[2004] VCAT 1337

Ms C. McNicol, Counsel, instructed by the Solicitor for the Commissioner of State Revenue

1 Rosecraddock is an historic mansion, Registered No. 8589 on the Victorian Heritage Register. Originally it was surrounded by more extensive grounds, some of which were subdivided and sold immediately after World War II. The remaining mansion and grounds including garages and stables is known as 3 Rosecraddock Place, North Caulfield. The registered proprietors of 3 Rosecraddock Place, North Caulfield, under the terms of the Transfer of Land Act are Brenchley Gardens Pty Ltd and Landro Pty Ltd who were registered as joint proprietors of the land on 18 July 1985. An adjacent property, known as No. 1 Rosecraddock Place is part of the subdivision in the former estate of the mansion. It now contains a cream brick dwelling and garage. The same two companies are registered proprietors as tenants in common of this parcel of land. By an assessment of 2002 Land Tax issued 22 March 2002, the Commissioner for State Revenue assessed Landro Pty Ltd for land tax upon those two properties.

2 The principal of Landro Pty Ltd, Mr Shellard, lodged a Notice of Objection with the Commissioner on 17 April 2002 claiming that Mr Shellard was the life tenant of these lands from March 1985 and that he, Mr Shellard, should have been the owner assessed but being an owner occupier was entitled to exemption from land tax under Part IIA of the Land Tax Act with respect to these lands on the basis that they were his principal place of residence.

3 The Commissioner disallowed this objection by letter dated 28 March 2003.

4 Landro has asked that the assessment be referred to this Tribunal.

5 The matter was listed for directions before Deputy President Coghlan on 14 May 2004. She made various directions including a direction that on or before 28 May 2004 the applicant should file and serve, inter alia:

Particulars of all grounds of objection, including any new grounds of objection.

6 On behalf of his company, Mr Shellard forwarded a document headed `Ground of Objection' with some three attachments. The grounds of objection shown on that document are as follows:

1. That the applicant should be considered to be on behalf of Brenchley Gardens Pty Ltd and Landro Pty Ltd the registered properties of land known as 10 Craddock Avenue, Caulfield, also known as 3 Rosecraddock Place, Caulfield and also 1 Rosecraddock Place, Caulfield.

2. That the applicant sold the land, being 10 Craddock Avenue, Caulfield on a contract of sale to Peter Shellard on 20 June, 1985 (Exhibit A).

3. That the land is occupied by the said Peter Shellard as a principal place of residence and should qualify for an objection on that basis.

4. That the commissioner has not objected to the fact that less than 15% deposit has been paid and that such contract at the time could not have been used to reduce any land tax payable.

5. That the applicants are holding land at 1 Rosecraddock Place, Caulfield as a trustee under a trust deed (Exhibit B).

6. That the contract for the purchase of 1 Rosecraddock Place was in the name of Peter William Shellard and the registered proprietor is holding it on his behalf (Exhibit C).

7. That 1 Rosecraddock Place, Caulfield is an adjoining property and is part of the principal place of residence.

7 The exhibits referred to were a Contract Note (Exhibit A) dated 20 June 1985 between Landro Pty Ltd and Brenchley Gardens Pty Ltd as vendor and Mr Shellard as purchaser with respect to the large house for a price of $1,405,000.00 providing for a deposit of $1,000 which was acknowledged as paid and the residue to be paid by 20 June 2010. Exhibit B is a Deed of Trust dated 22 September 1987 by Brenchley Gardens Pty Ltd and Landro Pty Ltd reciting that Mr Shellard had purchased the property at No. 1 Rosecraddock Place `by contract dated 20 June 1987' and that:

This property was settled in the names of Brenchley Gardens Pty Ltd and Landro Pty Ltd who hold the property in trust for the said Peter William Shellard which Brenchley Gardens Pty Ltd and Landro Pty Ltd hereby acknowledged.

8 The deed was executed under the common seal of both companies with Mr Shellard attesting as director/secretary in both cases. The deed provided that the companies would on request convey the property to Mr Shellard or as he directed.

9 Exhibit C were the particulars of sale for contract of sale between Ms Judith Pinkus and Mr Shellard providing for completion 90 days from the date of the contract, namely 20 June 1987.

10 For reasons which I then gave, I ordered pursuant to Section 26(1)(a) of the Land Tax Act 1958 that Landro Pty Ltd should be entitled to rely upon the document filed in the Tribunal on 3 June rather than upon the original objection.

11 Section 14A of the Land Tax Act which is to be found in Part IIA exempts from land tax `land owned by an actual person that is used and occupied as the principal place of residence of that person.' Section 13AA defined `owner' for the purposes of Part IIA and the principal place of residence of exemption as follows:

(a) entitled to the land for an estate of freehold in possession; or

(b) if the land is under a lease from the Crown, entitled to a leasehold interest as referred to in section 43--

and includes the owner of a life estate in the land as referred to in section 41;

12 Mr Shellard on behalf of his company submitted that with regard to the big house, No. 3, he, rather than his company, the applicant in the proceeding was to be regarded as the owner of this land for the purposes of the Act by virtue of Sections 48 and 49 of the Land Tax Act. With regard to the small house, No. 1, he said that since the property was held on trust for him, he, rather than Landro Pty Ltd was to be regarded as the owner. In both cases he said that he was entitled to the principal place of residence exemption granted by Part IIA of the Act.

13 Ms McNicol, Counsel for the Commissioner, submitted that as to the big house, that since Mr Shellard had not paid at least 15% of the purchase price of the big house deemed by virtue of Section 49(2) of the Land Tax Act he should not be regarded as the owner thereof. Whilst as a matter of discretion the Commissioner could accept Mr Shellard as the owner in possession, no application has been made to him to designate Mr Shellard and the Commissioner was not agreeable to do so. Ms McNicol said that aside from the 15% issue Mr Shellard did not fall within the definition of owner in Section 13AA so as to be entitled to the principal place of residence exemption. Further, she said `no evidence has been provided by Shellard that he used and occupied the land for the minimum period under Section 13(a)(2) of the Land Tax Act'.

14 Ms McNicol called into question the genuineness of the 1987 Deed of Trust. She continued:

No evidence has been provided by Shellard that the land at 1 Rosecraddock Place enhances the [big house] and that land is used solely for Shellard's private benefit and enjoyment.

15 I will deal first with the small house, No. 1 Rosecraddock Place. According to Mr Shellard the cream brick residence on this property is occupied by Mr Daryl Hays and two other people whom he did not name. These people, he said, did odd jobs and maintenance on the big house for him; nevertheless, they had `day jobs' as their principal occupations. Mr Hays paid $1300 per month rent. The exemption for principal place of residence extends not only to the land immediately around the principal place of residence but to contiguous land by virtue of Section 13A(3) of the Land Tax Act. That section states as follows:

(3) The exemption in sub-section (1) applies, in addition to land of an owner that is used and occupied as a person's principal place of residence ("the PPR land"), to land owned by that owner--

(a) that is contiguous with the PPR land or that is separated from the PPR land only by a road or railway or other similar area across or around which movement is reasonably possible; and

(c) that is used solely for the private benefit and enjoyment of the person who uses and occupies the PPR land and has been so used--

(i) since 1 July in the year preceding the year for which the exemption is claimed; or

(ii) if the owner or trustee became the owner of the land on or after 1 July in the year preceding the year for which the exemption is claimed, so used and occupied since a later date during that year.

16 Section 4 provides that the provision applies equally to premises owned by `sole owners or joint owners'. I was not referred to any authority upon the meaning of the phrase `used solely for the private benefit and enjoyment of the person who uses and occupies the CPR land' appearing in paragraph (c) of the sub-section. I would imagine that there would be authorities in the rating jurisdiction illuminating the concept of `used solely' and perhaps the concept of `private benefit'; nevertheless, even without the citation of authority I am satisfied that the small block with the cream brick house cannot satisfy the requirements of the sub-section. Whatever might be the case if the cream brick house were occupied by a person or the family of a person whose principal employment was as a domestic servant or general handyman at the big house, where the small house is let at a commercial rent to a person whose principal activity is unconnected with the big house, it cannot be said that the small house is used solely for the private benefit of the occupier of the big house.

17 Mr Shellard's contention that he qualifies for the principal place of residence exemption with regard to the small house and its land must fail.

18 Nevertheless, this conclusion leaves unresolved the question as to whether Landro is properly taxed with respect to the small house and its surrounding land. Mr Shellard's contention is that by virtue of the deed of trust dated 22 September 1987 he is the equitable owner in fee simple and the applicant and the other legal co-owner have a bare legal state. Section 51 of the Land Tax Act 1958 is in the following terms:

Subject to the other provisions of this Act, the owner of any equitable estate or interest in land shall be assessed and liable in respect of tax as if the estate or interest so owned by him was legal, but there shall be deducted from the said tax so payable by him in respect of that estate or interest the amount of any tax paid in respect thereof by the legal owner of the land.

The effect of that proviso is to render Mr Shellard liable for tax on the small house and its land as if he were the legal owner. The section does not however relieve the applicant company from liability to tax as legal owner. Since liabilities to land tax depends not merely upon the value of a particular piece of land owned by a taxpayer but also upon the value of other land owned or deemed to be owned by him, I can express no view as to whether the small house would be taxable in Mr Shellard's hands. There is no assessment against Mr Shellard before me. The conclusion that Section 51 of the Land Tax Act applies is of course dependant upon my accepting the photocopy deed of trust which has been placed before me at face value.

19 Ms McNicol called into question the genuineness of the deed. She put it to Mr Shellard in cross-examination that it was a recent invention, that is a document brought into existence in the past few months to assist in this case, not a genuine document created in 1987 at all. The basis for her cross-examination was this. The document styled `Ground of objection' which I quoted earlier in these reasons has the following in small characters at the foot `C:\Documents and Settings\Shirley\My Documents\Victorian Civil and Administration Tribunal .doc'. This document was apparently brought into existence in May 2004. At the foot of the document styled Declaration of Trust the same folder or file reference appearance appears save that instead of `Victorian Civil and Administration Tribunal.doc' the words in capital letters `DECLARATION OF TRUST.doc' appear. Ms McNicol submitted that this showed that the two documents emanated from the same file or folder and were brought into existence at the same time viz. in 2004. Mr Shellard denied this. He said that he had had the same computer since 1987 and `Shirley' whom he did not further identify operated the computer which he could not do. He said that `Shirley' had worked for him for 25 years. He conceded that the two documents were generated by the same `program'.

20 No original of the document was provided. I stood the matter down following the completion of argument till after lunch to enable Mr Shellard in answer to a `call' by Ms McNicol to produce the original contract of sale with regard to the small house showing him as purchaser and dated in 1987. He said that he could produce no other originals of the documents upon which he relied. I asked him whether that meant that the declaration of trust could not be located. He said `not at this stage', meaning, as he explained, that he had not and could not find it but had not at that stage exhausted his enquiries. This was scarcely satisfactory but I regret to say typical of the attitude which Mr Shellard displayed to the entire proceeding. One would have thought that someone seriously prosecuting a revenue review proceeding would at least take the trouble to produce the original documents upon which he relied or if that proved impossible to be in a position to say that he had made exhaustive enquiries.

21 What then am I to make of the Declaration of Trust, is it a genuine 1987 document or a recent invention? I asked Ms McNicol if her client, the Commissioner of State Revenue as successor to the Comptroller of Stamps would have any record relative to the stamping of the transfer of the small house to Brenchley Gardens Pty Ltd and Landro Pty Ltd. Likely some elaboration and further documentation would have been required at the time of assessment if this transfer were presented for stamping allegedly in completion of a contract of sale showing Mr Shellard as the purchaser. Whilst the Commissioner's material included a copy of the transfer to the present registered proprietors of the big house there was no copy of the transfer to the small house. The transfer it produced might for instance have included an opinion number if it were put in for opinion at the time of stamping as distinct from having been done `over the counter'. Be that as it may, Ms McNicol stated that her instructions were that no records from the 1987 stamping could be recovered for perusal.

22 With some hesitation I conclude that I should accept the declaration of trust at face value. The common seals appear to be the type of common seals that would have been employed in 1987 viz. they do not include Australian Company Numbers. There is nothing in the document to arouse suspicion except the folder or file description at the foot. Moreover the original contract of sale was produced. It was prepared by an independent party. The solicitors for the vendor, Minter Ellison, and appeared to be regular on its face. Some documents such as the declaration of trusts must have been produced for stamping purposes to enable the transfer of the small house to be stamped in 1987.

23 In the end however it may make little difference because the affect of Section 51 upon the findings which I have just made, is that the small house is taxable in Mr Shellard's hands. Nevertheless this does not remove the liability which the registered proprietors and legal owners of the small house would otherwise have, but merely creates an additional tax liability upon Mr Shellard subject to his being credited with the tax payable by the legal owner.

25 Mr Shellard's contentions with regard to this part of the land is that he is the proper taxable party as purchaser in possession and he is entitled to a principal place of residence exemption.

26 His case depends upon Sections 48 and 49 of the Land Tax Act which deal with the liability of vendors and purchasers to land tax. The sections are as follows:

Subject to the next succeeding section where any agreement has been made for the sale of land, whether before or after the commencement of this Act, the buyer shall be deemed to be the owner of the land for the purposes of this Act (though not to the exclusion of the liability of any other person) so soon as he has obtained possession of the land so purchased whether the agreement has been completed by transfer or conveyance or not.

49. Seller to remain liable until certain conditions fulfilled

(1) When any agreement has been made for the sale of land, whether before or after the commencement of this Act, and whether the same has been completed by transfer or conveyance or not, the seller shall be deemed to remain the owner of the land for the purposes of this Act (though not to the exclusion of the liability of any other person) until possession of the land has been delivered to the purchaser and at least Fifteen per centum of the purchase money has been paid.

(2) Where in any case in which possession has been so delivered, less than Fifteen per centum of the purchase money has been paid, the Commissioner may exempt the seller from the provisions of this section if the Commissioner is satisfied that the said agreement for sale has been made in good faith, and not for the purpose of evading the payment of tax, and that the said agreement is still in force. In any such case the decision of the Commissioner shall be final and conclusive.

(3) In estimating the amount of purchase money which has been so paid, all money owing by the purchaser to the seller and secured by any mortgage or other charge on the land, and all money lent to the purchaser by the seller, and all money owing by the purchaser to any other person, and directly or indirectly guaranteed by the seller, shall be deemed to be unpaid purchase money.

(4) When by virtue of this and the last preceding section the buyer and seller of land are both liable for tax in respect thereof, there shall be deducted from the tax so payable by the seller in respect of the said land the amount of the said tax payable in respect thereof by the buyer.

(5) Notwithstanding anything in this Act when the Commissioner is satisfied that any settlement grant assignment transfer or conveyance of land although not made for valuable consideration has been made in good faith and not for the purpose of evading the payment of tax he may for the purposes of this Act amend in accordance with such settlement grant assignment transfer or conveyance any assessment made by him.

27 It is clear that 15% of the purchase money has not been paid. All that has been paid according to Mr Shellard is a mere $1,000 out of a total purchase price of over $1M.

28 A more significant impediment to the success of Mr Shellard's argument is that whilst Section 48 deems the purchaser in the appropriate circumstances to be the owner of the land for land tax purposes, that meaning was `not to the exclusion of the liability of any other person'. Section 49(1) provides that the seller remains deemed to be the owner `until possession of land has been delivered to the purchaser and at least 15 percentum of the purchase price has been paid'. Section 49(2) allows the Commissioner to:

Exempt the seller from the provisions of [the] section if the Commissioner was satisfied that the said agreement for sale has been made in good faith, and not for the purpose of evading the payment of tax, and that the said agreement is still in force. In any such case the decision of the Commissioner should be final and conclusive.

29 Ms McNicol says that the Commissioner declines to `exempt' Landro from the effect of Sections 48 and 49 viz that it remained deemed as owner until 15 percent of the purchase price has been paid.

30 Mr Shellard says that the Commissioner has been aware of the existence of the sale note for over a year and that the time has passed when he would be entitled to rely upon the provisions of Sections 48 and 49 to treat Landro as owner rather than Mr Shellard. Further, he submits that if that were wrong, I am entitled to re-exercise the Commissioner's discretion and that I should in the circumstances find that the `said agreement for sale has been made in good faith, and not for the purpose of evading the payment of tax, and that the said agreement is still in force'.

31 The sections seem to be of some antiquity. They have been in the statute in their present form from its enactment in 1958. They were Sections 45 and 46 of the Land Tax Act 1928 and before that the Land Tax Act 1915. They seem to be modelled upon Section 37 of the Commonwealth Land Tax Assessment Act 1910. Section 26 of the New South Wales Land Tax Management Act 1956 was to the same effect when originally enacted but has since been completely recast. According to Rich J in Highlands Ltd v Deputy Commissioner of Taxes (SA) (1931) 37 CLR 191, 196 such provisions have their `origin in legislation in New Zealand'.

32 My researches have disclosed no case which would illuminate the proper approach to the final sentence in the sub-section.

33 Insofar as Mr Shellard submits the Commissioner has delayed too long in relying upon the `15%' point, he appears to be invoking a form of estoppel by representation.

34 In my view his submission is without foundation. The initial objection which Landro lodged contended that Mr Shellard was a life tenant. The sale note with regard to the big house lodged in support of that objection by Mr Shellard on behalf of Landro seemed to show that the objection was misconceived. There was, on no view, any obligation upon the Commissioner to respond to an objection based upon the view that Mr Shellard was the owner as purchaser in possession. He had not at that stage even have lodged a proper objection ground to that effect. This ground was formulated for the first time in the document lodged in the Tribunal as recently as 3 June this year. It was only once Mr Shellard obtained a favourable exercise of my discretion that his company became entitled to rely upon this ground. That was upon the very day of the hearing. No criticism could reasonably be addressed to the Commissioner in those circumstances. Even if that were wrong, in any event, even assuming that estoppel by representation could be relied upon in these circumstances cf Minister for Immigration, Local Government and Ethnic Affairs re Kurtovic [1990] FCA 22; (1990) 92 ALR 93 there has been no clear and unambiguous representation to Mr Shellard or his company that the _`15% point' w_ould not be taken.

35 Further, I do not believe that in the circumstances I would be entitled to relieve Landro from the consequences that its purchaser had not paid 15% of the purchase price under the sale contract. Since this is a review proceeding Section 51(1) of the Victorian Civil and Administrative Tribunal Act 1998 applies to it. That sub-section states as follows:

(1) In exercising its review jurisdiction in respect of a decision, the Tribunal--

(a) has all the functions of the decision-maker; and

(b) has any other functions conferred on the Tribunal by or under the enabling enactment; and

(c) has any functions conferred on the Tribunal by or under this Act, the regulations and the rules.

36 The effect is to give this Tribunal the same powers as the Commissioner for the purposes of reviewing his determination. It is sometimes said colloquially that the Tribunal stands `in the shoes' of the decision-maker; but Section 51(1) is a general provision. Section 159 of the Victorian Civil and Administrative Tribunal Act 1998 provides:

If a provision of this Act, the regulations or the rules is inconsistent with a provision of an enabling enactment, the provision of the enabling enactment prevails to the extent of the inconsistency.

37 The effect is that the Victorian Civil and Administrative Tribunal Act yields to the provisions of the `enabling enactment', in this case the Land Tax Act 1958 to the extent of any inconsistency. The final phrase in Section 39(2) is a clear exception to the `standing in the shoes' principle exemplified in Section 51(1) of the Victorian Civil and Administrative Tribunal Act. There has been no favourable exercise of the Commissioner's discretion in the circumstances the Tribunal is precluded from re-exercising that discretion. Landro cannot rely upon Sections 48 and 49 to exempt itself from land tax.

38 It follows that the Tribunal should affirm the Commissioner's determination.