Happy Days Property Pty Ltd v Chief Commissioner of State Revenue

Preliminary issue

1. The Applicant sought a review of the Disallowance Decision. As the Commissioner correctly submitted at [2] in his written submissions, the decision which the Tribunal is empowered to review is the decision which had been subject to an objection, that is the decision to reassess the transfer for stamping at ad valorem duty. The Commissioner relied on Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28]: … the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection. Although the existence of an objection is a necessary precondition to the power of review by the Court, and it is the taxpayer's dissatisfaction with the determination of the objection which provides standing to seek review, it is the initial decision which is the subject matter of the review.

Substantive issue for the Tribunal

1. The substantive decision for review by the Tribunal is the Reassessment.

Onus of proof

1. The Applicant has the onus of proving its case in a review by the Tribunal, s. 100 of the TA Act. The requisite standard of proof in such a review is the "balance of probabilities" Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 at [104].

Material before the Tribunal and decision in the absence of the parties

1. The Respondent relied on documents filed pursuant to s 58 of the ADR Act and the Commissioner's written submissions filed 7 July 2016 (RS).
2. The Applicant relied on the application to the Tribunal filed 19 April 2016, written submissions filed 21 June 2016 (AS) and a letter from Mr Dickin, representing the Applicant, to the Commissioner dated 20 July 2015 a copy of which is included in the s 58 documents.
3. Section 50 of the Civil and Administrative Tribunal Act 2013 permits the Tribunal to make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or other documents or material lodged with or provided to the Tribunal. The parties were informed that the Tribunal proposed making such an order in the absence of submissions to the contrary. No such submissions were received. Accordingly, I ordered that the matter be determined on the documents without a hearing.
4. References in these reasons to paragraph numbers of written submissions by the Commissioner are references to paragraphs of RS and references to paragraph numbers of written submissions by the Applicant are to paragraphs of AS unless stated to the contrary.

Factual background

1. There is no dispute as to the following material documents and events.
2. A decision was made that a property at Mosman in New South Wales (the Property) would be purchased for the benefit of a superannuation fund (the Fund) of which the sole member was Mr Anthony Dickin and Happy Days Management Pty Ltd (Management) was the trustee.
3. A bank had provided a list of requirements to finance the purchase on a limited recourse borrowing arrangement which included the need for a corporate custodian which would hold the Property in trust for Management as trustee of the Fund. Mr Dickin determined that FP Transitions Pty Ltd (Transitions), a company of which he was sole director, secretary and shareholder, would be the corporate purchaser and custodian of the Property.
4. On 12 March 2015 Transitions and Management entered into a deed whereby Management would borrow money from a lender to enable Transitions to acquire the Property for the Fund. Transitions declared that it would hold the Property on trust for the Manager (the Custody Trust).
5. On 17 March 2015 Transitions, as trustee for the Custody Trust, entered into a contract (the Contract) to purchase the Property from the then owners. The agreed price was $610,000.
6. After 17 March 2015 and before the proposed settlement date on 28 April 2015 the bank advised that Transitions was not suitable to hold the Property and a non-trading corporate custodian was required.
7. On 7 April 2015: 1. the Applicant, Happy Days Property Pty Ltd (HPD) was registered; and 2. a Deed of Discharge and Appointment was made between Transitions, Management and HPD. The deed provided that Management removed Transitions as custodian of the Custody Trust and appointed HPD as replacement custodian. HPD consented to the appointment.
8. The bank was unwilling to advance the amount previously agreed until certain requirements had been finalised. By deed made 27 April 2015 between Management, HPD and Mr Dickin, the latter agreed to advance the required amount to permit the Fund to settle the purchase of the Property on 28 April 2015 on terms contained in a loan agreement made 27 April 2015 between Management, HPD and Mr Dickin. It was envisaged that the bank would be in a position to advance the previously agreed amount to the Fund within one month.
9. On 28 April 2015 the purchase of the Property was completed in accordance with an undated Real Property Act transfer (the Transfer).
10. On 30 April 2015, the Contract was stamped with duty of $22,940 in respect of a dutiable amount of $610,000 and the Transfer was stamped at $10 pursuant to s 18 (3).
11. On 8 May 2015, the amount previously agreed was advanced by the bank to a bank account in the name of Mr Dickin and on 9 May 2015 the bank confirmed the loan had been drawn.
12. By letter dated 19 June 2015 a firm of chartered accountants wrote to the Office of State Revenue (OSR) enclosing two copies of the declaration of the Custody Trust for stamping at $60. The covering letter recited aspects of the history of the purchase as set out above.
13. On 15 July 2015, the OSR issued a letter advising that, as HPD was not registered until after the Contract was exchanged, the Transfer could not be stamped under s 18 (3) and duty was payable on an ad valorem basis on the Transfer. The letter advised that the duty charged on the Transfer had been reassessed and enclosed a Duties Notice of Assessment in the sum of $22,940. The Notice included an amount of $180.33 for interest. The covering letter stated that the interest should be disregarded.
14. The Applicant objected to the Reassessment by letter dated 20 July 2015 (the Objection) and the Commissioner disallowed the Objection. The Applicant then applied to the Tribunal for administrative review of the Disallowance Decision.

Legislative scheme

1. The Duties Act 1997 (the Act) imposes stamp duty on certain transactions and provides exemptions and concessions in specified circumstances. References throughout these reasons to legislative provisions are to provisions of the Act unless stated to the contrary.

The Applicant's case

1. The Applicant's case is that the Respondent was not entitled to payment of double duty on four main, and partly overlapping, grounds. 1. Firstly, on a legislative basis, as HPD was the trustee of a trust of which Mr Dickin was the sole beneficiary, the Applicant was entitled to the concession provided in s 18. 2. Secondly it was incumbent upon the Respondent to correctly assess the duty and, having correctly stamped the Transfer with $10 duty where the names of the purchaser on the contract and the transferee on the Transfer were different, the Respondent was estopped from reassessing the Transfer. 3. Thirdly the Reassessment had denied the Applicant the opportunity to renegotiate the contract or minimise the impact of the additional duty. 4. Fourthly the Respondent had improperly relied on a decision of the Tribunal in Rowntree Investments Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 141 which was made after the Transfer had been stamped with $10 duty.

The Respondent's case

1. In response to the Applicant's case the Respondent submitted: 1. the Applicant was not entitled to any of the concessions under s 18; 2. there was no estoppel against the Respondent properly administering the Act; 3. the Applicant had created the two dutiable transactions, triggered operative provisions of the Act and settled the purchase before submitting any documents to the Respondent. There was no explanation or evidence as to what alternative course would or could have been taken or how stamping the Transfer in accordance with the Reassessment when the Transfer was first submitted to the Respondent would or could have given the Applicant the ability to take any alternative approach; and 4. the Rowntree decision did not retrospectively change the law, which had applied for many years.

Analysis and findings

1. I deal with each of the Applicant's broad categories of submissions below.

Legislative relief

1. The Act creates and charges a number of duties, s 3. The effect of ss 8 and 9 is that each of "a transfer of dutiable property" and "an agreement for the sale or transfer of dutiable property" are dutiable transactions and "duty … is to be charged as if each such dutiable transaction were a transfer of dutiable property. Section 11 provides that "dutiable property" includes "land in New South Wales" and s 13 relevantly provides that the duty is payable by the transferee.
2. Section 18 provides relief from double duty under certain circumstances. There is no submission by the Applicant that any part of s 18 applies to the Transfer other than s 18 (3) under which the Transfer was initially stamped. Section 18 (3) states: (3) The duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $10 if: (a) the duty chargeable in respect of the agreement has been paid, and (b) the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement, and (c) the transfer occurs at the same time as, or proximately with, the completion or settlement of the agreement, and (d) at the time the agreement was entered into, and at the completion or settlement of the agreement: (i) the purchaser under the agreement and the transferee under the transfer are related persons, except as provided by subparagraph (ii), or (ii) if the purchaser purchased as a trustee, the transferee and the beneficiary are related persons. Note. Section 64C also provides for a duty concession in respect of a transfer of dutiable property that is made in partial conformity with an agreement for the sale or transfer of the property. The concession applies if the interest in the property transferred to the transferee is not identical to the interest agreed to be transferred to the transferee under the agreement.
3. In the present matter the "agreement" referred to in s 18 (3) is the Contract in respect of which duty has been paid. The Commissioner conceded at [19] that paragraphs 18 (3) (a), (b) and (c) are satisfied. However, the Commissioner submitted, and I find, that for the Applicant to obtain relief under s 18 (3) it is also necessary for s 18(3)(d) to apply.
4. Paragraph 18 (3) (d) requires that at both the time the agreement was entered into and at the completion or settlement of the agreement one of two conditions must be satisfied. Either the purchaser under the agreement and the transferee under the transfer are related persons or if the purchaser purchased as a trustee, the transferee and the beneficiary are related persons.
5. Related persons is defined in the Dictionary to the Act as follows: related person means a person who is related to another person in accordance with any of the following provisions: (a) natural persons are related persons if: (i) one is the spouse or de facto partner of the other, or (ii) one is the parent, brother or sister of the other, or (iii) one is the spouse, or de facto partner, of a parent, child, brother or sister of the other, (b) companies are related persons if they are related bodies corporate, (c) a natural person and a private company are related persons if the natural person is a majority shareholder or director of the company or of another private company that is a related body corporate, (d) a natural person and a trustee are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee, (e) a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee.
6. It may be that at the date of completion or settlement of the agreement, 28 April 2015, the purchaser under the agreement (Transitions) and the transferee under the transfer (HDP) were related persons as defined. However, HDP did not exist at the time the agreement was entered into, 17 March 2015, and there is no evidence or submission that HDP could, prior to coming into existence, be a related person of Transitions.
7. Accordingly, the requirements of paragraph 18(3)(d) are not satisfied at both the time the agreement was entered into, and at the completion or settlement of the agreement. Therefore the relief available, if there was compliance with s 18 (3), does not apply to the calculation of duty in respect of the Transfer and duty is imposed on the Transfer on an ad valorem basis.

Estoppel

1. The Applicant conceded that the Respondent was empowered to retrospectively impose stamp duty. However, the Applicant also submitted that the Respondent, having already assessed duty on the Transfer, was estopped from reassessing the duty.
2. Section 4 of the TA Act provides that the Act is a taxation law for the purposes of the TA Act. Accordingly, duty charged by the Act is to be regarded as a tax for the purposes of the TA Act. Section 9 (1) of the TA Act states: The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer.
3. That power of reassessment is limited by some of the provisions of s 9 of the TA Act. None of those limitations are relevant to the present matter.
4. The Respondent referred to the Commissioner's power of reassessment and submitted at [22]: … An estoppel cannot fetter the right of the Chief Commissioner to exercise that power. For example, in Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271 at [11] the Tribunal stated: "... the doctrine of estoppel does not apply to prevent the Chief Commissioner from attending to his statutory duties. It is well established that the doctrine of estoppel cannot be invoked by a taxpayer so as to prevent the Commonwealth Commissioner of Taxation assessing tax pursuant to the statutory duty so to do. (cf. Kitto J in Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117 and approved by the High Court in several subsequent cases including Federal Commissioner of Taxation v ANZ Savings Bank Ltd (1994) 181 CLR 466, Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 and Federal Commissioner of Taxation v Ryan (2000) 168 ALR 704). As stated by Hill J, very succinctly and unequivocally, in AGC (Investments) Ltd v FC of T 9 ATC 4180 at p. 4195: .... there is no room for the doctrine of estoppel operating to preclude the Commissioner of Taxation from pursuing his statutory duty to assess tax in accordance with law. The Income Tax Assessment Act imposes obligations upon the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel cannot be invoked by a taxpayer so as to prevent the Commissioner assessing pursuant to his duty so to do. The cases certainly support that view."
5. In the state revenue context, in BBLT Pty Ltd v Chief Commissioner of the Office for State Revenue [2003] NSWSC 1003, Gzell J, when dealing with submissions by the plaintiffs that various kinds of estoppel arose against the Chief Commissioner referred to several appellate authorities, including Wade, and said at [111]: It should be noted, however, that with few exceptions the courts have concluded that estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast upon it by the legislation.
6. The Applicant provided no authority in support of its argument for an estoppel and I find that the principle of estoppel does not lie against the Respondent in reassessing duty applicable to the Transfer.

Denial of opportunity for the benefit of the Applicant

1. The Applicant submitted that by allowing the matter to proceed to completion the Respondent denied the Applicant the opportunity to take steps which might have been available between exchange of contracts and completion to renegotiate the Contract with the vendors or to take steps to minimise the impact that has been imposed by the Reassessment.
2. In response, the Respondent submitted at [24]: …. The Applicant refers in submissions to some lost opportunity, but there is no explanation or evidence as to what alternative course would or could have been taken, or how stamping the Transfer for the amount in the Notice of Assessment would or could have given the Applicant the ability to take any alternative approach. By that point of time it was too late …
3. I note that the Contract and Transfer were not submitted to the Respondent until after completion of the purchase and, as the Respondent stated, "by that point of time it was too late". The Applicant provided no legal basis other than estoppel for this submission. I have dealt with estoppel above and I reject the submission.
4. The Applicant determined, without input from the Commissioner, to structure the transaction in a particular way which has resulted in two separate dutiable transactions giving rise to two separate charges of duty under the Act. If there were opportunities to proceed with the transaction in a manner different to that which occurred, which may have resulted in the imposition of less duty, they were opportunities available to the Applicant which the Applicant did not take advantage of. I make no further observations on this point..
5. The Applicant also submitted that it was unfair to Mr Dickin to be assessed for double duty. However, the choice of the manner in which the acquisition proceeded was not that of the Chief Commissioner, and it would be unfair for other taxpayers if the Chief Commissioner, or the Tribunal, disregarded the clear provisions of the Act in order to give an advantage to the Applicant.
6. It may well be as the Applicant submitted at [6] "it was incumbent upon the Respondent to correctly assess the duty" on the transfer. However, the fact is that by the time the duty was assessed, the second dutiable transaction had already occurred, through no fault of the Commissioner.

Improper reliance on another decision of the Tribunal

1. The Applicant observed that in the covering letter of 15 July 2015, which enclosed the Reassessment, the OSR referred to and enclosed a copy of the decision of this Tribunal in Rowntree. The Applicant submitted that the Respondent could not rely on that decision as it was made after the Respondent had accepted and stamped the Transfer with $10 duty.
2. The Respondent's reply to this submission was that Rowntree was provided as an example of the application of the current law which had been in existence since the mid-2000s.
3. I find that the relevant law applies by statute, not because of the decision in Rowntree. I accept the Respondent's reply and reject the Applicant's submission.

Decision

1. Having regard to the above findings on the material before me, the Applicant has not satisfied its onus of proving on the balance of probabilities by way of admissible and probative evidence that the Reassessment is incorrect.
2. Accordingly, the correct and preferable decision of the Tribunal is that the decision of the Chief Commissioner under review is affirmed.

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 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: 08 December 2016