWL Ebsworth, in early 2017 regarding its duty liability from the proposed development, though it is doubtful that it ever provided the heads of agreement to them in this process. This is explained by the fact that the heads of agreement was not entered into until around six months later, and at the earlier stage when HWL Ebsworth's advice was sought, the mechanism for the grant of new leases had not been thought through.

HWL Ebsworth's taxation advice

1. On 17 March 2017, the solicitor at HWL Ebsworth who was acting for Golden Age on the transaction, Mr Peter Garrett (Mr Garrett) instructed a colleague in the taxation group to provide advice on the duty implications of the new approach to the development of the Land. Those instructions were in the following terms: Our client is in negotiations with its landlord regarding the grant of a new lease which will permit it to redevelop the site for mixed uses as retail, commercial and residential property. In the course of this process it has been suggested that our client will surrender the current lease, enter into a license [sic] during the building period, and pay a $30 million premium to Place Management for the grant of the new lease on completion of the redevelopment.
2. The instructions provided by Mr Garrett do not mention an agreement for lease.
3. On 31 March 2017, Ms Sedaghat, a partner at HWL Ebsworth, provided preliminary advice to Mr Price and Mr Richard Huynh (Mr Huynh) who was employed by Time & Place and assisted Mr Price on the transaction, that any premium paid for the grant of a lease would be subject to duty, and that duty may also be payable on the surrender of the lease if the lease has market value even if the surrender Is made for no consideration.
4. On 22 April 2017, a further 'finalised' advice of the 'stamp duty and tax team" on duty implications was provided by Mr Garrett to Mr Price and Mr Huynh, which stated that (a) the Landlord would be liable to duty on the surrender of the original lease on the greater of the consideration paid for the surrender and the market value of the lease at the time of the surrender; and (b) the payment of an amount for the grant of the new lease would be subject to duty as a premium. It is clear from the advice that the focus at this stage was on how the 'proposed' $30 million payment by Golden Age to PMNSW should be structured, and it was pointed out that it would be dutiable as a premium if allocated to the grant of the new lease, rather than the surrender of the Original Lease.
5. Following the receipt of this advice that there was the potential for duty on the surrender of the Original Lease by reference to its market value. Mr Garrett provided further information to Mr Huynh in May 2017 directed at how to go about determining the market value of the unexpired term of the Original Lease. This included commentary and revenue rulings on duty implications from the surrender of a lease.
6. Mr Price and Mr Huynh were also concerned about the potential for 'double duty'. Mr Huynh sent an email to Mr Garrett on 16 May 2017, with a copy to Mr Price, which stated: Duty on new lease - presumably if the Lessor is paying duty on surrender of the existing lease, will the Lessee then have to pay duty again when entering into the new lease? This seems outrageous if that was the case as the Lessee (GAHTR) already paid duty when they entered into the existing lease. Also, through the proposed process of surrender of the existing lease and then entering into new lease, the Lessor and Lessee are the same parties so there is clearly continuity demonstrated. Please see attached sketch showing process. If continuity existed, then surely the duty is then payable on the difference in value of the existing lease vs the new lease. Please advise on this matter in layman terms so we are clear.
7. On 20 May 2017, Mr John Caravousanos (a member of HWL Ebsworth's stamp duty team) responded to that question by email, which relevantly stated: If a premium (ie a lump sum up front) is paid for the new lease, then duty will be paid on this amount. If we know the value of the old lease we are surrendering (based on the above principles), we can work out the optimal payment arrangement so that duty is minimised.

Engagement of Maddocks

1. In or around August 2017, the plaintiff, represented by Mr Price of Time & Place, approached Ms Albury of Maddocks to take over the matter from HWL Ebsworth. Ms Albury is a partner in the property team at Maddocks who had worked with Mr Price on property transactions for mutual clients in the past. From this time Mr Price was the principal person at Time & Place who instructed Ms Albury in relation to the transaction. Time & Place was responsible for the day to day management of the development of the Land on behalf of Golden Age, including the conduct of negotiations with PMNSW and the dealings with Ms Albury.
2. In an email dated 31 August 2017, from Ms Albury to her colleagues in Maddocks' taxation team, Mr Baring and Mr Andrew Wright (Mr Wright), Ms Albury noted the following: Our client (Golden Age) has bought a ground lease of property in the Rocks in Sydney - it is a long term lease from what used to be called the Sydney Harbour Foreshore Authority and which is now called Place Management NSW. The lease allowed for commercial office use. Our client is proposing to knock down the existing office building and build a mixed use resi/ retail/ commercial development in its place. Place Management NSW is agreeable to this and will accept a surrender of the existing lease and will grant a new 99 year lease. Our client paid duty on the transfer to it of the existing lease (we didn't act on that so I'll need to find out more about this). Under the heads of agreement for the new lease Place Management NSW requires a duty indemnity in respect of the surrender of the existing lease - it is as yet unclear to me whether any consideration is payable in relation to the surrender. Under the heads of agreement for the new lease Place Management NSW requires an upfront payment of $31 million - I haven't yet seen the documents and how this is characterised but it is likely a premium and no doubt if it is and it is dutiable, then our client will need to pay duty on it. HWL has been acting up until now but the client has not been happy with them so we are taking over. Apparently there is a duty advice from HWL that they would like us to re-visit and confirm/ comment on. One of their issues with HWL is that the client finds the advice hard to understand so we'll need to be clearer than they are.
3. On 5 September 2017, Ms Albury emailed Mr Baring and Mr Wright seeking a fee estimate on the provision of duty advice in the matter. Attached to this email, amongst other documents, was the advice provided by HWL Ebsworth in the emails described at [30]-[35] above. Ms Albury stated that Golden Age was looking to them for a review of those HWL Ebsworth advices, and any creative solutions to managing the duty more effectively than "the current proposal that has them paying duty 3 times". She then described the three dutiable events as follows: 1. Duty on acquisition of the existing lease of 99 years with approximately 72 years left to run (Existing Lease) - this has been paid already. 2. Duty on surrender of Existing Lease (based on the value of the 73 years left to run) - not yet surrendered so not yet paid - all there is at present is a heads of agreement proposing to surrender 3. Duty on premium paid to enter into new lease of 99 years from commencement (New Lease) - not yet granted so not yet paid
4. In this email Ms Albury describes the payment of $31 million referred to in her earlier email as a premium to enter into a new 99-year lease and while it references the heads of agreement it did not mention that an agreement for lease was contemplated. The heads of agreement was not included in the attachment provided by Ms Albury. Mr Baring said in cross-examination that shortly after Ms Albury's email he reviewed the HWL Ebsworth advice of 22 April 2017 and provided feedback to her to the effect that he agreed that the proposed transaction as described in her email involved two dutiable transactions, being duty on the surrender of the original lease and duty on the grant of the new lease or leases.
5. On 31 October 2017, Ms Albury sent Mr Huynh, on behalf of Golden Age, Maddocks' costs agreement and standard terms of appointment. The costs agreement described the work to be performed by Maddocks as "act for [Golden Age] in relation to the review, negotiation and completion of an agreement for lease and lease from [PMNSW] in accordance with the agreed heads of terms". It is clear both from the description of the work in the engagement letter and the evidence in cross-examination of Ms Albury, Mr Baring and Mr Bolic that the expectation of both Maddocks and Golden Age was that Maddocks' role included advising Golden Age on its obligations to lodge the agreement for lease and lease for stamping under the Duties Act.

2 November 2017 meeting

1. On 2 November 2017, Mr Baring, Ms Albury, Mr Price, Mr Huynh, Mr Chris Crighton (Golden Age's chief operating officer) (Mr Crighton), and Mr Bolic had a telephone conference. Mr Bolic and Ms Albury each recorded a file note of the meeting, but Mr Baring did not. All relevant witnesses, and both file notes, indicate that Mr Baring suggested that the transaction be restructured as an amendment to the Original Lease in order to avoid a surrender of the Original Lease, and that someone at the meeting (most likely Mr Price) said that PMNSW had indicated that it could not vary the term of the original lease from 73 to 99 years.
2. Mr Bolic gave evidence that he was advised at this meeting by someone from Maddocks that Golden Age would be liable for stamp duty upon the registration of the new lease provided by PMNSW. Mr Bolic's file note starts by recording the following under "HOA" (which was a reference to the heads of agreement): - GA liable for duty - surrender of existing lease - rego of new lease → looking at most efficient way to approach it.
3. Later in Mr Bolic's file note he records that the "existing proposal" involved an agreement for lease with the "existing lease [to be] surrendered" and that "5 different leases → all get created at same time". The words "payment for this = dutiable ($31 m)" appear under an arrow pointing to the words "5 different leases". I accept Mr Bolic's evidence that at the meeting advice was given by either Mr Baring or Ms Albury (but most likely by the former) that under the proposed structure at that time as reflected in the heads of agreement, Golden Age would be liable to pay stamp duty at two points: the first was on and at the time of the surrender of the existing lease, and the second was on and at the time of registration of the new leases that would be executed under the transaction documents yet to be entered into. Mr Bolic's evidence was also that no mention was made at the meeting that the agreement for lease would be liable to duty, which I also accept as it is consistent with his file note.
4. Ms Albury's file note does not record this advice being given, and her evidence in cross-examination was that she did not give Golden Age advice on the timing of its obligation to pay stamp duty on the transaction at this meeting. However, that does not detract from Mr Bolic's evidence as it was not put to her that Mr Baring did not provide that advice.
5. Mr Baring recalled that he participated in the conference call but could not recall what was discussed, except that there was a general discussion about the structure of the transaction, including that it involved a surrender of the existing lease and possible alternatives to that surrender to mitigate the duty implications of the surrender, which was a matter on which he was asked to give advice following the meeting. Given that Mr Baring had already by the time of the meeting reviewed and indicated his agreement with the HWL Ebsworth advice of 22 April 2017, Mr Baring's evidence is not inconsistent with Mr Bolic's recollection of what was discussed at the meeting. At the time of the meeting, Golden Age had a concern that the proposed transaction involved a liability to double duty, and it is likely that at the outset of the meeting this exposure to double duty was referred to before moving to a discussion as to how to mitigate that exposure. This is what Mr Bolic's contemporaneous file note records.

Subsequent advice

1. On 5 December 2017, Mr Baring provided a draft memorandum of advice by email to Mr Price, Mr Crighton, Mr Huynh, and Ms Albury (Memorandum). It was copied to Mr Bolic around the same time. This memorandum addressed Golden Age's request for advice "as to how it can undertake the Development on the Property in a manner that minimises any adverse duty implications". The Memorandum sets out a proposal to vary, rather than surrender, the Original Lease so that duty on the surrender contemplated by the heads of agreement would not arise, and also the variation of the Original Lease to allow Golden Age to call for new leases on registration of a strata plan and the payment of consideration for the right to call for those new leases. The Memorandum did not contemplate a new agreement for lease. The substance of the advice was that there would be no dutiable surrender of lease and duty would only be payable when new leases were granted on registration of the strata plan on completion of the development by reference to the consideration payable for the right to call for those leases. The focus was on avoiding what Golden Age regarded as double duty (ie. ad valorem duty on the surrender and the grant of new leases). Ultimately, this proposal would be rejected by PMNSW in January 2018.
2. The Memorandum includes a summary of the Duties Act and notes the following: 4.2 Relevantly, section 8 charges duty on the following: … 4.2.3 a lease in respect of which a premium is paid or agreed to be paid. 4.3 'Lease' and 'premium' are defined in section 8 of the Duties Act as follows: 4.3.1 'lease' means a lease of land in New South Wales or an agreement for a lease of land in New South Wales… 4.5 … Section 21(5) of the Duties Act provides that the dutiable value of the leased property transferred by way of lease is taken to be the amount of the premium paid or payable in respect of the lease.
3. The Commissioner submits that the inclusion of these definitions is important in circumstances where the recipients of the advice were actively engaged in negotiations with PMNSW regarding the agreement for lease and were aware that the transaction would involve a premium being payable for the new leases. The Commissioner says that it would have been or ought reasonably to have been apparent to Golden Age, Ms Albury and Time & Place when reading the Memorandum that the agreement for lease they were negotiating would be a dutiable transaction.
4. I reject that submission. It is true that the Memorandum does draw attention to the fact that a lease is a dutiable transaction and that the term "lease" includes an agreement for lease. However, the Memorandum also goes on to make the following observation (albeit in the context of the proposal under consideration which was a variation to an existing lease): 4.6 Whilst section 8 of the Duties Act does not specifically refer to a 'grant' of a lease in respect of which a premium is paid or agreed to be paid, we are of the view that this section can only apply to impose duty in respect of a grant of a lease in respect of which a premium is paid or payable. We say this because: 4.6.1 the common-law definition of a 'premium' is a personal promise to pay money in consideration of a lease being granted (Hill v Booth [1930] 1 KB 381 and restated in Westpac Funds Management Ltd v Chief Commissioner of State Revenue[ 2008] NSWSC 1245). 4.6.2 as the common-law definition of 'premium' is defined to be in respect of a grant of a lease and the duty payable on a lease under section 8 is based on the premium payable, in our view, it follows that the dutiable transaction that results in a lease being dutiable is in respect of a grant of a lease in respect of which a premium is paid or payable.
5. This is significant because the inference could reasonably be drawn from this statement that while an agreement for lease is a dutiable transaction, if the agreement provides for the premium to be paid for the grant of leases under the agreement, rather than as consideration for entering into the agreement itself, duty would only be payable on that premium in respect of the separate dutiable transaction arsing when leases were subsequently entered into. In that situation, the agreement for lease would not be a dutiable transaction. For this reason, the Memorandum is consistent with Mr Bolic's understanding of the advice given by Maddocks during the conference call on 2 November 2017. I return to this point below.
6. On 8 February 2018, Ms Albury emailed to Mr Huynh a document entitled 'Agreement for Lease - 75-85 Harrington Street, The Rocks Table of Key Dates', after Mr Huynh had asked for such a document "so we can plug into our program for PMNSW" (which I infer is the feasibility study referred to below). The document is in the form of a table which outlines various milestones that are to occur according to the then draft agreement for lease being negotiated by the plaintiff and PMNSW. Each entry is identified by reference to the clause in the draft agreement. Ms Albury referred to this as a 'wayfinder' document in her evidence. It did not change in any relevant respect after the Agreement for Lease was signed.
7. Item 14 of the table identified the time at which Golden Age was to give PMNSW a stamped LPI form of surrender of lease. Items 32 and 34 of the table identified the time at which Golden Age was to "procure any necessary stamping" in relation to the proposed new leases, by reference to the number of business days prior to the proposed lodgement of documents for registration with the LPI or the Date of Practical Completion. In other words, stamping was to occur in relation to those leases shortly before they were granted rather than by reference to when the Agreement for Lease was entered into. Ms Albury's evidence was that this reflected her understanding of the stamp duty implications of the grant of the new leases. While it is true that, as the Commissioner submitted, the wayfinder document was directed to the time for compliance with Golden Age's obligations under the Agreement for Lease, the important point is that the document was entirely consistent with advice previously and subsequently given by Maddocks to the effect that the agreement for lease was not a dutiable transaction.
8. On around 30 March 2018, Time & Place created a detailed feasibility and cash flow analysis for the development which it provided to Golden Age in the form of an Excel spreadsheet with multiple tabs. One of those tabs, entitled "Land and Authority" sets out the timing of expenditure on various matters, including "acquisition costs", and "statutory authority costs". The version of this document created on 30 March 2018 included a line item "stamp duty on Lease Surrender and Premium at new lease" of $3,500,000 which was forecast to be payable as to $1 million in December 2018 and $2,500,000 in June 2020. The timing of these payments reflected the timing indicated by Ms Albury's wayfinder document. Time & Place revised this document from time to time, but the timing of these payments remained unchanged.
9. On 24 April 2018, Mr Andrew Melhem of Time & Place emailed Ms Albury and requested advice as to the timing of the stamp duty liability for the surrender of the lease. Ms Albury replied on 27 April 2018 to the effect that the stamp duty liability would need to be paid within 3 months of the date for financial close, which was 30 June 2019.

Agreement for lease

1. On 25 May 2018, PMNSW and Golden Age entered into the agreement for lease (Agreement for Lease). Recital B identified the basic scheme of the Agreement for Lease, being that the plaintiff would surrender its existing lease, undertake the development and PMNSW would grant new leases. Relevant provisions of the Agreement for Lease included the following: 1. Clause 6 of the Agreement for Lease dealt with Financial Close. Among other things, the "Financial Close Conditions" included the plaintiff procuring vacant possession of the Land and the release of encumbrances on its leasehold interest and its entry into one or more building contracts.43 On the Date of Financial Close, the plaintiff was to give PMNSW a stamped LPI form of Surrender of Lease (cl 6.5(a)) and the plaintiff surrendered its leasehold interest (cl 6.8(a)). 2. Clause 7 of the Agreement for Lease dealt with the grant by PMNSW to the plaintiff of licences to access the Land after the surrender of the plaintiff's leasehold interest for the carrying out of the plaintiff's development works. 3. Clause 9.2 of the Agreement for Lease provided that, at least 20 business days before the "Date of Practical Completion (general)", the plaintiff was to pay to PMNSW the Agreed Sum of $38,778,053 subject to indexation and adjustment in accordance with that clause. 4. Clause 24.2 of the Agreement for Lease provided that PMNSW was to grant the new leases. In the case of the Strata Leases, these were to take effect from the date of registration of the Strata Documents. In the case of the Commercial Lease and Retail Lease, these were to take effect from the 'Date of Practical Completion (general)'. 5. Clause 24.5 of the Agreement for Lease dealt with the various things that the plaintiff was required to do in relation to the proposed lodgement of the Strata Documents for the creation of the Strata Leases. Paragraph (b) provided that the plaintiff must procure any necessary stamping of the Strata Leases. 6. Clause 24.7 of the Agreement for Lease dealt with the various things that the plaintiff was required to do in relation to the creation of the Commercial Lease and the Retail Lease. Paragraph (b) provided that the plaintiff must procure any necessary stamping of each of those leases.
2. On 31 May 2018, Ms Albury provided an updated version of the table of key documents to Mr Melhem, and stated: There are a number of actions that need to be taken within the first 90 days after the date of the AFL (being the date it was signed by the Minister) so please focus on these at first instance.
3. This document did not include any action item for the stamping of the Agreement for Lease or payment of duty thereon and is consistent with the advice previously given that duty in respect of the grant of the new leases would be payable at the time they were granted.
4. On 8 June 2018, this version of the table was forwarded to Mr Bolic by Mr Price. In cross-examination, Mr Bolic accepted that the purpose of the document was a summary of the terms of the Agreement for Lease. However, this does not detract from the fact that the document is entirely consistent with the advice previously given by Maddocks to Mr Bolic at the meeting on 2 November 2017.
5. By 25 August 2018, the plaintiff had not presented the Agreement for Lease to the Commissioner for stamping and the payment of duty. This amounted to a tax default as three months had passed since entry into the Agreement for Lease: Duties Act s 17(1).
6. On 12 November 2018, Ms Albury sent an email to Mr Baring attaching the agreement for lease and requesting advice on the amount of duty payable on the surrender of the original lease. Relevantly, the email said: Nearly a year on from the draft duty advice you kindly provided and government has rejected any restructure of the deal and the parties have signed the AFL and are moving on towards financial close. I understand the intention is to be ready to achieve financial close at the end of this month. Our client now has a development consent to construct a mixed use development on the site and we are now nearing the time to surrender the long term lease (that expires on 30.10.2088). I attach a link to a copy of the lease and the surrender of lease that needs to be marked with duty. I also attach a link to the signed AFL and draw your attention, in particular to clause 6, which sets out the mechanism and timing in relation to financial close and the surrender of the long term lease. Can you please assist with determining the amount of duty payable on the surrender of lease? You may recall that the developer is responsible for all duty arising from all components of the transaction regardless of who is liable under the Duties Act. The money flow is: ● No consideration was payable on entry into the AFL and none is payable by either party to the other in respect of the surrender of the long term lease. ● Following the surrender of the long term lease the Developer continues to occupy the site, but under a construction licence (see clause 7 of the AFL). The licence fee payable has been calculated as the same amount that would have been payable as rent under the lease. ● Following practical completion of the works, the developer will pay to Property Management the "Agreed Sum" which is $38,778,053 subject to indexation and adjustment in accordance with clause 9.2. Property Management will then grant the various strata leases in accordance with clause 24. ● Rent of $1 is payable under the residential leases and the commercial/retail leases. Please let me know what else, if anything you need to know (or have from me/the developer) in order to determine the duty payable on the surrender of lease form.
7. Mr Baring responded by email on 15 November 2018 as follows: The position is quite straight forward. Duty is payable on the greater of the consideration given for the surrendered lease or the market value of the surrendered lease at the time of its surrender. What is the market value of the existing lease?
8. Following internal discussions within Maddocks as to the nature of the valuation required for the calculation of the plaintiff's duty liability, Mr Price emailed Ms Albury on 3 December 2018 to obtain advice on the '[d]uty valuation requirement'. On 17 December 2018, Ms Albury emailed Mr Price with the requested advice.
9. On 6 March 2019, Mr Price emailed Mr Baring and Ms Albury stating 'we really need this duty clarification please'. I infer that the duty clarification sought was as to the amount of duty that would be payable on the surrender of the Original Lease and the grant of the new leases. On 7 March 2019, Mr Baring replied and stated: In my opinion the stamp duty ramifications that arise from the Surrender of the Lease and the Grant of the Strata Leases will be as follows: 1. The Surrender of Lease will be subject to duty at 5.5% of the market value of the Existing Lease. You should have your valuer prepare a valuation of the Existing Lease ASAP. 2. the grant of the Strata Leases will be dutiable at the rate of 5.5% of the Agreed Sum ($38,778,053) as modified in accordance with clause 9.2 of the Agreement to Lease.
10. The Commissioner submits that the Court should infer that this email was not provided to the plaintiff and was only provided to Mr Price. Mr Price did not have a recollection of providing that advice to Mr Crighton but expected that he would have communicated the advice verbally to an employee of the Plaintiff. I accept that evidence.
11. On 12 April 2019, Golden Age executed a surrender of the Original Lease. On 18 April 2019, Ms Albury arranged for the stamping of the document, along with the payment of duty in the sum of $1,690,490.00. The stamped document was lodged for registration on 2 May 2019.
12. The development of the Land subsequently progressed, and by March 2021 steps began to be taken for the preparation of strata leases. On 2 March 2021, Ms Albury forwarded Mr Baring's advice excerpted at [64] to Ms Paola Di Beradino of Time & Place, and stated: We will talk to our stamping agent - the assessment for duty and physical stamping will need to be built into the timeline - this step needs to occur before the strata plan and strata leases can be lodged for registration.
13. This reflects and reiterated the advice contained in Mr Baring's email of 7 March 2019 that Golden Age's obligation to pay duty would only arise on the grant of the strata leases.

Duties assessment and subsequent appeal

1. On 7 June 2021, PMNSW issued a tax invoice for the agreed sum under cl 9.2 of the Agreement for Lease, which amounted to $39,694,294.94.
2. On 28 July 2021, Ms Albury sent a letter to the Commissioner and attached the Agreement for Lease for stamping. The letter stated that "we accept that the AFL and Leases are dutiable on the basis that the Agreed Sum payable is a premium for the AFL and the Leases". Ms Albury did not attach the strata and other leases that were envisioned by the Agreement for Lease. On 4 August 2021, Ms Albury wrote to the Commissioner requesting that the assessment be conducted on an urgent basis.
3. On 23 August 2021, the Commissioner issued a duties notice of assessment with a total amount of $2,748,247.47. As noted at [3] above, this consisted of a duty assessment of $2,168,696.50, a market interest component of $60,539.35, and a premium interest component in the sum of $520,007.03.
4. On 25 August 2021, the plaintiff paid the duty component of the assessment, but not the interest component.
5. On 27 August 2021, Mr Baring wrote a letter to the Commissioner objecting to the assessment of premium and market interest on the following bases: 1. there was no premium paid in respect of the Agreement for Lease, but rather the sum paid to PMNSW was in relation to the leases that were subsequently entered into; or 2. alternatively, the premium rate of interest should be remitted on the basis that the taxpayer took reasonable care or made a voluntary disclosure before the commencement of an investigation. The taxpayer took reasonable care by engaging advisors on the dutiable aspects of the transaction and received reasonable advice that the liability would only arise at the later date.
6. This objection was not correctly filed with the Commissioner until 10 December 2021, which is outside the 60-day period to raise objections. Nevertheless, on 14 December 2021, the Commissioner confirmed that a review officer would review the objection.
7. On 12 March 2022, the Commissioner disallowed the objection, with the review officer forming the view that the initial assessment was correct. In respect of the portion of the objection relating to the remission of interest, the objection determination stated (emphasis in original): A remission of interest is considered based on the circumstances of the case and particularly what action was taken by the Taxpayers and their representative. Firstly, in respects to market interest imposed these amounts can only be remitted in exceptional circumstances which were beyond the taxpayer's control such as fires, floods, earthquakes, or other natural disasters; key personnel not being available because of sudden resignation, ill health or death; and, Computer system breakdowns, including third party systems such as electronic funds transfer systems. The Taxpayers have not stated any exceptional circumstances contributing to the tax default therefore, the remission of market rate of interest is not applicable. The premium interest may be remitted where sufficient evidence is provided that the default was within the taxpayer's control, but the taxpayer (or their representative) has taken reasonable care. In the case of RVO Enterprises Pty Ltd as trustee for the R M O'Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWAFT 64, factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law. In Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [298-299], Ward CJ [sic] outlines that simply engaging in or retaining a professional representative is not sufficient to consider as reasonable care. Ward CJ accepts that it is a factor that (taken with others) might demonstrate reasonable care to comply with the taxation law, however, what would be more relevant would be the seeking of professional advice or the making of inquiries to the relevant taxing agency or others directed to the issue or as to the structuring of arrangements with a view to ensure that any tax liability would be met. Importantly the reasonable care standard applies to both the taxpayer and their adviser. In these respects, merely engaging a legal representative does not satisfy the reasonable care standard. The Taxpayer did not engage Revenue NSW within 3 months from the execution date nor make any efforts to make payment during this time. Therefore, I find no grounds for the remission for the premium component of interest and the imposition of full interest is confirmed.
8. On 1 July 2022, the plaintiff filed a summons commencing these proceedings.

Plaintiff's submissions

1. The plaintiff submitted that the starting point for the discretion is to understand the purpose of the imposition of the premium component of interest. The premium component of interest is a form of penalty that is imposed in order to deter conscious and willing tax defaults, in order to dissuade taxpayers who may otherwise defer payment of taxation in order to invest the money elsewhere to earn a return above the market interest component: Adams Bidco Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 702 at [157]-[158]; Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [101]. That underlying policy guides the Commissioner in the exercise of the discretionary power to remit premium interest: Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365 at 384; [1969] HCA 5.
2. The plaintiff contended that the principles that govern remission of the premium component of interest were stated by the Appeal Panel of the Civil and Administrative Tribunal in Chief Commissioner of State Revenue v Incise Technologies (2004) 56 ATR 82; [2004] NSWADTAP 19 at [62]-[63].
3. The plaintiff submitted that the Appeal Panel's statement is reflective of the current approach to the exercise of the Commissioner's discretion, and has been applied in this Court on multiple occasions: Winston-Smith v Chief Commissioner of State Revenue (2018) 108 ATR 63; [2018] NSWSC 773 at [81]-[86]; Antegra Pty Ltd v Chief Commissioner of State Revenue (2021) 112 ATR 777; [2021] NSWSC 107 at [177]-[180]; E Group (No 2) at [105]-[107].
4. The plaintiff submitted that there is no basis for the Commissioner's contention that a failure to take reasonable care should be regarded as an additional criterion to the Incise Technologies criteria. This is because the standard for remission should not be higher than the conduct that is intended to be deterred by the imposition of premium interest, which is conscious and wilful default. Making the test a failure to take reasonable care would mean that the premium component of interest would be capturing a far broader set of conduct. Further, the introduction of a criteria to take reasonable care would render the fourth Incise Technologies criterion nugatory, as there would be no circumstance where a taxpayer took reasonable care but was otherwise in wilful default.
5. In relation to the fourth criterion identified by the Appeal Panel in Incise Technologies at [62] of 'wilful default', the plaintiff submitted that there will generally be a wilful default where the taxpayer does not pay tax once assessed, as the taxpayer is taking the risk that it may be unsuccessful in any review proceedings to challenge the impost of the tax: Winston-Smith at [84]-[85]; Antegra at [180]. However, where the taxpayer has received advice that it has good prospects of challenging the assessment, there may not be a wilful default: Winston-Smith at [86]. That case is even stronger where the taxpayer was unaware of their liability, and upon being notified by the Commissioner of the liability promptly pays the tax. In the circumstances, the imposition of the premium component cannot disincentivise deferral of payment because the taxpayer was unaware of the liability. Here, the plaintiff honestly and reasonably believed, on the basis of legal advice, that it was not required to pay duty upon entry into the Agreement for Lease, and that the interest charged from that time is not payable.
6. The plaintiff submitted that it was the failure of Maddocks to advise it as to the requirement to pay duty upon entry into the Agreement for Lease that was causative of its tax default. The plaintiff had done all that it needed to do in order to obtain duty advice on the transaction, having asked first HWL Ebsworth and then Maddocks for taxation advice.
7. In relation to the specific advices given by Maddocks post-engagement, the plaintiff submitted: 1. Despite the basic transaction structure being provided to HWL Ebsworth, it was never brought to the plaintiff's attention that duty would be payable upon execution of the Agreement for Lease. Maddocks was specifically engaged to review that advice and did not bring it to the plaintiff's attention that duty would be owed sooner than expected. In particular, the sketch provided by Mr Huynh on 16 May 2017 asked expressly when duty was payable, and no comment was ever made on this issue. 2. Mr Bolic's evidence should be accepted that he was positively advised by Maddocks at the meeting on 2 November 2017 that duty would only be payable upon the registration of the leases. 3. The 5 December 2017 advice, outlined at [47]-[49] above, while including the extended definition of lease at [4.3.1], was directed towards an alternative transaction structure and did not contain any specific advice that duty was payable upon entry into the Agreement for Lease. 4. The 'wayfinder' documents, whilst not a specific advice on dutiable liabilities, did include dates regarding the plaintiff's liability to duty and when viewed in context it was reasonable for the plaintiff to assume that any duty obligation would be raised in that document. 5. The 7 March 2019 advice, excerpted at [64], from Mr Baring that included that statement that 'the grant of the Strata Leases will be dutiable at the rate of 5.5% of the Agreed Sum' indicated Maddocks' view that duty was only payable upon the grant of the leases and not the Agreement for Lease.
8. The plaintiff submitted that even if the Court finds that there was no point during the negotiation of the Agreement for Lease where it asked specifically for advice on whether duty was payable on that instrument, it was sufficient that it had engaged a firm to advise it on the duty implications of the transaction as a whole. The plaintiff had engaged solicitors with the purpose of being guided through the transaction as to its obligations and was entitled to an expectation that any duty obligation would be proactively raised by the solicitors. That expectation is confirmed by the evidence of Ms Albury and Mr Baring that they accepted that they should have raised the timing of the plaintiff's liability to duty proactively.

Defendant's submissions

1. The Commissioner submitted that the imposition of the premium interest component has multiple purposes. One purpose is to incentivise the prompt payment of tax by taxpayers. Another is as a form of penalty for the punishment of a tax default: Incise Technologies at [61]. However, the Commissioner submits that this is not its prime purpose when viewed in the context of the legislative scheme. The interest provisions in the TAA are directly followed by the penalty provisions in Pt 5 Div 2, with a range of penalties from 25% to 90%: TAA ss 27-30. By contrast, the premium component of interest is 8%, and therefore if it is a penalty it is at the low end of possible penalties for tax defaults.
2. The Commissioner draws attention to practice note 'CPN 024: Interest and penalty tax guidelines' (CPN 024), which was released in June 2022 and provides: The amount of interest and penalty tax imposed depends on the degree of culpability and are aimed at compensating the Government for the opportunity cost of unpaid revenue and deterring customers from defaulting on their tax liabilities … The premium component is 8 per cent per annum. The premium rate is imposed to deter non-compliance and ensure that defaulting taxpayers are not advantaged when compared to taxpayers who meet their taxation obligations.
3. The Commissioner submitted that contrary to the plaintiff's submission, there is no indication in the text of Pt 5 Div 1 of the TAA, or any extrinsic materials that could be used to aid in the construction of the Act's provisions, that the premium rate of interest is only imposed to deter and punish conscious and willing tax defaults. I accept that submission.
4. The Commissioner noted that the discretion conferred by s 25 of the TAA is broad and must be exercised in accordance with the circumstances of the case: Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 at [185]-[186]. The Commissioner also accepted that in order for the premium component to be remitted, the taxpayer's conduct must meet the cumulative Incise Technologies criteria. However, the Commissioner emphasised that the criteria are neither exhaustive nor determinative of the exercise of the Commissioner's discretion: Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [106] per Griffiths AJA; Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] per Payne JA.
5. The Commissioner submitted that other relevant circumstances include whether the taxpayer has taken reasonable care and where the delay in payment was the fault of the Chief Commissioner, see eg. the Commissioner's acceptance of a 50% remission of the premium interest component in Adams Bidco v Chief Commissioner of State Revenue [2019] NSWSC 702 at [149].
6. The Commissioner's rulings and guidelines are relevant to the exercise of discretion in s 25 of the TAA: Adams Bidco v Chief Commissioner of State Revenue [2019] NSWSC 702; Bayton Cleaning Company v Chief Commissioner of State Revenue [2019] NSWSC 657. CPN 024 clearly states that reasonable care is the primary principle guiding the Commissioner in the exercise of his discretion to remit interest.
7. The Commissioner accepted that the plaintiff met the first through third Incise Technologies criteria. However, the Commissioner submitted that the plaintiff was in wilful default of its obligations under the Duties Act. The plaintiff's contention that it did not know that the Agreement for Lease was dutiable is entirely inconsistent with the fact that the only transaction document that was lodged for assessment was the Agreement for Lease. The tax default was intentional. The plaintiff intended to pay duty following the completion of the development, and followed that course.
8. The evidence shows that the plaintiff, its development manager Time & Place, and its legal advisors all knew that the plaintiff would enter into an agreement for lease involving a premium. This was either because they had seen the heads of agreement, were involved in the negotiations with PMNSW for the Agreement for Lease, or were aware as a result of the discussions at the 2 November 2017 meeting.
9. Mr Bolic accepted in cross-examination that he knew that duty had to be paid within 3 months of entering into a document that gives effect to a dutiable transaction (T58.44-48). All the relevant personnel of the plaintiff and its advisors had received and read Mr Baring's draft advice that included provisions of the Duties Act that governed the plaintiff's liability for duty upon entry into the Agreement for Lease.
10. The Commissioner submitted that the plaintiff has not established its contention that it held an honest and reasonable belief that duty was not payable until the grant of leases. In particular, the plaintiff was unable to discharge its burden of proof as to the state of mind of Golden Age. The only evidence led by the plaintiff of its state of mind was that of Mr Bolic. He is not a director of the plaintiff, was General Counsel of the plaintiff from September 2017, and from January 2021 also holds the position of chief operating officer. Mr Bolic accepted that he was not involved in negotiating the heads of agreement and was not familiar with it at the relevant time and was not involved in the negotiations of the Agreement for Lease and was only brought in for specific discussions.
11. The Commissioner submitted that the plaintiff's conduct in obtaining advice also discloses that it did not reasonably hold the belief that duty would not be owed until the grant of leases as: 1. The plaintiff never provided HWL Ebsworth the heads of agreement to obtain advice on the transaction, despite that being the most relevant document. 2. Following the provision of Mr Baring's draft advice on 5 December 2017, along with the previous advice of HWL Ebsworth, the plaintiff, Time & Place, and Ms Albury each ought to have known that the Agreement for Lease was dutiable. If any of the recipients were confused or unsure of the position, they should have obtained specific advice to clarify the position. Each of these parties was experienced in property transactions and should have been aware of the duty implications of the Agreement for Lease. 3. There was no evidence that any member of the Maddocks tax group was contacted between 6 December 2017 and 12 November 2018, in which time the Agreement for Lease was negotiated and concluded. There was no evidence that Time & Place or the plaintiff requested tax advice in this time. 4. There were reasonable and prudent steps available to Ms Albury, Time & Place, and the plaintiff to take at any point in this process, such as: 1. obtaining tax and duty advice on the date at which the relevant duty liability arose; 2. obtaining a private ruling from the Commissioner; or 3. lodging the Agreement for Lease for assessment. 1. The two key dates documents provided by Ms Albury were merely summaries of the Agreement for Lease and never purported to be duty advice. This is emphasised by the fact that the items in the table always referenced the Agreement for Lease and no other obligations, such as a provision of the Duties Act. 2. Mr Baring's email of 7 March 2019 was provided to advise on the calculation of the amount of duty payable rather than on the timing of the obligation, and in any event provides no basis for the remission of interest that had already accrued on the tax default between August 2018 and 7 March 2019. 3. At no point prior to the payment of the duty in August 2021 did the plaintiff ever inquire or request advice as to the duty implications of the Agreement for Lease. The evidence lead by the plaintiff is insufficient to prove that the plaintiff had a reasonable belief that the date on which duty was payable was the grant of the new leases in 2021.
12. The Commissioner also submitted that there was a failure by the plaintiff and its advisors to take reasonable care to comply with the requirements of the Duties Act in respect of the Agreement for Lease. The size of the transaction effected by the Agreement for Lease along with the ease of obtaining advice from its advisors makes the failure to obtain specific advice a failure to take reasonable care.
13. The Commissioner submitted that Mr Bolic ought to have connected the information in Mr Baring's 5 December 2017 advice with the Agreement for Lease and should have sought advice from Maddocks. The mere assumption that Maddocks would advise the plaintiff on a question that they were never approached with is not enough to have taken reasonable care to comply with the plaintiff's obligations under the Duties Act.
14. The Commissioner also submitted that an acceptance that Maddocks failed to take reasonable care is not sufficient to discharge a taxpayer's burden to take reasonable care to comply with their taxation obligations. Engaging a development manager or a solicitor is not enough. The plaintiff would have had to have shown that it provided its advisors with all relevant information, supervised them adequately, and sought specific advice on the duty implications of a significant document that was being signed. The plaintiff had enough knowledge and advice to seek this advice, particularly bearing in mind its experience with the initial transaction executed in 2014, described at [25] above, where it had an agreement for lease stamped, and then a year later when the lease was registered had that document stamped as a collateral instrument.

Consideration

1. Section 25 of the TAA, both before and after its re-enactment, confers on the Commissioner (and on the Court standing in the place of the Commissioner under s 101) a broad discretionary power which is not subject to any limit: Chief Commissioner of State Revenue v Downer EDI Engineer Pty Ltd (2020) 103 NSWLR 772; [2020] NSWCA 126 at [151].
2. In the case of an unconfined discretionary power of this nature, the considerations which are relevant to its exercise are determined by reference to the subject matter, scope and purpose of the relevant statute, including the particular provision conferring the discretion: Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483; [2013] FCAFC 50 at [227] per Griffiths J (Edmonds J agreeing); Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365 at 384 per Windeyer J.
3. In Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, the Appeal Panel observed at [60]-[61] that the market rate component is intended to compensate the Commissioner for not having the benefit of the tax payment from the time it was due, and so approximates the ordinary lending interest rates, whereas the premium rate is a form of penalty which operates as a disincentive to taxpayers to delay tax payments. The view that the premium component is penal in nature has been accepted in later decisions, see eg. Southern Cross Community Health Care Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [443] per Emmett AJA.
4. In my view it is necessary to approach the remission question by recognising that the premium component is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment regime. Consequently, the culpability of the taxpayer in failing to pay the duty liability by the due date is an important matter in the exercise of the discretion. I do not accept the Commissioner's submission that it is a penalty at the "low end" of the scale. Depending upon the period of the delay in payment, the penalty arising from the premium component can be very significant as it was in the present case (being 24% of the duty assessed on the premium).
5. In Incise Technologies, the Appeal Panel identified (reflecting a submission made by the Commissioner in that case) four cumulative criteria which are relevant to the exercise of the discretion under s 25: 1. All principal tax that is owing and not in dispute has been fully paid; 2. There has been cooperation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; 3. Such cooperation has occurred prior to any investigation being commenced by the Commissioner or, at the very least, within a reasonable time after the request for information had been made by the Commissioner; and 4. There has been no wilful default by the taxpayer in not paying tax on time.
6. The Appeal Panel noted in Incise Technologies at [63] that the first of these criteria could be clarified to be "all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest" and that while they were all relevant and appropriate matters for consideration, they were not exhaustive. That the four criteria are not exhaustive has been confirmed in subsequent cases, eg. Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] and Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [105]-[106].
7. The Court was referred to the Commissioner's guidelines on interest and penalty tax appearing on the Revenue NSW website, which state: The premium rate of interest may be reduced if there is evidence you took reasonable care, or made a voluntary disclosure before the commencement of an investigation. However, for the purpose of payroll tax, the premium rate of interest is not reduced. … When determining whether reasonable care was taken we'll consider whether you: ● kept complete and accurate records ● Made a diligent effort to understand and comply with the law; ● Sought expert advice on uncertain or complex matters; ● Were honest in your dealings with us. We'll also consider your: ● Understanding of the law; ● Commercial experience; ● Access to expert advice; Meeting one or more of these criteria does not necessarily mean that reasonable care has been taken. All factors leading to the tax default are taken into consideration.
8. It was accepted in Adams Bidco at [158]-[162] that whether the taxpayer has taken reasonable care to comply with the taxation law is a relevant consideration for the exercise of the discretion under s 25; see also Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 at [86]; Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [301]. I agree that whether the taxpayer took reasonable care is relevant to the remission of the premium component under s 25. In particular, it is necessary to consider whether there are factors which mitigate the taxpayer's behaviour in failing to pay its tax liability on time and, in this regard, it is necessary to consider the steps (if any) taken by the taxpayer to comply with the taxation law, whether those steps were reasonable and the explanation for why, despite those reasonable steps, the tax default occurred.
9. There is no dispute that the first three criteria stated in Incise Technologies are satisfied in the present case. The plaintiff paid the duty on 25 August 2021, being two days after the issue of the Notice of Assessment and well before the request for remission of interest. The taxpayer has cooperated with the Commissioner in providing relevant information for the assessment of duty on the Agreement for Lease. While it is true that there was considerable delay in doing so, this delay has been explained. Further, this cooperation occurred voluntarily by the plaintiff providing the Agreement for Lease to the Commissioner together with the invoice from PMNSW without the Commissioner having commenced any investigation.
10. The fourth criterion is that there has been no wilful default by the taxpayer in not paying the tax on time. Incise Technologies and the decisions which have followed it have not considered in any detail the meaning of the expression "wilful default". In the analogous context of a trustee's breach of duty, the phrase "wilful default" refers to the situation where a person is conscious that, in doing the act which is complained of or omitting to do the act which it is said he ought to have done, he is committing a breach of his duty, or is recklessly careless whether it is a breach of duty or not: In re Vickery [1931] 1 Ch 572 at 583; Dalrymple v Melville (1932) 32 SR (NSW) 596 at 602; Armitage v Nurse [1998] Ch 241 at 252. It involves essentially consciousness of the breach or reckless indifference to whether it will be a breach or not. In my view, that is an appropriate meaning of "wilful default" in this context, and is consistent with the approach adopted by Emmett AJA in Winston-Smith at [84]-[86]; see also Antegra at [180].
11. In circumstances where tax has been assessed and a taxpayer fails to pay the amount assessed before the due date, it will be difficult for the taxpayer to avoid the conclusion that the default is wilful: see Winston-Smith at [85]-[86]. However, that is not the present case. Here the tax default arises from the failure to lodge the Agreement for Lease for stamping within three months of its execution.
12. It is apparent from the findings that are set out earlier in this judgment, that the explanation for how the delay in lodgement of the Agreement for Lease for stamping and payment of the duty assessed came about is as follows: 1. In late 2017, Golden Age engaged Maddocks to act for it in relation to the review, negotiation and completion of the Agreement for Lease and the leases to be entered into pursuant to it, in accordance with the heads of agreement. Maddocks' role clearly encompassed the giving of advice to Golden Age on its obligations to pay duty in relation to that transaction. 2. Golden Age sought and received advice on the duty implications of the transaction, most importantly at the meeting which occurred on 2 November 2017 at which advice was given that there would be duty payable at two points, first on the surrender of the Original Lease and second on the registration of new leases pursuant to the Agreement for Lease. I infer that the reference to "registration" of the new leases was shorthand for the time of their grant. 3. That advice was then incorporated into a wayfinder document provided by Maddocks to Time & Place and then in turn in a feasibility study prepared by Time & Place and provided to Golden Age. 4. Mr Baring, the stamp duty partner at Maddocks, gave advice on 7 March 2019, which was consistent with the earlier advice that he had provided, that duty would be payable on the surrender of the Original Lease and the grant of the strata leases pursuant to the Agreement for Lease. 5. Shortly after that email was sent, the surrender of the Original Lease was executed by Golden Age and Ms Albury arranged for it to be stamped with ad valorum duty on 18 April 2019. 6. On 2 March 2021, Ms Albury forwarded Mr Baring's advice by the email of 6 March 2019 to Time & Place. 7. On 7 June 2021, PMNSW issued a tax invoice for the amount of the premium payable under the Agreement for Lease for the grant of the new leases, in the amount of $39,694,294.94. 8. On 28 July 2021, Ms Albury forwarded the Agreement for Lease for stamping on the basis that duty of $2,167,753.50 was payable on the Agreement for Lease and grant of the new leases pursuant to the Agreement for Lease. 9. Mr Bolic's evidence which I accept was that he, in his role as general counsel. expected that Maddocks would proactively advise Golden Age on its duty liability in respect of the transaction. Maddocks did, in my view, do so through the advice given and steps referred to above. The problem is simply that in giving that advice and taking those steps Ms Albury and Mr Baring overlooked the question whether the dutiable transaction was the Agreement for Lease rather than the grant of the leases pursuant to it. 10. Similarly, Mr Price's evidence was that he and Golden Age (on whose behalf he was acting throughout) were reliant on the tax experts, by which he meant Maddocks.
13. In my view, Golden Age took reasonable care in the discharge of its obligations to pay duty on the transaction by engaging Maddocks to act for it, seeking and obtaining advice from that firm and then acting on that advice. The failure to pay duty on the Agreement for Lease arose from an oversight on the part of Maddocks, which both Ms Albury and Mr Baring candidly accepted in cross-examination, in failing to consider the duty implications of the Agreement for Lease. Given that explanation for the tax default, it was not a wilful default by Golden Age.
14. A significant matter in considering the remission question is that the duty implications of the transaction contemplated by the heads of agreement and then embodied in the Agreement for Lease were complex. First, there was a question as to the timing and calculation of the duty payable on the surrender of the Original Lease. This required the valuation of the leasehold interest of Golden Age under the Original Lease which was not straightforward and was a matter on which Maddocks' advice was necessary and sought.
15. Second, the payment of a lump sum for the new leases (referred to as the Agreed Sum) to be granted under the Agreement for Lease involved a complex question as to both timing and quantum. As to timing, there was a question as to whether the Agreed Sum payable under cl 9.2 of the Agreement for Lease was properly characterised as a premium for the Agreement for Lease or a premium for the leases to be granted pursuant to the Agreement for Lease. There is a respectable argument that unless the Agreed Sum is properly characterised as a premium for PMNSW entering into the Agreement for Lease in favour of Golden Age, the Agreement for Lease would not be a dutiable transaction. If the proper characterisation of the Agreed Sum is that it was a premium for the new leases rather than the Agreement for Lease itself, then the Agreement for Lease would not be a dutiable transaction because, although a lease, no premium would be payable for it. This is on the basis that the words "in respect of" in s 8(1)(b)(viii) properly construed mean "for": Westpac Funds Management Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 566; [2008] NSWSC 1245 at [59].
16. As to quantum, the mechanism for calculating the Agreed Sum under cl 9.2 of the Agreement for Lease meant that it was not known at the date of the Agreement for Lease what the premium would be. This was only finalised by the calculation made by PMNSW in June 2021. Hence, had the Agreement for Lease been lodged for stamping in May 2018 it would seem that the Commissioner would have been required to make assessment by way of estimate under s 11(2) of the TAA with a further assessment being made subsequently when the Agreed Sum was quantified.
17. Ultimately, it is not necessary to determine whether the Agreement for Lease was a dutiable transaction for the purposes of the application of s 25 of the TAA. The relevant point is that the question of what duty was payable and the timing of the liability was complex and Golden Age sought and acted on the advice which Maddocks gave on those questions. Both Ms Albury and Mr Baring accepted in cross-examination that they understood that Golden Age was looking to Maddocks to provide advice on those questions and that the potential for duty to be payable on the Agreement for Lease was a matter which was overlooked by them.
18. In Challenger Listed Investments Ltd v Commissioner of State Revenue [2010] VSC 464 (affirmed on appeal, [2011] VSCA 272), the taxpayer was assessed for penalty tax of 25% in respect of a tax default arising from the failure to pay duty on a transaction involving the public float of a land rich unit trust. The taxpayer had sought and acted on advice from its solicitors as to the stamp duty issues associated with the transaction and the memorandum of advice provided by the solicitors was tendered in evidence. It was apparent from the memorandum of advice that the particular section of the duties legislation which the Commissioner relied on had been overlooked by the solicitors. Pagone J concluded that had the taxpayer not succeeded in overturning the assessment of duty on another basis, it would have plainly established that it took reasonable care for the purposes of s 30(1) of the Taxation Administration Act 1997 (Vic), which permits a reduction in penalty where a taxpayer has taken reasonable care. Pagone J said at [32]: The application of taxing provisions has become increasingly complicated, and at times uncertain, with the inevitable consequence that taxpayers must rely upon expert legal advisors to navigate their way through complex and difficult provisions. The taxpayer in this case did precisely that. The duty cast upon the lawyers by the retainer and the law was to consider provisions which were likely to apply to the transactions in question. Whatever fault may be found with the legal advisors, the taxpayers took reasonable care to comply with the law by seeking advice and acting upon it. The Commissioner was in error in not considering that CLIL had taken reasonable care to comply with the taxation law. The evidence available to me would appear to satisfy the condition stipulated in s 30(3)(a) to permit the Commissioner to determine that no penalty tax was payable.
19. In my view, these observations are apposite to the present case.
20. The Commissioner submitted that the Court should draw an inference that the plaintiff's failure to call Mr Crighton and Mr Huynh is indicative of the fact that their evidence would not have assisted its case: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8. Mr Crighton, who no longer works for the plaintiff was its Chief Operating Officer at the time the Agreement for Lease was entered into and was included in a number of the emails passing between Maddocks and the plaintiff, and attended the meeting on 2 November 2017. Mr Huynh was a person at Time & Place who was involved in most of the correspondence between the plaintiff and its legal representatives, HWL Ebsworth and Maddocks.
21. In my view, no adverse inference can be drawn in respect of the failure to call Mr Crighton and Mr Huynh. The adverse inference can only be drawn where a party is required to 'explain or contradict' something, or there is evidence 'requiring an answer': Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; [2000] HCA 18 at [51]. In the present case, the Commissioner cannot point to any specific facts or evidence requiring an answer from either Mr Crighton or Mr Huynh. Further, it is not necessary for the taxpayer to call all material witnesses in order to discharge its onus of proof: Federal Commissioner of Taxation v Cassaniti [2018] FCAFC 212 at [88]. Nor are parties required to give cumulative evidence, and if multiple people attend a meeting it is sufficient if one person is called to give evidence of that meeting: SAMM Holdings Pty Ltd v Shaye Properties Pty Ltd (2017) 345 ALR 633; [2017] NSWCA 132 at [163]. The failure to call Mr Crighton to give evidence regarding the meeting of 2 November 2017 falls into that category.
22. Taking into account all the circumstances relating to the tax default and the explanation for how it came about, and bearing in mind the purpose of the imposition of the premium component, I am satisfied that it is appropriate to remit the premium component in full.

Orders

1. For these reasons, I will order that the plaintiff's application for review is allowed, that the objection decision be set aside to the extent of the decision not to remit the premium component of the interest, that the plaintiff's liability to interest to the extent of the premium component is remitted under s 25 of the TAA and that the defendant pay the plaintiff's costs.

Amendments 14 March 2024 - Correct typographical errors in [16], [23], [33], [37], [50], [113], and [116] 15 March 2024 - Correct typographical errors in [99], [110], and [112] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2024