CITATION Oakbee Pty Ltd v Commissioner of State Revenue

(Taxation) [2012] VCAT 1984

Assessment of the Applicant in matter T15/2011 is set aside.

For Applicant Mr Simon Tisher of Counsel instructed by Belleli King and Associates.

For Respondent Mr Albert Dinelli of counsel instructed by the Commissioner of State Revenue

1. In November 2008, the Applicant as registered proprietor sold two blocks of land in a housing development at Endeavour Hills. A block of land at 113 Reema Boulevard was sold to Michael and Jacqueline Lebon for $227,000 by contract dated 22 November 2008 ("the Reema land"). Another block of land at 5 Loren Court Endeavour Hills was sold to Michael and Despina Parfitti for $231,000 by contract dated 29 November 2008 ("the Loren land").

1. Deposits on each block were payable by installments. The deposit for the Reema land was $11,350, of which $500 was paid on the day of sale and the balance of deposit was due on 8 December 2008. The Loren land deposit was also $11,350, of which $500 was payable on 1 December 2008 and the remainder due on 12 December 2008. Each deposit was approximately 5% of the land's purchase price.

1. Particulars of sale for the Reema land contract provided that

SETTLEMENT is the date upon which the Purchaser shall become entitled to vacant possession of the property and chattels must be provided, namely upon payment of the initial deposit monies and approval of the Plan of Subdivision.

The same term applied in the Loren land contract except that, impossibly, "29th January 2008 or earlier by agreement" was stated as the DATE when the purchasers became entitled to vacant possession. 1998 was the wrong year. Entitlement to possession therefore arose more than 10 months before the contract was entered.

1. The plan of subdivision relative to the blocks was approved in May 2007. Both contracts contained a "subject to fianance" condition precedent in the purchaser's favour. The Reema land contract provided:

1. Purchasers of the Loren land paid the balance of deposit outstanding by 12 December 2008 and the contract was completed by payment of the balance of the price on 29 January 2009.

1. Purchasers of the Reema land defaulted on payment of the balance of the deposit to the Applicant on 8 December 2012. No rescission notice was ever served on the Reema land purchasers. The Applicant sold the Reema land to different purchasers in late 2009.

1. Mr Mondous gave evidence for the Applicant as its director. He said that he regarded the Reema land contract with the purchasers Mr and Mrs Lebon as on foot until the Reema land was re-sold. Mr Mondous was challenged about this claim in cross-examination. LJ Hooker Dandenong was the Applicant's estate agent in the initial Reema land sale transaction. A 2 December 2011 letter from LJ Hooker to the Commissioner was put to him.[1] Responding to the Commissioner's inquiry: "[O]n what date did you or the vendor receive notification of the termination of the contract of sale?", LJ Hooker said that "[T]he notification was received the date of the refund." This was on 12th January 2009. Another question asked by the Commissioner elicited the letter's reply:

4. The deposit was refunded on 12/01/09 with a sales trust cheque no 848 in the amount of $500.

1. Also put to Mr Mondous was Mr Lebon's email response to the Applicant's inquiries dated 20 November 2011.[2] Communicating from India (as he said) Mr Lebon recollected being unable to obtain finance by 8 December 2008. When this fact was advised to the vendor, he said, "they gave us back the deposit without a fuss." Mr Lebon was unspecific as whether this was in 2008 or 2009.

1. Possibly the action of LJ Hooker in consensually discharging the Reema sale contract before the land's re-sale was done without the knowledge of Mr Mondous. LJ Hooker as the Applicant's agent in the sale transactions may have had sufficient authority to bind the Applicant. More likely, in my view, LJ Hooker acted on instructions from Mr Mondous. However, the time of discharge in 2009 is not important. LJ Hooker's letter was put in evidence by the Commissioner.[3] That letter stated that the Reema land contract was discharged on 12 January 2009.

1. Both the Reema land and the Loren land were vacant blocks. No evidence was given that the purchasers of either land improved the land in any way or otherwise took physical possession of their land before 31 December 2008.

1. Section 8 of the Land Tax Act 2005 ("the Act") provides that the owner of taxable land is liable to pay land tax on that land. A taxpayer is assessed by s36(1) of the Act on the total taxable value of all the taxable land of which the taxpayer was the owner at midnight on 31 December immediately proceeding a tax year.

1. As to who is the "owner" of land, the Act provides:

(1) For the purposes of this Act, a purchaser under a contract of sale of land is deemed to be the owner of the land (but not to the exclusion of any other person) if the purchaser has taken possession of the land.

(2) Subsection (1) applies whether or not the contract of sale has been completed by the transfer of the land.

(1) For the purposes of this Act, the vendor of land under a contract of sale of land is deemed to be the owner of the land (but not to the exclusion of any other person) until-

(a) the purchaser has taken possession of the land; and

(b) subject to subsection (3), at least 15% of the purchase money has been paid.

(2) Subsection (1) applies whether or not the contract of sale has been completed by transfer of the land.

(3) The Commissioner may determine that the vendor is deemed not to be the owner of the land despite the fact that 15% of the deposit has not been paid if the Commissioner is satisfied that

(a) the contract of sale was made in good faith and not for the purpose of avoiding land tax; and

(5) If the vendor and the purchaser are both deemed to be owners of the land under this part, there is to be deducted from any land tax payable on the land by the vendor any land tax on the land paid by the purchaser.

1. Subsection 16 (1) of the Act deems a vendor to be owner of land sold until the purchaser has "taken possession" of the land and at least 15% of the purchase money had been paid. Less than 15% of the purchase money for the Reema land had been paid by 31 December 2008. This was accepted by Mr Tisher for the Applicant. It followed that "subject to subsection (3)", s-s16(1) of the Act provided that the Applicant as vendor of the Reema land was liable for land tax as owner of the land as at 31 December 2008.

1. The Commissioner has a discretion in s-s 16(3) of the Act to deem the vendor not to be the owner of the land "despite the fact that 15% of the purchase money has not been paid". The discretion is conditioned on the Commissioner's being satisfied about two things. First, the contract of sale must be made in good faith and not for the purpose of avoiding land tax. Secondly, the contract of sale must be still in force.

1. Mr Dinnelly for the Commissioner did not assert that the contract of sale was made other than in good faith. I will treat the condition in paragraph 16(3)(a) as satisfied.

1. Both parties agreed that 31 December 2008 was the relevant time for when the contract had to be in force in order to satisfy the condition in paragraph 16(3)(b) of the Act.[4] In paragraph 9 above I noted that the Commissioner was bound by the assertion that the Reema land contract was not discharged until 12th January, 2009. I find that the condition in paragraph 16(3)(b) was satisfied.

1. Purchasers under the Reema land contract exercised their right to avoid the contract, which arose pursuant to the contract's "subject to finance" clause. LJ Hooker has stated in response to the Commissioner's inquiry that it received "notice of termination" from the purchasers on 12 January 2009. For this reason I have assumed that the contract between the Applicant and the Lebons remained "in force" until notice was received and the contract consensually terminated by LJ Hooker acting for the Applicant on 12 January 2009.

1. The Act's s-s16(3) discretion has no other condition. It does not require the purchaser to have taken possession of the land. If the Tribunal were to construe the provision standing alone, it would seem that the Applicant has satisfied the requirements of that the subsection imposes.

1. However, the preceding paragraph 16(1)(b) the Act qualifies a requirement that "15% of the purchase money has been paid" with the expression "subject to subsection (3)". This is part of a formulation that a vendor of land is not deemed to be the owner of land if certain matters are satisfied. Paragraph 16(1)(b) is the second of s-s16(1)'s two requirements. The first requirement, in paragraph 16(1)(a), is that "the purchaser has taken possession of the land'.

1. There may be an implication from the words "subject to subsection (3)" in paragraph 16(1)(b) of the Act that the paragraph 16(1)(a) requirement is imported and applicable when the paragraph 16(1)(b) requirement is referred to in s-s16(3). Subsection16(3) then requires the purchaser to have taken possession of the land as an additional condition. An ellipsis may have occurred. But the construction is not obvious.

1. It is instructive to compare s16 of the 2005 Act and the corresponding provision of the Land Tax Act 1958 ("the 1958 Act").

49. (1) When any agreement has been made for the sale of land, whether before or after the commencement of this Act, and whether or not 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 agreement for sale has been made in good faith, and not for the purpose of avoiding tax, and the said agreement is still in force. In any such case the decision of the Comissioner shall be final and conclusive. [emphasis added]

1. The discretion in s-s49(2) of the 1958 Act corresponds with s-s16(3) of the 2005 Act. However, s-s49(2) includes an explicit condition that possession of the land "is delivered" to the purchaser. This correlates with the "possession of the land has been delivered to the purchaser" condition in s-s49(1) of the Act.

1. The Acts differ in this respect. Subsection 16(3) of the 2005 Act does not include a "purchaser has taken possession of the land" condition correlating to the same condition in paragraph 16(1)(a). Reference to "subject to subsection (3)" in paragraph 16(1)(b) qualifies the condition in that paragraph and not the s-s 16(3) discretion. It does not, in terms, add anything to s-s 16(3).

1. Perhaps the person drafting the 2005 legislation meant to replicate the terms of the 1958 Act in different but equivalent language. However, it is doubtful whether it is a legitimate interpretive technique for courts (and tribunals) to "read in" words to legislation where words are believed to be omitted. I am not prepared to interpret s-s16(3) of the Act other than by giving effect to its literal terms.[5]

1. I am also mindful that the point about the ellipsis in subsection 16(3) of the Act was not properly argued before me. Both parties before me assumed that a vendor needed to show that a purchaser had "taken possession" of the land as required by paragraph 16(1)(a) in order to qualify for favourable exercise of the subsection 16(3) discretion.

1. It was also not argued before me that the Commissioner has a general right to withhold favourable exercise of its discretion in favour of Applicants who satisfy the subsection's conditions.
2. On the assumption that I am mistaken in the interpretation of s-s16(3) of the Act, I will indicate my findings on the question of whether, during 2008, the purchasers of the Reema land had "taken possession" of that land.
3. Particulars of the Reema land contract, it will be recalled, were to the effect that the purchasers should be "entitled to vacant possession . . . upon payment of the initial deposit monies and approval of the Plan of Subdivision". $500 was paid on the day of sale and the Plan of Subdivision was approved at an earlier time.
4. Mr Tisher contended for the Applicant that the requirement "the purchaser has taken possession" in paragraph 16(1)(a) of the Act was satisfied when the purchaser became entitled to possession. No physical occupation of the land was said to be required to satisfy "taken possession" in the necessary sense.[6] Several authorities on the point were cited, none of which related to the words of the (2005) Act.
5. Mr Dinelli contended that the meaning of the expression "the purchaser has taken possession" used in s-s16(1)(a) of the (2005) Act significantly differs from the sense of "possession of the land has been delivered to the purchaser" when used in s-s49(1) of the 1958 Act. Use of the active and not the passive voice was said to carry the implication that the purchaser must do something in order to obtain possession. An entitlement to possession which can be validly conferred on a person is passive and/or ignorant of the right cannot suffice. The Tribunal was advised that the matter is free of authority and that nothing in the Explanatory Memorandum assists in the subsection's construction.
6. Almost at the end of the hearing, the Applicant sought leave to re-open its case and call the evidence of Mr Parfiti, one of the purchasers of the Loren land, for the purpose of demonstrating the time at which the Loren land purchasers took possession of their neighbouring land. The Respondent took no objection to this course of action. It was not alleged that any dealings with the Loren land were irrelevant to dealings which may have occurred in relation to the Reema land.[7] In the event, Mr Parfiti said that "[W]e took physical possession of the property on 29 January 2009" and "it wasn't our understanding" that he and his wife were entitled to possession "pre-January 2009". Mr Parfiti's evidence was evidently not what was hoped for on behalf of the Applicant.
7. I find that the Applicants never took possession of the land. Becoming "entitled" to possession was insufficient for the Applicants to "take possession" in the sense required by paragraph 16(1)(a) of the Act. The Reema land contract was terminated before positive possession-taking occurred. In the event that the Tribunal's construction of s-s16(3) of the Act is erroneous, the Respondent's assessment should be upheld.

[1] Exhibit "D" to Irene Tassone's statement dated 23 March 2012 and filed for the Commissioner.

[2] Exhibit "B" to Irene Tassone's statement dated 23 March 2012.

[3] As exhibit "D" to Irene Tassone's statement: see n. 1.

[4] The paragraph makes reference to the time which s-s 37(1) of the Act makes critical for the assessment of an "owner" of the land.

[5] See Cooper Brooks (Wollongong) Pty Ltd v FCT [1981] HCA 26; (1981) 147 CLR 297 as interpreted in R v Young [1999] NSWCCA 166; (1999) 46 NSWLR 681 at 687-688 per Spigelman CJ, D Pearce and R Geddes Statutory Interpretation in Australia 6th edn (LexisNexis, 2006), [2.31]-[2.34] and J Spigelman "Statutory interpretation: Identifying the linguistic register" [2000] NewcLawRw 1; (1999) 4 Newcastle L Rev 1.

[6] Relying on Manors of Mosman Pty Ltd v Commissioner of Land Tax (NSW) (1993) 26 ATR 164 at 170 per Smart J, upheld by the NSW Court of Appeal (1994) 34 NSWLR 94, Commissioner of Land Tax v Cam & Sons Pty Ltd [1965] HCA 13; (1965) 112 CLR 139 at 146, per Kitto, Taylor and Owen JJ and Sandhurst Golf Estates Pty Ltd v Commissioner of State Revenue (No 1) [2005] VCAT 549 per Bowman J.

[7] Being evidence, at best, of tendency (or similar fact evidence): compare s97 of the Evidence Act 2008.