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[2014] NSWCATAD 183
NCAT Administrative and Equal Opportunity
2014-09-19
Original judgment source is linked above.
WHAT THIS CASE IS ABOUT 1The Applicants seek review of the imposition of duty by a Duties Notice of Assessment issued on 6 December 2013 ( the Assessment) in relation to an assessment to stamp duty made by the Respondent in accordance with the Duties Act 1997 (NSW) (the Act). 2The Assessment was issued in respect of the transfer of property situated at 8A Painters Parade, Dee Why in New South Wales (the Property). 3The vendors in relation to the transfer were Danny Knezevic and Dana Knezevic as tenants in common in equal shares and the purchasers were Danny Knezevic and Stevan Knezevic ( "the Applicants") as tenants in common in equal shares. 4The critical issue that arises for determination in this application for review is whether the exemption in section 68 of the Act applies to the transfer insofar as Danny Knezevic is both one of the vendors and one of the purchasers.
THE FACTS 5The facts in this case are straightforward and do not appear to be the subject of any material dispute between the parties. 6Danny Knezevic and his wife Dana Knezevic were married and owned the Property as tenants in common. The Property was their matrimonial home and would fit within the concept of matrimonial property as defined in subsection 68 (5) of the Act. 7The marriage broke down and on or about 5 August 2013 certain orders were made by the Family Court of Australia. One of those orders was to the effect that the Property was to be sold by public auction. A further order was to the effect that either of the parties to the marriage were permitted to bid at such an auction and make an offer to purchase the Property. 8On 26 October 2013 the Property was sold by auction in accordance with the orders made by the Family Court. 9The Applicants were the successful bidders securing the property for a purchase price of $1,352,000. 10Accordingly, the Applicants became the registered proprietors of the Property as tenants in common in equal shares. 11Stamp duty of $25,930 was paid by the Applicants in respect of the purchase of the property. That amount was calculated by applying ad valorem stamp duty rates to 50% of the purchase price. 12On 6 December 2013, the Office of State Revenue issued the Assessment requiring a further $33,940 in stamp duty to be paid immediately. 13On 10 December 2013, that amount was paid in accordance with the Assessment. 14On or about 14 January 2014, the Applicants lodged an objection directly with the Office of State Revenue seeking an assessment calculated on 50% of the purchase price. 15The grounds of objection were described as follows "13. Section 68(1)(a) requires that there be a transfer of property to, inter alia, the parties to a marriage, or to either of them. 14. It is incontrovertible that property was (in part) transferred to, inter alia, a party to the marriage, that the property was matrimonial property immediately prior to auction, and the transfer is effected by a purchase at public auction. 15. Section 68 (1)(a) does not require that the transfer be to the stipulated persons only. 16On 11 March 2014 the Respondent provided the Applicants with an objection decision the effect of which was to disallow the objection. 17The Respondent determined that for the exemption under section 68(1) of the Act to apply, the property must be transferred or agreed to be sold or transferred only to the parties of marriage (that had dissolved annulled or broken down irretrievably) or to either of them or to a child, or children or either of them, or a trustee of such child or children. 18Further, the Respondent argued that in this case the Property had been transferred to the Applicants and Stevan Knezevic was not a party to the marriage that had been dissolved or annulled or broken down irretrievably, was not a child of either party to the marriage and was not a trustee of such child or children to the marriage 19On 16 May 2014, the Applicants lodged an application for review of that decision with this Tribunal.
ISSUE 20The issue to be determined is whether the exemption contained in subsection 68(1) of the Act applies with respect to the transfer of that part of the Property that was acquired by Danny Knezevic as a tenant in common in equal shares. 21 Fundamentally, no duty is chargeable if the following conditions are met: (a)there is a transfer or an agreement for the sale or transfer of certain property; (b)the property is matrimonial property; (c)the transfer is to the parties to a marriage that is dissolved or to either of them or to a child or children of either of them or a trustee of such a child or children; (d)the transfer is effected by or in accordance with an order of the court under the Family Law Act. 22 Clearly there is no dispute that conditions (a) and (d) are satisfied. Conditions (b) and (c) are in dispute.
RELEVANT STATUTORY FRAMEWORK 23There are a broad range of statutory provisions mainly in the Act that have some impact on the issue. 24In particular sections 8,10,11,12,13,16,21,32 and 68 of the Act need to be examined as part of the overall evaluation of this issue. Those sections provide answers to some key questions as follows. 25What is duty charged on? Section 8 states that "This Chapter charges duty on a transfer of dutiable property" and section 11 provides that dutiable property is any of a number of things including land in New South Wales. 26In this context, section 10 also relevantly provides that " it is immaterial whether or not a dutiable transaction is effected by a written instrument or by any other means, including electronic means." 27When does a liability for duty arise? Section 12 ensures that a liability for duty charged by this Chapter arises in two circumstances:
THE TRIBUNAL'S ANALYSIS - BACKGROUND TO THE ACT 34 Before seeking to answer these questions, it is important for the Tribunal to understand the background to the Act and in particular the way in which it now operates to charge duty not so much on instruments as on transactions. 35 In this context, the Respondent has placed much emphasis on there being one contract and one transfer which conveyed the Property to the Applicants as tenants in common. The Respondent submits that as a result these instruments give rise to the liability to duty. 36 This logic, with respect, fails to take account of the rewrite of stamp duty legislation which culminated in the enactment of the Act which changed the focus of the stamp duties legislation from being instrument based to imposing duty on particular transactions. Thus, in New South Wales at least, duty is imposed on "a transfer of dutiable property" and on certain transactions which are identified as "dutiable transactions". 37 This development is referred to in the LexisNexis Butterworth's loose leaf service "Australian Stamp Duties Law" where it is observed that: "While stamp duty was traditionally imposed on instruments, all States and Territories have now adopted provisions which, to varying degrees, impose duty on transactions. New South Wales has enacted the Duties Act 1997 which changes the focus from being instrument-based, to the extent that the former Acts were instrument based, to imposing duty on particular transfers or transactions. These jurisdictions now impose duty on "a transfer of dutiable property" and certain transactions which are identified as "dutiable transactions". 38 The High Court in Asciano Services Pty Limited v Chief Commissioner of State Revenue (2008) HCA 46 at 24 has also observed that "the obvious purpose of the Act was to create and charge a number of duties and this is stated in s 3. It did so by identifying transactions - those concerning particular property - as subject to duty............" (Emphasis added) In making this comment, the High Court went further and has drawn a clear distinction between Chapters 2 and 5 of the Act wherein the former, charges duty on transactions and the later charges duty on instruments. 39 Thus, it would seem that the more general liability to stamp duty arises as a result of a transaction and not as a result of an instrument. In other words, the liability for duty charged under the Act arises when a relevant transaction occurs and it is immaterial as to whether there is an instrument that evidences that transaction or not. 40 This conclusion is reinforced by section 10 of the Act which provides that: "it is immaterial whether or not a dutiable transaction is effected by a written instrument or by any other means, including electronic means". 41 Section 12 of the Act does provide that if the relevant transaction is effected by written instrument, then the liability will arise upon first execution. 42 Furthermore, if a transaction occurs in the absence of a written instrument, then a written statement must nonetheless be created and be lodged within three months of its creation (section 16 of the Act). 43 What is clear in all this, is that it is the transaction itself which is subject to duty and not the instrument which documents the transaction. The instrument itself is simply a mechanism for imposing and collecting the duty but it is not itself the item in respect of which duty arises. This is made clear by virtue of the fact that where a transaction occurs without the existence of an instrument, an instrument is to be created for the purposes of enabling stamping. 44 In this respect, the Tribunal is of the view that the Respondent is not correct in concluding that the contract which seeks to convey the whole of the property causes the liability to duty to arise. Rather, the Act itself requires duty to be applied to the transactions in question and whether such transactions are evidenced by no contract, one contract or two or more contracts is largely irrelevant. What matters is whether there is a dutiable transaction. If there is a contract, that contract itself evidences the existence of a transaction or transactions which might cause the duties liability to arise. If there is no contract, a liability to duty will still apply if there is a dutiable transaction.
THE TRIBUNAL'S ANALYSIS - THE TWO CRITICAL QUESTIONS 45 With that in mind I will now consider the 2 critical questions arising from section 68.
What is the matrimonial property? 46 The dispute regarding matrimonial property concerns not so much the question as to whether there is matrimonial property but rather what is the nature of that matrimonial property. 47 The Respondent argues that section 68 contemplates only the transfer of the whole of the matrimonial property and not portions or fractions of it. The Respondent also maintains that what was actually transferred was the whole of the Property. 48 Importantly, subsections 8(1)(a) and (b)(i) of the Act provides that: "This Chapter charges duty on: (a) the transfer of dutiable property, and (b) the following transactions..... an agreement for the sale or transfer of dutiable property." 49 Thus, duty is charged on certain transactions that relate to dutiable property. Again, it is not the instrument or the contract on which duty is charged. Rather, duty is charged on the transactions which, in cases where an instrument or contract exists, are transactions which are evidenced by the relevant instrument or contract. 50 The term dutiable property is itself defined in section 11(1)(a) of the Act in the following manner: Dutiable property is any of the following: (a) Land in New South Wales... 51 Furthermore, section 11(1)(l) of the Act includes as "dutiable property" any interest in any dutiable property referred to in the preceding paragraphs of this section. 52 Thus, an interest in land in New South Wales is also itself a separate item of dutiable property. 53 The term "matrimonial property" is defined in section 68(5) of the Act to mean "property in relation to the parties to a marriage or of either of them (within the meaning of the Family Law Act 1975 of the Commonwealth ), including any property treated as property in relation to the parties or of either of them as a result of an order made under that Act". 54 The term property is not defined in the Act but the term land is defined in an inclusive way only such that it includes a stratum. Nothing more is said - thus, the meaning of that term can be taken from section 21 of the Interpretation Act 1987 (NSW) and in that context: " land "includes messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein " 55 Thus, land for the purposes of the definition of "dutiable property" as contained in the Act includes any interest in the land. 56 Interestingly there is a similarly broad definition of the word 'property' in the Interpretations Act which would appear to have relevance as a result of section 5 of that Act. That definition makes it clear that property would include an interest in real property whether that interest is present or future and whether vested or contingent. 57 It would seem from the above that the term land in New South Wales and property would include both the whole of the property as well as a part or share of the whole of the property. This conclusion seems to be endorsed in the decision of Mason P in Trust Co Ltd V Chief Commissioner of State Revenue (2007) NSWCA 225 where the observation was made that: "In legal usage 'land' is not confined to the physical thing and can mean one of many legal constructs involving an estate in the land or an interest in the land ." 58 Thus, this logic would seem directly applicable in this case where there are tenants-in-common and two co-owners holding an interest in land in proportionate shares. Whilst there is no physical division of the land, the tenants-in-common have interests in the land which are distinct and separate and can be bought and sold as distinct interests. 59 Brennan J in Nullagine Investments Pty Limited v Western Australian Club Inc (1992-93) 177 CLR 635 observed of the character of an interest that tenants-in-common have that: "Each tenant in common has a separate and individual title to the property, limited according to the estate or term granted to or acquired by the tenant" and on this point the majority in Nullagine agreed adding that "...... There is a clear distinction between the individual "interest or share" owned by one or two or more tenants in common of the freehold interest in land and the freehold interest itself" 60 Section 100 of the Real Property Act 1900 (NSW) recognises the separate title of tenants in common and provides that the Registrar-General may create separate folios of the register and issue separate certificates of title to each tenant in common. 61 Thus, I conclude that prior to the sale of the Property, Danny Knezevic and his wife held separate and individual titles to the Property and after the acquisition of the Property, the Applicants each held separate and individual titles to the property. Notwithstanding the fact that there was only one contract that gave rise to the transfer which followed, Danny Knezevic acquired a separate and individual title to the property. The only thing that is relevant under the current Act is whether there were transactions which in this case were effected by a single contract. 62 In other words, notwithstanding that there was one contract, Danny Knezevic and his wife each conveyed their own share of the Property and each of the Applicants acquired their own share in the Property. 63 It is true that Danny Knezevic and his wife concurred in the conveyance of the shares in the Property as a whole but in law they in fact sold their individual interests. By parity of reasoning the Applicants acquired their own distinct shares in the Property even though by concurrence the purchase of the Property was achieved by way of one contract and one transfer. 64 In construing the relevant legislation, the focus must be on what it is that has been transferred and not the manner by which the transfer was affected. Here the manner of transfer was the relevant contract but the dutiable property was 2 interests as tenants in common in certain property. The fact that the manner of transfer was under one contract only, does not change the content of what it is that was transferred. 65 The issue under consideration here was also canvassed but in a somewhat different context in the case of In re Hannagan v Chief Commissioner of State Revenue 2012 NSWADT 15. In that case the Tribunal considered the application of the exemption in section 68 the Act. In that case, there was a transfer by a husband of his interest in matrimonial property to his wife as part of the settlement of family law proceedings. Subsequently, the relevant transfer document was amended to include the wife's new husband as a transferee as tenants in common in equal shares with the wife. 66 The Tribunal there found that the transfer of matrimonial property had been done in 2 transactions rather than as a single composite transaction. Accordingly, the exemption under section 68 would apply in respect of the transfer to the party to the marriage that had broken down but not in respect of the transfer wholly to a third party. 67 The Respondent has characterised the facts in Hannigan as having arisen by virtue of two transfers, where there was first a transfer of the matrimonial property by the husband to the wife and a subsequent transfer by the wife to her new husband. 68 Even if that characterisation of the facts in Hannigan is correct, it does not in my view matter. What matters is not how many transfers there were but what was the content of the transfer or transfers. In this case, as in Hannigan, there were two transactions involving two interests in the Property. In Hannagan that may have been more obvious than it is in this case but in my view the outcome is the same. 69 The Respondent has also sought to rely on the decisions in Zhang v Chief Commissioner of State Revenue (2013) NSWADT 103 and Warner v Chief Commissioner of State Revenue (2011) NSWADT 212 as authorities for the proposition that where there is more than one purchaser disclosed on a contract, it is the sale of the whole and not a sale of the part. 70 Both cases involved a different legislative provision namely section 18 of the Act. 71 Both cases fall short of considering whether the dutiable property in question could include an interest or share in the whole of a property. Further, they do not consider the interest that a tenant in common has and acquires under a contract and there is no discussion of the principles referred to in Nullagine discussed above. 72 In the context of section 16 which the Tribunal is addressing in this case, it is my view, after careful consideration of the authorities including the High Court decision in Nullagine, that the emphasis here should always be not on the means by which property is transferred but on the content of what is being transferred and whether that content is dutiable property which may include part of the whole. 73 Accordingly, I conclude that notwithstanding that there was one contract and one transfer Danny Knezevic acquired a separate and individual title. The transaction in question here involved 2 interests both held as tenants in common in the Property and both interests are matrimonial property for the purposes of section 68. In other words, each of the parties to the marriage conveyed their own shares in the Property. They concurred in a sale of the whole of the Property but in fact they sold their individual interests. By the same token the Applicants each acquired their own and distinct shares in the Property even though this was conveyed to them through a sale and purchase of the whole of the Property under one contract. 74 Finally, in this context I simply note that the Property could have been acquired by the Applicants under separate contracts. If that had occurred then it would seem readily apparent that the exemption provided by section 68 of the Act would have applied with respect to that part which Danny Knezevic had acquired under a separate contract. 75 It would seem anomalous that the exemption would be attracted in circumstances where two contracts were utilised rather than one where the economic outcomes are identical.
Is the transfer to a party to the marriage? 76 It must follow that I am satisfied that the interest in the matrimonial property held by Danny Knezevic prior to the dissolution of his marriage to Dana Knezevic, was transferred to a party to the marriage, namely Danny Knezevic. 77 Accordingly section 68 applies and to that extent no duty is chargeable. ORDER (1)The assessment is set aside and the matter is remitted to the Respondent to issue an assessment to the Applicants based on a calculation where the relevant ad valorem rates of stamp duty are applied to 50% of the applicable purchase price.
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: 30 October 2014
Knezevic
Chief Commissioner of State Revenue