Oueik v Chief Commissioner of State Revenue

Background

1. The appellant owns numerous parcels of land in New South Wales. He is the owner of land in Auburn which was originally comprised of five adjacent parcels ("the Auburn parcels"). On 10 August 2017, those adjacent parcels were consolidated into a single lot ("the Property"). He is also the owner of three units in Auburn ("the Auburn units"), a property in Homebush and his principal place of residence.
2. In January 2017, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2017 land tax year in the amount of $70,332.60. The Auburn units were not included in the land tax assessment.
3. In January 2018, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2018 land tax year in the amount of $9,472.20. Neither the Auburn parcels nor the Property, nor the Auburn units was included in the land tax assessment.
4. In May 2019, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2019 land tax year in the amount of $21,093.10. Neither the Auburn parcels, the Property, nor the Auburn units was included in the land tax assessment.
5. In May 2019, the Chief Commissioner also reassessed the 2017 and 2018 land tax years in the amounts of $75,220.60 and $13,290.50, respectively, to include one of the Auburn units.
6. In January 2020, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2020 land tax year in the amount of $28,978. Neither the Auburn parcels, the Property, nor two of the Auburn units was included in the land tax assessment.
7. On 12 March 2020, the appellant's representative, on the appellant's behalf, wrote to the Chief Commissioner advising that two of the three Auburn units were not included in the assessment of the appellant's land tax and should be added.
8. On 19 March 2020, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2017 to 2020 land tax years in the amount of $68,235.80, reassessing the 2017 to 2020 land tax years to include the two Auburn units which had not previously been included.
9. On 22 January 2021, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2021 land tax year in the amount of $48,769.50.
10. On 14 April 2021, the appellant lodged a land tax variation return with the Chief Commissioner, declaring the Property as land acquired.
11. On 21 June 2021, the Chief Commissioner issued a land tax assessment notice to the appellant for the 2018 to 2021 land tax years in the amount of $1,411,136.26, reassessing those years to include the Property. The assessment included an amount of $120,260.37 in interest.
12. On 29 June 2021, the appellant lodged an objection to the interest component of the assessment for the 2018 to 2021 land tax years. The Chief Commissioner wholly disallowed the objection on 30 November 2021.
13. The appellant applied to the Tribunal for review of that decision on 13 December 2021. On 26 April 2022, the Tribunal published its reasons and made an order affirming the decision under review.
14. On 17 May 2022, the appellant lodged a notice of appeal.

Grounds of appeal

1. The appellant identified his grounds of appeal in his notice of appeal as follows: 1. The Tribunal erred in law in failing to exercise the discretion of the respondent and failed to apply the relevant legal principles to find that the premium rate of interest should have been remitted in full and failed to order that (i) the decision of the respondent is set aside; (ii) the premium rate of interest is remitted in full; and (iii) the matter is remitted to the respondent to reassess interest at market rate only. 2. In the alternative, if the Tribunal did exercise the discretion of the respondent, the Tribunal erred in law in failing to correctly apply the relevant legal principles to find that the premium rate of interest should have been remitted in full and failed to order that (i) the decision of the respondent is set aside; (ii) the premium rate of interest is remitted in full; and (iii) the matter is remitted to the respondent to reassess interest at market rate only.
2. At the hearing of the appeal, the appellant's counsel put his case slightly differently, raising in his oral submissions the question of whether the Tribunal correctly construed s 25 of the Taxation Administration Act 1996 (NSW) ("TA Act"). As a result of this, we granted leave to the respondent to file further submissions after the hearing, and for the appellant to reply. In the Chief Commissioner's further submissions, it was submitted for the Chief Commissioner: "The grounds of appeal now advanced by the Appellant are that the Tribunal failed to construe s.25 of the TA Act as an unfettered discretion and constrained the exercise of the discretion in s.25 of the TA Act to consideration of whether the Appellant took reasonable care only."
3. The appellant, in his further submissions which responded to those of the Chief Commissioner, submitted: "The grounds of appeal on errors of law, as stated in the Notice of Appeal, are (in summary) that the Tribunal erred in law: (i) in failing to re-exercise the discretion of the Respondent in s 25 of the Taxation Administration Act 1996 ("TAA"); or (ii) if the Tribunal did re-exercise the discretion of the Respondent in s 25 of the TAA, the Tribunal failed to correctly apply the relevant legal principles to decide that the premium rate of interest should be remitted in full. At the hearing, the Appellant expressed these errors of law as: (i) a failure of the Tribunal to correctly consider the decision the subject of the review and the role and powers of the Tribunal (paragraph 6 of the Appellant's Submissions and 42 to 46 of the Appellant's Submissions in Reply); (ii) a failure to construe s 25 of the TAA as an unfettered discretion and that the Tribunal constrained the exercise of the discretion in s 25 by emphasis on whether the Appellant took reasonable care (paragraphs 11 to 30 of the Appellant's Submissions and 48 to 50 and 55 to 57 of the Appellant's Submissions in Reply)."
4. We note that the respondent was not given an opportunity to respond to this written re-framing of the appellant's case. The appellant's departure, such as it was, from the grounds of appeal at hearing, without prior notice to the respondent, and without identifying at the outset of the hearing that there was any such departure, was unfortunate. It created a lack of clarity as to what the appellant's case is and caught the respondent by surprise. We take the appellant's further submissions to indicate that the appellant maintains the grounds of appeal, as set out in the Notice of Appeal, but wishes the arguments which were developed at hearing to be considered as part of those grounds. That is the approach we have taken.
5. The appellant may appeal as of right in respect of any question of law and otherwise requires leave to appeal: Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act"), s 80(2)(b). The appellant's grounds raise errors of law and the appellant does not need leave to appeal on those grounds.
6. The appellant sought leave to appeal "on the merits" if the Appeal Panel found an error of law, such that the Appeal Panel could substitute its own decision for that of the Tribunal.

Relevant provisions

1. The appellant's liability to pay land tax arises under the Land Tax Management Act 1956 (NSW). A taxpayer who fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5 of the TA Act (Land Tax Management Act 1956 (NSW), s 72(1)). There is no longer any dispute that the appellant's failure to pay land tax on the Property was a "tax default" within the TA Act.
2. Section 21(1) of the TA Act provides that, 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 Division 1 of Part 5 of the TA Act.
3. The "interest rate" is the sum of the market rate component and the premium component (TA Act, s 22(1)). The premium component is 8% per annum (TA Act, s 22(3)).
4. 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 (TA Act, s 25).
5. A taxpayer may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (NSW) of a decision of the Chief Commissioner that has been the subject of an objection if the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection (TA Act, s 96(1)(a)).
6. Section 63(1) and (2) of the Administrative Decisions Review Act 1997 provide as follows: "63 Determination of administrative review by Tribunal (1) In determining an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including the following: (a) any relevant factual material, (b) any applicable written or unwritten law. (2) For this purpose, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision."

Ground 1 - Did the Tribunal err in failing to exercise the respondent's discretion or in misunderstanding its role?

1. We understand the first ground to raise the question of whether the Tribunal failed to exercise the Chief Commissioner's discretion, when conducting a merits review of the Chief Commissioner's decision not to remit the premium component of interest. The appellant also contends that the Tribunal did not correctly understand its role and powers.
2. The first ground, as set out in the Notice of Appeal, also contends that the Tribunal erred in law in failing to correctly apply the relevant legal principles. However, having regard to the appellant's further written submissions, we understand that now to be put as part of the second ground only.
3. In support of his submission that the Tribunal had failed to re-exercise the Chief Commissioner's discretion, the appellant relied upon Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 ("Incise Technologies") at [52] and [66] to [68]. The Appeal Panel of the Administrative Decisions Tribunal pointed out in that decision that a merits review tribunal was to make its decision based on all relevant information as at the time of the hearing and could consider conduct post-dating the Chief Commissioner's decision (at [67]-[68]).
4. The appellant also relied upon E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190 at [242], where Ward CJ in Eq (as Ward P then was) commented that "[t]he power [in s 25 of the TA Act] to remit interest is unconstrained and discretionary, and this Court is able to exercise that same power under s 101 of the Taxation Administration Act."
5. The appellant submitted that it was "unclear from the Tribunal decision if the Tribunal re-exercised the discretion of the Respondent in s 25 of the TA Act as this is not expressly addressed in the Tribunal's decision." In his further written submissions, the appellant submitted: "The Tribunal decision does not refer to the de novo nature of the proceedings or the powers of the Tribunal under subsection (2) of s 63 of the Administrative Decisions Review Act 1997 ("ADR Act"). The Tribunal quoted (at 5) from subsection (1) of s 63 that "the Tribunal is required to determine the correct and preferable decision having regard to the materials before it and the applicable law". However, the Tribunal did not quote from subsection (2) of s 63 of the ADR Act that 'For this purpose, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision'. Neither did the Tribunal otherwise state in the decision that the Tribunal was re-exercising the discretion of the Respondent under s 25 of the TAA and it is therefore unclear from the decision if the Tribunal did so."
6. As the Chief Commissioner submitted and the appellant acknowledged, the Tribunal's reasons ought not to be inspected with a fine tooth-comb attuned to identifying error and they must be read fairly and as a whole (Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 77 ALJR 1165; [2003] HCA 30 at [147]; Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271-272, 291; New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231; (2019) 100 NSWLR 578, Bell P at [77], Ward JA (as her Honour then was) agreeing).
7. The structure of the Tribunal's reasons indicates that it did consider whether the exercise the discretion to remit the premium component of interest, under s 25 of the TA Act. Under the heading "Remission," the Tribunal stated at [55] of its reasons that the Chief Commissioner may remit the market rate component or premium rate component of interest or both. The Tribunal then considered whether the market rate component of the interest should be remitted at [56] to [58] of its reasons under the heading "Market Rate component." Following this, the Tribunal discussed matters relevant to remission of the premium component under the heading "Premium component" at [59] to [71] of its reasons. At [60], it quoted from a Revenue NSW Fact sheet dealing with the circumstances in which the premium rate of interest may be reduced, which included if the taxpayer took reasonable care, or made a voluntary disclosure. The Tribunal then discussed whether the appellant had taken reasonable care in the following paragraphs, and also referred to the Appeal Panel's view, in Incise Technologies, that four criteria were relevant to the consideration of the remission of the premium component of interest.
8. We conclude that, considering the adequacy, substance and reasoning process revealed by the Tribunal's reasons in the light of the principles emerging from the authorities, the Tribunal's discussion of the premium component of interest at [59] to [71] was for the purposes of determining whether the Tribunal should remit that component in the exercise of its discretion. In the final sentence of [71], the Tribunal concluded: "The Tribunal cannot, in the absence of evidence addressing the matters referred to above, be satisfied that the Applicant has taken reasonable care to comply with his obligations or that it is appropriate in the circumstances to remit any amount of the premium component of the interest imposed."
9. That statement makes it plain that the Tribunal considered whether to remit the premium component of interest and decided not to do so.
10. The appellant contended that the Tribunal did not correctly identify the nature of its role in the proceedings and did not refer to s 63(2) of the Administrative Decisions Review Act 1997 (NSW). That provision confers a discretionary power to exercise the administrator's functions for the purpose of determining an application for administrative review. This has been taken to mean that the Tribunal "stands in the shoes" of the administrator (Irvine v Commissioner of Police, New South Wales Police Force [2012] NSWADT 245 at [12]; see also CFK v Office of Children's Guardian [2017] NSWSC 460 at [10]). The "effect of subs (2) is to confer on the Tribunal all of the functions of the [administrator] in making the decision" (CXZ v Children's Guardian [2020] NSWCA 338 at [38]).
11. It was not necessary for the Tribunal to refer to s 63(2) of the Administrative Decisions Review Act 1997 (NSW) in its reasons, as the appellant suggests. The Tribunal understood, as it indicated in [5] of its reasons, that its role was to determine the correct and preferable decision having regard to the materials before it. It did not have to "re-exercise" the discretion of the Chief Commissioner; its task was to determine whether the Chief Commissioner made the correct and preferable decision on the relevant factual material before it at the hearing. In circumstances where the Tribunal found that the Chief Commissioner's decision was correct and preferable on the basis of that material, it had fulfilled its task.
12. Accordingly, we reject the appellant's submission that the Tribunal erred in law by failing to re-exercise the Chief Commissioner's discretion under s 25 of the TA Act. The Tribunal considered how that discretion should be exercised and found that the appellant had not persuaded it that the discretion should be exercised in a different way.
13. For these reasons, the first ground is dismissed.

Ground 2 - misconstruction of statute and failure to apply the relevant legal principles

1. At the hearing, counsel for the appellant, Mr Rider, submitted that the Tribunal had erred in its construction of s 25 by using reasonable care as the sole or dominant determinant of whether interest should be remitted. He said that it had failed to recognise that s 25 confers an unfettered discretion.
2. Mr Rider submitted that the Tribunal had fettered its exercise of the remittal power by unreasonably focusing on whether the appellant took reasonable care. He said that, whilst the Appeal Panel of the Administrative Decisions Tribunal had recognised four criteria relevant to the remission of interest in Incise Technologies, it also recognised that there may be other circumstances in which remission of the premium component of interest would be appropriate. The four criteria, he said, have in common that the taxpayer demonstrated positive or non-negative behaviour. Mr Rider submitted that, by focusing on whether the appellant had taken reasonable care, the Tribunal had failed to take into account the appellant's positive behaviour, in particular his voluntary disclosure.

Tribunal's reasoning as to remission of the premium component of interest

1. The Tribunal identified the premium component of interest as being "a form of penalty," the purpose of which is to provide a deterrent against taxpayers failing to meet their obligations on time (at [59]). That is consistent with authority (see, for example, Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [443]).
2. The Tribunal referred (at [60]) to a fact sheet on the Chief Commissioner's website which states: "The premium rate of interest may be reduced if there is evidence you took reasonable care, or made a voluntary disclosure before the commencement of an investigation."
3. The Tribunal recognised that it was not bound by the Commissioner's guidelines (at [61]) (and implicitly that it was not bound by the fact sheet). The Tribunal referred (at [63]) to the four criteria considered by the Appeal Panel in Incise Technologies as being relevant to the consideration of remission of the premium component of the interest, whilst "noting that there may be other circumstances which it may be appropriate also to take into account." These were (in summary) that all principal tax is fully paid, the taxpayer has cooperated in providing relevant information, this has occurred prior to any investigation being commenced and there has not been any wilful default by the taxpayer in not paying tax on time. The Tribunal referred to the appellant's submissions as to why he satisfied these criteria, including because he had made a voluntary disclosure, but indicated that there were issues he had failed to address. These included whether he had attempted to notify the Chief Commissioner of the consolidation of the Property and why he did not notify the Chief Commissioner of the omission of the Property after receiving each of the 2018, 2019 and 2020 assessments (at [64]-[65]).
4. The Tribunal then turned to the question of whether the appellant had taken reasonable care and the appellant's submissions on that topic. It was unable to accept those submissions because they were not supported by evidence (at [66]). The Tribunal noted that the 2018 assessment was significantly lower than the 2017 assessment and that the appellant's representative had informed the Chief Commissioner that other properties were not included in an assessment, so some attention was being paid to the land tax assessments, and that the Property was of significant value, comprising about 105 units (at [67]). In light of those matters, the Tribunal observed that it was difficult to see that the omission of the Property had gone unnoticed for over three years (at [68]).
5. The Tribunal stated that it accepted the Chief Commissioner's submission that the appellant had not established that it had notified the Chief Commissioner "in a timely fashion or demonstrated reasonable care in making the disclosure which was made in April 2021" (at [68]). That finding of fact was open to the Tribunal, and has not been challenged on appeal.

Consideration

1. Considering the reasons as a whole, we are not satisfied that the Tribunal misconstrued s 25 of the TA Act, failed to construe it as conferring "an unfettered discretion" or improperly constrained the exercise of the discretion by emphasizing the question of whether the appellant took reasonable care.
2. The Tribunal expressly recognised that the four criteria in Insight Technologies were relevant to the exercise of the discretion under s 25 of the TA Act and that other circumstances may be taken into account. It referred to the appellant's submissions on these matters and we are satisfied that it had regard to them. The Tribunal noted, correctly, that it could take into account the statement in the fact sheet saying that the premium rate may be reduced if a person took reasonable care, but also recognised that it was not bound by the fact sheet.
3. The Tribunal gave consideration to the Incise Technologies criteria but took the view that there was a number of issues the appellant had failed to address. It was entitled to do so. The appellant submitted that the "number of issues" the Tribunal identified were inconsistent with Incise Technologies. The appellant submitted that in Incise Technologies the Appeal Panel of the Administrative Decisions Tribunal had said that the Administrative Decisions Tribunal in that case had not considered material which showed that the case was not simply one of mere failure to take reasonable care and had failed to take into account conduct from a specified period. Whilst that is so, in the present case, the Tribunal did not make the same error. It took into account all of the appellant's conduct.
4. The Tribunal considered and placed some emphasis on the question of whether the appellant had taken reasonable care, which was an issue the subject of argument by both parties. Any emphasis placed upon this factor by the Tribunal did not amount to the imposition of an improper or unlawful fetter on its discretion. As the appellant submitted, that discretion has been described by Ward CJ in Eq (as her Honour then was) as "unconstrained and discretionary." The discretionary nature of the power means that the Tribunal is entitled to place weight on particular factors if it chooses to do so. There was no error in the exercise of that discretion in the sense described in House v R (1936) 55 CLR 499 at [504]-[505] because, relevantly, the Tribunal did not act on a wrong principle. Nor did it fail to have regard to relevant matters, or have regard to irrelevant matters.
5. For all of these reasons, the appellant has failed to establish that the Tribunal erred as alleged in the second ground of appeal.

Leave to appeal "on the merits"

1. The appellant sought leave to appeal "on the merits" if he was successful in establishing an error of law. We take it, by this, that he was asking the Appeal Panel to decide to deal with the appeal by way of a new hearing (NCAT Act, s 80(3)(a)). In any event, as we have not found any error of law, this issue does not arise.

Orders

1. For the reasons given above, we have decided to dismiss the appeal. We make the following order: 1. Appeal dismissed.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 03 February 2023