Hamilton United Group Pty Ltd v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2020-05-06

Introduction

On 15 August 2019, the respondent issued to the applicant two Notices of Assessment, which assessed the applicant as liable for call option assignment duty (COAD), under s 107 of the Duties Act 1997 (NSW) (Duties Act), together with interest.
The applicant seeks administrative review of the decision to issue the Notices of Assessment.
The central issue in this proceeding is whether the COAD is payable. A subsidiary issue, which arises if the COAD is payable, is whether there ought to be any remission of interest.
For the reasons developed below the Notices of Assessment are confirmed, subject to the remission of interest for the period 31 July 2018 to 15 August 2019.

Jurisdiction

As the applicant has objected to the Notices of Assessment and the respondent has determined the objection, the Tribunal has jurisdiction to review the assessments, pursuant to s 96 of the Taxation Administration Act 1996 (NSW) (TA Act) and s 9 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act). It is the decision to issue the Notices of Assessment, not the decision on the objection, which is the subject of the review: see Singh v Chief Commissioner of State Revenue [2016] NSWCATAD 9 at [10] - [13] and the authorities there cited.
In conducting that review, the Tribunal is required to determine the correct and preferable decision having regard to the materials before it and the applicable law: s 63 ADR Act.

Findings of fact

The assessments arise from two parallel transactions concerning adjacent properties at Asquith. The transactions are essentially identical for all relevant purposes. It is common ground between the parties that it is sufficient that the Tribunal consider only one of the transactions in order to determine the position for both. Accordingly, the facts and analysis set out below relate to only one of the transactions.
The facts as set out below are uncontroversial and are taken from the Statement of Agreed Facts and from the underlying documents.
On 10 April 2017, the applicant (as Buyer) entered into a Put and Call Option Deed (Put and Call Option Deed) with the owner (Owner) of a property at Asquith (Property). The Put and Call Option Deed included the following provisions: 1. Grant (a) In consideration of the payment by the Buyer to the Owner of the First and Second Call Option Fees, the Owner grants to the Buyer a Call Option to purchase the Property on and subject to the terms and conditions contained in this Deed and the Contract. (b) In consideration of the payment by the Owner to the Buyer of the Put Option Fee, the Buyer grants to the Owner the Put Option to require the Buyer to acquire the Property from the Owner on and subject to the terms and conditions contained in this Deed and the Contract. Exercise of Call Option (a) Subject to this Deed, the Buyer may exercise the Call Option at any time during the Call Option Period subject to payment of all instalments of the Call Option Fee payable under Clause 5 hereof. (b) If the Buyer wishes to exercise the Call Option, the Buyer must deliver to the Owner the following items in accordance with this Deed at the same time and within the First Call Option Period or Second Call Option Period, as the case may be: (i) Notice of Exercise of Call Option duly completed and executed by the Buyer; (ii) 2 counterparts of the Contract executed by the Buyer and appropriately completed. (c) Within 5 Business Days after the exercise of the Call Option the Owner must sign both counterparts of the Contract and date both counterparts of the Contract with the date the Call Option was exercised, and give the Buyer one counterpart of the duly executed and dated Contract. DUE DILIGENCE PERIOD The Buyer may terminate both the Call Option and the Put Option created pursuant to the terms of this Deed at any time within 9 months of the date hereof by written notice to the Owner. Any monies paid prior to the date of termination are not refundable to the Buyer and are the property of the Owner. 1. Exercise of Put Option (a) Subject to this Deed, the Owner may exercise the Put Option at any time during the Put Option Period. (b) If the Owner wishes to exercise the Put Option, the Owner must deliver to the Buyer the following items in accordance with this Deed at the same time and within the Put Option Period: (i) A Notice of Exercise of Put Option duly completed and executed by the Owner; and (ii) 2 counterparts of the Contract executed by the Owner and appropriately completed. (c) Within 5 Business Days after the exercise of the Put Option the Buyer must sign both counterparts of the Contract and date both counterparts of the Contract with the date the Put Option was exercised, and give the Owner one counterpart of the duly executed and dated Contract. Exchange of Contracts 4.1 Exchange Upon exercise of either the Call Option or the Put Option the Contract is binding immediately on the Owner and the Buyer from the date that the Option is exercised even if either party fails to sign, date and exchange the Contract in accordance with this Deed. … 5. Option Fees (a) The Buyer shall, subject to clause 5(b), pay the Call Option Fee by two (2) instalments by cheque, to the Owner on or before the following dates: (i) First Call Option fee instalment $5,000.00 - payable on the date of this Deed; (ii) Second Call Option fee instalment unless this Deed is terminated pursuant to sub-clause 2(d) above $139,650.00 - payable on that date precisely nine (9) months from the date hereof; (b) In the event that the Buyer fails to pay any of the instalments of the Call Option Fee to the Owner by the date specified in paragraph 5(a) hereof, this Put and Call Option Deed may be terminated by either party by written notice to the other party. All monies paid to the Owner prior to the date of termination shall be retained by the Owner but the parties are released, subject to Clause 10, from future obligations under the Deed as and from the date of termination. (c) The Owner must pay the Put Option Fee to the Buyer on or before the date hereof by cash or cheque. On payment the Put Option Fee will be released unconditionally to the Buyer and will not be refunded or returned to the Owner in any circumstances. (d) If either the Put Option or the Call Option is exercised, then the total Call Option fee will form part of the Deposit under the Contract. (e) If neither the Put Option or the Call Option is exercised, then the whole of any Call Option Fees paid will be retained by the Owner after the Put Option End Date and will not be refunded or returned to the Buyer in any circumstances. 6. Termination 6.1 Termination If the Call Option is not exercised within the First Call Option Period or the Second Call Option Period, and the Put Option is not exercised within the Put Option Period, in accordance with this Deed, then this Deed will terminate at midnight on the Put Option End Date. 6.2 Effect of Termination Subject to clause 10, on termination of this Deed, the parties are released from future obligations under this Deed as and from the date of termination but accrued rights of the parties are not affected. 7. Merger The parties agree that the provisions of this Deed which are to apply after exercise of either the Call Option or the Put Option will not merge on exercise of such option, or on termination of this Deed, and will continue to be binding on the parties, include but not limited to provisions relating to payment of GST, duty, further assurances and confidentiality. … 11. General Provisions … 11.5 Assignment (a) Before the Call Option End Date or earlier recission or termination of this Deed, the Owner must not deal with its interest in the Property in any way except in accordance with this Deed, without the Buyer's prior written consent which shall not be unreasonably refused provided there is no substantive detriment to the interest of the Buyer. This prohibition includes but is not limited to any of the following dealings: the sale of the freehold; a lease, licence or parting with possession; granting a security interest, mortgage, charge or pledge; increasing any amount of money secured over an interest in the Property on the date of this Deed whether by a security interest, mortgage charge or pledge; granting of any other interest such as an easement, positive covenant or restriction on title; any conversion, consolidation or subdivision. (b) The Buyer may, by notice in writing given to the Owner at any time prior to the expiration of the Call Option Period, nominate another person or entity who will exercise the Option in place of the Buyer. In that event, the Notice of Exercise of Option and the Contract will be amended by the parties to substitute the name of the Nominee in the place of the Buyer in this Deed and the Contract will operate as though the Nominee was at all times a party in place of the Buyer. … (emphasis in original)
The following terms are defined in cl 12.1 of, and the Reference Schedule to, the Put and Call Option Deed: 1. "Call Option" means "the call option granted by the Owner to the Buyer pursuant to this Deed"; 2. "Call Option Start Date" means "the 43rd day after the date of this Deed"; 3. "Call Option End Date" means "the day 18 months after the date of this Deed"; 4. Contract means "the contract for sale of the Property in Annexure A requiring completion 42 days from the date of such Contract subject to any variation required or permitted by this Deed"; 5. "Put Option" means "the put option to require the Buyer to purchase property in accordance with this Deed"; 6. "Put Option Period" means "the period commencing at 9.00am on the Put Option Start Date and terminating at 5.00pm on the Put Option End Date"; 7. "Put Option Start Date" means "the 1st day after the Call Option End Date"; and 8. "Put Option End Date" means "the 21st day after the Call Option End Date".
Clause 2(d) of the Put and Call Option Deed was drafted by Mr Wehbe, the applicant's solicitor, with a view to providing the applicant with the ability to terminate any obligation to pay further monies to the Owner in the event that a development of the Property was not possible. At the time of entry into the Put and Call Option Deeds, the applicant intended to apply for the removal of a heritage affectation which was an impediment to the proposed development.
Mr Wehbe was of the view that no concluded or enforceable rights were granted to the Owner and the Owner's rights were contingent.
In October 2017, the applicant and the Owner entered into a Deed of Variation To Put and Call Option Deed (Deed of Variation), by which: 1. cl 2(d) of the Put and Call Option Deed was amended by the replacement of the expression "9 months" with the expression "15 months". In other words, the right of the Buyer to terminate both the Call Option and the Put Option by written notice to the Owner under cl 2(d) of the Put and Call Option Deed was extended by 6 months to be at any time within "15 months of the date of this Deed"; and 2. the "Call Option End Date" was changed to "the day 27 months after the date of this Deed", an extension of 9 months.
Thus the Put and Call Option Deed, as varied, contemplated the following time periods: 1. a period of 15 months from 10 April 2017, described as the Due Diligence Period, in which the applicant "may terminate both the Call Option and the Put Option created pursuant to the terms of this Deed"; 2. the Call Option Period, running from the 43rd day after 10 April 2017 until 27 months after 10 April 2017; and 3. the Put Option Period, running from the first day after the expiration of the Call Option Period until the 21st day after the expiration of the Call Option Period.
In other words, the Put and Call Option Deed, as varied, contemplated the following timeline: DATE EVENT 10 April 2017 Date of Put and Call Option Deed and start of Due Diligence Period 23 May 2017 Start of Call Option Period 10 July 2018 End of Due Diligence Period 10 July 2019 End of Call Option Period 11 July 2019 Start of Put Option Period 31 July 2019 End of Put Option Period

On 23 November 2017, the applicant (as Assignor) entered into a "Deed of Nomination of the Benefit of the Grantees Interest under a Deed of Put and Call Option" (Nomination Deed) with a third party (as Assignee), by which the applicant assigned the Call Option to the Assignee.
The Nomination Deed provided in so far as is presently relevant: RECITALS A. ..., who are the registered proprietors of .... Asquith, NSW, 2077 (referred to in the Deed as the "Grantor") entered into a Put and Call Option Deed with the Assignor dated 10 April 2017 granting the Assignor the option to purchase the property at ... Asquith, NSW 2077 for a purchase price of $1,396,500.00. The said Put and Call Option Deed was later amended by virtue of the Deed of Variation to Put and Call Option Deed dated 20 October, 2017 as entered into between the Grantor and the Assignor. B. The said Put and Call Option Deed, as varied by the said Deed of Variation to Put and Call Option Deed, is referred to as "the Deed" for the purpose of this deed. … D. Clause 11.5(b) of the Deed permits the transfer of the rights of the option to purchase. ... F. The assignors have agreed to nominate the Assignee as the purchaser of the property as permitted by the Deed on the terms and conditions on which are set out in this deed. OPERATIVE PART … 2. In consideration of $199,100.00 (inclusive of GST if any, and subject to the adjustment as described in clause 8(b)) ("Nomination Fee") paid by the Assignee to the Assignor, the Assignor as beneficial owner assigns and nominates to the Assignee absolutely the Assignor's right title and interest (without any encumbrances) under the Deed. …

Duties Act The salient provisions of Chapter 2 of the Duties Act are set out below: 12 When does a liability for duty arise? (1) A liability for duty charged by this Chapter arises when a transfer of dutiable property occurs. (2) However, if a transfer of dutiable property is effected by an instrument, liability for duty charged by this Chapter arises when the instrument is first executed. ... 16 Lodging instrument or written statement with Chief Commissioner (1) A transferee who is liable to pay duty under this Chapter or Chapter 2A in respect of a dutiable transaction must, within 3 months after the liability arises, lodge with the Chief Commissioner: (a) the instrument that effects the dutiable transaction …. 17 When must duty be paid? (1) A tax default does not occur for the purposes of the Taxation Administration Act 1996 if duty is paid within 3 months after the liability to pay the duty arises… The salient provisions of Chapter 3 of the Duties Act are set out below: Chapter 3-Certain transactions treated as transfers Part 1-Preliminary 105 Introduction and overview (1) This Chapter charges duty at the same rate as for a transfer of dutiable property under Chapter 2 on certain transactions which are not "dutiable transactions" under Chapter 2. (2) This Chapter also charges duty on certain transactions involving foreign persons that are not "surcharge duty transactions" under Chapter 2A, at the same rate under that Chapter as for a transfer of residential-related property to a foreign person. Part 2-Transactions involving put and call options 106 Definitions In this Part: assign or assignment includes transfer, and a reference to the assignment of a right under a call option includes a reference to a transfer of the call option. call option means a right to require a person to sell dutiable property that is conferred by an agreement or arrangement (being an agreement or arrangement that is not a dutiable transaction). put option means a right to require a person to purchase dutiable property that is conferred by an agreement or arrangement (being an agreement or arrangement that is not a dutiable transaction). residential land has the same meaning as in Chapter 2A. 107 Assignment of rights under call option dutiable as transfer (1) If a person (A) who has a right under a call option to require another person (B) to sell dutiable property assigns that right, so that the option is exerciseable by a third person (C), duty under Chapter 2 is chargeable on that assignment as if the assignment were a transfer of the dutiable property concerned. The duty chargeable on that assignment is referred to in this Part as call option assignment duty. (1A) Duty under Chapter 2A is also chargeable on the assignment if A is a foreign person and the dutiable property concerned is residential-related property. The duty chargeable on that assignment is additional to call option assignment duty and is referred to in this Part as surcharge call option assignment duty. (2) For the purposes of this section: ... (b) if, on or in connection with the exercise of a call option, A, for valuable consideration, enters into an agreement or arrangement under which A nominates a third person (C) as the purchaser or transferee of dutiable property the subject of a call option, A is to be treated as having assigned the right under the call option to require B to sell the dutiable property so that the option is exercisable by C. (3) An assignment is chargeable with duty as a consequence of this Part only if the person who may be required under the call option to sell the dutiable property (that is, B) has a right under a put option to require A, an associated person of A or an assignee of A to purchase the dutiable property. (4) If the assignment is chargeable with call option assignment duty, Chapter 2 applies in respect of the assignment in the same way as it applies to other transfers of dutiable property, and a reference in this Act to a dutiable transaction includes such an assignment, subject to this Part. (4A) If the assignment is chargeable with surcharge call option assignment duty, Chapter 2A applies in respect of the assignment in the same way as it applies to other transfers of residential-related property, and a reference in this Act to a surcharge duty transaction includes such an assignment, subject to this Part. (5) For the purposes of Chapters 2 and 2A, the transfer of dutiable property (including dutiable property that is residential-related property) is taken to occur when the assignment is made. (6) This section applies regardless of when the call option or put option is exercisable. (7) An assignment of a right under a call option to purchase dutiable property, as referred to in subsection (1) or (2), is referred to in this Part as a call option assignment. 108 Person liable to pay call option assignment duty (1) The call option assignment duty chargeable on a call option assignment is payable by the person who assigns the right under the call option to require another person to sell dutiable property (the option holder). (2) Accordingly, the option holder is taken, for the purpose of charging duty under Chapter 2, to be the transferee of the dutiable property. 108A Person liable to pay surcharge call option assignment duty (1) Surcharge call option assignment duty on a call option assignment is payable by any foreign person who assigns the right under the call option to require another person to sell residential-related property (the foreign option holder). (2) Accordingly, the foreign option holder is taken, for the purposes of charging duty under Chapter 2A, to be the transferee of the residential-related property. 109 Determination of dutiable value of transfer For the purposes of Chapters 2 and 2A, the dutiable value of dutiable property (including residential-related property that is dutiable property) that is subject to a call option assignment is taken to be the greater of: (a) the sum of the consideration for the assignment of the right under the call option and the consideration payable in the event that the call option is exercised (being in either case the amount of monetary consideration or the value of non-monetary consideration), and (b) the unencumbered value of the dutiable property. … 111 Exemptions (1) No duty is chargeable as a consequence of this Part on a call option assignment if the Chief Commissioner is satisfied that… (b) the call option and the put option form part of a scheme of call options and put options granted by proprietors of a business that: (i) were granted for the sole purpose of facilitating the continuation of the business by one or more of the proprietors (the continuing proprietors), and (ii) are not exercisable except on the occurrence of a specified event that would cause the continuing proprietors to seek to acquire the interest of one or more of the other proprietors of the business, or… (emphasis added)

The provisions providing for the imposition of COAD were introduced into the Duties Act by the State Revenue Legislation Amendment Act 2005 (NSW).
The Explanatory Note for that amendment provided: Schedule 1 [14] imposes transfer duty on the assignment or transfer of a right under a call option to purchase dutiable property from another person. Transfer duty will be payable only if the person from whom the dutiable property may be purchased also has a right, under a put option, to require the holder of the call option, or an associated person, to purchase the dutiable property. Duty is payable as if the assignment or transfer were a transfer of the dutiable property concerned. The person liable to pay the duty is the option holder or transferor of the call option.
The Second Reading Speech included: Amendment of the Duties Act Put and call options The amendments close 2 loopholes in the duties legislation which had the potential to allow duty to be avoided. The first relates to the use of put and call options. Simultaneous put and call options can have a similar effect to an agreement for sale of the property, so that an assignment of the call option is effectively a sub-sale of the underlying property. There is evidence that put and call options have been used to avoid duty on sub-sales of property, particularly in relation to purchases "off-the-plan". The bill provides that an assignment of a call option over property in respect of which a put option is also in existence will be liable to duty as if it were an agreement for the sale or transfer of the property. This liability will fall on the assignor, as this would impose the same liability to duty as applies to the purchaser under an agreement prior to a sub-sale. As the amendment only applies upon assignment of an option, it will not inhibit the granting of put and call options as a legitimate commercial practice. As a further safeguard, the provisions will not apply if the Chief Commissioner is satisfied that the options are being used solely for financing purposes or have been entered into under arrangements relating to the continuation of a business by its proprietors.

Consideration

The issue for consideration is whether s 107 of the Duties Act applied to the assignment of the Call Option effected on 23 November 2017. It is common ground that this is to be determined as at the time of the assignment, which occurred during the Due Diligence Period and the Call Option Period, but prior to the Put Option Period.
Section 107(1) requires that the applicant (A) had a right under a call option to require the Owner (B) to sell the Property and that A assigned that right so that the option became exercisable by a third person (C). It is common ground that s 107(1) was satisfied as at 23 November 2017 when the assignment occurred.
Satisfaction of s 107(1) is a necessary but not a sufficient condition for the imposition of the COAD. It is also necessary for s 107(3) to be satisfied.
Relevantly for present purposes, s 107(3) will be satisfied if, as at the time of the assignment on 23 November 2017, the Owner (B) had a right under a put option to require the applicant (A) to purchase the Property. The applicant contends that the Owner did not have such a right as at 23 November 2017 and the respondent contends that the Owner had such a right as at that date.
The determination of this issue depends upon the proper construction of the Put and Call Option Deed and of s 107(3) as at 23 November 2017.

Put and Call Option Deed

The proper construction of the Put and Call Option Deed involves an objective determination of what the parties to that Deed agreed by their entry into it. In this regard, the subjective understanding of Mr Wehbe as to the effect of that Deed is not relevant.
Clause 1(b) of the Put and Call Option Deed provided that "In consideration of the payment by the Owner to the [applicant] of the Put Option Fee, the [applicant] grants to the Owner the Put Option to require the [applicant] to acquire the Property from the owner on and subject to the terms and conditions contained in this Deed and the Contract".
This suggests that the applicant and the Owner objectively intended by their entry into the Put and Call Option Deed to create a Put Option from that point of time, but that the Put Option would be subject to the terms of the Put and Call Option Deed and the Contract. The proposition that the Put Option was created as and from the time of entry into the Put and Call Option Deed is supported by other clauses of that Deed. Clause 2(d) refers to the "…Put Option created pursuant to the terms of this Deed…" and cll 3, 4, 5(d) and (e), and 6.1 contemplated the existence of a Put Option which had been created but had not yet been exercised.
The salient terms of the Put and Call Option Deed to which cl 1(b) was subject are as follows.
First, cl 2(d), which (as amended) provided that the applicant "... may terminate both the Call Option and the Put Option created pursuant to the terms of this Deed at any time within 15 months of the date hereof by written notice to the Owner". Thus, the Put Option created by the Put and Call Option Deed was able to be terminated by the applicant within the Due Diligence Period.
Secondly, cl 3(a), which provided that "Subject to this Deed, the Owner may exercise the Put Option at any time during the Put Option Period". The cumulative effect of the definition of "Put Option Period" and the related definitions of "Put Option Start Date", "Put Option End Date" and "Call Option End Date", is that the Put Option Period was a period of 21 days commencing on the day after the Call Option End Date (being 27 months after the date of the Put and Call Option Deed). As noted above, the Put Option Period was to run from 11 July 2019 until 31 July 2019.
Thus, the effect of the Put and Call Option Deed (as amended) was to create in the Owner a right to require the applicant to purchase the Property from the Owner, but that right - immediately prior to the time of the assignment of the Call Option on 23 November 2017 - was: 1. not immediately exercisable, and would not be exercisable until the Put Option Period (11 to 31 July 2019); and 2. defeasible, in that could be terminated if the applicant were to choose to do so.
The Put and Call Option Deed (cll 3 and 4) also created in the applicant a correlative obligation to purchase the Property from the Owner if the put option were to be exercised.

Section 107

The constructional choice presented to the Tribunal is whether the "right under a put option to require A ... to purchase the dutiable property" in s 107(3) is to be construed: 1. as excluding from the set of such rights those which are not immediately enforceable or are defeasible (narrow construction), as the applicant contends. The applicant contends that this construction should be preferred because a "right ... to require" must be immediately enforceable and give rise to an extant correlative duty or obligation in another; or 2. as including all such rights including those which are not immediately enforceable or are defeasible (wider construction), as the respondent contends. The respondent contends that such a construction arises from the text of s 107, its context, and the absence of any reason to read it down in the manner suggested by the applicant.
In construing s 107(3), the start and end point is its text considered in its context (including the Duties Act as a whole, its legislative history and any extrinsic materials) and purpose: see Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126 at [112]; Secretary, New South Wales Ministry of Health v W [2020] NSWCA 212 at [63] and the authorities there cited.
Section 107(3) refers to a right in unqualified terms. It is not expressed to be limited to rights which are indefeasible or immediately enforceable.
The right is one which must arise under a "put option". However, the definition of "put option" in s 106 is expressed in similarly unqualified and general terms. It "means a right to require a person to purchase dutiable properly that is conferred by an agreement or arrangement ...".
There is also nothing in the text of the Duties Act more generally or the extrinsic materials which suggests that the expression "right under a put option to require A… to purchase the dutiable property" should not include a right that has been created but is not immediately enforceable or is defeasible.
Further, as to the absence of immediate enforceability, a construction which limits s 107 to rights which are immediately enforceable would be inconsistent with the terms of s 107 itself. Section 107(6) provides that s 107 applies regardless of when the put option is exercisable. Thus, s 107 expressly contemplates that the right may not be immediately enforceable and that put options which are exercisable at a future time are nevertheless put options capable of falling within the operation of s 107. Similarly, s 111 of the Duties Act contemplates the existence of a put option that is only exercisable upon the occurrence of s specified event.
Further, as to the defeasibility of the right held by the Owner to require the applicant to purchase the Property, there are several salient points.
First, cl 2(d) of the Put and Call Option Deed empowered the applicant to "terminate both the Call Option and the Put Option". The word "both" is defined in the Macquarie Dictionary as: "adjective 1. The one and the other: give both dates. -pronoun 2. The two together: both had been there."
Thus, cl 2(d) contemplated that the Call Option and the Put Option would be terminated together and not that the applicant could terminate one of them but not the other.
Secondly, at no time prior to the assignment did the applicant seek to terminate, or terminate, the Call Option and the Put Option (or indeed, either of them). Thus, the Put Option was extant at the time of the assignment of the Call Option.
Thirdly, from the time of the assignment, it is doubtful that the applicant retained any power to terminate the Put Option in circumstances where: 1. the Call Option and the Put Option had to be terminated together; and 2. the applicant could not terminate the Call Option in circumstances where the applicant had assigned all of its "right, title and interest (without any encumbrances) under the [Put and Call Option Deed]".
For all of the above reasons, the expression in s 107(3) "right under a put option to require A…to purchase the dutiable property" should be given the wider construction, and includes the right created under the Put and Call Option Deed described at [36] above. It follows that the assessment was correct.

interest

I turn now to consider whether there should be a remission of interest.
The applicant seeks a remission of the market component of interest for the period from 6 February 2018 (lodgement of the Nomination Deed) until 15 August 2019 (Notice of Assessment); and a remission of all of the premium component of interest.

Facts

The facts relevant to the determination of this issue are set out below. They are also uncontroversial and again are taken from the Statement of Agreed Facts and the underlying documents.
On 6 February 2018 Apex Lawyers Pty Ltd, acting for the Assignee, submitted documents, including the original Nomination Deed executed on behalf of the applicant, to the respondent for stamping.
On 22 March 2018 the respondent advised Apex Lawyers Pty Ltd that the applicant was liable for COAD, and requested details of the applicant's legal representative.
On 6 April 2018, Apex Lawyers responded to the 22 March 2018 letter, advising the respondent that the applicant's legal representative was Mr Wehbe of Wehbe & Co.
On 9 April 2018, the respondent wrote to Wehbe & Co in the following terms: I refer to the above matter and note your client Hamilton United Group Pty Ltd has entered into a Deed of Nomination dated 23 November 2017, nominating another party to exercise the option to purchase the above property which was granted under the Put and Call Option Deed dated 10 April 2017. As a result of the nomination, your client is liable to call option assignment duty under Chapter 3 of the Duties Act 1997. If your client is a foreign person, as defined, surcharge call option assignment duty is also payable. If the liability has already been assessed and paid, please provide a copy of the stamped Nomination Deed. If not, please lodge: 1. Your client's counterpart Nomination Deed. 2. The enclosed Purchaser/Transferee Declaration, completed by your client (your client as the option holder is deemed to be the transferee for the purposes of call option assignment duty). 3. If your client is not a foreign person, as defined, please provide evidence of this. Please refer to the enclosed Explanatory Notes and Supporting Evidence for definitions and the evidence required. Please reply within 28 days and quote my reference in your correspondence.
On 2 May 2018, Mr Wehbe wrote to the respondent, seeking a further 21 days in which to respond. The respondent agreed to that extension of time.
On 28 May 2018, Mr Wehbe wrote to the respondent, setting out why the applicant took the view that COAD was not payable. He indicated that this view was supported by senior counsel. Mr Wehbe's letter included: The essential qualification is that an assignment of a call option is chargeable with duty only if the person who may be required under the call option to sell the dutiable property has a right under a put option to require the other party, or his associate, to purchase the dutiable property. In this regard, the key words in the definition of 'put option' in s106 (repeated in s107) are 'right to require a person to purchase' - the right must be one which can be described as a right to require the buyer to purchase the property. During the Due Diligence Period set out above, it is clear that our client can terminate both the Call Option and the Put Option. In other words, during the Due Diligence Period, the Owner … had no more than a potential right to require our client to purchase the property. What [the Owner] had was future property, which may have become a right had our client allowed it. It follows that in the Due Diligence Period, the arrangement is not such as to engage s107. It is also noted that s107(6) does not alter this result. That sub-section provides that s107 applies regardless of when the call option or put option is exercisable. But here, as the Owner did not acquire a 'put option' as defined, the exercise period is irrelevant. (emphasis in original)
At this stage of the opinion of senior counsel was oral and had not been reduced to writing.
On 14 June 2018, the respondent wrote to Mr Wehbe in the following terms: There is an express grant of a put option in clause 1(b) of the Put and Call Option Deed. It is not considered merely because the right is conditional that it is anything less than the grant of that right. However, if you would like to lodge a copy of any written opinion you received from [senior counsel] in this matter I will consider its contents. Otherwise please lodge the items numbered 1-3 of my letter dated 9 April 2018. Please reply within 28 days.
On 4 July 2018, Mr Wehbe wrote to the respondent, advising that the written opinion of the applicant's senior counsel should be available for forwarding to the respondent in the week commencing 23 July 2018.
On 31 July 2018, Mr Wehbe provided to the respondent a copy of a written opinion of senior counsel of that date. That opinion had been addressed to Mr Anthony Watson of Mills Oakley. The essence of that opinion was as follows: 11. The question I am asked is whether an assignment of the benefit of the call option under the Deed will be subject to call option assignment duty during the period that the holder of the call option (the Buyer under the Deed) has the right to terminate the Deed as a consequence of clause 2(d) of the Deed. My instructing solicitor considers that call option assignment duty is not payable in these circumstances for the following reason: "The normal concept of rights are that they are present property, albeit exercisable in the future. Here what the owner had was future property, which may become a right if our client were to allow it. In other words, the owner is a step too far away to have a rights. What the owner has is an agreement under which it will acquire a put option at the expiry of the due diligence period." 12. I agree with this conclusion and can express my reasoning shortly as follows. 13. By s 107(3) call option assignment duty will only be payable, if at the time of the assignment by A of the benefit of its rights under a "call option" to require another person (B) to sell dutiable property, it can be said that B has a right under a "put option" to require A (or an associate/assignee of A) to purchase the same dutiable property. That B must have the right to require A (or an associate/assignee of A) to purchase the property is reiterated by the definition of "put option" in s 106. 14. During the period that the Buyer had the right to terminate the Deed under a clause in the form of cl 2(d) of the Deed, the Owner did not have a right under a "put option" (within the meaning of s 106) to require the Buyer (or an associate/assignee) to purchase the property. This is essentially because the ability of the Buyer to terminate the call/put options during that period meant that it had the ability to control whether to not the Owner would ever be able to exercise the put option (the put option only being capable of exercise after the call option expired). 15. The key words in the definition of "put option" in s 106 (repeated in s 107(3) are "right to require a person to purchase" - the right held by the Owner must be one which can be described as a right to require the Buyer to purchase the property. "A correlative obligation is usually implicit in the conferment of a right": Cadogan Estates Ltd v McMahon [2000] 3 WLR 1555 at 1566 per Lord Millet; MW v Director-General of the Dept of Community Services [2008] 244 ALR 205 at [77]. Here, it is explicit that there must be a correlative obligation ("a right … to require A … to purchase the dutiable property"). During the period that the Buyer can terminate the call/put options (but most importantly the put) the Buyer is not subject to any obligation to purchase the property - the Owner has no more than a potential right to require the Buyer to purchase the property, and hence the Buyer has no more than a potential obligation (the existence of which is entirely within its control). In my opinion, that is not enough to engage s 107. 16. While clause 1(b) of the Deed operates as a grant of a put option to require the Buyer to purchase the property, this is expressed to be subject to the terms and conditions of the Deed. Those terms and conditions include clause 2(d) which gives the Buyer an unfettered discretion to terminate the Deed at any time within 9 months after date of the Deed. It follows from clause 3(a) that the put option will not be capable of exercise before that 9 months period expires. Whether the transaction whereby a call option is assigned is liable to duty must be determined by having regard to the real nature or substance of the transaction rather than its form: Coles Myer Ltd v Commissioner of State Revenue (Vic) 98 ATC 4537 at 4545 and 4551. The substance of the Deed is that until the expiry of 9 months from the date of the Deed, the Deed merely creates a call option without a put option of the kind which satisfies s 107(3). On the expiry of that period of 9 months without the Buyer having terminated the Deed, the position will change the Deed will then become one which is capable of attracting s 107(1) and (2) if an assignment of the call option occurs. (emphasis in original)
A little over one year later and on 15 August 2019, the respondent wrote to the applicant, asserting that the assignment the subject of the Nomination Deed was liable to COAD and that interest was payable. The letter enclosed the Notice of Assessment.
The 15 August 2019 letter set out the salient provisions of the Put and Call Option Deed, Deed of Variation, the Nomination Deed and the Duties Act. It continued: … In claiming that your client is not liable to pay you seek to rely on a counsel's opinion ... dated 31 July 2018. We note that this opinion (at paras [11]-[16]) relies on clause 2(d) of each of the two Put & Call Option Deeds (quoted above) for the proposition that the respective owners of the two properties do or did not have a corresponding 'put option' within the meaning of sec. 106 of the Act (so that sec. 107(3) of the Act is not satisfied). We do not agree with this proposition. As set out above (and as its' name indicates) the scheme of each Put & Call Option Deed (being the 'agreement' or 'arrangement' referred to in the definitions of 'call option' and 'put option in sec. 106 of the Act) is as follows. First, there is an unconditional grant of a call option, exercisable by your client or (if a nomination occurs) its nominee during the call option period. (It was agreed by the parties (clause 4.2) that the grant of these call options gave your client a caveatable interest in the subject land. Following the assignment of the options, this interest has been acquired by the respective assignees/nominees, and it is they who have lodged caveats over the land to protect that interest). Second, there is an unconditional grant of a put option, exercisable by the respective owners of the two properties during the put option periods - which do not commence until the day after the call option periods (as extended by the Deeds of Variation) have expired. (In this regard, it is clear from sec. 107(6) of the Act that this section applies regardless of when the call option or put option is exercisable. Indeed, it is commonplace for a put and call option arrangement (like the one in this matter) to provide for the call and put options to be exercisable in successive periods rather than during the same period.) Third (and in respect of each of the Put & Call Option Deeds), it is only if the call option is not exercised within the call option period, and the put option is not exercised with the put option period (both of these periods being extended by the Deeds of Variation), that each of the put and call option agreements or arrangements will then terminate (clause 6.1). (This is the "termination of the Deed" referred to in clause 11.5(a) of each Put & Call Option Deed.) Contrary to what is suggested in counsel's opinion, the creation - and continued existence - of both components of this typical put and call option agreement or arrangement is or was not affected by the presence of clause 2(d) of each Put & Call Option Deed. Under this clause, your client (Hamilton United Group Pty Ltd) is or was granted the right to "terminate both the Call Option and the Put Option created pursuant to the terms of this deed" (emphasis added), this right be exercisable by your client with 15 months after the date of the deed (as extended by the Deeds of Variation). As the words I've emphasised recognise, this is or was a right to terminate the call and put options which had already been created by the earlier parts of the deed - not a right which prevented either of those options being created in the first place (and which were otherwise exercisable in accordance with the terms of the deed). Unless the clause 2(d) right is exercised, both options continue until the expiry of the respective call and put option periods. Clause 6.1 of each Put and Call Option Deed makes it clear that it is only if neither option is exercised during these periods that the deed will then terminate, and it is only upon such termination that the parties are released from their respective obligations under the deed (clause 6.2). (In the meantime, the respective owners of the properties charged the subject land with the performance of their obligations under the deed (which would include their obligations in respect of the corresponding put options) (clauses 4.2(a), (b) & (c)). Moreover (and in respect of both options), your client did NOT exercise its' clause 2(d) right. Rather - and by the Deeds of Nomination - it assigned (for valuable consideration) both call options to the respective nominees/assignees (such nominations/assignments being authorised by clause 11.5(b) of each Put & Call Option Deed). In the unlikely event of neither of these options being exercised by the respective assignees (if they've not been exercised already) the put options (which have remained in existence all along) can still be exercised by the respective owners of the two properties. (It is apparent from the heading of clause 2(d) ('Due Diligence Period') that the purpose of this clause was to give your client some time to do his due diligence with respect to the viability of the two call options and (related to this) the proposed development of the land. It is evident from the subsequent assignments of the call options (each for a consideration of upwards of $200,000) and (following the assignments) the subsequent development consent that the call options were valuable - and your client realised their value by the call option assignments.) It is for these reasons that we maintain that your client is liable to pay call option assignment duty under Part 2 of Chapter 3 of the Act …
After explaining how the assessed COAD had been calculated, the 15 August 2019 letter continued: … As the call option assignment duty payable on the two call option assignments was not paid within 3 months of the assignments (or at all) your client has committed a tax default in respect of which it is also liable to pay interest and penalty tax Part 5 of the Taxation Administration Act 1996 (NSW) (TAA) (see Duties Act 1997 (NSW); secs. 12(1), 13 and 107(5) and TAA; secs.21(1),22,26(1)). However, in the circumstances we will remit the interest for the period 31 July 2018 up until today, while we considered your submissions, and have remitted all the penalty tax (cf. TAA; secs.22,25,33). The attached notices of assessment include full interest, however if duty is paid by the due date shown on the notices the amounts of interest payable will be reduced to $3,062.86 in respect of the assessment issued under Duties Assessment Number 9329004 and $3,222.28 in respect of the assessment issued under Duties Assessment Number 9329100. Therefore, a total of $75,760.86 will be payable under 9329004 and $79,704.28 will be payable under 9329100, if paid by the due date. If not paid by the due date, interest will continue to accrue (on a daily basis) until the duty assessed on the call option assignments has been paid in full. It will be necessary for your client to complete and forward the attached Purchaser/Transferee Declaration (cf. Duties Act 1997, sec.16A). (For the purposes of assessing the call option assignment duty we have assumed that the transferee, Hamilton United Group Pty Ltd, is not a 'foreign person' within the meaning of sec. 104J of the Duties Act 1997 (NSW) (on the basis that Mr Pyatigorsky (its' sole shareholder and director) is an Australian citizen and/or was ordinarily resident in Australia at the time of the assignments). If that proves not to be the case, then the assignment of the options (which are residential related property within the meaning of sec. 104K(b) of the Act)) will also be liable to surcharge call option assignment duty (Duties Act 1997 (NSW) secs. 107(1A) & 107(5)). …
On 2 October 2019, by letter of that date, the applicant lodged an objection against the Notice of Assessment. The objection contended that COAD was not payable, but if it was payable then all interest should be remitted.
On 17 December 2019, by letter of that date, the respondent disallowed the objection and refused to remit interest.
On 15 January 2020, the applicant commenced this proceeding.
On 23 March 2020, Mr Boris Pyatt, the director of the applicant, contacted the Office of State Revenue by telephone seeking to make payment arrangements to pay the principal of the outstanding COAD by instalments. His details were taken and he was informed that he would be contacted by an officer from the collection department of the Office of State Revenue.
On 6 April 2020, Mr Pyatt forwarded email correspondence to the Office of State Revenue requesting a response to his previous enquiry.
The applicant has not paid the COAD or interest assessed.

Applicable law

The following provisions of the TA Act are relevant to the issue of remission of interest.
Section 3 of the TA Act defines: 1. a "tax default" as "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of the tax that the taxpayer is liable to pay"; and 2. "tax" in terms which include COAD.
Section 4 of the TA Act provides that the Duties Act is a "taxation law" for the purposes of the TA Act.
Division 1 of Part 5 of the TA Act provides in so far as is presently relevant: Division 1-Interest

21 Interest in respect of tax defaults (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. 22 Interest rate (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. … 25 Remission of interest 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.

Division 3 of Part 10 of the TA Act provides, in so far as is presently relevant: Division 3-Refund of amounts and payment of interest following successful objection or review 104 Refund of amount If a taxpayer's objection is allowed in whole or in part or a taxpayer's application for review is successful, the Chief Commissioner must, subject to section 19, refund any amount paid in excess of a requirement for payment under the relevant taxation law. 105 Payment of interest (1) In addition to an amount refunded under this Division, the Chief Commissioner is required, subject to section 19, to pay interest on the amount calculated on a daily basis from the date of its payment by the taxpayer until the date of the refund at the market rate component under section 22. (2) The requirement under this section to pay interest on an amount refunded to the taxpayer extends, subject to section 19, to an amount of land tax or payroll tax paid by and refunded to any other member of a group to which the taxpayer belongs if: (a) (as a consequence of the objection of the taxpayer being allowed in whole or in part or the review being successful) the Chief Commissioner makes a reassessment of the amount of land tax or payroll tax the other member of the group is liable to pay, and (b) the reassessment shows that the other member of the group is entitled to the refund.

Consideration

As the Duties Act is a "taxation law" for the purposes of the TA Act (s 4 TA Act), the failure of the applicant to pay the tax (i.e. the COAD) that it was liable to pay in accordance with the TA Act constitutes a "tax default" (s 3 TA Act).
As a tax default has occurred, the applicant is liable under s 21 of the TA Act to pay interest on the amount of tax unpaid calculated on a daily basis from: 1. the end of the "last day for payment" until it is paid; 2. at the interest rate from time to time applying to Div 1 of Pt 5 of the TA Act.
The "last day for payment" was 3 months after the liability to pay the duty arises (ss 16 and 17 Duties Act). As the liability to pay the duty arose when a transfer of dutiable property occurred (s 12 Duties Act) and this occurred when the assignment took place on 23 November 2017 (s 107(1) and (5) Duties Act), the last day for payment was 23 February 2018.
The applicable interest rate is specified by s 22 of the TA Act, as the sum of the market rate component (as defined in s 22(2)) and the premium component (8% per annum).
The respondent has a discretion, under s 25 of the TAA, to remit the market rate component or the premium component of interest (or both) by any amount.
As noted above, by letter dated 15 August 2019, the respondent offered to reduce the interest payable if the assessed COAD was paid in full by the date shown on the Notice of Assessment. That offer was not accepted and there has been no remission of interest.
The applicant asks the Tribunal to exercise the discretion that it has to remit interest. That discretion is broad and is to be exercised by reference to the particular facts of the case: Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 at [185].
As to the principles which inform the exercise of the discretion: 1. in Chief Commissioner of State Revenue (NSW) v Incise Technologies Pty Ltd [2004] NSWADTAP 19; 56 ATR 82 (Incise), an Appeal Panel of the Administrative Decisions Tribunal said at [60]-[63]: 60 In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation. 61 On the other hand, the premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The 'market rate' component approximates ordinary lending interest rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have a higher potential earnings; and may be content to carry the late payment surcharge were it only at the market rate. The 'premium rate' is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given a discretion to remit the market rate component or the premium rate component or both by any amount (s 25). 62 The Tribunal did not have the benefit of a detailed statement of the considerations relevant to the s 25 discretion as seen by the Commissioner. Moreover, the Commissioner has not developed any public guidelines going to the exercise of this discretion, in contrast to the position that applies in Victoria. Before the Appeal Panel, the Commissioner nominated four cumulative criteria for the circumstances where the premium component of interest should be remitted, namely: (1) all principal tax that is owing and not in dispute has been fully paid; (2) there has been co-operation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; (3) such co-operation by the taxpayer has occurred prior to any investigation being commenced by the Commissioner (voluntary disclosure) or, at the very least, within reasonable time after requests for information have been made by the Commissioner - i.e. the taxpayer has taken reasonable care; and (4) there has been no wilful default by the taxpayer in not paying tax on time. 63 The first of these criteria could be clarified to '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'. With this change, we agree that these four cumulative criteria are relevant and appropriate to the question of the circumstances in which the Commissioner should remit the premium component of interest. There may also be other circumstances where it could be appropriate to remit the premium component such as, as previously noted, where the Commissioner has in some way contributed to the tax default. 1. in Adams Bidco Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 702 Ward CJ in Eq. said at [163]: As to the market rate component, I accept that the purpose of this is to compensate the revenue for the loss of the duty. Moreover I take into account that the plaintiff had the benefit of funds available to pay the duty had it chosen to do so. 1. the four criteria identified by the Appeal Panel in Incise were applied by Emmett AJA in Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773.

The market interest component

The applicant seeks remission of the market interest component on the basis of unreasonable delay by the respondent. In support of that submission, the applicant relies upon Rowntree Investments Pty Ltd [2015] NSWCATAD 141 (in which a delay of 15 weeks was found to warrant remission of interest) and Re Molyneux and Vermeesch and Chief Commissioner of State Revenue (2013) 96 ATR 94 (in which a delay of 3.5 years taken into account as part of a finding that interest was to be remitted).
The respondent submitted that market interest is rarely remitted and that remission is not appropriate in the present case because: 1. the applicant was informed by the respondent in the respondent's first communication to the applicant (on 9 April 2018) that the applicant was liable for COAD; 2. communications concerning the Nomination Deed were instigated by the respondent rather than the applicant and the applicant did not make contact with the respondent until 2 May 2018 (being more than 2 months after the COAD became payable on 23 February 2018); 3. the respondent did not represent to the applicant that there would be any waiver of interest; 4. the applicant refused during the period from 9 April 2018 until 15 August 2019 (when the Notice of Assessment was issued) to provide various documents and information that had been requested by the respondent. More particularly, those requests were made in: 1. the respondent's 9 April 2018 letter in which the respondent requested: 1. a copy of the Nomination Deed as stamped or each of the applicant's counterpart Nomination Deed, 2. a completed Purchaser/Transferee Declaration form, and 3. evidence that the applicant was not a foreign person; 1. the respondent's 14 June 2018 letter, in which the respondent invited the applicant to provide a copy of any written opinion from senior counsel and to "Otherwise please lodge the items numbered 1-3 of my letter dated 9 April 2018"; 2. the respondent's 15 August 2019 letter enclosing the Notice of Assessment, in which the respondent again requested that the Purchaser/Transferee Declaration form be completed and provided to the respondent; 1. the applicant did not accept the offer made in the respondent's 15 August 2019 letter that interest would be remitted for the period 31 July 2018 until 15 August 2019 if the COAD assessed were to be paid by the date shown on the Notice of Assessment; 2. any delay on the part of the respondent during the period from 31 July 2018 to 15 August 2019, when it was considering the opinion of senior counsel that the applicant had provided, needs to be considered in light of the matters set out above and in particular that during that period the respondent was still waiting on information that had been requested and the applicant had not been informed by the respondent that time had ceased to run with respect to the calculation of interest.
In reply, the applicant submitted that its failure to lodge the documents sought in the respondent's 9 April 2018 should not be taken into account after 14 June 2018 because in the respondent's letter of that date in which the respondent requested a copy of any written opinion from senior counsel and stated "Otherwise please lodge the items numbered 1-3 of my letter dated 9 April 2018", which provided the applicant with a choice of either providing the written opinion of senior counsel or lodging the documents sought in the 9 April 2018 letter and the applicant chose the former course.
Taking all of the above into account, I am persuaded that there should be a remission of the market interest component for the period from 31 July 2018 to 15 August 2019. This is the period during which the respondent considered the opinion of senior counsel provided by the applicant and there was apparently no communication with the applicant. There is no explanation for this delay of the respondent. It is also the period for which the respondent offered remission in its 15 August 2019 letter.
However, I am not persuaded that there should be a remission of the market interest component for the period prior to 31 July 2018, during which period the applicant did not initiate contact with the respondent and after the respondent initiated contact with the applicant and requested from the applicant amongst other things, a completed Purchaser/Transferee Declaration form and information as whether the applicant was a foreign person, the applicant failed to provide that information.
I would expect that such information could readily have been provided, and there is no suggestion in the evidence that there was any impediment to its provision.

The premium interest component

The applicant seeks remission of all of the premium component of the interest on two bases.
The first basis is that to the extent that there is a remission of the market interest component there should be a commensurate remission of the premium interest component. The respondent did not resist this submission. It is appropriate, given the remission of the market interest component for the period 31 July 2018 to 15 August 2019, that the premium interest component for this period should also be remitted.
The second basis is that the four cumulative criteria described in Incise at [62] and Winston-Smith at [81] are each satisfied.
The first criterion is that all principal tax that is owing and not in dispute has been fully paid. The applicant submitted that the only outstanding tax is the COAD in dispute in this proceeding and thus there was no principal tax owing and not in dispute which is unpaid.
The second criterion is that there has been cooperation in providing relevant information to the respondent so as to enable the respondent to issue assessments.
The third criterion is that that such cooperation occurred prior to any investigation being commenced by the respondent or at the very latest within a reasonable time after a request for information had been made by the respondent.
The applicant submitted that the second and third criteria were satisfied because the Nomination Deed was lodged on 6 February 2018, the view of senior counsel as expressed orally was provided to the respondent on 28 May 2018 and following the grant of additional time by the respondent, senior counsel's written opinion was provided on 31 July 2018.
The respondent submitted that the second criterion had not been met because the applicant declined to provide the information necessary for the respondent to determine if surcharge COAD was payable (forcing the respondent to make an assumption in that regard in order to be able to issue the Notice of Assessment). That information was the Purchaser/Transferee Declaration form and information as to whether the applicant was a foreign person.
The respondent submitted that the third criterion was not met because the applicant refused to provide the information requested by the respondent from April 2018, it was the respondent that initiated communications, and the applicant did not make any contact with the respondent until more than 2 months after the COAD was due and payable.
In reply, the applicant submitted that there was no deliberate refusal on its part to provide documents because it took the one of the courses suggested by the respondent in the respondent's 14 June 2018 letter, namely, to provide the written opinion of senior counsel (thus, it is submitted, obviating the need to provide the documents sought). The applicant also submitted that: 1. the first item sought in the respondent's 9 April 2018 letter, namely the Nomination Deed, had in fact been provided to the respondent on 6 February 2018; 2. the absence of the other two items sought in that letter, namely the Purchaser/Transferee Declaration form and information as to whether the applicant was a foreign person, did not delay the respondent's determination of the applicant's liability, given that following the provision senior counsel's written opinion to the respondent on 31 July 2018, the respondent did not make further requests for that information; 3. its failure to lodge the Purchaser/Transferee Declaration form is not relevant because that form requested information as to whether additional surcharge purchaser duty applied and was not relevant to the determination of the underlying COAD.
In response, the respondent submitted that: 1. when the respondent's 15 June 2018 letter is read in context, the meaning of "otherwise" in that letter is not to present a choice to the applicant but meaning "in other respects", "nevertheless", or "apart from that", which should be treated as a reiteration of the request for the items identified in the respondent's 9 April 2018 letter; 2. alternatively the applicant has not discharged its statutory onus (s 100(3) of the TA Act) of proving that it understood "otherwise" as meaning "alternative"; 3. the applicants ongoing failure to provide the items that the respondent had requested cannot be anything other than a deliberate refusal in the sense of it being conscious or intentional; 4. the failure to provide the Purchaser/Transferee Declaration form and evidence that the applicant was not a foreign person were matters of importance going directly to the critical matter of the calculation of the duty payable.
The fourth criterion is that there has been no wilful default in not paying tax on time. The applicant submitted that this criterion is satisfied because: 1. the legal advice obtained at the time of the preparation of the call option and the lodgement of the Nomination Deed for stamping has been disclosed; 2. Mr Wehbe disclosed his reasoning process concerning the drafting of the Call Option and his view that no right to require the applicants to purchase the Property had been given the Owner; 3. the opinion of senior counsel's instructing solicitor (Mr Watson of Mills Oakley) included in the brief to senior counsel has been disclosed; 4. the views of senior counsel, expressed orally and subsequently in writing, have been disclosed.
The applicant referred to the observations in Pharmos Nominees Pty Ltd v Commissioner of State Taxation (2012) 113 SASR 487 at [80] that Pharmos Nominees could not rely on the fact that it obtained legal advice unless it elected to disclose the content of that advice and the observations of Emmett AJA in Winston-Smith at [84]-[86] to similar effect.
The applicant also submitted that conformably with the decision of Emmett AJA in Winston-Smith there is no evidence that there has been a "wilful default in not paying tax on time" because the applicant had been advised that there were good prospects of persuading the respondent that COAD was not payable.
The respondent submitted that it does not follow from the fact that senior counsel's opinion was provided on 31 July 2018, well after the COAD was due and payable on the Nomination Deed on 23 February 2018, that there was not a wilful default by the applicant in not paying the COAD on time. More particularly, the applicant was informed in the respondent's 9 April 2018 letter that COAD was due and payable.
The respondent also submitted that the decision by the applicant not to pay the COAD cannot be regarded as anything other than "wilful" in the sense of being intentional and that the proper course was for the applicant to have paid the COAD and if successful on review or objection to have sought a refund together with interest under ss 104 and 105 of the TA Act; and the applicant has not provided any reason as to why this course was not followed in the present case. In this regard, the respondent relied upon the statement by Emmett AJA in Winston-Smith at [85]: It would have been open to the Taxpayer to pay the duty assessed within the time specified by the Assessment Notice. The Commissioner indicated that, if such payment were made, the premium component of interest would be remitted. The Taxpayer elected not to do so and therefore must be taken to have decided to accept the risk that he would be unsuccessful in any objection or review in respect of the Commissioner's decision not to exempt the Transfer from the operation of Ch 4. Had he paid the duty when it was payable, but had been successful in an objection or review, the duty would have been refunded to him together with interest in accordance with the market component rate.
and submitted that by not taking up the offer of remission of interest made in the respondent's 15 August 2019 letter, the applicant similarly accepted the risk that it would be unsuccessful in any objection or review and having accepted that risk the applicant should not now obtain the benefit of further remission.
In reply, the applicant submitted that the respondent's submission that the applicant should have first paid the COAD and then if successful on review sought a refund together with interest, failed to take into account that the first criterion is the full payment of all principal tax that is owing and not in dispute and that all principal tax not in dispute had been paid.
The applicant further submitted that the respondent's submission concerning the observations of Emmett AJA at [85] of Winston-Smith should not be accepted because it is necessary to also consider paragraph [86] of Winston-Smith, in which Emmett AJA stated: The position might have been different if there were evidence that the Taxpayer had been advised that there were good prospects of persuading the Commissioner that he should be satisfied as to the application of s 163H. There is no such evidence and, as I have said, I do not consider that the circumstances are such that an inference should be drawn in favour of the Taxpayer in circumstances where he swore an affidavit but chose not to give evidence about his reasons for failing to pay the duty in accordance with the Assessment Notice. While I am satisfied that the first three pre-requisites propounded by the Commissioner for the exercise of the discretion to remit have been met, the fourth has not been satisfied. I consider that it is appropriate to characterise the relevant tax default as "wilful". In circumstances, where there is no evidence that the Taxpayer had a basis for believing that he was not liable to pay duty under Ch 4 in respect of the Transfer, there is no basis for remitting the premium component.
and that there is positive evidence in the opinions of Mr Wehbe, Mills Oakley and senior counsel that the applicant had a reasonable basis for believing it was not liable for COAD.
In response, the respondent submitted that the observations of Emmett AJA in Winston-Smith at [85] were not determinative, but rather reflective of the fact that the discretion is to be exercised in the context of TA Act, which as his Honour noted at [77] to [79] provides that tax assessed remains payable despite the taxpayer seeking a review of an assessment and that provision is made for a taxpayer to be paid a refund of the tax assessed, together with interest if it has the assessment set aside.
Taking all of the above into account and for the reasons set out below, I am not persuaded that there should be any remission of the premium interest component other than for the period 31 July 2018 to 15 August 2019.
The parties addressed this issue by reference to the four criteria described in Incise and Winston-Smith as matters informing the exercise of the discretion and I shall do the same.
As to the first criterion, I do not understand it to be in contest that all principal tax that was owing and not in dispute was fully paid.
As to the second and third criteria I am not satisfied that there has been cooperation in proving relevant information to the respondent and or such cooperation occurred prior to the commencement any investigation by the respondent or at the very latest within a reasonable time after the respondent had made a request for information. As noted above the applicant failed to provide the Purchaser/Transferee Declaration form and information as to whether the applicant was a foreign person.
A reasonable time for provision of this readily available information was within the 28 days specified in the request on 9 April 2018, but it was not provided prior to 31 July 2018 (or at all).
I am also not persuaded that the fourth criterion has been met. Whilst the applicant has placed considerable reliance upon the fact that there has been disclosure of various legal opinions, this in my view is insufficient.
The existence of a legal opinion may be relevant to the state of mind of a taxpayer, which is in turn relevant to whether the default in the payment of tax was wilful. A taxpayer may seek to prove their state of mind by adducing evidence including evidence that their state of mind has been influenced by legal advice received. As Pharmos Nominees and Winston-Smith establish, it is insufficient, in these circumstances, to simply refer to the existence of such advice and evidence merely that such advice has been received absent disclosure of the advice itself will be given little weight.
Critically, in the present case, whilst evidence has been adduced of various legal opinions, there is no evidence which links those opinions to the state of mind of the applicant. No evidence has been adduced from any person on behalf of the applicant, including its director, Mr Pyatt. An affidavit of Mr Wehbe was adduced, however, that affidavit referred to only Mr Wehbe's state of mind. Mr Wehbe gives no evidence of his views having been conveyed to the applicant and Mr Wehbe's state of mind is not attributable to the applicant. Further, there is no evidence that Mr Watson of Mills Oakley, who briefed senior counsel, conveyed the views of senior counsel to the applicant, that Mr Wehbe conveyed such views to the applicant, or indeed that anyone else did so. Nor is there a basis from which to conclude that if such advice was conveyed to the applicant, it was accepted by the applicant.
Had evidence been adduced as to the state of mind of the applicant, including evidence that the applicant relied upon particular legal advice, such evidence may have been tested, including as to whether the applicant continued to maintain such views after Mr Wehbe received the respondent's 15 August 2019 letter which contained a detailed refutation of the views expressed by the applicant's senior counsel in his written opinion.
I am not satisfied, based on the four criteria discussed above, that a remission of the premium interest component is appropriate, other than for the period 31 July 2018 to 15 August 2019. Nor is there any other factor which would justify such an exercise of discretion.

Orders

The Tribunal orders that: 1. Duties Notices of Assessment numbered 9329004-001 and 9239100-001 are confirmed subject to remission of interest for the period 31 July 2018 to 15 August 2019; 2. Duties Notices of Assessment numbered 9329004-001 and 9239100-001 are remitted to the respondent for determination in accordance with Order (1).

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 21 January 2021 - Added Mr M Sealey as Counsel for Respondent 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: 21 January 2021

State Revenue Legislation Amendment Act 2005(NSW)

(Duties Act 1997(NSW)

At a glance

Court

Decision date

Source

Judgment (18 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (8)