Campbell v Chief Commissioner of State Revenue - [2010] NSWADT 271

No judgment structure available for this case.

CITATION: Campbell v Chief Commissioner of State Revenue [2010] NSWADT 271

DIVISION: Revenue Division

PARTIES:
APPLICANT
Malcolm William Campbell and Peter Campbell
RESPONDENT
Chief Commissioner of State Revenue

FILE NUMBER: 086064 and 086105

HEARING DATES: 26 March 2009, 29 May 2009, 6 October 2009, 8 December 2009, 22 April 2010, 24 June 2010 - 25 June 2010

SUBMISSIONS CLOSED: 2 November 2010

DATE OF DECISION:
15 November 2010

BEFORE: Block J - Judicial Member

CATCHWORDS: Land tax- principal place of residence exemption –intended principal place of residence- explanation of delay –effect of the legislation prior to the introduction of section 10T

LEGISLATION CITED: Land Tax Management Act 1956

CASES CITED: IRG Technical Services Pty Ltd v FCT per Allsop J. (2007) 165 FCR 57
Khoury & Anor v Khouri [2006] 66 NSWLR 241
FCT v Dalco (1990) 90 ATC 4088 at 4093
Lord Sudeley v Attorney-General [1897] AC 11
Glenn v Commissioner of Land Tax (1915) 20 CLR 490
Livingstone v CSD (1960) 107 CLR 411
McCaughey v CSD 46 SR(NSW) 192 at 206

REPRESENTATION:
APPLICANT
I. Mescher, barrister on some (and in particular 6 October 2009,8 December 2009 and 22 April 2010) hearing days and Malcolm Campbell (who is one of the Applicants) on the other hearing days
RESPONDENT
I. Young, barrister

ORDERS: The decisions under review are affirmed

REASONS FOR DECISION

Part A. Preliminary and background

1 The decisions under review are the disallowance by the Respondent who is often referred to in this decision as the “Chief Commissioner” of objections by the Applicants against assessments of land tax (and the denial of the principal place of residence ("PPR) exemption) in respect of the property situated at 48 – 50 Vena Avenue, Gorokan ("the Gorokan property" or "Gorokan"); the decisions in question relate to the 2002 to 2008 land tax years (both land tax years inclusive). The land tax years referred to in the preceding sentence are collectively referred to as "the relevant years"; one or more, but not all, relevant years are denoted by references to the actual relevant year or relevant years.

2 The Tribunal had before it the documents produced pursuant to section 58 of the Administrative Decisions Tribunal Act 1997("the ADT Act") The Tribunal was also furnished with a number of witness statements, and other documents, some of which had been obtained in response to summonses issued by the Chief Commissioner. The Tribunal furthermore accepted the tender of a number of exhibits, but does not consider it necessary to list the exhibits so tendered. Taken overall the Tribunal has been furnished with a very considerable volume of documentation and including a number of written submissions at various times furnished by the parties.

3 There are two applications before the Tribunal and numbered 086063 and 086105 respectively and which were at all relevant times listed to be heard together. The only Applicant in respect of application number 086064 is Mr. Malcolm Campbell whereas both Applicants are the Applicants in respect of application numbered 086105. The former application related originally not only to Gorokan but also to the land tax liability of Mr. Malcolm Campbell in respect of property situate at Mount Riverview ("the MR property") and property at Dulwich Hill. There was originally an issue in relation to the MR property in consequence of the fact that Mr. Malcolm Campbell had been assessed to 100% of the land tax, and notwithstanding a contention by him that he had sold a half interest to his daughter Helen Campbell ("Helen")in January 1995. Mr Malcolm Campbell at one of the early hearings contended that the transfer of a one half interest to Helen had been duly stamped but that the document of transfer had been lost in the offices of the OSR. The Chief Commissioner denied that it had been lost as alleged and also did not accept that it had been duly stamped. No evidence as to stamping and whether in accordance with a paid cheque or a bank statement was produced, and the only evidence as to the existence of the transfer consisted of statements to that effect by Mr. Malcolm Campbell and Helen.

4 Nothing turns on the fact that there are two applications and that Mr. Peter Campbell is an Applicant only in respect of application number 086105. Nor is there any remaining relevance in respect of the issue set out in the preceding clause as to whether Helen did acquire a one half interest in the MR property. The Tribunal refers in this context to the agreed orders set out below in this decision.

5 The terms "Malcolm" 'Peter" and "Paul" refer (and without disrespect and purely in order to avoid confusion) to Mr. Malcolm Campbell and his sons Mr Peter Campbell (who is an Applicant) and Mr. Paul Campbell who gave evidence on 24 June 2010. Malcolm has at all relevant times been the directing mind on behalf of the Applicants in respect of these proceedings and it is he who appeared on the hearing dates both prior to the engagement of legal representation and after it is dismissed, and, as the transcript for 24 June 2010 demonstrates, (and because Malcolm is not a lawyer). with the consent of the Respondent.

6 On 26 March 2009 Malcolm applied for and obtained a postponement of the hearing in order to obtain legal representation. Peter was not present at the hearing on that date. Peter was again not present on 29 May 2009 when Malcolm again sought a further postponement, on this occasion on the basis that Peter was upset in consequence of the death some while earlier of his grandmother. Legal representation had not been obtained at that date. That postponement application was granted and so too was a postponement application made on 6 October 2009 on the basis that the Applicants required time within which to consider material obtained by the Chief Commissioner in consequence of summonses issued by him.

7 On 8 December 2009 Mr I. Mescher of counsel on behalf of the Applicants (and who was briefed by a firm of solicitors) and Mr Young on behalf of the Chief Commissioner and their respective clients entered into negotiations which resulted in a document (signed on behalf of the parties by the two counsel) entitled “Short Minutes of Order” (the agreed orders) which were made orders of the Tribunal and reading in full as follows:

8 It will be noted that in accordance with the agreed orders the parties agreed that the further hearing of the applications would be restricted to the dates of Peter’s ownership of Gorokan and the question of whether it was exempt from land tax in respect of that period. Put in other words the applications were thereafter no longer referable to any other property (and in particular the MW property) and in addition Malcolm withdrew as an Applicant in respect of Gorokan and thus leaving Peter as the only remaining Applicant for a PPR exemption in respect of Gorokan.

9 The hearing on 22 April 2009 was concerned with an application by the Applicants for the appointment, in terms of section 71(4) of the ADT Act, of Paul as Peter’s representative. The Applicants were represented by the same counsel and solicitors as had appeared at the previous hearing. Evidence was given by Dr Selwyn Smith, a psychiatrist, as to Peter’s mental condition and in addition the Tribunal accepted the tender of other medical evidence. Dr Smith was adamant as to the fact that Peter’s mental condition was such that he could not have given instructions in respect of two witness statements (one signed and the other unsigned) and that he, Peter, would not be able to give evidence before the Tribunal. The application for Paul’s appointment to represent Peter was opposed by the Respondent; however the Respondent did not tender any medical evidence in rebuttal of that presented by the Applicants and the application for Paul’s appointment as Peter's representative was granted.

10 The medical evidence before the Tribunal indicated in clear terms that Peter’s severe mental deterioration dated back some years and probably to about 2004, although Dr Smith was unable to put a precise date on when it became so severe.

11 On 24 June 2010 the Applicants surprisingly changed direction. They had discharged their solicitors and counsel and Malcolm thereafter, (with the consent of Mr Young, and because as set out previously, Malcolm is not a lawyer), appeared as their representative.

12 It was at this stage that Malcolm contended that notwithstanding the terms of the agreed orders he intended to press his claim as an Applicant for the PPR exemption in respect of Gorokan for all of the relevant years. He contended in this context that he had not withdrawn as an Applicant for the PPR exemption in respect of Gorokan and that the agreed orders did not have that effect. (He did not at any time contend that Mr. Mescher had not been authorised to sign the agreed orders on behalf of the Applicants). He also informed the Tribunal that he did not agree with Dr. Smith’s evidence as to Peter’s mental condition and his inability to give evidence, and notwithstanding the fact that Dr Smith was a witness called by the Applicants.

13 Mr Young contended that in accordance with the agreed orders the proceedings were confined to Peter’s ownership of Gorokan and to the dates of his ownership. The Tribunal considers that that contention is, having regard to the terms of the agreed orders, correct and so ruled. However and in case there is merit in Malcolm’s contention that the agreed orders should not be so interpreted the Tribunal allowed Malcolm to give evidence in support of that contention and it also allowed him despite the medical evidence previously referred to, to call Peter as a witness.

14 On 24 June 2010 and 25 June 2010 oral evidence was given by each of Malcolm, Peter and Paul and their evidence will be dealt with in more detail later in these reasons. It is sufficient at this stage to say that Paul's evidence was of little or no consequence in that he said that he knew virtually nothing of the issues and more particularly that Peter had never indicated to him, Paul, that he, Peter had ever had any intention of constructing a residence on Gorokan. Peter's evidence was incoherent to such an extent that the Tribunal is of the view that Dr Smith’s evidence was correct and that Peter was not able to, and should not have been called to, give evidence before the Tribunal.

15 Specifically in respect of Peter the Tribunal was informed that he had been a teacher but that he had been discharged from that position and (perhaps) in consequence of his deteriorating mental condition. Peter obtained a one half share in Gorokan in May 2004. Malcolm informed the Tribunal that in respect of that one half share Peter had paid a part only of the agreed purchase consideration; the Tribunal refers to page 4 of the transcript for 24 June 2009 as follows:

BLOCK: So at this stage Peter wasn’t involved?

YOUNG: Correct. Judicial Member--

BLOCK: Forgive us for using your first name, Mr Campbell, no disrespect is intended it’s just that’s it easier to do that than keep on referring to - it’s just done as a matter of distinction.

M.CAMPBELL: Be my guest.

YOUNG: Judicial Member, in respect of the Gorokan property in or about May 2004 a half interest in Gorokan was transferred to Peter Campbell and registered and that half interest was registered in Peter Campbell’s name so that the title for Gorokan reveals an original acquisition date by Mr Malcolm Campbell back in 1959 and in or about May 2004 it reveals or discloses a transfer of a half interest from Mr Malcolm Campbell to Mr Peter Campbell.

BLOCK: Does the transfer reveal that Peter paid anything? Often enough these things say for value received.

YOUNG: Judicial Member, I think that it’s disclosed as a $1 consideration but I’ll check that.

M.CAMPBELL: Do you want me to interrupt?

BLOCK: I think it would be best, Mr Campbell, since Mr Young is going to give us the benefit of his - being present in all of these proceedings right from the word go, let’s let him have his head. Unless it’s a simple one and do you know the answer?

M.CAMPBELL: Well, well the deed associated with mine said $130,000 and the applicant’s submissions in support indicate a part payment of that.

BLOCK: So the deed said 130,000 for a half.

M.CAMPBELL: That’s correct.

BLOCK: Your submissions say that a part has been paid, all right.

M.CAMPBELL: That’s correct.

YOUNG: Judicial Member, I’ll just double check off the actual transfer, it’s in evidence.

BLOCK: Well, while you’re looking Mr Campbell, what part had he paid?

M.CAMPBELL: Between 55 and 60,000, is my submission.

16 There was however no evidence proper in the form of bank statements or cheques or otherwise before the Tribunal as to what had been agreed as the consideration or how it was arrived at or whether it represented market value and more particularly what part was paid and when.

.

17 Although and in earlier submissions the Applicants indicated an intention to claim the PPR exemption in respect of Gorokan in respect of years going beyond the relevant years and up to 2012, the submissions received on behalf of the Applicants indicated no such intention and the Tribunal accordingly assumes that the issues with which it is concerned relate to the relevant years only.(Having regard to the fact that the applications before it relate to the relevant years the Tribunal would not be able to consider any periods outside the relevant years)

18 After oral evidence had been taken and on 25 June 2010 a time-table for final written submissions was, by consent, arranged and ordered. Submissions were duly received in accordance with those arrangements although not in some cases within the agreed time periods. The Respondent's submissions dated 1 October 2010 ("RS") are particularly comprehensive and the Tribunal has for this reason drawn on RS for the purposes of this decision.

19 Clause 7 of RS sets out that the assessments with which the Tribunal is concerned are as follows:

2002 to 2006

2007 to 2008

2005 and 2006

Part B; Gorokan; the claim by Malcolm in the context of relevant legislation; the threshold issue.

20 Gorokan was acquired by Malcolm by transfer dated 22 September 1959 which was registered on the 24 September 1959 and thus more than 50 years ago.

21 Clause 47 of written submissions by the Applicants dated 20 August 2009 prepared by Mr Mescher (and when Mr Mescher was retained by the Applicants) provides in part as follows:

22 The written submissions referred to in the preceding clause should be considered in conjunction with the Applicants’ submissions submitted after the hearings and in terms of which the Applicants did not make any claim for a PPR exemption in respect of any years other than the relevant years. (As set out previously the Tribunal does no in any event consider that it has the power to consider periods outside the relevant years)

23 Gorokan is vacant land in the sense that it has not been improved by the construction of any buildings. The surrounding lots (owned by other persons) have been improved by the construction of buildings thereon. Gorokan itself is overgrown with vegetation.

24 Peter acquired an interest in Gorokan by transfer dated 28 May 2004. It follows that in respect of the 2002, 2003 and 2004 years the only relevant Applicant is Malcolm and so that Peter is a possible Applicant only in relation to subsequent relevant years. It was contended on behalf of the Applicants that Peter obtained an equitable interest in Gorokan at an earlier time (in 2002) and prior to the transfer dated 28 May 2004 and that contention (which is not legally competent and in respect of which there was in any event no acceptable evidence) is dealt with in a separate part later in these reasons.

25 The threshold issue so far as Malcolm is concerned turns on the question of whether there is in fact any legislation which is relevant and which would permit the grant of discretionary relief of the nature sought in respect of an acquisition made so many years ago. It is perhaps desirable to note that the Applicants seek discretionary relief on the basis of a claimed intention to construct a residence on the property after the statutory period of 2 years referred to in the legislation. The provisions of this clause 25 should not be construed so as to suggest that the Tribunal agrees that Malcolm was entitled, in the light of the consent orders, to proceed after the making of the consent orders, with any such application. As previously indicated the Tribunal considers (and ruled) that he ceased to be an Applicant when the consent orders were agreed and the provisions of this part and other relevant parts of this decision are included only in case it should be held that the Tribunal has incorrectly interpreted the consent orders.

26 In its original form, as introduced by the Land Tax Management (Amendment) Act 1991, sec 10T of the Land Tax Management Act 1956 (“LTMA” or the “Act”) provided as follows:

27 In accordance with section 10T (4) of the Act the concession applies only for the first two land tax years immediately following the year of acquisition. If it could be said that section 10T (4) of the Act applied retroactively the concession might have been available, in relation to Malcolm, for the 1960 and 1961 land tax years.

28 However and in accordance with the transitional provisions, section 10T of the Act has no operation or application whatsoever, whether notional or otherwise, to the 1960 and 1961 land tax years. Section 17 of Schedule 2 Savings and Transitional Provisions provides as follows:

29 It follows that section 10T (4) of the Act applied prospectively from 1 January 1992. The Tribunal does not consider that there is any basis upon which it can be contended that the relevant legislation applied retroactively.

30 The structure of section 10T(4) of the Act is such that it allows the concession for intended use and occupation “only for the 2 tax years immediately following [acquisition]” and thereafter “extend or further extend its operation”. However that extension (or further extension) is from and on the base of the period of 2 tax years immediately following the acquisition.

31 The intended use and occupation concession in section 10T of the Act does not apply for the 1960 and 1961 land tax years and there is thus no applicable base (i.e. 2 land tax years immediately following acquisition) for the operation of any extension. There can be no extension of what is a nullity.

32 The Tribunal accepts the submission of the Chief Commissioner that the intended use and occupation concession in section 10T (1) of the Act, by section 10T(4) of the Act and section 17 of Schedule 2 (Savings and Transitional provisions), can have no operation in respect of land acquired before 1 January 1990. If land is acquired in 1989, then the next 2 tax years immediately following acquisition are the 1990 and 1991 tax years, which end before section 10T of the Act came into effect. If land is acquired during 1990, then the next 2 tax years are the 1991 and 1992 years. Sections 10T (1) and (4) of the Act, being prospective in operation, apply to the 1992 land tax year and the concession is potentially available in that 1992 year. Once the concession is available for that 1992 year, the power in section 10T (4) of the Act can be exercised so as to extend the application of section 10T (1) of the Act to the 1993 and possibly subsequent years.

33 For the Applicants to succeed, section 10T (4)of the Act, and also clause 6(4) of Schedule 1A to the Act, would have to be read in such fashion that they have an ambulatory operation. On this hypothetical basis the concession would be notionally available within the first limb of section 10T (4) of the Act for the 1960 and 1961 land tax years, but would then go into abeyance for the next 32 tax years, and when the operation of the second limb of section 10T(4) of the Act would spring back into existence, so as to allow an extension in the 1993 land tax year. In fact and in this case the hiatus period would be some 41 land tax years, because the extension is sought for the 2002 and subsequent land tax years.

34 The construction of section 10T(4) of the Act advanced by the Applicants produces an inconceivable result: see IRG Technical Services Pty Ltd v FCT per Allsop J. (2007) 165 FCR 57 at 65 paragraph [21] That contention is accordingly rejected.

35 The Applicants are confronted with the same problem of construction under clauses 6(3)(a) and 6(4) of Schedule 1A to the Act. Clause 6(3)(a) provides

36 By clause 6(4) the Chief Commissioner “may extend the period in which this clause applies”. Thus the initial period is the 2 tax years immediately following and that is the period which is referred to in clause 6(4).

37 In accordance with section 35 of schedule 2 to the Act, the transitional rule with respect to the introduction of schedule 1A is as follows:

(1) The amendments made to this Act by the 2003 amending Act (other than the amendments referred to in clause 34) apply in respect of a land tax year commencing on or after 1 January 2004 and do not affect any existing liability for land tax.

38 It follows that the introduction of Schedule 1A is also prospective as from 1 January 2004. It is only clause 8, (and not clause 6), which has a retrospective operation in accordance with sec 35(3) of Schedule 2.

39 It follows also that the power in the second limb of section 10T(4) of the Act and clause 6(4) of Schedule 1A to the Act to extend the period in respect of which the concession applies after the 2 tax years immediately following acquisition, is not available to Malcolm.

40 It follows that Malcolm (apart from the consent orders) fails at the first hurdle in respect of all of the relevant years. Leaving aside all other considerations (and there are many) there is no legislative provision which would permit the Chief Commissioner (even if he were he minded to do so) to grant the discretionary relief sought by Malcolm.

Part C Ownership of a part of Gorokan by Peter

41 It is contended on behalf of Peter that although the transfer in his favour was executed in 2004 he in fact became a part owner in April 2002.

42 The contention that Peter became an “owner” of a half share in the Gorokan property in April 2002 cannot be correct having regard to the terms of sec 23C(1)(a) of the Conveyancing Act 1919. That section provides as follows:

43 There was no writing disposing of, or transferring a half interest in Gorokan until 28 May 2004 when the transfer of a half share in the land occurred: see generally Khoury & Anor v Khouri [2006] 66 NSWLR 241.

44 The evidence discloses that in March 2002 a contract was executed by Australian Micro Solutions Pty Ltd (“the company”) to acquire a property in Urraween, Queensland. The acquisition was financed by a loan taken out by Malcolm and Peter jointly. That loan was secured by Malcolm alone granting a mortgage over Gorokan. The joint indebtedness of Malcolm and Peter does not create by operation of law or in equity an ownership or proprietary interest on the part of Peter in Gorokan.

45 Peter did nothing more than make himself primarily liable on a borrowing to acquire property registered in the name of the company. The existence of that liability does not create ownership rights in a property mortgaged as security for that borrowing, by a co-borrower. Peter ’s status as a shareholder in and director of the company does not produce any different result

46 The contention that Peter was an owner of Gorokan the period from April 2002 up to 24 May 2004 is without foundation in law or equity.

47 It follows of course that Peter cannot make an application in relation to any relevant years prior to the 2005 relevant year

Part D Gorokan as the intended PPR of either of Malcolm or Peter

48 I have previously noted that (apart from the operation of the consent orders) Malcolm fails at the first hurdle and so that references to him in this part D are also included purely in the interests of completeness

49 It is of course clear that the Applicants must discharge the onus on them. The Applicants must in accordance with section 100(3) of the Taxation Administration Act establish that the Chief Commissioner should be satisfied that the owner “intends to use and occupy the land” as his PPR.

50 One of the leading decisions of the High Court on the nature of the onus of proof is FCT v Dalco (1990) 90 ATC 4088 at 4093. That case concerned the onus in the context of the corresponding provisions of the Income Tax Assessment Act 1936. Brennan J (with whom Mason CJ agreed) approved the following statement of principle from the decision in Gauci v FCT 90 ATC 4088 at 4089 as correctly stating the law:

“ The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with … [the taxpayer’s onus] for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail”

51 In that respect, as in the immediately preceding passage, Brennan J observed that “... the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment .. ”.

52 Markedly different explanations have been offered at different times by Malcolm as to his actual PPR and as to his intended PPR. Those explanations are inconsistent to a quite remarkable degree. They were put to Malcolm in the course of his cross-examination and he was not able to furnish any adequate explanation of the inconsistencies involved. Clause 49 of RS neatly encapsulates Malcolm’s inconsistent claims and that clause 49 of RS is included in full as follows:

I cannot disagree

duty overpaid regd 05/04

confirming previous advice when requested to

see previous

Marshall road Mount Riverview - intended residence still awaiting stamped transfer

I cannot disagree

water/moisture run-off and termites

53 The evidence before the Tribunal indicates that Malcolm did not at any relevant time have any intention of building on Gorokan. The evidence before the Tribunal further indicates that his business commitments are such that he must reside at or near his current residence in Revesby (dealt with later in these reasons.) Put in other words Malcolm has a PPR in Revesby and there is no acceptable evidence of an intention on his part as to any other property. Even if he were, for whatever reason obliged to leave Revesby (and it is possible that Malcolm's siblings may be able to compel him to vacate Revesby and as to which see Part G below) it is unlikely that he would prefer to live in Gorokan which is a considerable distance away. I find as a matter of fact that there even if Malcolm had not failed at the first hurdle (and as to which see Part B above) there is no basis upon which he could seek discretionary relief in respect of land which is and is likely to remain vacant.

54 Peter’s very severe mental condition is such that at this time and for some time past he could not possibly have formed an intention to build a residence anywhere at all. Apart from any other considerations he would not have the financial means to do so and, in accordance with Malcolm’s statements to the Tribunal, Peter has not even paid the whole of the purchase consideration for his half share of Gorokan. Peter’s evidence (unsatisfactory as it was) establishes that he must live in the care of his father, or failing his father some other relative and that he has no capacity or ability to live and survive independently. (The evidence before the Tribunal is that Peter lives with his father in Revesby). I note in this context, as I have noted previously, that this finding is based upon the evidence of Dr Smith who was called by the Applicants. . The interlocutory application which was founded on Dr Smith’s evidence was clearly designed to ensure that Peter need not give evidence and for Malcolm then to seek to obtain evidence from Peter was as odd as it was futile. Two witness statements, (one signed and one unsigned) ,were tendered in respect of Peter. Dr. Smith said in categoric terms(as I have noted) that Peter could not have given the instructions for their preparation and having regard inter alia to Paul’s evidence it is likely that the relevant instructions could not have been given by anyone other than Malcolm.

Part E The evidence in general terms

55 As noted previously oral evidence was given by each of Peter Paul and Malcolm. Also as indicated, evidence by Peter was presented, in conflict with the evidence of Dr.Smith that he would not be able to give evidence; Dr. Smith proved to have been eminently correct; except on occasion it was difficult to know what Peter was trying to say.. The Tribunal concludes, having regard to Peter’s demeanour and the evidence of Dr. Smith, that Peter is and has been for some time completely reliant on Malcolm and that in the future that burden may have to be assumed by another close relative and perhaps one of his siblings.

56 As to Malcolm himself the Tribunal has come to the conclusion that his evidence does not deserve of credibility. As set out previously he has made numerous and conflicting claims as to his PPR; his oral evidence before the Tribunal was almost invariably evasive and in the opinion of the Tribunal and in relation to important matters of fact untruthful.

57 Malcolm’s evidence as to delay in consequence of termite problems was equally unworthy of credit. As regards finance the evidence before the Tribunal (which need not be dealt with in detail more particularly as there does not appear to be any serious suggestion that financial problems were a cause of delay) indicates that there was at all relevant times finance available or procurable for the construction of a residence on Gorokan. The evidence before the Tribunal indicates that Malcolm lives at Revesby as his PPR and that he is resisting attempts by his own siblings to procure his vacation of Revesby to enable its sale.

Part F An acceptable reason for delay

58 I have previously in these reasons made it clear that (even apart from the consent orders) Malcolm cannot apply for the discretionary relief sought because there is no statutory provision which would permit him to do so. I have also made it clear that Peter cannot apply for the discretionary relief sought because he does not have the capacity to build a residence on Gorokan and that the incapacity arises from both his mental situation and also his financial situation. Even if Malcolm were to provide the finance for the construction of a residence on Gorokan for Peter, Peter could not live in it otherwise than with and in the care of Malcolm and there was no evidence of any such intention.

59 As to whether it is necessary for me to canvas the reasons for delay advanced by the Applicants is doubtful. However and in case this remains a relevant consideration and purely for the sake of completeness, I note that it has been suggested that there were or are termite problems in respect of Gorokan, and it was also suggested (although this latter suggestion was not pressed at the hearings and so that references to it are included only to the extent that it is relevant) that there are reasons of a financial nature which precluded construction. The evidence of Malcolm indicates (as I have said) that he is a man of means and the owner directly or indirectly (through the company) of considerable real property and so that there are not (as I have indicated previously) financial restraints; as to the termite problem I include with approval clauses 57 to 74 of RS ( but omitting footnotes) as follows;

57 In this respect, summonses have issued by the Tribunal to each of the Commonwealth Bank, the Termite Information Centre and the Wyong Shire Council.

Financial difficulties

58 On previous occasions, the delay in commencing building work on the Gorokan property, has been attributed to financial difficulties. Thus, by way of example, Peter Campbell declared in his application for exemption dated 4/11/2008, as to the explanation for the delay:

“Employed at the time of purchase but lost job 2005. Only voluntary work since. Amount owing to Commonwealth Bank (mortgage). Negotiations rebuilding ceased, until re-employed”.

59 Malcolm Campbell does not now, by his witness statement of 20 August 2009, advance a case that any delay in the past was occasioned by financial difficulties of any description.
60. The Commonwealth bank documents produced on subpoena establish that the Gorokan property was mortgaged in or about March 2002 as collateral security, for an advance of $160,000, for the acquisition of an existing house property in Queensland at 56 Chancellor Drive, Urraween 4655, and registered in the name of Australian Micro Solutions Pty Ltd.
61 In cross examination of Malcolm Campbell it was seemingly accepted that an inability to obtain finance was not relied upon as an explanation for the delay.
62. The reason now advanced for the explanation in the delay is the “ enormous problems ... experienced with termites in the trees on the property” . The termites were, allegedly, first discovered in the early 1980’s.

The explanation for the delay 1959 – early 1980’s

63. According to Malcolm Campbell’s evidence the time sequence is as follows:
(i) The land was vacant uncleared land in 1959;

(ii) He removed shrubs and trees “ until some time in the 1960’s ”;
(iii) From that time in the 1960’s until 1973 he “then made enquiries to ascertain a suitable builder”;
(iv) He approached a builder in 1973;
(v) Plans for a 2 bedroom fibro house were drawn up in1974;
(vi) It was then and always his intention to build a house on the Gorokan property in which he could live permanently - though of course, that proffered intention was inconsistent with the signed declarations at tab 4 and 24;
(vii) The selected builder, due to his other commitments “would not be able to start construction of the house for several years”;
(viii) It took him from 1974 until “ the late 1970’s early 1980’s ” to decide to approach another builder;
(ix) Preliminary building plans were drawn up in the early 1980’s; and
(x) The “ extent of termite infestation ” was discovered in the early 1980’s.

The delay caused by termites from early 1980’s to 2005

64 According to Malcolm Campbell, the termites and the Wyong Council are the explanation for twenty-five years delay as follows:

(i) In the early 1980’s the termite exterminator “could not provide details of the termite barriers that could successfully be installed”;
(ii)The termite exterminator could not guarantee against future termite problems;
(iii) Wyong Council told him “he had to make attempts to remove the termites … before they would investigate and allow [him] to cut down the trees”;
(iv)That process “ took in excess of 10 years ” and the treatment was applied to some “ 20 or more trees ” in the 14 years from 1980 to 1994;
(v)The process took so long because of “the delays by the Council in arriving to inspect trees ... and making recommendations”;
(vi) In about 1994 he obtained council approval to “ remove certain trees ” which process of removal occurred over ten years from 1994 – 2004 and 5-6 trees were removed;
(vii) Council would take 1-2 years in inspection et al “ in respect of just one tree ”;

The Termite Information Centre

65 The Termite Information Centre were engaged in late 2004 and attended the property in accordance with their recommendations as per their letter of 14/4/2005.
66 Seemingly, the Termite Information Centre were remarkably successful and “ as a result of their efforts … there are now no termites in the trunks of the trees ”, but they may still be active in the roots of certain trees.

The work done by the Termite Information Centre

67 By the letter of 14/4/2005 the Termite Information Centre recommended a treatment consisting of:

(i)Drilling and injecting 3 live trees and 1 dead tree at the front and right rear of the property;
(ii)All other trees to be examined;
(iii)Trees and stumps to be removed after 3 weeks of treatment;
(iv)Remove all affected trees as per Council permission;
(v) Placing “Sentricon 11 bait stations” around the property;
(vi)Inspections every 2 weeks for 6 months.

68 On summons the Termite Information Centre produced two tax invoices only. First, on 15/8/2005, for $640 they drilled trees and stumps and injected them with a termicide to eliminate termite nest and colonies (see Tender Bundle 655 and 656). The price included follow up inspections.
69 By tax invoice dated 7/12/2005, for $632, the Termite Information Centre supplied and installed eight Sentricon in ground bait stations.
70 In the space of just over six (6) months, from 14/4/2005 until 7/12/2005, for the total amount paid of $1,272, the Termite Information Centre have achieved more than what was achieved in the previous twenty-five (25) years.

The Wyong Council documents produced on subpoena

71 The summons to the Wyong Shire Council required production of all documents or information which refers or relates to 48-50 Vena Avenue, including, but not limited to any termite building or development applications by Malcolm Campbell.
72 .The documents produced by the Wyong Shire Council provide no support for the assertions of delay on the part of the Council levelled against it in the witness statement of Malcolm Campbell.
73. Rather the Wyong Shire Council documents evidence, amongst other documents, the following:

(i) Mr. Campbell wrote to Council on 17/5/1979 seeking advice as to whether he could live on the land in a caravan;
(ii) Mr. Campbell wrote to Council on 11/9/1987 and 15/3/1991 regarding the erection of temporary dwelling on the property. Council advised that building applications would need to be submitted. No such applications appear on the Council file.
(iii) In April 1988 the Council advised Mr. Campbell of a noxious weed (pampas grass) problem on the property;
(iv) In February 1991, June 1992, November 1993 the Council inspected the property for certain declared noxious plants and that effective control measures did not appear to have been carried out;
(v) Mr. Campbell wrote to Council on 4/12/1995 concerning a proposed temporary caravan or dwelling on the property;
(vi) Mr. Campbell wrote to Council on 5/2/1996 requesting information for the construction of a permanent dwelling on the property and Council replied dated 19/2/1996;
(vii) On 23/8/1999 Mr. Campbell made an application to remove one tree only said to be badly affected by termites. (viii) A further request was made on or about 25/8/1999.
On 18/10/1999 Council refused application 923/99 by Mr. Campbell “to remove trees” and such consent was refused because “ the reasons and justification given do not warrant removal of most trees on site ”;
(ix) On 22/11/1999 an adjoining neighbour complained to Council that “property overgrown & tree is full of white ants - owner does nothing about it – please inspect”;
(x) On 23/12/1999 the Council wrote to Mr. Campbell seeking voluntary compliance to undertake the necessary remedial work and served a notice of intention to serve vegetative removal order;
(xi) According to Council notation Mr. Campbell complied with that request by 7/3/2000;
(xii) Approval dated 26/5/2005, to remove 1 identified Eucalypt tree in the middle of the block;
(xiii) Approval dated 7/9/2004, to remove 4 identified trees;
Council letter dated 10/5/2005, recording representations concerning the condition of the property and noting “ there is a large termite nest located in a tree in the rear yard ” and requesting voluntary co-operation;
(xiv)Proposed order dated 10/5/2005 requiring the removal of vegetative matter to ensure land is in a healthy/safe condition;
(xv)Vegetative removal order dated 29/6/2005;

74 In the submission of the Chief Commissioner, the contemporaneous, third party, arms length documentation provides no support for termites causing the alleged twenty-five year delay, from the early 1980’s to 2005, in commencing building operations on the land. The contemporaneous, third party, arms length documentation reveals that in the period of six (6) months, from April 2005 to December 2005, at a total cost of $1,272, the Termite Information Centre achieved in substance and effect, the eradication of the termite problem.

Part G. Is Malcolm an owner of property in Revesby and is it his PPR

60 The Respondent contends that as at November 2007 and thus with effect from the 2008 land tax year (and following) Malcolm did not in any event qualify for any intended PPR exemption.

61 In his witness statement (clause 33) Malcolm denied that he is the “owner” of any other property. In fact Malcolm does have a PPR at 21 Brett Street Revesby (“Revesby”).

62 In August 2009 Malcolm filed a document described as “Applicant’s Chronology” and in which he stated that in 1995 he moved into Revesby which was his late mother’s home, that he moved out in 2004, but moved back into Revesby in 2006.

63 Revesby was previously the home of Malcolm’s late mother who died on 16 November 2006. Revesby was then and is now unencumbered. Under the deceased’s will the residuary beneficiaries are Malcolm as to 5% and his siblings Donald and Margaret as to the balance. A transmission application into the name of Donald Campbell as executor was registered on 20 April 2007.

64 The so-called executor’s year expired n November 2007. At that date the residue was ascertained or ascertainable in that the only outstanding expense would have been solicitor’s fees.

The Chief Commissioner has furnished the Tribunal with a file of documents in respect of the administration of the estate. It indicates that the estate had no debts and that probate was granted with nil liabilities. Funeral expenses were paid out of the deceased’s bank account and accounts have been prepared and which establish that there are no liabilities. Shares owned by the deceased have been transferred into the name of the executor and dividends have been received and credited to the executor’s banking account.

65 It would seem that there is a dispute between Malcolm and his siblings in that the executor has been endeavouring to procure Malcolm’s vacation of Revesby to enable its sale, and it would also seem that Malcolm is resisting vacation. It would seem moreover that the executor is considering the possibility of spending money to improve the appearance of the house and also considering how to procure Malcolm’s vacation of Revesby to enable its sale.

66 The Tribunal finds that administration was complete by November 2007and that the executor thereafter held Revesby on trust for the residuary heirs in accordance with their respective shares. From that time onwards Malcolm occupied Revesby as his PPR.

67 It is clear that during administration of a deceased estate the residuary beneficiaries have no ownership or proprietary interest in any of the assets forming part of the estate: see Lord Sudeley v Attorney-General [1897] AC 11; Glenn v Commissioner of Land Tax (1915) 20 CLR 490 and Livingstone v CSD (1960) 107 CLR 411 (High Court ) and (1964) 112 CLR 12 (Privy Council).

68 The rationale for that rule is explained in Lord Sudeley at 18-19 per Lord Hershell in that, all that the residuary beneficiary has, pending and during the course of administration, is the mere personal right to seek and compel due administration from a Court of equity, because:

“until the estate is fully administered it is impossible to say of what assets the residuary estate will consist; we do not know how much the amount of the debt remaining unpaid was … [and] in truth, the right she had was to require the executors of her husband to administer his estate completely, and she had an interest to the extent of one-fourth in what should prove to be the residuary estate of the testator. ”

69 It can be a difficult question as to when the estate is “fully administered. That point in time is important because, as per Santow J in Estate of Fryer: Stokes v Churchill (1994) NSW Conv R 55-694:

70 It is the point when “ownership” for land tax purposes, on the part of the residuary beneficiaries is established: see Glenn v FCT (supra).

71 Jordan CJ in McCaughey v CSD 46 SR(NSW) 192 at 206 described the transition point as:

72 It is clear that in the case of land it is not necessary that the land be either sold and the proceeds distributed, or that the land be transferred in specie, to the residuary beneficiaries, before administration can be said to be complete. In Estate of Fryer: Stokes v Churchill (1994) NSW Conv R 55-694, Santow J stated:

73 In this case, as at November 2007, the only outstanding liability was the solicitor’s fees. There was thus no impediment to the completion of administration. Nor for that matter would an actual sale or distribution in specie have constituted an impediment.

74 From the executor’s documents produced on summons to this Tribunal, the Chief Commissioner contends (and correctly) that the residue, that is, the residuary estate was “capable of ascertainment”, if not actually ascertained, soon after death.

75 At the conclusion of the traditional “executor’s year” it is clear that the Revesby property was held by the executor as trustee, on trust for the residuary beneficiaries. Accordingly Malcolm has been an owner of a 5% interest in Revesby, as from 16 November 2007, being 12 months from the death of Mrs Campbell. It is also clear that Revesby is the actual PPR of Malcolm.

76 Thus it follows that for the 2008 land tax year, and having regard to clause 6(7)(a) of Schedule 1A to the Act Malcolm cannot be entitled to any exemption for the Gorokan property as his intended PPR.

Part H Summary and conclusion

77 Malcolm as indicated by the consent orders withdrew his claim for a PPT exemption in respect of Gorokan. Even if he did not withdraw his claim the legislation is such that Malcolm cannot make a claim for the PPR exemption in respect of Gorokan.

78 Peter at least in theory could seek a PPR exemption in respect of Gorokan at least for the 2005 land tax year and subsequent land tax years but the evidence before the Tribunal indicates that he does not have and never has had any intention to or means with which to construct a residence on Gorokan, and as set out in this decision could not in any event live there excepting with Malcolm who on the evidence has no such intention.

79 To the extent relevant there is no acceptable explanation of delay’

80 There must be an argument that the conduct of Malcolm has in respect of these applications been vexatious within section 88 of the ADT Act; however the Chief Commissioner has not sought an order for costs and no such order is made.

81 In all the circumstances the decisions under review are affirmed.

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Citations

Campbell v Chief Commissioner of State Revenue [2010] NSWADT 271

Cases Citing This Decision

0

Cases Cited

5

Statutory Material Cited

1

IRG Technical Services Pty Ltd v Federal Commissioner of Taxation [2007] FCA 1867

Glenn v Federal Commissioner of Land Tax [1915] HCA 57

MSP Nominees Pty Ltd v Commissioner of Stamps (SA) [1999] HCA 51

CITATION:	Campbell v Chief Commissioner of State Revenue [2010] NSWADT 271
DIVISION:	Revenue Division
PARTIES:	APPLICANT Malcolm William Campbell and Peter Campbell RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086064 and 086105
HEARING DATES:	26 March 2009, 29 May 2009, 6 October 2009, 8 December 2009, 22 April 2010, 24 June 2010 - 25 June 2010
SUBMISSIONS CLOSED:	2 November 2010
DATE OF DECISION:	15 November 2010
BEFORE:	Block J - Judicial Member
CATCHWORDS:	Land tax- principal place of residence exemption –intended principal place of residence- explanation of delay –effect of the legislation prior to the introduction of section 10T
LEGISLATION CITED:	Land Tax Management Act 1956
CASES CITED:	IRG Technical Services Pty Ltd v FCT per Allsop J. (2007) 165 FCR 57 Khoury & Anor v Khouri [2006] 66 NSWLR 241 FCT v Dalco (1990) 90 ATC 4088 at 4093 Lord Sudeley v Attorney-General [1897] AC 11 Glenn v Commissioner of Land Tax (1915) 20 CLR 490 Livingstone v CSD (1960) 107 CLR 411 McCaughey v CSD 46 SR(NSW) 192 at 206
REPRESENTATION:	APPLICANT I. Mescher, barrister on some (and in particular 6 October 2009,8 December 2009 and 22 April 2010) hearing days and Malcolm Campbell (who is one of the Applicants) on the other hearing days RESPONDENT I. Young, barrister
ORDERS:	The decisions under review are affirmed