The decision of the respondent is set aside, and notice of assessment 10796263 dated 5 May 2016 is varied, to reduce the additional duty from $110,000 to $5,500, and the penalties from $22,000 to nil.

1. On or about 30 June 2011, Parklea (Estates) Pty Ltd (Parklea) entered into a contract of sale to purchase land at 20 Lecky Road, Officer (Subject Property) from Portbury Development Co Pty Ltd (PDC) for $2.1 million. Stamp duty of $115,500 was paid based on that consideration.
2. On 28 February 2014, Garde J. delivered his decision in Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd[1] (Portbury). While the decision in Portbury primarily related to the loss recoverable by PDC from a defaulting purchaser in respect of an earlier sale of the Subject Property, Garde J. also considered the circumstances in which PDC came to sell the Subject Property in June 2011 and evidence as to the market value of the property at the time.
3. On 26 November 2015, some 21 months after the decision in Portbury, the Commissioner of State Revenue (Commissioner) notified Parklea that he was commencing an investigation relating to the duty payable on its purchase of the Subject Property.[2]
4. On 5 May 2016, following the investigation, the Commissioner issued notice of assessment 10796263 (Assessment) imposing additional duty of $110,000 in respect of Parklea's purchase of the Subject Property, together with penalties of $22,000 and interest (to the date of assessment) of $15,070.22.[3] An accompanying letter[4] explained that the additional duty was calculated on the basis that the Subject Property had an unencumbered value of $4.1 million on 30 June 2011, based on a valuation commissioned by the Valuer-General Victoria from Mr Cundell of ValueIt Pty Ltd dated 29 March 2016[5] (Cundall Valuation). Further, the letter explained that the penalty was applied on the basis that Parklea had failed to take reasonable care in relation to its stamp duty liability, at the rate of 20% of the additional duty.
5. On 5 May 2016, Parklea objected to the Assessment on the basis that the unencumbered value of the Subject Property was no greater than the consideration of $2.1 million, and that it had taken reasonable care.[6] The objection was accompanied by a letter from Mr Brian Dudekov of Urbis dated 10 June 2016[7] (Dudekov Letter) expressing the view that the 'sale price of the subject property to Parklea in the amount of $2.1 million can be properly characterised as [unencumbered value] and therefore should be relied upon for the assessment of Stamp Duty'.
6. By letter dated 29 December 2016, the Commissioner reduced the penalties from 20% ($22,000) to 5% ($5,500), but otherwise disallowed Parklea's objection.[8] It is that decision which is the subject of the referral to the Tribunal.
7. Essentially, there are three questions to be considered in resolving the dispute between the parties being:

1. Can the unencumbered value of property be equated with the consideration payable on its purchase, in circumstances where it is agreed that parties to a contract of sale are dealing at arm's length, but the vendor is a forced seller? 2. If not, should the value of $2.2 million identified in the Retrospective Valuation as of 29 June 2011 prepared for the applicant by Mr Dudekov (Dudekov Valuation),[9] or the value of $4.1 million identified in the Supplementary Report and Valuation dated 22 February 2018 produced for the respondent by Mr Cundall (Cundall Supplementary Valuation),[10] be accepted as the unencumbered value of Subject Property?

1. Did Parklea take reasonable care in relation to the stamp duty payable on its acquisition of the Subject Property or, if not, should the penalty otherwise be remitted in full?
2. Connected with the questions in paragraphs 7(a) and (b) is the extent to which the decision of Garde J. in Portbury is relevant to the resolution of these questions.
3. For the reasons which follow:

1. I find that, as PDC was a forced seller, the consideration paid by Parklea to purchase the Subject Property does not represented its unencumbered value. 2. I prefer the Dudekov Valuation over the Cundall Supplementary Valuation, and find that the unencumbered value of the Subject Property at the relevant date was $2.2 million.

1. I consider that Parklea took reasonable care in the circumstances and the penalty tax should be reduced or remitted to nil.

1. Under section 18 of the Duties Act 2000 (Duties Act), stamp duty is payable on the 'dutiable value' of dutiable property that is the subject of a dutiable transaction at the rates specified in Part 3 of the Duties Act.
2. So far as relevant, section 20 provides that:-

(1) The dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of -

(a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration); and

(b) the unencumbered value of the dutiable property.

1. If stamp duty is not paid, it gives rise to a tax default, upon which penalty tax is imposed under section 30 of the Taxation Administration Act 1997 (Administration Act), ordinarily at 25% or 75% of the duty.
2. However, under section 30(3), the Commissioner can determine that no penalty tax is payable where he is satisfied that 'the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law'. Further, under section 35 of the Administration Act, the Commissioner may remit penalty tax by any amount 'in such circumstances as the Commissioner considers appropriate'.

1. The essential factual background is conveniently summarised in Portbury in the following paragraphs of Garde J.'s decision:

4 Following the failure of Ottedin and Goldcare [the defaulting purchaser] to complete the varied sale contract, Portbury came under increasing pressure from the National Australia Bank ('the Bank') to reduce its debt to the Bank. It appointed Knight Frank Australia Pty Ltd ('Knight Frank') to resell the property. Over April and May 2011, the property was offered for sale by tender together with four adjoining lots of land totalling approximately 49.2 hectares. Despite extensive marketing and advertising, including print- and web-based advertisements, brochures, and the erection of signage on each lot, the tender for the sale closed without any offers.

5 In June 2011, Portbury put the property back onto the market for auction as a separate block. Knight Frank undertook further marketing, including print- and web-based advertisements, sign boards and brochures.

6 The property was passed in at the auction on 29 June 2011. Only one non-vendor bid in the amount of $2 million was made at the auction. The bid was made by Mr Andrew Facey ('Mr Facey'), on behalf of Parklea (Estates) Pty Ltd ('Parklea'). Subsequently, the property was sold by Portbury to Parklea for $2.1 million ('the Parklea sale').

7 From 8 July 2011, negotiations took place between Mr Facey, Mr Khay Taing ('Mr Taing') and Ms Helen Li ('Ms Li'). On or about 31 October 2011, the property was on-sold ('the Biltex sale') by Parklea to Biltex Group Pty Ltd ('Biltex') for $6 million including an allowance for civil works of $500,000. By this time, three other investors had been introduced to Biltex and become shareholders in that company.

8 On 14 September 2012, Parklea and Biltex extended the settlement date for the property to 1 November 2012, and removed a condition as to obtaining a planning permit. On 20 December 2012, Parklea and Biltex extended the settlement date to 2 April 2014. $3.6 million remains to be paid on settlement. Biltex took possession of the property on 10 January 2013. Biltex is seeking a permit for the property from Cardinia Shire Council ('Cardinia') for a private hospital, hotel and assisted-living use.

1. The evidence of Mr Facey, a director of Parklea, was that the auction attracted a reasonable crowd of approximately 25 people[11] and, in his oral evidence, he confirmed this included representatives of Biltex Group Pty Ltd (Biltex) to whom he sold the property soon after. Relevantly, prior to concluding the conditional sale to Biltex, Mr Facey had offered to sell the Subject Property to Biltex as 'a straight cash sale for $3 million without conditions'.[12]

Is the unencumbered value of the Subject Property on 30 June 2011 to be equated with the actual sale price paid by Parklea to purchase it?

1. The general test for determining the market value of land is that set out in Spencer v The Commonwealth (Spencer),[13] namely the amount that would be paid in hypothetical transaction between a willing but not anxious seller and a willing but not anxious buyer.[14]
2. Although Spencer was a case about compulsory acquisition, it has been accepted in VCAT as applicable to a wide variety of situations including, relevantly, to valuations for stamp duty purposes.[15]
3. Generally, the market value of a property should be the same as the actual sale price if the sale is between parties acting at arm's length. Thus, in ISPT Pty Ltd v City of Melbourne,[16] Morris J. (the then President of VCAT) observed:[17]

if particular land was sold on the relevant date for valuation, and the land was in the form to be valued (for example, it was vacant land), and the sale was not affected by special factors (such as a distressed seller), then that sale would be a perfect yardstick in valuing that land.

1. The Commissioner submits that, in this case, the evidence shows it was a 'forced sale' by PDC and, accordingly, the price paid by Parklea for the Subject Property should not be accepted as its unencumbered value. In this regard, the Commissioner points to the decision in Portbury,[18] as well as a letter from PDC to the Commissioner dated 4 December 2015[19] in which Mr Portbury (a director of PDC) says the company's 'motivation to sell was a forced necessity' arising from the company being 'under extreme pressure to reduce its debt level with the National Australia Bank'.
2. While Parklea concedes that PDC was a forced seller, it submits that the price paid by Parklea should nevertheless be accepted as being the unencumbered value because there is no evidence that PDC had overlooked any ordinary business consideration, given the sale occurred after an extensive marketing campaign, a tender process and a well-attended auction.
3. Parklea say that its contention is supported by the judgement of Isaac J. in Spencer, who said:[20]

To arrive at the value of the land at that date, we have, as I conceive to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value ... including ... the then present demand for land...

1. Parklea also points to the Dudekov Letter, in which Mr Dudekov expresses the view that while 'there is ample evidence to support the proposition that given Portbury's financial position as disclosed in the Portbury case it was under financial pressure and hence could be construed as an anxious seller', it was nevertheless his view that 'it is not appropriate to discount the transaction as being at odds with the definition of [unencumbered value] (or indeed market value as enunciated in the Spencer case) solely on that ground'.
2. Mr Dudekov goes on to set out at length his reasons for this view as follows:
   • I agree with Mr Torr [one of the valuers in Portbury] that when a market turns for the worse there is a hiatus period during which time no transactions take place and the market is left to speculate on how far it has fallen.
   • At some point in time one or more vendors, for their own particular reasons be it financial pressure or some other reasons, will 'break rank' and accept a lower offer at which time the market recalibrates.
   • To assert that the one (or more) vendor who 'breaks ranks' and accepts a lower price than previously being achieved does not fit the definition of a not anxious vendor is, in my submission, ill conceived.
   • The actual words J Isaacs used in the Spencer Case and quoted below would support my proposition [see paragraph [33] above].
   • A proper examination of the above passage acknowledges that vendors, while expected to not be anxious, should not overlook ordinary business considerations and be fully conversant with current market conditions. Portbury was not the only owner to come under financial pressure from the Banks but was the only vendor to market and ultimately sell its property in this precinct.
   • Reverting to the decision of His Honour in the Portbury Case, the SRO selectively refers to Paragraph 389 to assert that Portbury was under financial pressure and by extension does not qualify as a 'not anxious vendor'.
   • What SRO conveniently overlook is His Honour's ultimate conclusions at Paragraphs 462, 465 and 466 [which are then set out].
   • Finally, there was no sales evidence produced by any valuer in the Portbury Case, nor could I find any sales evidence, which could be termed as truly comparable, particularly as to being contemporaneous thereby truly reflecting market conditions as they existed as at the relevant date.
   • In my opinion, the only reasonable conclusion that can be drawn from the foregoing is that if an owner such as Portbury takes all reasonable measures to market a property and ultimately after a protracted and extensive marketing campaign finds the only buyer willing to negotiate a purchase at that time, the price ultimately arrived at can properly be characterised as [unencumbered value] notwithstanding Portbury's parlous financial situation. The fact that there were no other sales from which to gauge the extent of the fall in the market in no way supports adopting an alternate hypothetical valuation assessment based on precious little evidence.
3. Apart from debating the relevant aspects of the decision in Spencer applicable to the present case, neither party was able to refer the Tribunal to any case in which a similar issue has been considered.
4. In considering this matter, I have had regard to what the parties agreed was the leading text on the law applicable to land valuation,[21] which suggests that the principle regarding forced sales was developed in cases involving a sale by a sheriff or in bankruptcy and like situations.[22]
5. The author goes on[23] to refer to the definition of forced sale in an exposure draft of a proposed international valuation standard issued by the International Valuation Standards Council in June 2010 as relating to 'circumstances where a seller is under compulsion to sell and a proper marketing period is not available'. This suggests that perhaps not all situations where a seller is under some financial or other pressure to sell should be considered a forced sale, or at least a forced sale of a kind that results in the actual sale price of land being ignored.
6. The approach set out in the proposed international valuation standard could be seen to be consistent with the decision of Isaacs J. in Spencer who said:[24]

...the question for the tribunal is, what is the point at which the parties would meet; what is the sum the one would be willing to give and the other to take? That is practically the same as asking what is the highest sum such a purchaser would give, because we must assume the owner would be willing to take the best he can get. ... It is not, as it seems to me, proper for this purpose to assume the owner retains his land unsold indefinitely because such an assumption could only be for the purpose of getting an improved value, arising from more favourable circumstances than those existing [at the relevant date], which is the very thing forbidden by the Statute.

1. There is also some support for this line of analysis in an article by Professor Bernard Marks relating to valuation principles applicable for tax (specifically income tax) purposes, who observes:[25]

The 'willing but not anxious' principle is basic to the Spencer rule because the hypothetical market place assumes objectivity. Any other principle would be impossible to apply since, presumably, the less willing or the more anxious the participants the lower or higher would be the price. Thus actual sale prices in mortgagee auctions or sales by a receiver or trustee in bankruptcy would ordinarily not be useful as comparable market value transactions. On the other hand_, the sale prices reached at a well publicised and orderly auction of a person who has been forced to sell his assets - a classic 'unwilling' seller - may well be the market value where a reasonable reserve is set simply because, if the seller had actually been willing to sell, the auction price would have been the same_.

1. However, Professor Marks does not cite any Australian decision which supports the latter proposition, and I have not been referred to (and have not found) any authority on point.
2. Even if the proposition is correct, there is a difficulty for Parklea.
3. The decision in Portbury makes it clear that the auction of the Subject Property was well publicised and orderly.[26] As previously noted, Mr Facey's evidence was that the auction attracted approximately 25 people, including Biltex's representatives. There was evidence that, after the auction, both Mr Smirk and PDC unsuccessfully sought to obtain a higher offer from Parklea,[27] as well as to elicit interest in the Subject Property from Biltex's representatives.[28]
4. However, while a reserve of $2.5 million was set by PDC based on advice from its agent, Mr Smirk of Knight Frank,[29] the actual sales price was below that reserve.
5. The Commissioner properly accepted that, given the statutory context in which the Tribunal must decide this case, the decision in Portbury is not binding on the Tribunal. However, it was nevertheless suggested the Tribunal should pay significant regard to the fact that while Garde J. had 'some sympathy for the view of Mr Portbury that the value of the property as at 30 June 2011 is best set by the sale price of $2.1 million actually achieved in the sale to Parklea following the auction',[30] His Honour went on to assess the market value by reference to the valuation reports tendered, (and ultimately accepting the evidence of Mr Les Brown that the value of the Subject Property was $4 million).[31]
6. Like Garde J., I have sympathy for the view that the unencumbered value of the Subject Property should be set by reference to the actual sales price in the circumstances. However, given:
   • the longstanding acceptance of the Spencer test;
   • the absence of any case law to suggest that a court or tribunal can accept a sale by an anxious seller in assessing the market value of property; and
   • the fact that there was only one bid at the auction of the Subject Property, which was below the reserve,

I have come to the conclusion that the unencumbered value of the Subject Property cannot be equated with the sale price.

Should the Dudekov Valuation or the Cundall Supplementary Valuation be accepted?

1. Before considering whether to adopt the Dudekov Valuation or the Cundall Supplementary Valuation, a question arises as to what significance the Tribunal should place on the valuation of the Subject Property by Mr Brown, which was accepted by Garde J. in Portbury.
2. As noted, it is conceded by the Commissioner that Garde J.'s acceptance of that valuation is not binding on the Tribunal. A further reason that the Tribunal cannot simply rely on the market value accepted by Garde J. in the decision in Portbury is that both valuers in this case have identified a further contemporaneous sale, of 200 Officer South Road, Officer (Officer Rd Property), which was not referred to or considered by Mr Brown in his valuation. There may have been a reason for this, but as Mr Brown was not called by either party, I consider the Tribunal should be reluctant to draw a firm conclusion from that earlier valuation.
3. Mr Dudekov's opinion is that the value of the Subject Property as at 29 June 2011 was $2.2 million, based on $350,000 per hectare for 6.2 hectare of developable land, and $10,000 per hectare of non-development land (1.9 ha).[32]
4. In forming this view, Mr Dudekov has relied on one sale, being the sale of the Officer Rd Property. He explained in his report that:[33]

Turning to a consideration of the sales evidence from which to adduce value, in my opinion, at or around the relevant date of valuation there was only one sale which could be characterised a comparable. Specifically, the property at 200 Officer South Road sold on the 22 June 2011, eight (8) days prior to the relevant date for the sum of $830,000. The property had a land area of 2 ha and erected upon the land was a substantial brick dwelling of approximately 250m2 together with outbuildings.

1. Mr Dudekov adjusted the sale price of the Officer Rd Property to $290,000 per hectare to exclude the value of the dwelling and other improvements, and made an adjustment of $60,000 per hectare to reflect the fact that, as at the relevant date, the Subject Property was within an area with a Precinct Structure Plan (PSP), while there was no approved PSP applicable to the Officer Rd Property.
2. He said that 'while I am aware of other sales in the immediate area, in my opinion none can be classified as comparable as they are all to the north of the Pakenham Bypass and either immediately developable or zoned for residential development'.[34]
3. Mr Cundall's opinion is that the Subject Property's value was $4.1 million at 30 June 2011, comprising $700,000 per hectare for commercial land (4.7 ha) and road widening land (0.02 ha), $500,000 per hectare for high density residential land (1.48 ha) and $30,000 per hectare for encumbered land (1.95 ha).[35]
4. In forming his view on the value per hectare of the commercial land, he had regard to five sales, which can be summarised as follows:[36]

1. Mr Cundall explains that, based on the range of $896,552 to $3,000,000 per hectare, 'if [the] development potential [of the Subject Land] had been in the next few years from June 2011, the sales evidence indicates a rate in the order of $1,400,000/ha for the commercial land'.[37] However, in the case of the Subject Property, the 'adjoining Kaduna Park [land owned by Parklea] holds the key as to when services can be available' and '[g]iven this unknown, we have adopted a rate of $700,000/ha for the 4.7 hectares of commercial land in the subject property, to reflect its prominent Freeway location, but also the extended holding period - effectively a 50% discount'.[38]
2. For the residential land, Mr Cundall considered two sales at 138 Rix Road, Officer (10.8 ha at $655,072/ha) and 120 Cardinia Road, Officer (0.63 ha at $1,587,301/ha). He says this demonstrates a rate of $1,000,000/ha 'if the development horizon was in the next few years from June 2011' and again discounts this by 50% for the longer development horizon of the Subject Property.[39]
3. Mr Cundall did not include the Officer Rd Property as a comparable sale in the Cundall Supplementary Valuation, even though it had been included in the original Cundall Valuation. In a cover letter to the Valuer-General Victoria dated 22 February 2018,[40] Mr Cundall says that he made a mistake in original Cundall Valuation as he had thought it had been sold for $4.4 million. He confirmed that the land had been subdivided and a portion of 12 hectares was sold for $830,000 on 24 June 2011. Mr Cundall said that he excluded this sale from the Cundall Supplementary Valuation on the basis that '[t]he corrected sales information together with planning detail and lack of development potential of the 200 Officer South Road site clearly leads to the conclusion that this sale is not relevant to the value of the subject property'. The reference to planning detail and development potential relates to the absence of an approved PSP for the Officer Rd Property.
4. There are two main issues in relation to the Cundall Supplementary Valuation.
5. First, all of the sales put forward have a number of issues affecting their comparability, being that:
   • most are to the North of the Princes Freeway, and it was commonly accepted by the valuers that such properties have a shorter development time frame than the Subject Property to the South of the Princes Freeway;
   • many are smaller than the Subject Property, and it was commonly accepted by the valuers that the rate per hectare of a small property is greater than a larger property;
   • one of the properties on the same side of the Princes Freeway is quite distant from the Subject Property and adjacent to an area already quite developed prior to 30 June 2011; and
   • the closest property in the comparable set to the Subject Property was sold prior to the global financial crisis, with the evidence of Mr Facey suggesting a drop of around 50% in the value of englobo commercial land in the area from pre-crisis values.[41]
6. Of itself, this would not be problematic if appropriate adjustments were made. However, rather than making adjustments to each sale of land relied upon to reflect the differences to the Subject Property, Mr Cundall appears to have determined an average sales rate across the properties and made a singular adjustment of 50%. In my view, this process lacks sufficient logic and transparency. In this regard, in Tomaga Aluminium Co Ltd v Valuer-General,[42] Pepper J said:

[I]t is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency.

1. Similarly in Calder Park Raceway Pty Ltd v Brimback CC (Calder Park),[43] Deputy President Dwyer and Member Jacono observe:[44]

...what is important is that the valuer's professional judgement and any adjustments are clearly and transparently articulated. Generally adjustments should also be individually articulated, rather than included in an amorphous and unexplained bundle.

1. Second, Mr Cundall excluded the Officer Rd Property from the Supplementary Valuation, which is inconsistent with:
   • his previous view that the sale was comparable (which was at a time when his understanding of the sale price could be said to be more consistent with his valuation);
   • the evidence that the development timeframe of both the Subject Property and the Officer Rd Property was long and indeterminate, obviating some of the difference relating to the PSP; and
   • his willingness to make significant adjustments for other factors, but not the absence of a PSP.
2. The main criticism that can be levelled at the Dudekov Valuation is that it only has regard to one comparable sale, being the sale of the Officer Rd Property. This is obviously unusual. However, I found Mr Dudekov's explanation - as to why he did not regard the other sales referred to by Mr Cundall as comparable - convincing. Given the significant adjustments that Mr Cundall made to those other sales (up to 77% in the case of the property at 490 Princes Highway, Officer), there is a real question as to whether they were comparable at all, as explained in the following passage from Calder Park:[45]

It is perhaps worth adding that, where the valuer's professional judgement leads the valuer to make substantial adjustments to a comparable sale (and VCAT often sees contended single or multiple adjustments of 25% to 40% or more), the valuer will need to demonstrate why the supposedly comparable sale is indeed 'comparable' at all.

1. I asked the parties whether it was open to the Tribunal to reach a different value, by somehow adjusting one or other of the valuations put forward. Both parties agreed that it is not the role of the Tribunal to do so, but rather to determine which of the valuations is to be preferred. This is consistent with the discussion of this point in Calder Park[46] that VCAT 'must still be careful not to undertake its own valuation of the land', although it may sometimes use its own expert skill and knowledge to '"piece together" a valuation from the evidence and submissions before it, and does not simply have to agree wholly with one valuer or another'. In this case, there is no real basis on which I could piece together a satisfactory valuation.
2. In my view, the Dudekov Valuation is to be preferred on the basis that other evidence suggests it is likely to be closer to the market value of the Subject Property. This is based on:
   • the actual sale price of the Subject Property, which if not decisive on the question of market value, at least is evidence of the limited level of demand at the time;
   • the fact that Biltex was at the auction and decided not to bid at all, although it could potentially have secured the right to negotiate with PDC by making a bid slightly higher than the $2 million bid by Parklea at the auction;
   • the rejection by Biltex of Parklea's cash offer of $3 million, suggesting that the market value of the Subject Property must have been less than that amount; and
   • the Valuer-General's acceptance, in July 2013, of an adjustment to the council valuation of the Subject Land as at 1 January 2012 from $2,849,000 to $2,400,000, following an objection by Parklea.
3. As such, I accept the Dudekov Valuation and find that the unencumbered value of the Subject Property at the relevant date was $2.2 million.

1. Any penalty imposed under section 30 of the Administration Act is set as a percentage of the tax default. It follows from my decision on the primary duty liability that it is still necessary to consider if the penalty should be reduced or remitted.
2. For the reasons below, Parklea should be accepted as having taken reasonable care for the purposes of section 30(5) of the Administration Act and, in any event, the penalty should be remitted in full under section 35 of the Administration Act.
3. The Commissioner's position that Parklea should have been on notice that the price it paid was a bargain and could not reflect the unencumbered value is untenable in circumstances where there was an extensive sales campaign, a failed tender, a well-attended auction and attempts to secure a higher price after auction.
4. It must, of course, be accepted that the structure of section 20 of the Duties Act means that where the unencumbered value of dutiable property exceeds the consideration paid for it, the unencumbered value will represent the dutiable value of that dutiable property. However, it cannot be necessary for every taxpayer who buys at auction to consider whether the seller may be anxious or unwilling and, if so, obtain specific legal advice or a valuation to demonstrate that they have taken reasonable care.
5. The Commissioner seems to have formed the view that Parklea failed to take reasonable care after becoming aware of the decision in Portbury, although it is interesting that it took some 21 months after that decision before the Commissioner even commenced its investigations.
6. In particular, the Commissioner points to the circumstances in which Parklea sold the Subject Property to Biltex soon after for $5.5 million (plus $500,000 for civil works) as being a factor that should have put it on notice that there was likely to be a discrepancy between the consideration and unencumbered value and that it ought to have obtained legal advice and/or a valuation in the circumstances.
7. Both valuers in this case agree that, because the Biltex sale was subsequent to the relevant date, and conditional on a planning permit for use of the Subject Property as a private hospital, hotel and assisted living centre,[47] it was not a comparable sale. Given the sale does not shed any light on the unencumbered value of the Subject Property, it is hard to see it suggests the need for legal advice or an independent valuation.
8. In closing submissions, Mr Young further argued that the fact that Parklea offered to sell to Biltex unconditionally at $3 million was also relevant to consideration of the penalty issue. The difficulty with this submission is that Biltex did not accept that offer, but instead chose to acquire the property at a higher price, but on a conditional basis. Further, the evidence was that Biltex attended the auction of the Subject Property and did not seek to bid before the property was passed in. In those circumstances, it seems to me the only conclusion that could be confidently drawn by Parklea at the time was that the Subject Property's value was less than $3 million, and might, of course, be the same as the actual sale price. As such, reasonable care did not require extra steps to be undertaken by Parklea.
9. Taking all these matters into account, the penalties should be reduced or remitted to nil.

[1] [2014] VSC 57.

[2] Documents lodged with the Tribunal by the Commissioner pursuant to clause 89(1) of Part 19 of Schedule 1 of the Victorian Civil and Administrative Tribunal Act 1988 (T Documents), T16.

[11] Witness Statement of Andrew Charles Facey dated 18 January 2018 (Facey WS) [19].

[13] [1907] HCA 82; (1907) 5 CLR 418.

[15] See, for example, Roth v Commissioner of State Revenue [2006] VCAT 2536 [65].

[16] [2007] VCAT 652.

[18] See, for example, Portbury [214]-[215].

[21] A Hyam, The Law Affecting Valuation of Land in Australia (5th Ed: 2014, The Federation Press).

[24] Spencer, 441-2 (emphasis added).

[25] B Marks, 'Valuation Principles in the Income Tax Assessment Act', (1996) (8) Bond Law Review 114, at 126 (footnotes omitted, emphasis added).

[35] Cundall Supplementary Valuation, 11-12.

[42] [2010] NSWLEC 4.

[43] [2016] VCAT 551.

[46] [2016] VCAT 551 [52]-[55].