Rafael v Chief Commissioner of State Revenue

The purchase money issue

1. I concluded, for the reasons set out below, that Mr Rafael had failed to satisfy me as to the purchase money issue. That is, he had failed to satisfy the onus which he bore to establish that he as the real purchaser had provided the money for the transfer to him of the dutiable property, including by reference to s 55(1A). In relation to that sub-section, Mr Rafael had not persuaded me that any part of the purchase money which had been provided to him as a loan has been or would be repaid by him.
2. It is now settled law that the obligation is to establish that the purchaser provided the full amount of the purchase money: Triantafilis v Commissioner of Stamp Duties for New South Wales [1998] NSWSC 112 at 116; Landfall Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 270 at [28- [30]; Al- Haddad v Chief Commissioner of State Revenue [2018] NSWCATAD 91 at [32]- [33].

The $110,000 contributed by Mr Shahaf

1. I could not be persuaded by what had been put to me by Mr Rafael or on his behalf that the balance of funds to pay the deposit for the purchase of $110,000 was his money or that it had been provided to him as a loan.
2. Mr Rafael's assertion is that the deposit totalling $140,000 was comprised of two cheques in the respective sums of $30,000 and $110,000. In order to attract the section 55 concession, Mr Rafael had to persuade me that all of that amount had either been paid by him or alternatively, by operation of s 55 (1A), comprised loans to him which had been or would be repaid.
3. The $30,000 payment clearly came from an account operated by Mr Rafael's wife's business. There is adequate evidence that the amount has been repaid with interest and the Chief Commissioner conceded that that was so.
4. So the focus of attention falls on the source of the $110,000.
5. Mr Rafael asserted that for what he referred to as "technical reasons" (which as I understand it, amounted to the unavailability at that time of approximately $247,608 which he then had in a term deposit in his children's names "for tax reasons"), he paid the $110,000 from a joint account with his brother. His own evidence and specifically attachments to his written submissions, makes it clear that he did no such thing. The payment was by way of a bank cheque.
6. But what was the ultimate source of funds which supported the issue of that bank cheque? The answer to that required detailed analysis of the evidence and submissions of both parties. I accepted in large part the analysis provided in the written submissions by the Chief Commissioner and preferred that to the explanations given in various statements, statutory declarations and in sworn evidence by Mr Rafael and to some extent by Mr Shahaf.
7. The ultimate source of the bank cheque for $110,000 is best understood in stages, as set out below and I found this explanation, most of which emerged from the Chief Commissioner's submissions, to be more reliable than Mr Rafael's own account, because it was logical, consistent with the evidence contained in bank and other financial records available to both parties and was not successfully challenged. 1. Mr Rafael said in his submissions that the payment of $110,000 came from a "joint account with my brother", being an account whose number ends in '265' and which, for convenience, I will refer to it as "the 265 account". The 265 account was not a joint account. It was an account in the sole name of Mr Shahaf, over which he apparently gave his brother Mr Rafael authority to operate on or about 5 January 2012. 2. So the source of the funds of that $110,000 in the 265 account becomes highly relevant. 3. Based on the tabular summary reproduced in the Chief Commissioner's written submissions at [33], which I accept as accurate and reliable, the $110,000 is shown to have been sourced as follows: 1. a credit on 24 January 2015, being proceeds of a CBA Term Deposit: $81,122.13. The Chief Commissioner accepted that that was sourced from term deposit proceeds originating from an account in the name of Asaf Shahaf; 2. a transfer on 4 February 2015 from a NetBank account, whose account number ends in "188", in the name of Mr Rafael: $18,000; and 3. a further transfer on 4 February 2015 "from NetBank 6802 David Rafael": $9,000. 1. The deposit of those 3 amounts into the 265 account which had an existing credit balance of $2,559.82, produced a balance as at 4 February 2015 of $110,681.95. 2. The next day, 5 February 2015, $110,000.00 was withdrawn from the 265 account and I accept that was used to produce a bank cheque for that amount, which was the deposit on the purchase of the Vaucluse Property.
8. Two issues emerge from all this. If the Chief Commissioner's explanation of them is correct, that defeats Mr Rafael's claim that he provided the deposit (including by way of loans to him which have been or will be repaid).The issues are these: 1. What was the real source of the $81,122.13, described at 36(a) above as proceeds of a CBA Term Deposit; and 2. how is the "missing" sum of $1,877.87 accounted for? If it cannot be accounted for (and the onus of doing so rests clearly on Mr Rafael) then he did not provide all the purchase money. The $1,877.87 is the difference between: 1. the amount paid as deposit for the Vaucluse property purchase, $140,000; and 2. the sum of the 3 components set out at [36] (3) (a), (b) and (c) above (that is, $81,122.13 + $18,000 + $9,000) and the $30,000 provided by Mr Rafael's wife, noted at [32]. The sum of those components is $138,122.13.
9. I shall examine those two elements in turn.

(1)The $81,122.13

1. As noted above the Chief Commissioner accepted that this payment was sourced from the proceeds of the term deposit in the name of Asaf Shahaf. In his written submissions the Chief Commissioner questioned how Mr Rafael could be regarded as the source of funds which originated in a term deposit in the name of his brother and then paid to a bank account solely in the name of his brother.
2. Mr Rafael's response was as follows, in his statement dated 10 June 2021: "6. To draw the bank cheque for the deposit I also obtained $83,000 as a loan from my brother (Mr Shahaf).. The amount of $83,000 was overlooked in the written agreements because I had forgotten to tell my brother that I had used his money for the deposit. In our family there were many occasions when we used each other's money without notification… 7.d. The $83,000 as well as the other monies borrowed remain an outstanding loan.
3. A few paragraphs later in his statement, in apparent contradiction to what is said in paragraph 7.d quoted above, he says: "10. Further, in relation to the loan from my brother to me for the deposit of $83,000, I state that I repaid that amount to my brother's account (the 265 account) on 11 June 2021 of the interest on the loan for the deposit I have calculated to be $11,412 remains outstanding."
4. Mr Rafael's statement of 10 June 2021 does annex what appears to be a confirmation note on the letterhead of the Commonwealth Bank of a deposit to the 265 account of $83,000. It is dated 11 June 2021. That was 11 days before the hearing and, confusingly, one day after the date of Mr Rafael's statement of 10 June 2021. The payer's description of the transaction is as follows: "Rtn Depst 5Feb15".

Was the $83,000 "provided as a loan"?

1. The $83,000 was not "provided as a loan", because: 1. The availability of that amount resulted from an unauthorised use by Mr Rafael of an account owned by his brother Mr Shahaf. Mr Shahaf was not aware at the time of the withdrawal from the 265 account of the $83,000. In short, the putative lender was not aware that he was lending anything and was not aware that the money had left his account. 2. The fact that Mr Rafael had some sort of authorisation to operate the account and that there was clearly an informal arrangement for family support between the brothers does not change that result. An authorisation to operate does not of itself justify a withdrawal made without the knowledge of the account holder and certainly does not constitute a "loan" from the account holder. 3. The $83,000 was provided by means of a transfer from an account which Mr Shahaf owned. It was Mr Shahaf's money. The amount was not transferred towards payment of the deposit with Mr Shahaf's authority. It only became available by reason of a use of the account unknown to the account holder. It was not clear when Mr Shahaf became aware of what had happened. 4. Under cross examination, when asked specifically about the $83,000,Mr Shahaf admitted that: "We never discussed it as a loan as such." (Recording; Disk 2 16:30)

Has the $83,000 been repaid?

1. Even if, contrary to the above, the money can be construed as having been provided as a loan, at the hearing, in the course of sworn testimony, the two brothers provided the following somewhat confusing and contradictory account as to whether the $83,000 has been repaid.
2. (Recording: Disk 1 at 01.11.45): SENIOR MEMBER CURRIE (to Mr Shahaf): Have you been paid all money that went to the purchase or might have assisted the purchase? MR SHAHAF: Yes, I have. MR RAFAEL: (Interrupting): Not the loan. Just the… MR SHAHAF: Ah, I have a loan. Sorry. I have a separate loan that I have loaned him, not the (indistinct), separately towards the house. But the moneys that he actually borrowed from me, to the account, yes he has repaid that. But I have a separate loan for him. SENIOR MEMBER CURRIE: And Mr Shahaf, is that a loan that relates to the purchase of Vaucluse? MR SHAHAF: Yes. SENIOR MEMBER CURRIE: And would you mind telling me what the, the amount of that loan is? MR RAFAEL: $83,000. ….. [01.13.55] SENIOR MEMBER CURRIE: And Mr Rafael, you are saying most of the $83,000 is, as it were, "on the books" between you: has not been repaid? MR RAFAEL: It's been repaid. SENIOR MEMBER CURRIE: It has been received? (Discussion between Mr Rafael and Mr Shahaf: indistinct) MR RAFAEL: Yes.

Will interest on the $83,000 be repaid?

1. By operation of s 55(1A), loan amounts can be taken into account in concluding that the real purchaser provided all the money for the purchase only if the loan "has been or will be repaid by the real purchaser".
2. Absent any enforceable release of the borrower's obligations, a loan cannot be considered "repaid" whilst interest remains outstanding.
3. In his statement dated 10 June 2021 at [10], Mr Rafael conceded that: "The interest on the loan for the deposit I have calculated to be $11,412 remains outstanding"
4. There was no indication at the hearing that that situation had changed. So I must determine whether the alleged interest "will be repaid".
5. Mr Rafael as Applicant has not established to the required standard that it will. I reached that conclusion for the following reasons: 1. It was Mr Rafael , the purported borrower, who claimed that interest was payable. There was no evidence from Mr Shahaf, the lender, as to this, including in his testimony at the hearing. 2. In the course of Mr Shahaf's participation in the hearing and despite some detailed cross examination in this area, he did not indicate a clear expectation that the any purported interest would be repaid. Indeed, the picture which emerged from Mr Shahaf's testimony was that he had in the past and would continue to stand ready to provide financial assistance to his brother and the brother's immediate family when they needed help, that he had money available to do this and (with reference to his advances generally): "It wasn't money that I needed urgently. I still don't need it. I said, whenever he can, he can just pay me back"(Recording, Disk 2 at 18:50) 1. To the extent that the Mr Rafael's case can be understood as being that this interest amount and its repayment was covered by the agreements between the brothers dated 28 April 2015 ("the 2015 Loan Agreement"), 20 December 2017 ("the 2017 Loan Agreement") and 25 February 2021("the 2021 Loan Agreement") (collectively "the Loan Agreements"); he has not established to the required standard of proof that that was so, as discussed below at [59]- [66].
6. That being so, it would have been reasonable for the Chief Commissioner and is reasonable for me not to be satisfied to the required standard of proof that even if a loan of $83,000 had been provided, it will be repaid by Mr Rafael.
7. The decision in Wykrota v Chief Commissioner of State Revenue [2019] NSWCATAD 106 demonstrates the necessity, in cases involving the section 55 concession, for clear evidence to be adduced in order to satisfy the taxpayer's burden of proof.
8. Mr Rafael did not adduce clear evidence such as to satisfy his burden of proof. He has not established to the requisite standard that he provided the $83,000 or that that amount and any interest will be repaid by him.
9. It follows that, even with the assistance of sub-section 55(1A), he has not established that he provided the money for the purchase of the dutiable property.

(2)The unexplained $1,877.87

1. Even if I am mistaken in my conclusions as to the $83,000, there is an unexplained sum of $1877.87.
2. In Mr Rafael's statement of 10 June 2021 at [9] he describes the unexplained $1877.87 as "irrelevant to the Tribunal's determination". He says that it is irrelevant for the following reasons: "e. Aside from the amounts of $18,000 and $9000 that I deposited into the account, the balance of the funds belong to my brother, from that balance I used $83,000 to make up the balance of the deposit and that amount remains an outstanding loan to my brother. 10. Further, in relation to the loan from my brother to me for the deposit of $83,000. I state that I repaid that amount to my brother's account xxxx 265 on 11 June 2021. (Annexed hereto and marked 3e is a copy of the transfer from my account xxxx 5225). The interest on the loan for the deposit I have calculated to be 11,412 remains outstanding."
3. None of that explains the missing $1,877.87. Mr Rafael appears to conflate that amount and the $83,000 discussed above. Somewhat generously, the Chief Commissioner's written submissions suggest at [37] that the amount might be asserted as having come from funds in credit in Mr Shahaf's bank account on which the $110,000 cheque for the deposit for the purchase was drawn. I cannot see that that is so. Even if it is so, for the reasons discussed in detail above that was not money provided by Mr Rafael, including in the extended sense made available by subsection (1A) of section 55.

Interim conclusion on the purchase money issue

1. For the reasons discussed above the Mr Rafael has failed to discharge the onus which he bears to satisfy me that he provided the money for the purchase within the meaning of s 55 (1)(b)(ii), including by reference to subsection (1A).

Do the Loan Agreements alter that conclusion?

1. The Loan Agreements do not alter that interim conclusion.
2. There was little reference to or explanation of the Loan Agreements in the presentation of Mr Rafael's case at the hearing for in his written submissions. However, it is apparent that their chief purpose was to record the total amount borrowed by Mr Rafael from Mr Shahaf of approximately GBP 306,220.46. Only in together with interest making a total repayable of GBP $313,876 and in addition (recorded in the 2021 Loan Agreement only) "an Amount of AUD 924,550.00 deposited on 8 March 2019".
3. The main significance of the 2017 and 2021 loan Agreements is that they purport to make repayment due on any sale of the Vaucluse property. The 2021 Loan Agreement goes further and in clause 2 purports to securitise the loan against that property and provides that the loan needs to be repayable in for on the sale of the property "not later than 31 December 2025".
4. The date and source of the loans is otherwise not helpfully described, other than by the statement in the 2021 Loan Agreement that that the Lender is:" to continue to lend to the Borrower" those funds.
5. Significantly, there is no description in any of the Loan Agreements as to the components of the loan amount. It is completely unclear and as a result, Mr Rafael as applicant has failed to discharge his onus to establish the that either the $83,000 or the $1877.87 is included in the loan amount under any of those agreements.
6. To the extent that the introduction into the Applicant's case of the Loan Agreements was an attempt to demonstrate that the amounts of $83,000 and $1877.87 had been provided as a loan to Mr Rafael and would be repaid by him (at the latest from the proceeds of the sale of the property no later than 31 December 2025), so that s55(1A) is attracted, that attempt has failed.
7. Additionally, there must remain some doubt that the Loan Agreements in any case would in practice be strictly enforced by Mr Shahaf against his brother. It was confirmed, at least in general terms, by Mr Rafael in his closing submissions that the real purpose of establishing those agreements was to demonstrate to the Inland Revenue authorities in the United Kingdom the purpose for funds (presumably the total loan amount) had left that country.
8. Further, even if the loan amounts in the Loan Agreements do cover outstanding loans for the Vaucluse purchase, it seemed from Mr Shahaf's testimony and his answers to that he would be unwilling and unlikely to exercise his powers as lender under the Loan Agreements and in particular the 2021 Loan Agreement as if he were an "arm's-length" lender. He observed and insisted that he had in the past and would continue to be available to assist his brother Mr Rafael and his immediate family financially and I gained the impression he would seek to do so.

Conclusion: the purchase money issue

1. Mr Rafael has failed to discharge the onus which he bears to satisfy me that he provided the money for the purchase within the meaning of s 55 (1)(b)(ii), including by reference to subsection (1A).
2. It must follow from my conclusion as to the purchase money issue that the section 55 concession was not available to Mr Rafael and that the Chief Commissioner's decision to that effect was the correct one. There was nothing put to me which would indicate that it was not also the preferable one. I found that it was the correct and preferable decision.

The trust issue

1. But even if I had not reached that conclusion in relation to the purchase money issue, I would have found that the Chief Commissioner's decision was the correct and preferable one because Mr Rafael's case as to the trust issue also failed.
2. I reached that conclusion for the following reasons, stated briefly.
3. Mr Rafael as Applicant has adduced no evidence of a declaration of trust made in writing over the land in his favour. There is no express trust to that effect.
4. It is now established that the reference to a trust in s55(1)(b)(i) is to a resulting trust: see Harvey v Chief Commissioner of State Revenue [2021] NSWCATAD 63 at [37]-[38] ("Harvey"), citing Truskett v Commissioner of Stamp Duties (NSW) (1976) 6 ATR 1 and Commissioner of Stamp Duties (NSW) v Pendal Nominees Pty Ltd (1989) 167 CLR 1.
5. As confirmed in the leading texts on this issue and in Harvey at [47], the question of whether the person in the position of Mr Rafael (as real purchaser) acquired a beneficial interest in the property depends upon the intention of the person in the position of his brother Mr Shahaf (as apparent purchaser). In Harvey, Senior Member Goodman explained the position in this way: "[47] …Absent a particular feature of the relationship between the two persons as would give rise to a presumption of advancement, it is presumed that the person providing the purchase money did not intend the other person to take the property beneficially. Absent evidence rebutting the presumption that the person providing the purchase money did not intend the other person to take the property beneficially, a resulting trust arises in favour of the person providing the purchase money: see e.g. Calverley v Green (1984) 155 CLR 242 at 246 per Gibbs CJ and 266-267 per Deane J. [48] .. (In the present case) (t)here is no suggestion that the presumption of advancement applies. In those circumstances, a rebuttable presumption arises that the applicants did not intend (the apparent purchaser) to take the property beneficially and that it was intended that (the apparent purchaser) would hold the Property on a resulting trust for the applicants." (Emphasis added)
6. Nothing in Mr Rafael's case persuaded me that the presumption of advancement applied in this case.
7. So a rebuttable presumption arises that the dutiable property (the 49.5% share in the title to the Vaucluse property which was the subject of the Transfer) was to be held by Mr Shahaf on a resulting trust for his brother Mr Rafael. Unless that presumption is rebutted then s55(1)(b) (i) of the Duties Act would be satisfied and duty at the concessional rate only would be payable.
8. As contended by Counsel for the Chief Commissioner, actual intention is relevant to rebut the presumption. That was clear from the analysis undertaken by the Chief Justice of the High Court, Sir Harry Gibbs in Calverly v Green , as cited at [73] above, at [9].
9. More recently, in Harvey, it was said at [49] that such an intention is not a subjective intention, but rather an objective one inferred from the conduct of the relevant party or parties who provided the purchase monies and determined as at the date of the purchase
10. Mr Rafael has not persuaded me to the required standard that there was any such intention, when the relevant facts are judged objectively. There are 3 grounds for the opposite conclusion; that is, one which would mean that there was no resulting trust in this case. 1. Firstly, the retention by Mr Shahaf of a registered legal interest in the Vaucluse property, albeit one of only 0.5%, is quite inconsistent with his holding of any part of the property on resulting trust for Mr Rafael. Late in the hearing Mr Rafael tendered by way of explanation the assertion that the lending bank required his brother to remain on the title; the intended corollary being, I assume, that this was merely a formal bank requirement and not indicative as to the nature of Mr Shahaf's holding financial interest in the property. I find that uncorroborated contention quite unpersuasive. There was no independent evidence or acknowledgement of such a requirement by the bank. 2. In his closing submissions, Mr Richardson for the Chief Commissioner raised a further ground which I found persuasive. It is based on Mr Rafael's assertion (for example in his written submissions of 10 June 2021 at [5]) that at the time of the purchase he had approximately $247,608 on term deposit in the names of his children "for tax reasons" (referred to at [34] above), but that that amount was not then accessible because the term deposits did not mature until 4 March 2015. But, as noted by Mr Richardson, although exchange of contracts for the purchase occurred on 5 February 2015, completion did not occur until 6 May 2015 (which is confirmed in Mr Shahaf's statutory declaration of 1 November 2019 at[1]). So the proceeds of the term deposit appear to have been available to complete the purchase. The availability of such a significant asset tells against the existence of a "clear intention" that Mr Shahaf was to hold his interest on resulting trust for his brother when assessed on an objective basis, as it must be on the authority of Harvey. 3. Finally, Mr Richardson's contention that the existence and purpose of the 2021 Loan Agreement tells against there being any clear intention that Mr Shahaf was to hold his interest on resulting trust, is persuasive. The intention of that agreement, which is made clear in clause 2 is that the stated amount of the Loan: "..shall be secured against the (Vaucluse) property… and, together with accrued interest and all other amounts accrued or outstanding under this agreement shall be repayable by the Borrower in full by the sale of the Property not later than 31 December 2025." (Emphasis added).
11. The contention as I understand is that this clause gives Mr Shahaf as apparent purchaser (at the least) some influence in determining and potentially the power to dictate the timing of a sale of the Vaucluse property. The 2021 Loan Agreement also purports to give him an interest in the proceeds of that sale. That is totally inconsistent with the position and the obligations of a trustee of the resulting trust necessary for the purposes of s55(1)(b). Nothing to the contrary emerged from the vidence or was put to me by or on behalf of Mr Rafael. I found the Chief Commissioner's contention persuasive.

Conclusions and Orders

1. For those reasons neither the purchase money issue nor the trust issue can be resolved in Mr Rafael's favour.
2. It must follow that the section 55 concession was not available to Mr Rafael and that means that the Chief Commissioner's decision under review was the correct one. There was nothing put to me to support a contention that the decision was not also the preferable one and given the clear terms of section 55, it must also be the preferable decision. I therefore find that the Chief Commissioner's decision was the correct and preferable one.
3. It must follow that the Chief Commissioner's decision should be affirmed and I ordered accordingly.

Orders 1. The Applicant be allowed to file his application for a review of the Chief Commissioner's decision after the period prescribed by s 99(1) of the Taxation Administration Act 1996 (NSW). 2. The Chief Commissioner's decision under review is confirmed.

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: 27 July 2021