4 Bloodfinch Pty Ltd ACN 627 969 813 as trustee for the 4 Bloodfinch Trust ABN 46 501 073 014 v Commissioner for Act Revenue (Administrative Review) - [2024] ACAT 94

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

6 DOUBLEBAR PTY LTD ACN 627 973 246 AS TRUSTEE FOR THE 6 DOUBLEBAR TRUST ABN 27 264 911 230; 4 BLOODFINCH PTY LTD ACN 627 969 813 AS TRUSTEE FOR THE 4 BLOODFINCH TRUST ABN 46 501 073 014 v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2024] ACAT 94

AT 84/2021;
AT 85/2021
Catchwords: ADMINISTRATIVE REVIEW – stamp duty payable by two purchasers on two transactions for the purchases of two allegedly undervalued properties – sections 20 and 24 of the Duties Act 1999 – whether the transactions should be aggregated – transactions should not be aggregated – consideration of the preferred dutiable values of the properties – consideration of whether there is a tax default and any penalty – interest payable is not within tribunal’s jurisdiction
Legislation cited: ACT Civil and Administration Act 2008 s 68
Duties Act 1999 ss 16, 20, 24, 82, 83, Dictionary
Legislation Act 2001 s 156
Taxation Administration Act 1999 ss 101, 108A, 134, Dictionary

Subordinate

Legislation cited: Taxation Administration (Amounts Payable—Duty) Determination 2018 (No 1) s 7

Cases cited:Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243
Briginshaw v Briginshaw [1938] HCA 34
Comcare v Power [2015] FCA 1502
Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51
Commissioner of Taxation v Park [2012]FCAFC 122
Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co (SA) Ltd [1947] CLR 358
Cypjayne Pty Ltd v Rodskog [2009] NSWSC 301
Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409
Spencer v Commonwealth of Australia [1907] HCA 82
Tenstat Pty Ltd v Valuer General [2012] NSWLEC 1361
Wakefield v Commissioner of State Revenue [2019] QSC 085

Tribunal:Senior Member L Beacroft
Senior Member M Sinclair

Date of Orders:  13 December 2024
Date of Reasons for Decision:      13 December 2024
Date of Publication:  20 December 2024
AUSTRALIAN CAPITAL TERRITORY          )
CIVIL & ADMINISTRATIVE TRIBUNAL     )          AT 84/2021

BETWEEN:

6 DOUBLEBAR PTY LTD ACN 627 973 246 AS TRUSTEE FOR THE 6 DOUBLEBAR TRUST ABN 27 264 911 230
Applicant

AND:

COMMISSIONER FOR ACT REVENUE
Respondent

AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 85/2021

4 BLOODFINCH PTY LTD ACN 627 969 813 AS TRUSTEE FOR THE 4 BLOODFINCH TRUST ABN 46 501 073 014
Applicant

AND:

COMMISSIONER FOR ACT REVENUE
Respondent

TRIBUNAL:Senior Member L Beacroft
Senior Member M Sinclair

DATE:13 December 2024

ORDER

The Tribunal orders that:

The two reviewable decisions made on 9 August 2021 as set out in the reviewable decision notices, which disallowed objections to the dutiable value and penalty as set out in the assessment notices dated 18 July 2019, for two transactions that occurred on 6 August 2018, are set aside.
The assessments of duty and penalty payable are remitted to the respondent for the respondent to reassess and undertake any related acts based on the following directions:
(a)there is no aggregation under section 24 of the Duties Act 1999 of the two transactions dated 6 August 2018;
(b)the dutiable values of the properties are as follows: $1,300,000 for 4 Lyell Street; and $550,000 for 6 Lyell Street; and
(c)there is no penalty imposed.

………………………………..

Senior Member L Beacroft
For and on behalf of the Tribunal

REASONS FOR DECISION

Background

These cases involve two applicants, 6 Doublebar Pty Ltd (AT 84/2021 or the first applicant) and 4 Bloodfinch Pty Ltd (AT 85/2021 or the second applicant) (the applicants) and the same respondent, the Commissioner for ACT Revenue (the respondent). It is primarily about the duty payable by the applicants on properties they each purchased.
On 11 October 2018, the respondent issued notices of investigation to the applicants in relation to a property they each purchased,[1] to 4 Bloodfinch Pty Ltd for 4 Lyell Street,[2] and to 6 Doublebar Pty Ltd for 6 Lyell Street.[3] Each investigation notice stated that the values declared for the purposes of calculating the duty on each property may be undervalued, and required each of the applicants to provide a declaration by a competent valuer of the value of the relevant property.
[1] In the ACT land is leasehold so a landowner is a leaseholder, however familiar terms such as purchaser and land owner are used in this decision
[2] Tribunal Documents, page 248 (T248)
[3] T249
On 18 October 2018, the applicants’ solicitor forwarded valuations (as at the date of 6 August 2018) prepared by Herron Todd White involving inspections on 26 September 2018 (Herron Todd White 2018 valuations). They advised market valuations as follows: $520,000 for 6 Lyell Street, and that the agreed purchase price was below fair market value;[4] and $1,280,000 for 4 Lyell Street and that the agreed purchase price was below fair market value.[5]
[4] T251-272
[5] T276-294
On 29 October 2018, the respondent informed the applicants via email that the ACT Valuation Office (AVO) had been requested to provide valuations for the properties 4 and 6 Lyell Street and that inspections would be arranged for this purpose.[6]
[6] T295-296
The AVO valued (as at the date of 8 August 2018) 6 Lyell Street at $600,000 excluding GST in a report signed 30 November 2018,[7] and 4 Lyell Street at $1,900,000 excluding GST in a report signed 5 December 2018,[8] involving “roadside only” inspections on 27 November 2018 (the AVO 2018 valuations).
[7] T451–467
[8] T468–487
On 18 July 2019, the respondent issued a “Conveyance Duty Notice of Assessment” to each applicant (the initial assessment notice/s),[9] as follows:
(a)in the matter of AT 84/2021, an initial assessment notice was issued to 6 Doublebar Pty Ltd, as the transferee/purchaser of the property at 6 Lyell Street, Fyshwick, ACT (6 Lyell St); and
(b)in the matter of AT 85/2021, an initial assessment notice was issued to 4 Bloodfinch Pty Ltd, as the transferee/purchaser, of a property at 4 Lyell Street, Fyshwick, ACT (4 Lyell St).
[9] Initial assessment notices, T488–T491
The initial assessment notices imposed duty on the applicants based on “Market Value[s]” plus GST, and aggregating and apportioning the two purchase transactions for the Lyell St properties under section 24 of the Duties Act1999 (the Act), as follows:
(a)for AT 84/2021, the purchase of 6 Lyell St, the initial assessment notice comprised an apportionment of 24% of the duty and duty payable of $33,000, with 25% penalty tax ($8,250), and interest ($2,842.89), totalling $44,092.89; and
(b)for AT85/2021, the purchase of 4 Lyell St, the initial assessment notice comprised an apportionment of 76% of the duty and duty payable of $104,500, with 25% penalty tax ($26,125), and interest ($9,002.48), totalling $139,627.48.
In the initial assessment notices, the dutiable value of 4 Lyell St was $2,090,000 (with GST added), and the dutiable value of 6 Lyell St was $660,000 (with GST added), which is consistent with the AVO 2018 valuations but includes GST.
The applicants objected to the initial assessment notices in their objections dated 19 August 2019 (objections).[10] After considering the objections, the respondent issued two reviewable decision notices, including statements of reasons (reviewable decision notices).[11] These confirmed:
(a)the aggregation of the transactions for the purchase of the 4 and 6 Lyell St properties;
(b)the respondent’s market values for the Lyell St properties;
(c)penalty was payable because there was a tax default when the duty related to aggregation was not paid by 3 September 2018 and the applicants failed to declare the transfers formed part of one agreement, and the provisions to remit it are not enlivened;
(d)interest is payable from the date of the tax default, being 4 September 2018, and discretion to remit it is not enlivened.
[10] Objections dated 19 August 2019, T499–T508
[11] Reviewable Decision Notices with Statements of Reasons dated 9 August 2021, T9–T21; T30–42
The reviewable decision notices allowed the applicants’ objections that GST should be excluded from the dutiable values for the properties in the assessments. On this basis, the respondent reassessed the duty, penalty tax, and interest, and issued refunds.[12] For AT 84/2021, 6 Doublebar Pty Ltd, the reassessment notice maintained the apportionment of 24% of the duty payable, and after adjusting to exclude GST, set out a duty payable of $30,000, a 25% penalty tax ($7,500), and interest ($2,592.28 and $2,212.02), totalling $42,304.30. For AT 85/2021, 4 Bloodfinch Pty Ltd, the reassessment notice maintained the apportionment of 76% of the duty payable and, after adjusting to exclude GST, set out a duty payable of $95,000, a 25% penalty tax ($23,750), and interest ($8,208.88 and $7,004.74), totalling $133,964.
[12] Statutory Declaration of Emily Carruthers dated 23 August 2022, Annexure B
The applicants filed applications for review of a decision, dated 6 September 2021, with the ACT Civil and Administrative Tribunal (the ACAT or the tribunal). In summary, the applicants contended that:
(a)there was no basis for aggregating the transactions for the purchases of the Lyell St properties under section 24 of the Act;
(b)the market values of the Lyell St properties relied on by the respondent were not correct; and
(c)on this basis, the duty payable was “nil because they concern[ed] commercial property each of less than $1,500,000 value”.[13]
[13] Objections dated 19 August 2019 Annexure A at [3], T4; T25
The applicants also disputed the penalty and the interest on the basis that there had not been a tax default, or that it should be remitted.[14]
[14] Applicants’ Outline of Submissions — Part Heard dated 15 February 2023 at [184]–[189]; Applicants’ Submission in Reply dated 18 December 2023 at [1(b)]
The respondent disputed the applicants’ contentions.
For the review proceedings before the Tribunal, the parties submitted numerous submissions and substantial evidence before and after the hearing, which was conducted over numerous days. Various witnesses provided evidence, and some were cross-examined.
One of the applicants’ witnesses was directed by the Tribunal to produce certain documents as set out in the Order dated 10 March 2023 and amended by Order dated 18 May 2023. The Tribunal stated its reasons orally for this Direction at the hearing on 10 March 2023.[15] The Tribunal is satisfied that the witness produced the required documents. A subset of the documents was tendered by the respondent in a Tender Bundle dated 30 May 2023. The applicants objected to the Tribunal’s Direction.[16] Nonetheless, the applicants submitted that the produced documents are corroborating and not adverse to the evidence of their witnesses and submissions. The Tribunal has considered the respondent’s Tender Bundle and produced documents in making its decision and the Tribunal concurs with the applicant that they are corroborating and not adverse to the applicant’s evidence and submissions. Given this, the Tribunal does not expand on its reasons for the Direction in these reasons.

Role of the tribunal

[15] Transcript of proceedings dated 10 March 2023, pages 284-288; 292-294
[16] Applicants Closing Submissions dated 6 November 2023 at [73-75]

The ACAT can review a reviewable decision as set out in the Taxation Administration Act 1999 (the TAA).[17] The reviewable decisions in this case are the respondent’s decisions about the taxpayers’ objections, as set out in the reviewable decision notices mentioned above. The burden of showing that the applicants’ objections are made out rests with the applicant taxpayers.[18] When conducting a review, the ACAT stands in the shoes of the administrator/decision‑maker, in this case the respondent, and the ACAT’s role is to make its own decision based on the material before it. It is well recognised that “[t]here is no presumption that the administrator’s decision is correct”, as Katzmann J stated in Comcare v Power.[19]
[17] TAA s 108A
[18] TAA s 101(3)
[19] [2015] FCA 1502 at [58]
Under section 68(3) of the ACT Civil and Administration Act 2008 (the ACAT Act), the ACAT must make an order as follows:
(a)     confirm the decision; or
(b)     vary the decision; or
(c)     set aside the decision and—
(i)make a substitute decision; or
(ii)remit the matter that is the subject of the decision for reconsideration by the decision-maker in accordance with any direction or recommendation of the tribunal.
In this case, as indicated in the Orders set out above, the Tribunal has determined that the reviewable decisions should be set aside. The matters of what duty and penalty are payable are remitted to the respondent for it to reassess based on the directions as follows:
(a)the transactions dated 6 August 2018 for the purchases of the Lyell St properties by the applicants are not aggregated under section 24 of the Act;
(b)the dutiable values of the properties are as follows: $1,300,000 for 4 Lyell St, and $550,000 for 6 Lyell St; and
(c)no penalty is imposed.
Reviewing interest is not within the jurisdiction of the tribunal so no order is made in this respect.[20]
[20] S 107A, Schedules 1 and 2, Taxation Administration Act 1999
In making the above Orders, the Tribunal makes no adverse findings about the honesty or professional competence of any witness in the proceedings.

Summary chronology

The case has a complex history which is summarised below.
On 6 August 2018, both of the applicant corporations were incorporated.[21]
[21] T226–229
On 6 August 2018, the Lyell St properties were transferred under written instruments prepared and registered by solicitors. The conveyancing documents comprised, for AT 84/2021, the first applicant, 6 Doublebar Pty Ltd, and regarding the property 6 Lyell St:
(a)A Law Society of the ACT “Contract for Sale” between 6 Lyell Street Pty Ltd as vendor, and 6 Doublebar Pty Limited as purchaser, for $450,000.[22]
(b)A transfer executed on 6 August 2018,[23] which was lodged on 7 August 2018 and registered on 20 August 2018.[24]
(c)A deed of agreement titled “Transfer of 6 Lyell Street Property” dated 6 August 2018, which states:
(i)      Under “Parties: clause 4” — the transferor is 6 Lyell Street Pty Ltd;
(ii)     Under “Parties: clause 5” — the transferee is 6 Doublebar Pty Ltd;
(iii)   Under “Background: clause M”, the Deed of Agreement provides for “the assumption of the transferor’s liabilities to … Marginata … Reliance and … Accolade by the transferee”; and
(iv)   Under “Background: clause B”, the Deed of Agreement states that it operates with and takes precedence over the contract for sale.[25]
[22] T181–T201
[23] T220–T222
[24] T223–225
[25] T203–T215
For AT 85/2021, the second applicant, 4 Bloodfinch Pty Ltd, and regarding the property 4 Lyell St, the documents consisted of:
(a)A Law Society of the ACT “Contract for Sale”, between 4 Lyell Street Pty Ltd as vendor and 4 Bloodfinch Pty Ltd as purchaser, for $1,050,000.[26]
(b)A transfer executed on 6 August 2018,[27] which was lodged on 7 August 2018 and registered on 20 August 2018.[28]
(c)A deed of agreement titled “Transfer of 4 Lyell Street Property” dated 6 August 2018, which states:
(i)      Under “Parties: clause 4” - the transferor is 4 Lyell Street Pty Ltd;
(ii)     Under “Parties: clause 5” - the transferee is 4 Bloodfinch Pty Ltd;
(iii)   Under “Background: clause M”, the Deed of Agreement provides for “the assumption of the transferor’s liabilities to … Marginata … Reliance and … Accolade by the transferee”; and
(iv)   Under “Background: clause B”, the Deed of Agreement states that it operates with and takes precedence over the contract for sale.[29]
[26] T146–T167
[27] T223–T225
[28] T223–225
[29] T168–T180
These deeds are referred to as the ‘Deed/s of Agreement’ throughout the decision.
On 6 August 2018, Mr Stefan Morvillo was the sole director, shareholder, and secretary of both the applicant companies.[30]
[30] T226–229
Mr Morvillo remained the director from 6 August 2018 to 10 June 2019 of both the applicant companies.[31]
[31] Statutory Declarations of Stefan Morvillo dated 24 August 2022 and 9 February 2022 at [1]
On 6 August 2018, Mr Morvillo was the sole director, shareholder, and secretary of Marginata Securities Ltd (Marginata).[32] Mr Morvillo describes Marginata as a “private lender” operating that business for the benefit of a trust, with Accolade Advisory Pty Ltd (Accolade) as its accountant; and that Marginata in turn acts as an agent for a “private lending firm”, Reliance Financial Services (Reliance).[33]
[32] Statutory Declaration of Stefan Morvillo dated 14 November 2022, Annexure A
[33] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [2]–[3] and [8]
Mr Morvillo was the director of Marginata from 11 January 2016 to 1 July 2019.[34]
[34] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [2]–[3] and [8]
Prior to 6 August 2018 being the date of the relevant transactions, Marginata and Reliance lent substantial sums of money to persons whose interests included those held by 4 Bloodfinch and 6 Doublebar Pty Ltd (the vendor companies or vendors), and Marginata held mortgages over the Lyell St properties.[35]
[35] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [4]; [5]–[7] and [9]; Annexure D
By 6 August 2018, the vendors were in default to Marginata and Reliance and had other outstanding liabilities, including to Accolade, which Mr Morvillo set out in a table accompanied by supporting documentation.[36]
[36] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [5] and [10]; Annexure B
Mr Morvillo described the state of the premises on or around the 6 August 2018 as: the 4 Lyell St property was “effectively abandoned” with “significant damage”, and the 6 Lyell St needed a “clean-up”.[37]
[37] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [13]
Mr Morvillo gave evidence that he became concerned about the implications of Supreme Court litigation against the vendors, in that Marginata and Reliance would be drawn into a dispute with the respondent about ownership of certain monies.[38]
[38] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [10(e)]
Mr Morvillo gave evidence that “Marginata found new borrowers” for the properties, being the applicants, and the “purchase prices” were met by the purchaser applicants including that they assumed part of the liabilities owed to Marginata pursuant to the Deeds of Agreement.[39]
[39] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [11]–[12] and [18]
The vendor companies resolved that the companies be placed in liquidation, and a liquidator of the vendor companies was appointed on 6 August 2018.[40] Based on the 2018 “market appraisals”, the liquidator formed the opinion that “prima facie”, the Lyell St properties “were not transferred for value and are uncommercial transactions”.[41]
[40] Affidavit of Mr N Natkunarajah, the liquidator dated 27 November 2018 at [7]
[41] Affidavit of Mr N Natkunarajah, the liquidator dated 27 November 2018 at [16] and [19]
In correspondence between the liquidator and the applicants, the legal representatives for the applicants stated in a letter, dated 12 September 2018:
In the case of the 4 and 6 Lyell, Fyshwick properties, the price was wholly satisfied by an agreed reduction (equal to the price) of the liabilities of 4 Lyell St PL [i.e. Pty Ltd] and 6 Lyell St PL [i.e. Pty Ltd] to Marginata, Reliance and Accolade, with an associated assumption of those liabilities by the new purchasers, namely 4 Bloodfinch and 6 Doublebar.[42]
[42] T244
The initial assessment notices were paid in full by the applicants on 3 March 2020.[43]
[43] T12
A “Conveyance Duty Notice of Assessment” dated 10 June 2022 that showed “Duty Value” as $0 was provided on that day to the first applicant, 6 Doublebar Pty Ltd. [44]
[44] Statutory Declaration of Emily Carruthers dated 23 August 2022 Annexure A

A “Conveyance Duty Notice of Reassessment” dated 10 June 2022, was provided on that day to each of the applicants, and related refunds paid to the applicants.[45] These adjusted to exclude GST for the duty, penalty, and interest payable but otherwise relied on the AVO 2018 valuations
[45] Statutory Declaration of Emily Carruthers dated 23 August 2022, Annexure B
Various valuations of the Lyell St properties dated between 2015 and 2022 were in evidence, as set out in more detail later.

Issues

The parties agreed on the contested issues.
Issue 1: Should the transactions be aggregated under section 24 of the Act? This involves three sub-issues:
(a)Issue 1(a): Are the transferees “associated” or “related” under section 24(1)(b) of the Act?
(b)Issue 1(b): Are the dutiable transactions “one arrangement” under section 24(1)(c) of the Act?
(c)Issue 1(c): Is it just and reasonable to aggregate the transactions?
Issue 2: What is the dutiable value of the properties? This involves three sub‑issues:
(a)Issue 2(a): Is the duty nil, following issue of a document titled “Conveyance Duty Notice of Assessment” dated 10 June 2022?
(b)Issue 2(b): Is the dutiable value of the properties under section 20(1)(a) of the Act the “consideration” of the dutiable transactions?
(c)Issue 2(c): What are the unencumbered values of the Lyell St properties?
Issue 3: What penalty and interest are payable?

Considerations and findings

Issue 1: Should the transactions be aggregated under section 24 of the Act?

The key provisions of the Duties Act1999 relevant to this issue as they were at the relevant time are extracted below:
Section 24 Aggregation of dutiable transactions
(1)     Dutiable transactions relating to separate items of dutiable property, or separate parts of, or interests in, dutiable property are to be aggregated and treated as a single dutiable transaction if—
(a)they occur within 12 months; and
(b)the transferee is the same or the transferees are associated people; and
(c)the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, 1 arrangement relating to all of the items or parts of, or interests in, the dutiable property.
(2)     Dutiable transactions are not to be aggregated under this section if the commissioner is satisfied—
…
(d)that it would not be just and reasonable for the transactions to be so aggregated.
(3)     The dutiable value of aggregated dutiable property is the sum of the dutiable values of the items or parts of, or the interests in, the dutiable property as at the time when each dutiable transaction occurs.
…
(5)     Duty may be apportioned to the instruments effecting or evidencing the dutiable transactions, or may be payable in accordance with section 17 (1), as determined by the commissioner.
Dictionary:
associated person—
(a)     for this Act generally—means a person who is associated with another person in accordance with any of the following provisions:
(i)people are associated people if they are related people;
(ii)individuals are associated people if they are partners in a partnership to which the Partnership Act 1963 applies;
(iii) private companies are associated people if common shareholders have a significant interest in each private company;
(iv)trustees are associated people if any person is a beneficiary common to the trusts (not including a public unit trust scheme) of which they are trustees;
(v)a private company and a trustee are associated people if a related body corporate of the company is a beneficiary of the trust (not including a public unit trust scheme) of which the trustee is a trustee; and
(b)     for part 3.2 (Acquisition of interests in certain landholders)—see section 83A.
related body corporate—see the Corporations Act, section 9.
related person means a person who is related to another person in accordance with any of the following provisions:
(a)     individuals are related people if—
(i)they are partners, or they have been partners and the partnership has ended (whether the partnership ended in Australia or elsewhere); or
(ii)the relationship between them is that of parent and child, brothers, sisters, or brother and sister;
(b)     private companies are related people if they are related bodies corporate;
(c)     an individual and a private company are related people if the individual is a majority shareholder or director of the company or of another private company that is a related body corporate of the company;
(d)     an individual and a trustee are related people if the individual is a beneficiary of the trust (other than a public unit trust scheme) of which the trustee is a trustee;
(e)     a private company and a trustee are related people if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (other than a public unit trust scheme) of which the trustee is a trustee.
Summary of parties’ contentions for issue 1(a): Are the transferees “associated” or “related” under section 24(1)(b) of the Act?
Respondent
As set out in the reviewable decision notices, the main basis for the respondent determining that the transferee applicants were “associated” under section 24(1)(b) were that they were incorporated on the same day, 6 August 2018, being the same day of the purchases of the properties, and at that time Mr Morvillo was the sole director and shareholder of both. There was no evidence that the applicants purchased the properties as trustees when the reviewable decisions were made.[46] Subsequently, the applicants submitted evidence relevant to this issue including the Deeds of Agreement.
[46] Reviewable Decision Notices with Statements of Reasons dated 9 August 2021, T14; T35
During the proceedings, the respondent’s main contentions on the issue of associated persons was that the Deeds of Agreement include various clauses to indicate that each of the applicants became a trustee for a Lyell St Trust. The Lyell St Trusts are discretionary trusts created on 8 May 2015 by deeds titled “Discretionary Trust Deed The 4 Lyell Street Trust” and “Discretionary Trust Deed The 6 Lyell Street Trust” (the Lyell St Deeds or Trusts).[47] In the case of AT 84/2021, 6 Doublebar Pty Ltd , the relevant Deed of Agreement stated: “the parties agree that in transferring the 6 Lyell St Property to the Transferee, the Transferee receives transfer of the 6 Lyell Street Discretionary Trust.”[48] In the case of AT 85/2021, 4 Bloodfinch Pty Ltd, the relevant Deed of Agreement similarly stated: “the parties agree that in transferring the 4 Lyell St Property to the Transferee, the Transferee receives transfer of the 4 Lyell Street Discretionary Trust”.[49] On this basis, the respondent contended that the applicants upon purchase of the properties on 6 August 2018 each became the owner in their capacity as a new trustee of the relevant Lyell St Trust, and the Lyell St Trusts have common beneficiaries and other bases for being associated.[50]
[47] Copies of the Lyell Street Deeds were submitted by the applicants in September 2022
[48] Deed of Agreement dated 6 August 2018, “Terms: clause 2”, T205
[49] Deed of Agreement dated 6 August 2018, “Terms: clause 2”, T170
[50] Respondent’s Outline of Submissions dated 7 October 2022 at [23]–[25]
By way of background, the applicants contended that there are errors in the Deeds of Agreement and a correct interpretation of them is that the benefit of the contracts of sale was held by the applicant 4 Bloodfinch Pty Ltd, for the 4 Bloodfinch Trust (AT 85/2021), and by the applicant 6 Doublebar Pty Ltd for the 6 Doublebar Trust (AT 84/2021) (the Doublebar and Bloodfinch Trusts). The Doublebar and Bloodfinch Trusts are discretionary trusts which were created on 6 August 2018 by two separate deeds titled “Discretionary Trust Deed. The Bloodfinch Trust” and “Discretionary Trust Deed. The 6 Doublebar Trust” (the Doublebar and Bloodfinch Deeds).[51] The Doublebar and Bloodfinch Deeds each name the relevant applicant company as the trustee.[52] In the case of the 6 Doublebar Deed and Trust, the “General Beneficiaries” are Thanh Cong Hoang and certain categories of “related” persons.[53] In the case of the 4 Bloodfinch Deed and Trust, the “General Beneficiaries” are Maria Cassaniti and certain categories of “related” persons”.[54]
[51] Statutory Declaration of Maria Cassaniti dated 24 February 2022, Annexure A; Statutory Declaration of T C Hoang dated 9 February 2022, Annexure A
[52] Doublebar and Bloodfinch Deeds dated 6 August 2018, “Parties, Recitals: C”
[53] Doublebar Deed dated 6 August 2018, “The Schedule: Item 2”,
[54] Bloodfinch Deed dated 6 August 2018, “The Schedule: Item 2”
Given the applicants’ evidence about the above issue, the respondent contended that this raised further dutiable transactions, being the change in beneficial ownership of the properties from the Lyell Street Trusts to the Doublebar and Bloodfinch Trusts.[55] The respondent contended that these transactions should also be aggregated for the purposes of assessing the duty.
[55] Respondent’s Outline of Submissions dated 7 October 2022 at [19]; [30]–[33]
The respondent disputed that the Deeds of Agreement have errors, and ought to be interpreted such that the applicants each became an owner as a trustee of the relevant trust — the Doublebar or Bloodfinch Trust. The respondent contended: “the Deeds only make sense if the trusteeship of the Lyell Street … trusts was transferred along with the … properties”[56] and the evidence about errors in the deeds as contended by the applicants is inconsistent and unreliable and should not be accepted.[57]
Applicants
[56] Respondent’s Outline of Submissions dated 7 October 2022 at [22]
[57] Respondent’s Closing Submissions dated 4 December 2023 at [35]–[36]
The applicants contended that the applicants were not “associated persons” or “related persons” for the purposes of section 24 of the Act.
The applicants contended that if they each became a trustee of a Lyell St trust, as the respondent contended, there is no basis for finding the applicants are associated. The Lyell St trusts are not associated because the commonly named persons in those trusts are not “beneficiaries” for the purposes of section 24. Citing Cypjayne Pty Ltd v Rodskog [2009] NSWSC 301 (Cypjayne), the applicants contended that the named persons are “at best “potential beneficiaries” if the trustee chooses to exercise its discretion in their favour”, and that therefore they “had no “interest” in the trust property”.[58] Cypjayne concerned the interpretation of a partnership deed which included a term “associated person” that was defined in reference to the then NSW duties legislation. For this reason, the court considered the meaning of terms[59] that are the equivalent of terms applicable in this case — the terms “associated person” (subsection a)(i)), and “related person” (subsection (e)) in the Act. The court in Cypjayne found that “a potential beneficiary of a discretionary trust is not a ‘beneficiary of a trust’ within the definition of a ‘related person’ in the Duties Act.”[60]
[58] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [97]
[59] [2009] NSW SC301 at [36]–[38]
[60] [2009] NSW SC301 at [45]
The applicants’ main contention was that the respondent’s primary case (that the applicants first became the trustees of the Lyell St trusts and then transferred the land to the Doublebar and Bloodfinch Trusts) rests on an incorrect interpretation of the Deeds of Agreement. The applicants contended there is an error in the Deeds of Agreement as follows:
(a)the Deeds of Agreement describe:
4 Lyell Street Trust and the 6 Lyell Street Trust as the vendor trusts …[and then refers] to them again in the same document by different names as the purchaser trusts… [which] defies common sense. Rather, the different names attributed to the purchaser trusts … indicates a difference of the purchaser trusts from the vendor trusts.[61]
(b)The respondent’s contentions involve an “absurd construction” of clause 2 of the Deeds of Agreement, because they involve the trustee of the Lyell St trusts transferring obligations to beneficiaries contrary to the requirements of the Lyell St Deeds, among other issues.[62]
(c)Evidence given by the persons named as “beneficiaries” of the Doublebar and Bloodfinch Trusts is consistent with the applicants’ interpretation.
(d)Evidence given by the professionals involved with the setting up the Doublebar and Bloodfinch Trusts is consistent with the applicants’ interpretation.[63]
(e)There are no trusts known by the names “4 Lyell Street Discretionary Trust” and “6 Lyell Street Discretionary Trust” which indicates an error.[64]
(f)The respondent’s interpretation of the Deeds of Agreement as involving changes in trustees for the Lyell St trusts is commercially “absurd” given the purpose of the sales was:
a reduction of the liabilities of the vendor trustees to a registered mortgagee and two equitable mortgagees by the ‘price’ … and are commercially sensible … only if there were an immediate transfer of 4 and 6 Lyell St … to purchaser trustees on behalf of the new trusts [the Doublebar and Bloodfinch Trusts] liable to the financiers for the price.[65]
(g)There is no evidence of any change in trustee transactions in accordance with the usual requirements, mechanics, and documents.[66]
(h)In any case, there is an exemption from duty for a “mere” change of trustee (section 54 of the Act).[67]
[61] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [50]
[62] Applicant’s Submissions in Reply dated 18 December 2023 at [15]–[16]
[63] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [73]–[75]
[64] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [55] and [77]
[65] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [80]
[66] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [74]
[67] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [81] and [100]
The applicants contended that on a correct interpretation of the Deeds of Agreement, the benefit of the contracts of sale was held by the second applicant for the 4 Bloodfinch Trust, and by the first applicant for the 6 Doublebar Trust, and these trusts have no beneficiaries in common. No other relevant elements of the definition of associated person or related person apply.
The applicants disputed that Mr Morvillo’s roles supported a finding that the transferees were associated or related. While Mr Morvillo was a common director and shareholder to both the applicant companies, these were “nominee” and trustee companies and as such this does not provide a basis for aggregation by association.[68] While Mr Morvillo is a relative of Maria Cassaniti, this is not a basis for finding there is an association between the applicants because of the nature of discretionary trusts — none of the objects of the Bloodfinch and Doublebar Trusts (similar to the applicants’ contentions about the Lyell St Trusts) are “beneficiaries” for the purposes of the tests for being associated or related persons, relying on Cypjayne.[69]
Findings for issue 1(a): are the transferees ‘associated’ or ‘related’ under section 24(1)(b) of the Act?
[68] Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [134(f)]
[69] Applicants’ Outline of Submissions — Part-Heard, dated 15 February 2023 at [134(g)]
The Tribunal finds that the applicants are not “associated” or “related” persons for the purposes of aggregation under section 24(1)(b) of the Act.
The Tribunal finds that the correct interpretation of the Deeds of Agreement is that there are errors in them and the applicants’ interpretation is the correct interpretation. Contrary to the respondent’s contention, the Tribunal finds that the Deeds of Agreement as worded do not make sense. In each Deed of Agreement the relevant applicant as transferee is described as “trustee” of the relevant Lyell St “Discretionary Trust”,[70] but contradictorily each also state that the relevant applicant agrees to receive transfer of the same named trust.[71] It was not contested that there are no registered trusts with the names, “4 Lyell Street Discretionary Trust” or “6 Lyell Street Discretionary Trust”, and the Tribunal regards this as a further indication that there is an error in referring to them. Also, there was no change of the trustees’ processes, and clause 2 of each the Deeds of Agreement is inconsistent with the Lyell St Deeds. The Tribunal also finds the Deeds of Agreement do not make sense commercially, in that there is no commercial reason given the context of the transactions for the applicants to each become a trustee of a Lyell St Trust.
[70] Deeds of Agreement dated 6 August 2018, “Parties: clause 5”; “Background: clause L”
[71] Deeds of Agreement dated 6 August 2018, “Terms: clause 2”
The Tribunal is also persuaded to make this finding because of the strength of evidence from various professionals that they acted in a manner consistent with the applicants’ interpretation of the Deeds of Agreement. For example, it was not contested that:
(a)Mr Charlie Duardo obtained an ABN for the Doublebar and Bloodfinch Trusts and accounted for 4 Lyell St as trust property of the 4 Bloodfinch trust and accounted for 6 Lyell St as trust property of the 6 Doublebar trust.[72]
(b)Mr Morvillo ensured that 6 Doublebar Pty Ltd accounted for 6 Lyell St as trustee property of the 6 Doublebar Trust, and similarly for 4 Bloodfinch Pty Ltd in relation to 4 Lyell St as trustee property of the 4 Bloodfinch Trust[73]. Searches show Mr Morvillo held the shares beneficially.[74]
(c)Mr Morvillo, in his roles in the 4 Bloodfinch Trust and 6 Doublebar Trust, consulted the wishes of the relevant appointor for each of these Trusts and was advised by each of the Trusts’ accountants.[75]
(d)The intent of the applicants on or around 6 August 2018 is evidenced in the initial instructions to set up the applicants’ entities for the acquisition of the Lyell St properties. The documents instructing the formation of the applicant companies and the Doublebar and Bloodfinch Trusts make clear the intention that the applicants be trustee companies for the relevant Bloodfinch or Doublebar Trust, for the purpose of acquiring the respective properties, and these documents are signed by Mr Duardo, Mr Morvillo, and Thanh Cong Hoang.[76]
[72] Statutory Declarations of Mr Duardo dated 9 February 2022 and 25 February 2022 at [9]; Applicant’s Outline of Submissions — Part-heard dated 15 February 2023 at [127]
[73] Statutory Declarations of Mr Morvillo dated 9 February 2022 [7] and dated 24 August 2022 at [7] of Morvillo
[74] T229 for the second applicant and T227 for the first applicant
[75] Statutory Declarations of Mr Morvillo dated 9 February 2022 at [3], and dated 24 August 2022 at [3]
[76] Respondent’s Tender Bundle dated 30 May 2023, pages 2–13
The applicants set out the corrections required to the Deeds of Agreement to correctly interpret them, which the Tribunal accepts, as follows:
Parties – clause 5
Amend clause 5 to read “6 Doublebar Pty Ltd … (in its own capacity as trustee of the 6 Doublebar Trust)”
Background – clause L
Amend clause L to read “the Transferee (as trustee of the 6 Doublebar Trust)”
Terms – clause 2
Amend clause 2 to read “Without otherwise affecting the operation of this deed, the parties agree that in transferring the 6 Lyell [St] Property to the Transferee, the Transferee receives the transfer as trustee of the 6 Doublebar Trust.”^[77]
The amendments of the Deed of Agreement relevant to the applicant 4 Bloodfinch Pty Ltd are similar, with references changed to 4 Lyell St and the 4 Bloodfinch Trust.
[77] Applicants’ Closing Submissions dated 6 November 2023 at [63]–[65]

Given the above finding about the interpretation of the Deeds of Agreement, the question about whether the applicants are associated involves determining whether the applicants as trustees of the Doublebar and Bloodfinch Trusts are associated. The Tribunal finds that none of the relevant elements of the definitions of “associated” and “related” persons are met. The Tribunal’s findings in relation to each relevant element of the definition of “associated person” are set out below.
Persons are associated if they are “related” (definition of ‘associated person’ at dictionary, subsection (a)(i) of the Act). A private company and a trustee are ‘related’ if “the company, or a majority shareholder or director of the company, is a beneficiary of the trust … of which the trustee is a trustee” (definition of ‘related person’ at subsection (e)). The respondent contended that the applicant:
[AT85/2021] 4 Bloodfinch Pty Ltd (as trustee of the 4 Bloodfinch Trust) and [AT84/2021] 6 Doublebar Pty Ltd (as a beneficiary of the 4 Bloodfinch Trust) are “related persons”. As “related persons”, [they] are “associated persons” per paragraph (a)(i) of [the] definition [of ‘associated person’ and (e) of the definition of ‘related person’][78]
More specifically, the respondent contended that Stefan Morvillo is related to Maria Cassaniti and on the relevant date was “therefore, a beneficiary of the 4 Bloodfinch Trust [while also being] the sole shareholder (i.e. sole member) of 6 Doublebar Pty Ltd”.[79] In response to Cypjayne, the respondent relied on section 82(2) of the Act, which the respondent contended applies to the whole of the Act and deems beneficiaries of discretionary trusts to own or otherwise be entitled to trust property.[80]
[78] Respondent’s Outline of Submissions dated 7 October 2022 at [38]–[39]
[79] Respondent’s Outline of Submissions dated 7 October 2022 at [36]
[80] Respondent’s Closing Submissions dated 4 November 2023 at [29]–[34]
The applicants denied that there was an association for the purposes of aggregation under subsection (a)(i) and (e), and the Tribunal agrees. The 4 Bloodfinch and 6 Doublebar Trusts are discretionary trusts and the respondent’s contention about who are “beneficiaries” for the purposes of section 24 is contrary to Cypjayne. Applying Cypjayne, the Tribunal finds that Mr Morvillo is at best a “potential beneficiary” and is not a “beneficiary” for the purposes of the test for “associated persons” and “related persons” in the Act.
In regard to the application of section 82(2) of the Act, the Tribunal agrees with the applicants’ submissions on this point and that as a matter of statutory interpretation section 82(2) does not apply in this case:
The definitions applying to the whole of [the Act] appear in the Dictionary … Part 3.2 of [the Act] contains several sections 78-80 which introduce bespoke definitions for the purposes of assessing landholder duty. In context, s 82 is concerned to extend a definition appearing in s 80 (ie., one of the bespoke definitions). Section 80 is concerned with “landholdings” for the purposes of Part 3.2. Section 80 is concerned with “landholdings” for the purposes of Part 3.2. Section 82 is concerned with “constructive ownership of landholdings” in the case of discretionary trusts. It is absurd to construe s82(2) as applying across the entire [Act] …[81]
[81] Applicants’ Submissions in Reply 18 December 2023 at [10]
Further, the authorities relied on by the respondent are not directly on point in contrast to Cypjayne. Brereton J in Cypjayne considered an equivalent to section 82(2) of the Act, and stated that unless such a provision explicitly applies then a beneficiary of a discretionary trust was not caught by the definition for the following reasons:
it is difficult to conceive – given the notoriously extensive range of classes of persons who are included as potential beneficiaries of discretionary trusts – that Parliament intended that every potential beneficiary of a discretionary trust be caught by the definition [of associated persons], so as effectively to attribute to the object of a discretionary trust power a beneficial interest. Where it was desired to achieve that result, specific provision was made [in a chapter in the NSW duties legislation about certain landholders][82]
[82] [2009] NSWSC 301 at [43]
Considering subsection (a)(iii) of the definition of associated person, it states that private companies are associated people if common shareholders have a “significant interest” in each private company. The respondent contended that if the Tribunal accepted that discretionary beneficiaries are not beneficiaries for the purposes of the associated person test in the Act, then the beneficial interest must rest with the applicant companies and, by reason of the common shareholding, this means they are associated.[83] The Tribunal does not agree with the simplistic binary logic of the respondent’s latter contention given it is inconsistent with significant bodies of case law, as the applicant submitted.[84] In any case, common shareholding is not the test here, the test is whether Mr Morvillo had a “significant interest” in each of the applicants. On this issue, during the proceedings the respondent contended that Mr Morvillo had a “significant interest” in the applicant companies because he was the only shareholder of a landholding company and he would be entitled to 100% of any distribution under section 83 of the Act.[85] The respondent contended that the latter was true even if the applicants were trustee companies, relying again on section 82(2) of the Act which the Tribunal finds does not apply.
[83] Respondent’s Closing Submissions dated 4 November 2023 at [26]; Applicants’ Outline of Submissions — Part Heard dated 15 February 2023 at [134(f)]
[84] Applicant’s Submissions in Reply dated 18 December 2023 at [7]
[85] Transcript of proceedings dated 23 November 2022, pages 114–116
The Tribunal agrees with the applicants submissions[86] and finds that a corporate trustee such as each of the applicants is not a landholder, therefore a significant interest does not arise here, and an association on the basis of subsection (a)(iii) is not established.
[86] Applicants’’ Outline of Submissions 15 February [104]-[118]; Applicants’ Submissions in Reply dated 18 December 2023 at [8]
The applicant companies were trustee companies so they could not operate the trusts for their own benefit. Given the latter, the Tribunal agrees with the applicants that any connection between the applicants due to common directorship or shareholding was “theoretical and remote” and not a basis for aggregation.[87] More specifically, the Tribunal relies on the authorities cited by the applicants which establish that “a corporate trustee’s interest is in the nature of a charge or other secured creditor only”,[88] and so does not meet the definition of ‘landholding’ under sections 79 and 80 of the Act and the dictionary.[89] On this basis, the Tribunal finds that, as trustee companies, the applicant companies were not landholders in their own right and a “significant interest” does not arise.
[87] Applicants’ Outline of Submissions — Part Heard dated 15 February 2023 at [102(f)] and [134(c)]
[88] Applicants’ Submissions in Reply dated 18 December 2023 at [8]
[89] ‘Significant interest’ is defined in the dictionary of the Act in relation to ‘landholders’ and section 83 is cross-referenced (see footnote 89). ‘Landholder’ is defined in the dictionary and s79 is cross-referenced which states that a ‘landholder’ is an entity with “landholding” in the ACT. Section 80 defines ‘landholding’ as “other than the interest of a mortgagee, chargee, or other secured creditor”
If the Tribunal is wrong in the above findings, the Tribunal agrees with the applicants that section 83 of the Act[90] supports the view that “the test of a significant interest is by reference to actual entitlements to distribution of property.”[91] Mr Morvillo had no such interest given he is merely the nominee shareholder of a trustee company.
[90] Section 83 of the Act states that a significant interest is where the person in the event of a distribution “would be entitled to at least 50%”
[91] Applicants’ Outline of Submissions — Part Heard dated 15 February 2023 at [104]–[118]
Considering the subsection (a)(iv) definition of ‘associated person’, trustees are associated people if “any person is a beneficiary common to the trusts … of which they are trustees”. The respondent contended that the Lyell St Trusts were associated. Given the Tribunal’s finding about the interpretation of the Deeds of Agreement and that the applicants did not become trustees of the Lyell St Trusts, the Tribunal does not need to decide this issue. The issue for determination by the Tribunal is whether the 4 Bloodfinch and 6 Doublebar Trusts had common beneficiaries, and the Tribunal finds that they did not.
Considering the subsection (a)(v) definition of ‘associated person’, a private company and a trustee are associated people if “a related body corporate of the company is a beneficiary of the trust … of which the trustee is a trustee”. The respondent’s contentions on this issue were unclear, but appeared to be that given Mr Morvillo was the sole director and shareholder of both of the applicant companies and also Mrs Cassaniti’s grandson, he is “one of the people to whom money [from the 4 Bloodfinch Trust] could be distributed … [t]herefore a company of which he was a director is also a beneficiary of a trust.”[92] The Tribunal finds that (a)(v) does not apply. The 6 Doublebar and Bloodfinch Trusts have no private company beneficiaries. The Tribunal agrees with the applicants that the applicants are not related bodies corporate, neither have any such bodies, and there are no such bodies which are a beneficiary of any trust.[93]
Summary of Parties Contentions for Issue 1(b): Are the dutiable transactions “one arrangement” under section 24(1)(c) of the Act?
[92] Transcript of proceedings dated 23 November 2023, page 116
[93] Applicants’ Outline of Submissions — Part-Heard dated 15 February 2023 at [119]
Given the above findings, section 24(1)(c) does not need to be determined. However, in case the Tribunal is in error in the findings about section 24(1)(b), the Tribunal makes findings about section 24(1)(c) as follows.
Respondent
The reviewable decision notices stated that the respondent had applied the ordinary meaning of “arrangement”; that it had undertaken a “wide-ranging factual enquiry into determining the true nature of the relevant transactions”; and its conclusions support its decision that section 24(1)(c) is met.[94] In the notices, the bases for finding that the purchase transactions evidence substantially one arrangement were, in summary, as follows:
(a)The vendors became subject to a court order dated 3 August 2018, primarily favourable to the respondent about the recovery of payroll tax, and during the objection phase of that court matter they were represented by Mr Sam Cassaniti of Accolade Advisory Pty Ltd and McEvoy Legal who are all also performing roles for the applicants in this case.
(b)On 6 August 2018, both the purchaser companies were incorporated, the vendors signed contracts for sale with the purchasers, and both the applicant companies had Mr Morvillo as a common sole director and shareholder, and both the transfers occurred on 8 August 2018.
(c)On 7 August 2018, Marginata Securities Pty Ltd discharged its registered mortgages.
(d)The properties were “not arms length transactions”:
the conduct of the parties and relevant circumstances … form evidence that the transfers of the properties amount to what is substantially one arrangement
…
the common purpose of transferring the properties … was to place the properties beyond the reach of the [respondent’s] recovery powers including any creditors.[95]
[94] T36–37
[95] T37–38
During the proceedings, the respondent contended that the two transactions were one arrangement as follows:
(a)on the same date, the transactions occurred, the applicants were incorporated, and two new discretionary trusts were settled in the name of each applicant;[96]
(b)the same lawyers acted on both sides of both transactions;[97]
(c)the Deeds of Agreement were “near-identical, down to the alleged typographical errors”;[98] and
(d)the applicants’ own submissions and evidence is that:
the transfers were effected by Marginata using its powers as mortgagee to effect the transfers of both properties to new owners … in respect of the same loan and for the same purpose, namely to ensure repayment of that loan and related loans to Accolade and Reliance.[99]
[96] Respondent’s Outline of Submissions dated 7 October 2022 at [10]
[97] Respondent’s Closing Submissions dated 4 December 2023 at [39(b)]
[98] Respondent’s Closing Submissions dated 4 December 2023 at [39(c)]
[99] Respondent’s Closing Submissions dated 4 December 2023 at [39]–[40]
The respondent contended that Mr Morvillo’s common roles was evidence of one arrangement:[100]
(a)the applicant companies were controlled by same director, secretary and shareholder, Mr Morvillo;
(b)Mr Morvillo was the director of Marginata Securities, which was the registered mortgagee of both properties before and after the transactions, and the transactions were initiated by Marginata exercising its powers as mortgagee under a mortgage default;
(c)Mr Morvillo was interested in protecting Marginata’s interests in relation to the money which it had advanced to the transferors; and
(d)Mr Morvillo agreed that the express purpose of the transactions was to move assets beyond the reach of the respondent.
[100] Respondent’s Closing Submissions dated 4 December 2023 at [39(d)]–[39(m)]
Based on the above, the respondent contended as follows:
Taken together, … these transfers were part of one scheme or arrangement designed to protect the interests of the secured creditors … What occurred was in truth a single transaction by which Marginata, Reliance and Accolade were seeking to get assets out of the hands of companies which were subject to a payroll tax debt and into the control of new trustee companies controlled by Marginata’s director, Mr Morvillo.[101]
Applicants
[101] Respondent’s Closing Submissions dated 4 December 2023 at [42]
The applicants contended that the test for one arrangement requires evidence of circumstances that are not present in this case, citing Wakefield v Commissioner of State Revenue [2019] QSC 085 (Wakefield); there needs to be “some relationship or connection or interdependence between the transactions; not merely a relationship between the parties”.[102]
[102] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [142], citing Wakefield v Commissioner of State Revenue [2019] QSC 085 at [63]
The applicants contended that in substance, not just form, the transactions in this case were separate.[103]
[103] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [138]–[140]
The applicants disputed that Marginata’s intentions and actions, being a financier, are relevant to the issue of whether there is one arrangement under section 24(1)(c). The applicants summarised the evidence of Mr Morvillo about the financier’s intentions and actions as follows:
The vendors “defaulted on the mortgage over [the properties]; the powers under the registered mortgage was exercised to effect a sale to the purchasers who were new borrowers with Marginata; the new borrowers had nothing to do with the [vendors’] interests; the purchase price was not met by payment to the defaulting mortgagors due to a risk that future garnishee orders would attach at the point of sale and draw Marginata (a secured creditor of the [vendors’] interests) into a dispute with the [respondent] (an unsecured creditor of the [vendors’] interests. This was uncontradicted evidence [and the applicants contended it was corroborated by the applicants’ witnesses].”[104]
[104] Applicants’ Submissions in Reply dated 18 December 2023 at [29]
To the extent that the respondent’s contentions implied that the above arrangement was a “sham” orchestrated by Marginata to move assets subject to the payroll debt, the applicants contended that this serious allegation was unfairly not explicitly contended. In any case, the evidence does not support it.[105] For example, the vendors “accepted that the price would reduce their liabilities upon transfer”, but the vendors’ “further liabilities to Marginata, Reliance and Accolade … continued after the Deeds of Agreement”.[106] The applicants contended that the Deeds of Agreement were legitimate, and necessary to avoid a negligent conveyance, following Commissioner of Taxation v Park [2012] FCAFC 122.[107]
[105] Applicants’ Submissions in Reply dated 18 December 2023 at [40]
[106] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [173]
[107] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [175]
The applicants contended that there is no authority which “makes relevant to the test any of the intentions of financiers.”[108] More specifically, there is no authority that the:
simultaneous exercise of the power of sale of a mortgagee in distinct mortgages over distinct property is a sufficient basis for aggregation … There is no authority that the respondent points to that aggregation is permitted if the arrangement does not involve the transferee other than coincidentally.[109]
Findings for Issue 1(b): are the dutiable transactions ‘one arrangement’ under section 24(1)(c) of the Act?
[108] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [137]
[109] Applicants’ Closing Submissions dated 7 November 2023 at [167]
The Tribunal finds that the transactions do not together form, evidence, give effect to, or arise from what is, substantially, one arrangement under section 24(1)(c).
The intentions and actions of the vendor and purchaser of sale transactions are of primary relevance.[110] The Tribunal agrees with the applicants that various concerns arise, including about fairness, if the Tribunal were to make detailed findings against non-parties such as financiers, in this case Marginata, Reliance, and Accolade, in connection with actions they took to reduce their exposure to the distressed vendors in this case.[111] Nonetheless, the intentions and actions of a financier may be relevant to whether section 23(1)(c) applies, in that they can clarify the circumstances surrounding transactions and the intentions and actions of the vendor and purchaser to the transactions.
[110] Wakefield at [5]
[111] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [156]–[167]; Applicants Submissions in Reply dated 18 December 2023 at [31]–[37]
On this point, the stronger contention of the respondent was about Mr Morvillo’s key roles in the applicant companies and Marginata, contending that he was “the controlling mind” who was able to “get assets out of the hands of companies that were subject to a payroll tax debt and into the control of new trustee companies controlled by Marginata’s director”.[112] For the respondent’s contention to be supported, and for the Tribunal to find that Mr Morvillo was a controlling individual who orchestrated one arrangement for Marginata, it requires findings that Marginata controlled the applicants; that the applicants were effectively involved in a sham; and that the Doublebar and Bloodfinch Trusts were part of this sham. The nature of proof required for such serious findings was set out in Briginshaw v Briginshaw [1938] HCA 34 (the Briginshaw principle), namely that cogent or strict proof is necessary. The Tribunal finds that there is not evidence to support such findings, consistent with the Briginshaw principle.
[112] Respondent’s Closing Submissions dated 4 December 2023 at [39(e)] and [42]
The Tribunal finds that the financiers’ actions in this case are not an “arrangement” caught by section 23(1)(c). In the Tribunal’s view, Mr Morvillo honestly described the intention of the financiers when he stated the following:[113]
The enforcement powers were exercised to exit the failed borrowers, namely 4 Lyell Street Pty Ltd as trustee for the Lyell Street Trust and 6 Lyell Street Pty Ltd as trustee for the 6 Lyell Street Trust and controlled the purchase by [the] two different families [who through trusts purchased the properties] as director of their respective corporate trustees – this was in taking all necessary steps to protect Marginata’s and Reliance’s interest in exiting the failed borrowers and obtaining security from borrowers.
[113] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [17]

Mr Morvillo’s statement above is supported by consistent and significant documentation. Having considered all the submissions and evidence, the Tribunal is satisfied that Mr Morvillo’s multiple roles in Marginata and the applicant companies in this case does not establish that the transactions were part of one arrangement, or a sham, orchestrated by the financiers. The Tribunal finds in this case that the intentions and actions of Marginata, Reliance, and Accolade are consistent with the exercise of the powers of sale legally available to them against the mortgagor vendors.
The Wakefield court stated that the purpose of the provision at issue there (which was similar to section 24(1)(c)) is to “ensure taxpayers in similar circumstances are treated consistently and equitably.”[114] The Tribunal regards the latter as an important consideration and one which puts a focus on the intentions and actions of the taxpayer applicants. Considering the evidence about the intentions and actions of the applicants, including whether they were involved in a sham, the Tribunal finds there is not evidence to support a finding that they were involved in the financiers’ actions other than coincidently and fortuitously, and on this basis also finds the transactions were not part of “one arrangement”.
[114] Wakefield at [67]
Considering in more detail the evidence about the intentions and actions of the applicants, the Tribunal is particularly persuaded to make the above findings by the following factors:
(a)while the properties are adjacent, there is no joint plan between the purchasers for them to redeveloped under one plan;
(b)two distinct and unrelated family trusts purchased the properties;
(c)each purchaser applicant incurred liability to a financier (Marginata), but the benefits of the properties and burdens of the mortgage of each trust are not interdependent in this case;
(d)the common timing of the transactions is not evidence of any interdependence between the vendors and purchasers, or between the purchasers in this case, but the evidence supports the applicants’ contention that the timing was due to “the pressure of the compliance notices issued to the directors and former directors of [the vendor companies] … and the reactions of their secured creditors”;[115]
(e)the common errors in the Deeds of Agreement are not evidence of any interdependence between the vendors and purchasers or between the purchasers in this case; rather the evidence supports this being due to the accountant for each of the applicant companies, Mr Duardo, using a template deed and making similar drafting errors in each Deed of Agreement;[116]
(f)having one solicitor and the same professionals involved in transactions can be a matter of convenience, as confirmed in Wakefield, and the evidence supports this being the case here.
Summary of considerations and findings for Issue 1(c): is it just and reasonable to aggregate the transactions?
[115] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [139]
[116] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [127]–[133]; Applicants Submissions in Reply dated 18 December 2023 at [26(h)]
The applicants contended that if their contentions are not accepted, given the circumstances of the case, it is just and reasonable under section 24(2)(d) for the transactions not to be aggregated. The respondent disputed that section 24(2)(d) should apply. Given the findings above that sections 24(1)b) and 24(1)(c) are not engaged in this case, the Tribunal does not need to decide whether section 24(2)(d) applies. If the Tribunal is wrong in its findings, the Tribunal finds that section 24(2)(d) applies.
The Tribunal agrees with the applicants’ submissions that if section 24(1)(b) or section 24(1)(c) is met, then it is of a technical nature, and for this reason and given the circumstances of the case section 24(2)(d) applies.[117]
[117] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [31] and [148]
The Tribunal finds that the circumstances of the transactions as set out in the above findings are such that section 24(2)(d) applies. In particular, while Mr Morvillo had theoretical control of the applicants for a period, these were nominee/shelf companies and trustee companies. Applying Cypjayne, Mr Morvillo was not a “beneficiary” for the purposes of section 24(1)(b). The applicants in this case were only coincidentally and fortuitously involved with the financier’s actions, and the financier’s actions in any case were not a scheme for the purposes of section 24(1)(c).
As mentioned earlier, the Wakefield court stated that the purpose of the respective provision at issue (which was similar to section 24) is to ensure taxpayers are “treated consistently and equitably.”[118] The Wakefield court emphasizes the importance of considering the justness and reasonableness of the applicants being subject to duty based on aggregation, compared to other purchasers who are not subject to this. The Tribunal regards this as an important consideration when determining if section 24(2)(d) applies. The Tribunal agrees with the applicants as follows:
Had Mr Huang appointed a different shelf company to serve as the 6 Doublebar Trust, no question of aggregation would arise; his family trust therefore should not bear the economic burden of a stamp duty liability arising from the acquisition of considerably more valuable land for the benefit of Maria Cassaniti’s family (who is a non-relation) … The same may be said for Maria Cassaniti …[119]
[118] Wakefield at [67]
[119] Applicant’s Outline of Submissions — Part-Heard dated 15 February 2023 at [148]
Given the above considerations and circumstances, the Tribunal finds that it is not just and reasonable to aggregate the transactions and section 24(2)(d) applies in this case.

Issue 2: What is the dutiable value of the properties?

Summary of parties contentions for issue 2(a): Is the duty nil, following issue of a document titled “Conveyance Duty Notice of Assessment” dated 10 June 2022?

A “Conveyance Duty Notice of Reassessment” (the Notice of Reassessment) that recalculated the duty assessed to exclude GST for duty liability, penalty tax, and interest, was provided to each of the applicants on 10 June 2022 and refunds paid to the applicants.[120] On the same day, a “Conveyance Duty Notice of Assessment” dated 10 June 2022 (the disputed assessment document) which showed “Duty Value” as $0 was provided to one applicant, 6 Doublebar Pty Ltd.[121]
Applicants
[120] Statutory Declaration of Emily Carruthers dated 23 August 2022, Annexure B at [7]
[121] Statutory Declaration of Emily Carruthers dated 23 August 2022, Annexure at [3]–[10]
The applicants submitted that the disputed assessment document, showing duty as nil, is the correct and preferable decision in respect of 6 Lyell St and that the same decision should be made in respect of the transfer of 4 Lyell St.[122] The applicants acknowledged that the respondent had advised in a letter dated 28 July 2022, “please disregard this [Notice of Assessment, being the disputed assessment document]”.[123] However, the applicants contended that the disputed assessment document establishes that the duty for 6 Lyell St is nil. The respondent relies on the fact that it has never been withdrawn in accordance with statutory requirements.[124] The applicants also relied on section 134 of the TAA, which states that:
production of a notice of assessment purporting to be a copy of a notice of assessment, is conclusive evidence … of the due making of the assessment … and that the amount and all particulars of the assessment are correct, except in an objection or appeal proceeding where it is prima facie evidence only.[125]
[122] Applicants’ Submission: Correct and Preferable Decision dated 1 September 2022
[123] Statutory Declaration of Emily Carruthers dated 23 August 2022, Annexure D
[124] Applicants’ Closing Submissions dated 6 November 2023 at [7]
[125] Applicants’ Closing Submissions dated 6 November 2023 at [8]–[10]
On this basis, the applicants contended that even if the sales are aggregated, the duty payable on the aggregated transactions is nil.[126]
Respondent
[126] Applicants’ Closing Submissions dated 6 November 2023 at [11]
The respondent contended that the disputed assessment document was not a valid notice of assessment but an administrative error, and relied on a witness statement dated 5 October 2022 by Mr Shaun Lonergan, an employee of the respondent. The respondent stated that it was not “the end result of a process of working out 6 Doublebar’s taxation liability…[but] was an automatically generated document which has no legal force or effect” and can be “ignored”, relying on Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 (Batagol).[127] In Batagol, Owen J stated the following which supports the respondent’s contention that the disputed assessment document is not a valid notice of an assessment:
[A]n ‘assessment’ is not a piece of paper: it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances … of the amount of tax chargeable to a given taxpayer [and] [w]hen he has completed his ascertainment of the amount, he sends by post a notification thereof called the ‘notice of assessment’ … But neither the paper sent nor the notification it gives is the ‘assessment’. That is and remains the act or operation of the Commissioner.[128]
Findings for issue 2(a): is the duty nil, following issue of a document titled “Conveyance Duty Notice of Assessment” dated 10 June 2022?
[127] Respondent’s Outline of Submissions dated 7 October 2022 at [45]
[128](1963) 109 CLR 243, page 257
The Tribunal finds that the disputed assessment document is not a valid notice of assessment. If the Tribunal is wrong on this issue, then the Tribunal finds that it is only prima facia evidence of an assessment which is displaced by other evidence in this case.
There are a number of indicators that the disputed assessment document was provided to the relevant applicant due to administrative error:
(a)the Notices of Reassessment were provided to the applicants on the same day as the disputed assessment document; and
(b)the disputed assessment document has a different CRN to that in the Notice of Reassessment for the relevant applicant.
The above are consistent with the evidence of the respondent’s witness, Mr Lonegan, that the disputed assessment document was created for administrative reasons to process a complex refund, and then accidently provided to the applicants. A further persuasive indicator of administrative error is that the disputed assessment document on its face is erroneous — it shows “Less Amount Paid” as nil when the initial duty assessments were both paid in full by the applicants on 3 March 2020.[129]
[129] T12
The result is that the Tribunal does not rely on the nil assessment in the disputed assessment document.
Summary of parties’ contentions for issue 2(b): is the dutiable value of the properties the ‘consideration’ of the dutiable transactions?
Respondent
Late in the proceedings, the respondent contended that the dutiable value was “the consideration” of the dutiable transactions, because it was greater than “the unencumbered value” under section 20(1)(a), as follows:
the consideration for the dutiable transaction, being the value of the benefit received by Marginata… Accolade… and Reliance pursuant to the Deeds of Agreement, being in excess of $9 million.[130]
[130] Respondent’s Closing Submissions dated 4 December 2023 at [3(b)]
The respondent acknowledged that a complicating issue in determining consideration on the above basis was that a third property was involved.[131]
[131] Respondent’s Closing Submissions dated 4 December 2023 at [61]
The respondent referred to the applicants’ own evidence including the Deeds of Agreement to support this contention.[132]
Applicants
[132] Respondent’s Closing Submissions dated 4 December 2023 at [58]–[63]
The applicants contended that the “consideration” for the purposes of section 20(1)(a) is “what was received by the vendor trustees so as to move the transfers to the purchaser trustees as stipulated in their agreement”, relying on Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51 (Lend Lease), among other authorities.[133] They contended that the unencumbered value of the Lyell St properties was greater than the consideration received by the vendors, and must be the focus of the determining their dutiable value.
[133] Applicants’ Outline of Submissions — Part-Heard dated 15 February 2023 at [170]
The applicants acknowledged that there was an agreement between the purchasers and the financiers so the financiers would agree to the purchases, which is reflected in the Deeds of Agreement. They contended that this is irrelevant to determining “consideration” in this case, as “[w]hat the purchasers had to undertake to obtain the consent of third parties, such as Marginata, Reliance, and Accolade, to the sale is totally irrelevant”, relying on Lend Lease among other authorities.[134] The applicants contended that in any case, the Deeds of Agreement “do not alter the indebtedness of the vendor trustees by anything more than the price”, relying on various clauses in the Deeds of Agreement.[135]
Findings for issue 2(b): is the dutiable value of the properties the ‘consideration’ of the dutiable transactions?
[134] Applicants’ Submissions in Reply dated 18 December 2023 at [51(a)]
[135] Applicants’ Submissions in Reply dated 18 December 2023 at [51]
The Tribunal accepts the applicants’ contentions on this issue and relies on the authority Lend Lease. The Tribunal finds that the consideration of the dutiable transactions for the purposes of section 20(1)(a) is what the vendors received, and this is less than the unencumbered value of the Lyell St properties. Given this, under section 20(1) of the Act the dutiable value is the unencumbered value of the Lyell St properties, which is considered in Issue 2(c) below.
Summary of parties’ contentions for issue 2(c): what is the unencumbered value of the Lyell St properties?
The Tribunal members are not valuers. The Tribunal’s role is to consider the valuation evidence and determine what is the preferable valuation. In this case this involves determining if the valuations for the Lyell St properties relied on for the initial assessments by the respondent are the preferred valuations. If not, what are the preferred valuations?
As mentioned earlier, the onus is on the applicant taxpayers to show why the reviewable decisions are not the preferable decisions. Relevantly here, the reviewable decisions disallowed objections to the values for the Lyell St properties relied on in the the initial assessment notices which were based on the AVO 2018 valuations. Therefore, the onus is on the applicants to show why the AVO 2018 valuations are not the preferred valuations.
The rate of duty at the relevant time was set out in Taxation Administration (Amounts Payable—Duty) Determination 2018 (No 1). Table 2, section 7, sets out that no duty is payable where the transaction is less than or equal to $1,500,000 (the duty threshold).
Given the Tribunal’s finding above that there is not a basis to aggregate the two dutiable transactions under section 24 of the Act, the main issue to determine about the duty payable is whether the preferred value for either of the Lyell St properties is equal to or above the duty threshold. The valuations submitted as evidence and relied on by the parties are set out in more detail later below. In all valuations before the Tribunal, the 4 Lyell St property is valued significantly higher than the 6 Lyell St property, and the 6 Lyell St property is valued at below the duty threshold. Therefore, the focus of what is set out below is the preferred valuation for the 4 Lyell St property, noting that evidence about the preferred valuation for the 6 Lyell St property can be relevant to this issue.
There are various alternative valuation methods which are in summary as follows:
(a)“comparative sales” or “direct comparison” which involves the direct comparison of comparable sales;
(b)“capitalisation of returns”, which in the respondent’s valuation evidence takes into account rental income and the appropriate capitalisation rate;[136] and
(c)“summation”, which in the respondent’s valuation evidence takes into account land values and the depreciated values of improvements.[137]
[136] See calculations in AVO 2018 valuations, T486
[137] See calculations in AVO 2018 valuations, T485
The test for determining property value accepted by courts and tribunals was stated by Isaacs J in Spencer v Commonwealth of Australia [1907] HCA 82 (the Spencer test):
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 cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for whatever reason soever in the amount which one would otherwise be willing to fix as the value of the property.
What has come to be known variously as the “direct method”, the “comparative sales method”, or “direct comparison method” (comparable sales method) to determine property value was set out by Hope JA in Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409:
Theoretically a comparable sale may be of the very land to be valued, as where, for example, a contract for its sale was entered into on the very day upon which it was to be valued. This would be a most unusual situation, but often evidence is available of sales of very similar land close in point of time to the date of valuation. However, probably more often, the lands the subject of the sales relied upon are in some way different from the land to be valued, giving the latter land a higher or lower value than that to be deduced from the sales. The times of the sales in relation to the date of valuation may also have to be considered in the light of general movements in land prices. The need to make adjustments to values deducted from sales in order to arrive at the true valuation of the land to be valued does not preclude the court which has the task of valuing the land from relying upon the sales as comparable in the relevant sense, nor from the making by the court or by valuers of adjustments which may be nothing more than the best guess that can be made … Whether the differences between land a sale of which is to be relied upon and the land to be valued are so great that the land the subject of the sale cannot be regarded as comparable is a question of fact and degree. The difference may be so great that a court may be constrained to hold that the land is in no sense comparable, and that the adjustments which have been made are so great that the sale can provide no evidence of the value to be determined, and no basis upon which that value can be assessed.[138]
[138] (1981) 48 LGRA 409, pages 434–435
In Tenstat Pty Ltd v Valuer General [2012] NSWLEC 1361 (Tenstat Pty Ltd), the court stated that the comparable sales method has been described by courts as “the conventional method of valuation” and involves a number of steps: “a) accumulation; b) analysis; c) adjustment and d) application of potentially genuinely comparable sales”.[139]
[139] Tenstat Pty Ltd at [36]; cited by applicants in Applicants’ Outline of Submissions — Part-Heard dated 15 February 2023 at [181(c)]

The respondent relied on the AVO 2018 valuation reports and evidence of the witness Mr Pilat.
The AVO 2018 valuations involved a limited roadside only inspection on 27 November 2018, unlike the Wright 2022 reports;[199] Mr Pilat did further roadside only inspections of the Lyell St properties on 16 September 2022 for his witness statements dated October 2022. In the AVO 2018 valuations report for 4 Lyell St, Mr Pilat stated that a request to the applicants for access was made by email on 28 November 2019 and there was no response received by 5 December 2018, so a roadside inspection only occurred.[200] Under cross‑examination, he stated that in 2018 he made the decision to do just roadside inspections also due to “deadlines” and was aware that there was a power for him to gain access for valuation purposes. He agreed that in 2022 he was aware that the respondent’s solicitor advised the applicants that the inspection powers would be exercised if site visits could not be arranged,[201] and agreed he still did not conduct site visits: “I don’t believe this is right approach in a civilised country.”[202] Consequently, “[t]he adopted value of the subject building improvements is based on the roadside inspection, available documentation and an assumption that an internal condition of the subject improvements is in fair to average workable condition consistent with their age”.[203]
[199] T453 for 6 Lyell Street and T470 for 4 Lyell Street
[200] T485
[201] Exhibit R3: Letter from ACT Government Solicitors to solicitors for applicants, dated 27 September 2022
[202] Transcript of proceedings dated 22 February 2023, pages 210-213
[203] AVO 2018 valuations T485
The AVO 2018 valuations involved considering 10 sales for the 4 Lyell St property and eight for the 6 Lyell St property. For 4 Lyell St, two of the 10 sales were not in Fyshwick, and for 6 Lyell St one was not in Fyshwick — these were in another industrial area, Mitchell. The timeframes for comparable sales for 4 Lyell St were from July 2012 to July 2018 (i.e. up to 6 years from the purchase date), and for 6 Lyell St from August 2015 to February 2018 (i.e. up to three years from the purchase date). There were six sales in common for the two AVO 2018 valuations.
The AVO 2018 valuations were derived as follows based on the comparable sales method. A rate per square metre of GFA of improvements was derived for the Lyell St properties from comparable sales. Only a sub-set of the sales, those with a comparable “plot ratio” (i.e. area of improvements as a portion of land area), were relied on for the comparable sales calculation (sales one, two, and six for 6 Lyell St; sales one, three, four, and eight for 4 Lyell St). The derived rate per square metre of GFA in the relevant valuation was multiplied by the GFA for the relevant Lyell St property as follows:
(a)For 6 Lyell St, the derived rate per square metre of GFA was $1,400, the estimated GFA was 440 m², the value was $616,000 and $615,000 adopted, and this was reduced taking into account the results applying the other methods, the lack of an inspection and that the property was not tenanted, to $600,000.[204]
(b)For 4 Lyell St, the derived rate per square metre of GFA was $1,150, the estimated GFA was 1702 m², the value was $1,957,300 and $1,900,000 adopted, but this was not reduced further.[205]
[204] T466
[205] T487
Mr Pilat’s witness statements dated October 2022 followed his review of Herron Todd White valuations referred to earlier, including those dated 2018. Mr Pilat maintained the valuations set out in his AVO 2018 valuations and confirmed that the “Direct Comparison Approach is the most reliable method of for industrial properties in Fyshwick”.[206]
[206] Mr Pilat’s Witness Statements dated 6 and 7 October 2022 for 4 Lyell St at [48]; and for 6 Lyell St at [39]
Mr Pilat’s two “further comments” dated November 2022[207] followed his review of the Wright 2022 reports and he maintained the valuations set out in his AVO 2018 valuations. He stated:
I do not consider Mr Wright [sic] approach to be correct. It is standard valuation practice for improved industrial sale to use an improved building rate as a base for valuation purposes. This is because it is easier to adjust the sales evidence based on improved GLA rate for differences between quality, condition, and size of building improvements, and considering density of developments for the purpose of the subject property valuation.[208]
[207] Exhibits R1 and R2
[208] Mr Pilat’s “further comments” dated 21 and 23 November 2022, for 6 Lyell St at [3] and for 4 Lyell St at [3]
Despite stating the above, in his “further comments” Mr Pilat presented a new analysis to justify his valuations involving “gross lettable area” (GLA). He calculated the rate per square metre of GLA and also analysed the rate per square metre of improved area relied on by Mr Wright for 10 sales in the case of 4 Lyell St, and the five sales in the case of 6 Lyell St considered in the Wright 2022 reports.[209] In the case of 4 Lyell St, Mr Pilat concluded that the rates adopted by Mr Wright are “below market parameters”, and in the case of 6 Lyell St he concluded that the rates suggest a higher value — on this basis, Mr Pilat confirmed his (higher) valuations for the Lyell St properties.[210]
Findings for issue 2(c): What is the unencumbered value of the Lyell St properties?
[209] Mr Pilat’s “further comments” dated 21 and 23 November 2022, for 6 Lyell St at [Table 1, page 7]’ and for 4 Lyell St at [Table 1, page 9]
[210] Mr Pilat’s “further comments” dated 21 and 23 November 2022, for 6 Lyell St at [11, 14]; and for 4 Lyell St at [19,23]
As explained earlier, in making its findings the Tribunal focused on comparable sales valuations and evidence for 4 Lyell St and structured its considerations using the four steps in Tenstat Pty Ltd as follows:
(a)Accumulation of a pool of relevant comparable sales and a process of reasoning to establish their utility or otherwise.
(b)Analysis of comparable sales to establish a common basis such as a rate to allow for comparison.
(c)Adjustment to acknowledge that no properties are identical and adjustments are required to convert comparable sales to a hypothetical expression of value that reflects differences between the comparable properties and that being valued.
(d)Application of potentially genuinely comparable sales through a consideration of the relevance to the property being valued of the rate derived from the adjusted comparable sales and the calculation of the value.[211]
a) accumulation
[211] Tenstat Pty Ltd at [3]–[65]
The Tribunal finds that the sales relied on by Mr Wright are more comparable and supported by more coherent and transparent reasoning than those relied on by Mr Pilat.
Compared to Mr Pilat’s comparable sales relied on in applying the comparable sales method, Mr Wright’s sales are the more reliable: they are more numerous in number, sale dates are within a more reasonable time frame from the purchase date, they are more comparable in regard to critical characteristics of the subject properties for e.g. in the case of 4 Lyell St involving sales of more battle-axe blocks, and are all in Fyshwick.
Mr Wright’s reasoning about the appropriateness of his comparable sales was more coherent and transparent than that by Mr Pilat. Mr Pilat’s reasoning was inevitably more limited because he only undertook roadside inspections. The Tribunal accepts that he knew he could have undertaken site inspections, by the respondents following up to gain access by agreement or using the relevant powers under the Act, but he chose not to.
The Tribunal does not accept Mr Pilat’s evidence that a site visit was not critical and a mere “final touch” in this case.[212] This evidence is contrary to communications from the respondent’s legal representatives to the applicants’ legal representatives. In an email from the respondent it is stated that Mr Pilat’s office had “advised that an internal inspection would be beneficial from a valuation perspective” and in a letter from the respondent dated 27 September 2022 it is stated that an internal inspection will be required as evidence.[213] The Tribunal finds that in the absence of on-site inspections, Mr Pilat had less knowledge than the hypothetical buyers relevant to meeting the Spencer test, which Mr Pilat admitted under cross-examination.[214]
[212] Transcript of proceedings dated 22 February 2023, page 226
[213] Exhibt R3
[214] Transcript of proceedings dated 22 February 2023, pages 226, 277
Significantly, Mr Pilat had more limited knowledge compared to Mr Wright of relevant details about the properties including the design and condition of the buildings, access, and exposure. For example, under cross-examination Mr Pilat disagreed that it was likely an industrial vehicle would need to use the driveway of 4 Lyell St to enter the side doorways of 6 Lyell St, although he did acknowledge that manoeuvring would be required.[215] In the Tribunal’s view, the evidence before the Tribunal, including photos in the AVO 2018 valuations and Exhibit R3, support a view that access to the side doorways of 6 Lyell St would often be challenging and access to the neighbouring driveway often required. Another example is that Mr Pilat included in his comparable sales two saleroom sites at street level. When questioned about their comparability, he stated that while 4 Lyell St is a battle axe block, signage and buildings can be seen from the street and the battle-axe driveway allows for six metres of Lyell St frontage, so its exposure was acceptable.[216] In the Tribunal’s view, the evidence before the Tribunal, including photos in the AVO 2018 valuations and Exhibit R3, support a view that that 4 Lyell St is significantly more obscure than a street frontage site, given its long battle-axe driveway and fencing. In contrast to Mr Pilat’s selection and analysis of comparable sales, the Tribunal is satisfied that Mr Wright considered more adequately key issues including about access, exposure, and condition of the improvements.
b) analysis
[215] Transcript of proceedings dated 22 February 2023, page 276; Transcript of proceedings dated 9 March 2023, page 371
[216] Transcript of proceedings dated 22 February 2023, page 272; Transcript of proceedings dated 9 March 2023, pages 363-364
The choice of the rate to be applied for analysis of the comparable sales is obviously an important step in the valuation. Mr Wright and Mr Pilat disagreed about the most appropriate rate in this case, as set out earlier.
The Wright 2022 reports used sales analysis on rate per square metre of improved site area. Mr Wright maintained throughout his evidence that this was the “most suitable unit of comparison for the valuation of older style industrial properties” and provided a coherent reason for his view consistent with his other evidence.[217] Mr Wright’s evidence in this regard was not seriously challenged during cross‑examination or by Mr Pilat’s evidence.
[217] Wrights Supplementary Reports at [4–5, 10]
Mr Pilat initially used a rate per square metre of GFA and in his later evidence he also used a rate per square metre of GLA. Both of the latter rates used by Mr Pilat required more estimates and assumptions to be made than the rate used by Mr Wright, which leads to questions about how safe Mr Pilat’s rates are compared to Mr Wright’s. The Tribunal accepts that Mr Wright’s detailed evidence about Mr Pilat’s rates is coherent and accepts it.
A more fundamental issue is that Mr Pilat did not provide the same level of reasoning for use of his rates as Mr Wright. Rather, as the proceedings progressed Mr Pilat introduced a new rate, one that he had not regarded as useful enough to include in his AVO 2018 valuations, to support his valuations. This approach, coupled with his use of different valuation methods in his AVO 2018 valuations which were not his preferred methods as mentioned earlier, undermined the coherence of the AVO 2018 valuations and Mr Pilat’s evidence. It leads the Tribunal to conclude that Mr Pilat’s approach to justifying his valuations involved presenting an increasing number of methods and rates, rather than deeper explanations and better transparency about his preferred method and preferred rate. While a triangulation approach may be useful to confirm and resolve some valuation issues, this should not be at the expense of adequately identifying and justifying the preferred method and rate. The Tribunal is of the view that in this case the latter has occurred.
c) adjustment
In Tenstat Pty Ltd, the court confirmed that generally what is preferred is as follows:
as few adjustments as possible, [applied] in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property, with too much adjustment potentially rendering comparable sales unsafe to use.[218]
[218] Tenstat Pty Ltd at [48]
Also, transparent and explicit adjustments are required to support an “explicable assessment of value” rather than an unacceptable “assertion of value.”[219]
[219] Tenstat Pty Ltd at [58]
Given the greater complexity of the rates used by Mr Pilat, more complex adjustments as well as estimates and assumptions were required, as compared to Mr Wright’s adjustments. The Tribunal finds that Mr Pilat failed to adequately identify and explain his adjustments, and that Mr Wright’s critiques of them are coherent, detailed, and supported by the evidence. The Tribunal finds that Mr Wright’s adjustments, if any, were uncontroversial and without sustainable criticism.
Mr Pilat made few concessions about the limitations of his roadside inspections under cross-examination,[220] but the Tribunal accepts the applicants submissions that his valuations were done from a vantage point that “limited his knowledge”[221] compared to Mr Wright. Due to the limited knowledge of Mr Pilat, his adjustments or lack of them were more controversial. For example, he made assumptions that the improvements were in “fair to average workable condition consistent with age.”[222] The condition of the properties was relevant to Mr Pilat’s evidence given the methods he used involved GFA and GLA. By contrast the “inferior” condition of the properties at purchase date was considered by Mr Wright in the Wright 2022 reports and in his later evidence.[223] These inferior conditions were corroborated during the proceedings, especially in regard to 4 Lyell St, by Mr Morvillo and Mr Ortilik.[224]
[220] Transcript of proceedings dated 22 February 2023, page 272-225
[221] Applicants Closing Submissions dated 6 November 2023 at [126]
[222] AVO 2018 valuations for 4 Lyell ST at T485 and for 6 Lyell St, T465
[223] Wright 2022 reports, page 6
[224] Statutory Declaration of Stefan Morvillo dated 14 November 2022 at [13]; Statutory Declaration of Trent Ortlick dated 15 November 2022
As set out earlier, under cross-examination, Mr Pilat conceded usability constraints might not have been known to him,[225] but may have been taken into account by the hypothetical parties under the Spencer test.[226] Evidence was provided that Mr Pilat did not apply the battle axe block adjustments necessary for valuation of 4 Lyell St. Evidence was provided that Mr Pilat failed to adjust adequately for the development potential of the comparable sales. Evidence was provided that the AVO 2018 valuations and subsequent evidence included arbitrary, nonmarket derived adjustments which were not explained or justified.
[225] Transcript of proceedings dated 22 February 2023, page 273 line 6
[226] Transcript of proceedings dated 22 February 2023, page 273 line 14
A more fundamental concern about Mr Pilat’s adjustments is that there were not consistently done with adequate explanation of why this occurred. One example mentioned earlier is sale two in the AVO 2018 valuation, which is a battle-axe block with an easement like 4 Lyell St. Mr Pilat reduced the land area of sale two to “useable” site area by not counting the area of the battle-axe arm and an easement, which increased the rate per square metre he applied from $277 to $457.[227] However he did not apply this adjustment to other sales he relied on or to 4 Lyell St, and did not explain this inconsistency adequately.
d) application
[227] Wright 2022 reports “Critique” dated 31 October 2022 at [74-86]
In Wright’s 2022 reports and evidence, Mr Wright provides an adequate explanation of his reasoning which importantly is consistent with his approach to the three steps set out above. He summarises the resulting calculation for 4 Lyell St as follows:
I have assessed the retrospective market value in the range of $400 to $450 per square metre of improved land area. This reflects a value range between $1,225,000 and $1,375,000. I have adopted the midpoint of at $1,300,000.[228]
[228] Valuation Report dated 6 August 2018 at [28]
As set out above, the Tribunal finds the Wright 2022 reports and Mr Wright’s evidence better meet the requirements of the steps for a comparable sales valuation. His final calculations are consistent with his approach to these steps. It logically follows that Mr Wright’s valuations are preferred. The Tribunal finds the Wright valuations meet the Spencer test.
By contrast, as set out above the Tribunal finds that the AVO 2018 valuations and Mr Pilat’s evidence less adequately meet the requirements of the steps for a comparable sales method valuation. As also set out above, in some respects the Tribunal finds the AVO 2018 valuations and Mr Pilat’s evidence do not meet the Spencer test. On this basis the Tribunal finds that the AVO 2018 valuations are excessive and not preferred.
The Tribunal finds the valuations as set out in the Wright 2022 reports, of $1,300,000 for 4 Lyell St and $550,000 for 6 Lyell St, are the preferred valuations in this case.

Summary of parties’ contentions for Issue 3: What penalty and interest is payable?

Respondent

The respondent contended that under section 16 of the Act, the duty was payable within 14 days of when the transfers were registered and therefore due by 3 September 2018. The alleged tax default was as follows:
As the companies failed to declare that the transfers formed part of one agreement in accordance with section 24 [of the Act]… and failed to pay the required amount of duty by the due date, tax defaults occurred pursuant to section 30 of the [Taxation Administration Act 1999]. As such, [the respondent] imposed 25 per cent penalty tax on the Assessments, which is the base rate.[229]
[229] T41
Further, the respondent contended that, as the onus was on the taxpayers to comply, it would have been prudent for them to make an inquiry of the respondent but they did not, and remitting the penalty is not appropriate.
During the proceedings, as explained earlier the respondent contended that there were two sets of dutiable transactions not just one, and that given the circumstances of the case, penalty tax should be assessed at 50% on both sets of transactions.[230] However, later in the proceedings the respondent stated it did not press this increased penalty.
Applicants
[230] Respondent’s Outline of Submissions dated 7 October 2022 at [53]–[54]
The applicants contended that there was not a tax default even if the respondent’s contentions about aggregation and dutiable value are accepted. Under the TAA, a tax default means “a failure by a taxpayer to pay, in accordance with a tax law, the whole or part of tax that the taxpayer is liable to pay.”[231] The applicants contended that any duty became payable upon receipt of the initial assessment notice:
It was only following the election to apportion [under section 24(5) of the Act] that any particular amounts become payable by a taxpayer. At no earlier point in time was there a tax default within the meaning of the Act [and this finding is important because] it relieves the taxpayers of liability on a period of interest.[232]

Findings for Issue 3: What penalty and interest is payable?

[231] Dictionary, TAA
[232] Applicants’ Outline of Submissions – Part-Heard dated 15 February 2023 at [189]

Given the findings of the Tribunal set out above, it follows that there has not been a tax default and no penalty is payable.
Further, the Tribunal agrees with the applicants’ contention that any tax default in this case arose 14 days from the issue of the initial assessment notices. In the Tribunal’s view, this is the earliest date when the applicants were liable for particular amounts — it was only then that the applicants became aware the respondent had elected to determine duty by apportionment under section 24(5) of the Act and what this apportionment was.
Reviewing interest is not within the jurisdiction of the Tribunal.[233] Therefore, no order about the quantum of interest payable is made. However, given the Orders and findings set out above, the Tribunal anticipates that any interest payable will need to be reassessed by the respondent.
[233] S107A, Schedules 1 and 2, TAA

………………………………..
Senior Member L Beacroft
For and on behalf of the Tribunal

Date(s) of hearing:	31 August 2023
Solicitors for the Applicant:	Mr R Grossman
Solicitors for the Respondent:	Ms G Junakovic, ACT Government Solicitor