Cheng and Commissioner Of State Revenue - [2008] WASAT 52

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: FIRST HOME OWNER GRANT ACT 2000 (WA)

CITATION: CHENG and COMMISSIONER OF STATE REVENUE [2008] WASAT 52

MEMBER: JUSTICE M L BARKER (PRESIDENT)

HEARD: 8 AND 11 FEBRUARY 2008

DELIVERED : 6 MARCH 2008

FILE NO/S: CC 1958 of 2007

BETWEEN: BING CHENG
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

First Home Owner Grant Act 2000 (WA) - Residency requirement not met by applicant - Determination to require repayment of grant and concessional stamp duty - Determination to impose penalty tax of 20% - Applicant claimed exceptional circumstances, namely child's ill health and misunderstanding due to poor command of English

Legislation:

First Home Owner Grant Act 2000 (WA), s 13, s 13(3), s 21(2), s 21(5), s 51(1)

Result:

Application listed for further hearing to enable applicant to present further evidence

Category: B

Representation:

Counsel:

Applicant: No appearance
Respondent: Ms J Jones

Solicitors:

Applicant: Mr Y Cheng (Representative)
Respondent: State Solicitor's Office

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant and his wife purchased a property in Western Australia in August 2005. They lived in the property until October 2005, when they moved back to China.
The Commissioner of State Revenue paid the first home owner grant in September 2005, and later sought repayment of the grant and the concession on stamp duty when the Commissioner determined that the applicant had not satisfied the residency requirement set out in s 13 of the First Home Owner Grant Act 2000 (WA).
The applicant, through his representative, objected to the decision to require repayment of the grant and the decision to impose penalty tax. The Commissioner disallowed the objection.
The applicant, again through his representative, then sought review by the Tribunal. The Tribunal determined that it did not have sufficient evidence to determine whether exceptional circumstances existed such that the Commissioner ought to have reduced the period of the residency requirement.
The Tribunal listed the matter for further hearing to enable the applicant or his wife to give direct evidence and to arrange for medical evidence to be given.

Issues

The issues for determination in these proceedings are whether the Commissioner of State Revenue (Commissioner) was correct in disallowing the applicant's objection to the Commissioner's decision to require the applicant to repay a first home owner grant and pay penalty tax in relation to the repayment of that grant under the First Home Owner Grant Act 2000 (WA) (FHOG Act).

Background to this decision

As will be explained in these reasons for decision, the Tribunal is presently unable to conclude the review application because it considers that more relevant information may be available for presentation to the Tribunal before it makes a final determination.
At the first directions hearing of the application, the President, Justice Barker, took the opportunity to discuss in a preliminary way what information the Tribunal might need at the final hearing to help deal with the matter. At that stage and since, the applicant has been represented by his brother, Mr Yong Hua Cheng. One point made by the Tribunal at that early stage, and on later occasions, through email communications between the President's Associate and Mr Yong Cheng, is that the Tribunal would probably benefit from hearing directly from the applicant concerning the matters in issue.
The application was listed for a final hearing initially on Friday, 8 February 2008 at 10 am. Unfortunately, Mr Yong Cheng as representative of the applicant was unable to attend. The President then re‑listed the application for final hearing at 2.15 pm on Monday, 11 February 2008. The notice of hearing was given to the applicant through his representative Mr Yong Cheng. Unfortunately, Mr Yong Cheng was again unable to appear at that hearing.
In the circumstances where the applicant and his representative failed to attend the final hearing, the Tribunal indicated that it would make a final decision in the matter and then reserved its decision, notwithstanding the failure of the applicant or his representative to attend the hearing.
In any event, as appears from these reasons, the Tribunal has formed a tentative view concerning the appropriate disposition of the proceedings. As the Tribunal indicates below, on the basis of the information currently before the Tribunal, the review application would fail. However, the Tribunal intends to provide the applicant with a final opportunity to present any other relevant information before the matter is finally disposed of. To that end, the application will be re‑listed for a final hearing so that the applicant either directly, or through his representative, can attend to the provision of further information in the manner suggested by the Tribunal.
In essence, this means that the Tribunal would like to hear directly from the applicant or his wife concerning the circumstances in which they ceased living in the home the subject of the FHOG Act grant and also to receive appropriate medical evidence concerning the health of the applicant's infant son at the time the family left Western Australia and returned to China in October 2005.

Facts

On 8 March 2005, the applicant and his wife, Xiaoyan Ge, concluded a contract for sale of land by offer and acceptance by which they agreed to purchase and Mr Yong Cheng and Ju Ying Ji agreed to sell a home in Craigie, Western Australia (the property), for a purchase price of $250,000.
The parties agree that Mr Yong Cheng is the brother of the applicant.
On 10 April 2005, the applicant and his wife applied for the first home owner grant by application UIN736575 under the FHOG Act. They also lodged an application for concessional stamp duty on 28 April 2005.
Application UIN736575 met the eligibility criteria specified in the FHOG Act, including that at least one of the applicants is a permanent resident or Australian citizen, and was approved, subject to conditions established by the FHOG Act and set out by the Commissioner in the letter of approval, including:
1)All applicants must occupy the home to which the application relates as their principal place of residence for a continuous period of six months commencing within 12 months (or a longer time approved by the Commissioner of State Revenue) of the completion of the transaction. In the case of a contract to purchase an established home, the completion is the settlement date, while in the case of a building construction, the completion date is the date the home is ready for occupation.
2)If the residency condition is not complied with you must give written notice of the fact and repay the grant to the Commissioner within 30 days of the expiration of the residency requirement or the date it becomes apparent you will not be able to fulfil the requirement whichever is the earlier.
3)Please note that all FHOG applications are subject to scrutiny by the Office of State Revenue to confirm that an applicant has met the above conditions. FHOG recipients who fail to meet these conditions will be required to repay the grant and an additional penalty of up to 100% of the grant provided.
The Commissioner also advised in the letter approving the grant that the Commissioner has discretionary powers in relation to the residency conditions, namely:
1)The Commissioner may consider requests in writing to exempt applicants from the residency requirement, provided at least one applicant occupies the home and the Commissioner considers there are good reasons to do so. Applicants must make the request for exemption prior to the expiry of the 12 month period.
2)The Commissioner may consider requests in writing to extend the 12 month period within which applicants must meet the residency requirement, should unforseen circumstances arise. Applicants must make the request for extension prior to the expiry of the 12 month period.
On 30 July 2005 the applicant, his wife and their infant son, Ye Cheng who was born on 7 December 2003 and so was then about one and a half years old, arrived in Australia from China.
The applicant and his family commenced occupation of the property on 7 August 2005.
Settlement of the sale of the property took place on 31 August 2005.
It may be observed in passing that it does not appear that the applicant and his wife made any site inspection of the property prior to occupying and purchasing it.
On 6 September 2005, the applicant advised the Commissioner that application UIN736575 should be withdrawn and he lodged a new first home owner grant application UIN794889 on 6 September 2005. The reason for the withdrawal of the first application and the lodgement of the new application was expressed in a letter to the Commissioner in the following terms:
"We hereby request that the First Home Owner Grant approval (Reference UIN736575) be cancelled as [we] are proceeding the application via Australian Mortgage Securities."
It appears that the Commissioner accepted the request for withdrawal and then approved the second application UIN794889.
The grant of $7,000 was then paid on 21 September 2005.
The applicant, his wife and their child occupied the grant property until all three returned to China in October 2005 after living in the home for only about two months.
However, it appears that the applicant returned briefly to Australia in July 2007 to explore business opportunities.
But before that, in about late 2006, it appears that the applicant instructed his brother as his agent to sell the property the subject of the grant.
In August 2007, the property was then sold to a third party.
The property was not the subject of a lease or the like from the time the applicant and his wife purchased it until the time of its subsequent sale in August 2007.
As a matter of fact, it appears the applicant did not give notice to the Commissioner of his failure to comply with the residency requirement of continuous occupation for a period of six months commencing within 12 months of completion of the purchase transaction.
The facts relating to the apparent non‑compliance with the residency condition came to the attention of the Office of the Commissioner in late 2007 upon the subsequent sale of the property. A compliance report was then prepared. While the investigator was not able to speak to the applicant or his wife - who had then returned to China - the investigator was able to speak to Mr Chess Cheng, the applicant's brother and apparently the settlement agent.
The investigator telephoned Mr Chess Cheng and, according to the notes of the investigator, was advised as follows:
•Mr Chess Cheng owned the property before selling it to his brother and his wife (thus it appears "Chess" Cheng and the "Yong" Cheng referred to earlier are one and the same person);
•The applicant and his wife were currently living in China and Mr Chess Cheng was arranging to sell the house for them;
•The applicant and his wife moved into the property on 7 August 2005, about a month before the settlement on 31 August 2005, together with their child;
•The applicant and his wife continued to live in the property until their child became sick in September 2005 and they had to take their child to hospital for an overnight stay;
•The applicant and his wife were nervous that their child was not adjusting to life in Perth and they decided to go back to China and wait for the child to become stronger and older before they returned to Perth;
•The applicant and his wife returned to China in October 2005 to live with the applicant's parents;
•The property remained vacant and was never leased out;
•The applicant and his wife are Buddhist and believe the property has bad feng shui, too much yin and not enough yang;
•The applicant and his wife requested "Ching Beng" to sell the property and buy a new property as they did not want to live there because of the bad feng shui (presumably the "Ching Beng" referred to in the notes is a reference to Chess Cheng or Yong Cheng and not some other person); and
•The applicant returned to Perth in July 2007 to look for a business opportunity to buy in Perth before the whole family returned.
According to the investigator's notes, the investigator at that point explained to Mr Chess Cheng that, based on what he had said, the applicant and his wife might not have met the residency condition of the grant and, in that case, might be required to repay the first home owner grant and stamp duty concession, and that a penalty might be applied.
The investigator reported that Mr Chess Cheng started to become verbally abusive and his English became broken and unclear. The investigator tried to explain that no decision would be made until Mr Chess Cheng could provide a written statement confirming what he had told the investigator. Mr Chess Cheng said it was unfair and that the Office of the Commissioner should not punish hardworking people. However, he agreed to do the statement. The investigator asked Mr Chess Cheng to send the written statement with any evidence to support his claims of what illness the child had and why it could not be treated in Australia.
According to the investigator's notes, during the conversation, Mr Chess Cheng apparently also told the investigator the following things:
•The applicant and his wife have a poor understanding of the English language and may not have understood the approval letter explaining that they must make the property their principal place of residence; and
•Mr Chess Cheng strongly believes the property should be classed as the principal place of residence because of the special circumstances involved in the case.
On 15 August 2007, the investigator received a statement from Mr Chess Cheng confirming what he had said in the earlier telephone conversation. The investigator then telephoned Mr Chess Cheng and advised that the applicant and his wife had not met the residency condition.
The investigator noted that when he communicated this, upon hearing the decision, Mr Chess Cheng became abusive and started yelling down the phone. After two warnings to stop the abuse, the investigator terminated the call before he could explain the recovery process to Mr Chess Cheng.
In light of the facts given to the investigator by Mr Chess Cheng the compliance report prepared by the investigator on 3 October 2007 summarised the factual position in these terms:
•Mr Chess Cheng admitted that the applicant and his wife only physically lived in the property for about two months - between August 2005 and October 2005 - after they acquired the property, and had moved back to China;
•The applicant returned briefly in July 2007 to explore business opportunities in Perth for when his whole family returned to Perth;
•Although the applicant and his wife have various correspondence directed to the property, and they appear to have lived there for the two months that they were residing in Perth, they appear not to have made the property their principal place of residence;
•For a home to be considered a principal place of residence occupation is required to have something of a settled character;
•The applicant's "parent's family home based in [sic] is where they moved to and lived between October [2005] to the present date. I have determined that this property has been the [applicant and his wife's] principal place of residence from October [2005]".
As a result of this compliance report, the decision was made on behalf of the Commissioner to require the applicant and his wife to repay the grant of $7,000 under s 51(1)(c) of the FHOG Act. The Commissioner also took the view that because the applicant and his wife were in breach of s 21(2) FHOG Act by not giving written notice of the position to the Commissioner, they should be penalised under s 21(5) FHOG Act.
As to the penalty, the compliance report noted that the applicant should be penalised at the "innocent/not intentional" rate stipulated in the Commissioner's policy relating to matters of penalty, for the following reasons:
•Information gathered did not categorically prove it was not the applicant and his wife's original intention to make the property their principal place of residence for the required time period. There is no evidence to indicate otherwise.
•Mr Chess Cheng indicated that it was always the applicant and his wife's intention to live in the property for a period of more than six months, however, their circumstances changed when their child became unwell and they had to move back to China.
•The applicant and his wife may have lived in the property for several months during the initial "take-up" period. While leaving their possessions in the property and not leasing the property during the period they remained living China, the applicant and his wife believed that they had met the residency conditions of the grant.
The email of Mr Chess Cheng to the investigator dated 14 August 2007 purports to summarise the position of the applicant after Mr Chess Cheng had talked to his brother. It is appropriate to set out the terms of this email in full, as it endeavours to fully explain the position of the applicant and his wife not physically remaining in the property for a continuous period of six months as required by the residency condition.
Mr Chess Cheng's email states:
"1.Time Period
My brother was granted Skills Migrant visa in end of 2004. My brother, his wife and their baby made first visit to Perth in Jan‑Feb 2005 for few weeks. They then went back to sell their business and house and deal with all other matters. They loved Perth during the visit and I agreed to sell my house to him (they could not qualify for the 80% loan ratio without my help). We signed the contract Feb 2005 for the sale of the house to him. On 7 Aug 2005, they moved to Perth. The House was settled in August 2005.
2.Settled in Perth
After they moved to Perth in Aug 2005, they fully settled in Perth. His wife started TAFE English training; my brother started launching an IT business (he is an IT specialist) and registered a sole trader Business (Name: Most Benefit ABN 95 127 694 127); their baby started daycare (Craigie Daycare and Eddystone Daycare), they also applied for Tax File Nos. They started a new life in Perth.
3.Baby Health
In September 2005, my brother's baby started getting unwell (cough and fever) and frequently visited GPs and hospital. Most serious situation was after we visited the Perth Royal Show, at the night, the baby had a high fever and developed fit. Everyone was scared and we rushed into Joondalup hospital and stayed there overnight. We were all sad. Since they came to Perth, the baby so often got sick. They were very nervous and the baby had always been well since birth. China has [a] one child policy and the baby boy to my brother and his wife became so important. They thought to put the baby's [health] first and decided to go back to China and waited for the baby stronger and older to come back to Perth. In later Oct 2005 they left [temporarily] to China. (The hospital, local GPs have all the records. The Customs had the forms they signed for [temporarily] leaving).
In 2006 the baby was still getting unwell often, mainly cough and fever. Once he developed fit again. That deferred their comeback to Australia.
When they were in China and they lived with my parents. They mainly looked after the baby. They did not have any business there and no job either. My brother did not do any work and my sister-in-law full time at home looked after the baby (Chinese people treated too seriously on their child - One child policy).
My brother is a [Buddhist] and he believes Fengshui and Yingyang [sic]. He believed the house I sold to him had bad Fengshui and Yingyang [sic] lost balance (Ying [sic] was stronger than Yang). He asked to me to sell the house and to buy a better one late 2006.
In early July 2007, my brother came back to Perth to look for business to buy before the whole family came together and few weeks ago. He and I went to News Agency and General Business Broker to look for news agency and post office business. We visited few businesses in Beldon, Coolbellup. Last week I went to Childcare business and a News agency seminar for him.
4.They were temporarily living with my parents
When they are in China and they stay with my parents [temporarily] because they sold their house and business. They have not been working since they left for China. They just wanted to get the baby better and then came back home.
5.Not letting out
Since they left, they have not rent out the house for a single day. They always wanted to come back at any time and were deferred by the baby's health. They have not been working since they left for China. All his water bill, rates, gas, car, insurance, bank statement, [C]entrelink and other communications are kept at the house.
6.Their Poor English.
When they left in a hurry (as above), they did not advise the commissioner mainly due to their poor English in understand the letter and they always think that is their home and principal place. They could not fully understand the letter because [of] their poor command English. Their attention was fully on the baby's health and just wanted help the little baby.
7.Principal Place
I strongly believe my brother's place should be treated as his principal place because of the special circumstances.
Thank you again for consideration …
Kind regards,
Yong Cheng"

It is clear enough that the applicant, through his brother, was endeavouring to explain to the Commissioner that the reason he and his wife and infant son had returned to China after two or three months occupation of the property was because the child had contracted an illness, was still "getting unwell often" and that he believed the house was contributing to the poor health of their son because of bad feng shui and yin yang. For that reason, the applicant had asked Mr Chess Cheng (Mr Yong Cheng) to sell the house and "buy a better one". Plainly, the applicant, according to this letter, "just wanted to get the baby better and then [come] back home", albeit to a new home.
By letter dated 24 September 2007, Mr Yong (Chess) Cheng wrote to the Commissioner complaining about the decision to require repayment of the loan with penalty tax and about the process undertaken by the investigator. The objection procedure under the FHOG Act was then undertaken. In response to the request of another officer of the Office of the Commissioner by letter dated 2 November 2007, the applicant through his agent, his brother Mr Yong Cheng, was requested to provide documentary evidence for two purposes:
•To substantiate the claim that the applicant's child was sick and how living at the property affected the child's health; and
•To support the claim that the property was not a suitable place of residence for the child's health.
Mr Yong Cheng was also asked to explain how the condition of the property materially changed from the date of purchase to the date the decision was made to sell it in 2006.
By letter dated 14 November 2007, Mr Yong Cheng on behalf of the applicant and his wife, responded to these issues and also provided documentary materials from the Belridge Medical Group and the Joondalup Health Campus.
Mr Yong Cheng as agent for the applicant and his wife stated a number of things in this letter:
•The medical records clearly demonstrate how often the baby got sick and eventually had to be hospitalised following a seizure.
•That this "terrible situation" caused the applicant's concern for his baby's health and led to the applicant and his wife returning to China.
•If one were in China, one would understand how important a baby boy is to a family, particularly under the one child policy. The baby was healthy before they came to Perth, but then got sick. The implication was that this reasonably led to the applicant and his wife deciding to return to China for the sake of the health of their baby boy.
•Nonetheless, the applicant had returned to look, to date unsuccessfully, for a profitable business. The implication here was that the applicant still wanted to return to Perth to live with his family.
As to the information requested to say the house was not a suitable place of residence for the baby, in the letter Mr Yong Cheng indicated that "we could not provide any 'scientific' document that to say the house was not [a] suitable place of residence for the baby's health". However, Mr Cheng went on to say that his brother is a Buddhist and believes in feng shui which is a "typical" Eastern culture and emphasises a yin yang balance, harmony and Qi (spirit). Mr Cheng went on to explain as follows:
"Regarding the house, I can provide following comments which may explain it is not good FENGSHUI. Again, to certain people, it is not suitable from their point of view. Most importantly, the baby has been unwell and developed into a very bad situation since living [in] the house - this is the fact; the situation had pressured them to go back with nothing because they sold their house and business there - this is a fact. Those are more than enough for people who have deep belief in FENGSHUI and Buddhism to blame the house does not suit them, in particular when they [weigh] the importance of a baby son to them (one child policy). To them, nothing is more importance than the baby's health."
Mr Cheng went on to illustrate why there were feng shui problems with the house by reference to design and diagrams.
The documentary materials from the Belridge Medical Group show that the doctors at that practice saw the applicant's infant son on various dates between August 2005 and October 2005. The relevant entries appear to disclose as follows:
•As at 2 August 2005, the child was a "fit and healthy boy". The recent vaccination history was discussed.
•As at 15 August 2005, the child had a cough and was becoming more chesty but was well otherwise. The child appears to have been taking some medication.
•As at 20 August 2005, there was a discussion concerning an allergy test and it appears a change of medication occurred.
•As at 30 August 2005, the child was experiencing coughing at night.
•As at 1 October 2005, the child was noted to have "high fevers" and was seen at Joondalup "as ? febrile convulsion". There is a note that "temperature normal, runny noses, coughing, diarrhoea, sore ears - nil, feeding less as well".
•As at 7 October 2005, the notes disclose an ongoing cough, chesty, but "no fever", and a runny nose.
Materials from the Joondalup Health Campus suggest as follows:
•An admission to the Emergency Department on 1 September 2005, and a discharge on the same date, when a "GP" saw the child who "presented with cough" which started the day before. The absence of fever and abdominal pain was noted. Advice and reassurance was given with an indication to come back if the symptoms persisted. The follow up advice given was to follow up with a GP for review.
•As of 1 September a Joondalup Health Campus Emergency Department triage/nursing assessment document was also completed which suggested that the cough had persisted for some time and that antibiotics were prescribed. There was also a suggestion that the child was allergic to penicillin.
•A Joondalup Health Campus Emergency Department medical assessment on 1 September was to similar effect. Namely, that the patient had a history of a cough a month ago and it had returned recently or the previous night.
•Further, a Joondalup Health Campus Emergency Department triage/nursing assessment dated 17 September 2005 also appears to relate to the infant child and notes the following:
"Injury 21 months was lifted by pulling his L arm cried instantly now not using his L arm NV-intact good colour". The accompanying notes show that the mother and father attended with a friend as an interpreter and the arm was looked at.
•A Joondalup Health Campus Emergency Department medical assessment dated 17 September 2005 is also recorded in relation to this injury.
•A Joondalup Health Campus medical discharge summary for an admission on 27 September 2005 and discharge on 28 September 2005 indicates a "principal diagnosis" of "febrile convulsion". A Joondalup Health Campus Emergency Department medical assessment and medical notes apparently at the same date relate to this diagnosis. They note that the parents were "v anxious want the baby to stay in hospital tonight mother worried about meningitis …"
•A Joondalup Health Campus Emergency Department triage/nursing assessment dated 27 September 2005 relating to the same admission notes "febrile convulsion lasting half min". Medical notes apparently from the same admission note "parental issues re anxiety/language problems".
•The Joondalup Health Campus integrated progress notes apparently also relating to this same admission make reference to the febrile condition suggesting it was within "normal limits" and problems associated with it such as "went floppy", "eyes rolled back" and "small shaking" of the whole body. However, the same notes show that later following attention and review, a medical practitioner approved discharge and advised to give Panadol or Nurofen only if the child appears unwell and to follow the instructions on the bottles.
•A Joondalup Health Campus paediatric nursing discharge plan dated 28 September 2005 indicates discharge at 10 am that day to the child's home.
In the light of this additional information, the Office of the Commissioner officer responsible for dealing with the objection of the applicant considered the position and wrote to the applicant and his wife care of Mr Yong Cheng by letter dated 26 November 2007.
After repeating the residency requirements set out in s 13 FHOG Act, the officer noted that s 13(3) allows the Commissioner to reduce the period that applicants are required to make the property their principal place of residence if the Commissioner is satisfied there are good reasons for doing so.
The officer advised in this regard that:
"Historically, a reduction of the residency period will only be granted in circumstances that are exceptional and unforeseeable at the time of commencement of the transaction. Therefore, in order for the Commissioner to approve a reduction of the residency requirements for your Brother's Family, it must be shown that the circumstances were exceptional and unforeseeable on 31 August 2005."
The officer then went on to consider the factors concerning the health of the baby that appear to have led the applicant and his wife to return to China before the residency period was completed. In that regard, the officer made the following observations:
"You have submitted that the health of the baby of your Brother's Family was compromised as a result of living in the Property. Having regard to the medical certificates provided, it is clear that the baby was sick. However, I note that no direct correlation has been evidenced between the baby's sickness and the condition of the Property or Australian climate. Consequently, I am unable to form the view that the baby's sickness was affected by these factors at all.
You have explained that your Brother's Family was unable to live in the Property due to the bad Feng Shui. In your letter dated 14 November 2007, you explained that matters in the nature of orientation, structure, and altitude affected the Feng Shui of the Property. I note that each of these factors are quite static and were capable of being identified on 31 August 2005. I am therefore not satisfied that the unsuitability of the Property, for the purposes of your Brother's Family, was unforeseeable at the material time."
In light of these considerations, the officer advised that the Commissioner was unable to grant a reduction in the residency period and that the Commissioner's earlier decision requiring repayment of the grant therefore was confirmed.
As to the penalty tax that had earlier been set at 20% of the amount of the grant to be repaid, the officer further advised that having regard to the factors set out he was satisfied that no exceptional circumstances had been presented such that would warrant a reduction of the penalty. Consequently, the decision to impose the penalty at 20% was confirmed.

Tribunal's draft finding

The Tribunal can understand why, on a consideration of the medical and hospital records supplied by Mr Yong Cheng to the Office of the Commissioner during the objection proceedings, the officer of the Office of the Commissioner was not immediately able to conclude that the documents substantiated a continuing health problem with the applicant's child such that would have led the applicant and his wife to maintain a concern (whether reasonably held or not) that their residence in Australia, in the property they had just purchased, was bad for the health of their child, such that they should return to China for the sake of the child's health.
Currently, the Tribunal does not have any more information before it concerning the issues that led to the applicant and his wife returning with their child to China than was before the officer of the Office of the Commissioner during the objection proceedings.
In these proceedings, Mr Yong Cheng, the brother of the applicant, has wholly represented their interests and purported to give evidence on their behalf. So far, he has not taken the opportunity that has been offered by the Tribunal to present more evidence to help establish that the proper reason why the applicant, and his wife and child, returned to China was to protect the child's health. All the Tribunal has at the moment, as the Commissioner previously had during the objection proceedings, is the statements of Mr Yong Cheng in that regard.
It is important that the best evidence available be given to the Tribunal in a case like this so it can form a properly‑based view as to what the reasons for the applicant's return to China were. On their own, the medical and hospital records do suggest, as the officer of the Office of the Commissioner earlier found, that the applicant's child was indeed sick at material times in August, September and October 2005. The trouble is, the Tribunal knows nothing more about the health of the child and exactly how unwell the child was. It would be extremely useful for the applicant to provide more evidence, for example from the general practitioner at Belridge Medical Group, explaining just how sick the child was in October 2005 at about the time the applicant and his wife and their child returned to China.
It would also be extremely useful to receive direct information from the applicant and/or his wife, through an interpreter, as to the reasons they returned to China.
A full consideration of all relevant, primary information concerning the reasons for the applicant's return to China may well enable the Tribunal to form a view that there were indeed exceptional circumstances, within the Commissioner's usual policy, that led to the return to China and the failure of the applicant and his wife to remain in occupation of their property for the required residency period.
Unfortunately, without that further information, it is difficult to be satisfied that such exceptional circumstances existed.
The Tribunal appreciates that the applicant's brother, Mr Yong Cheng, has strong views about the reasons why his brother and his wife and their child returned to China. It is not, however, sufficient for Mr Yong Cheng simply to make these strong assertions. The Tribunal's responsibility is to independently assess whether or not there were exceptional circumstances that led to the family's return to China. As explained above, more information will need to provided to the Tribunal, if it exists, to assist the Tribunal in its decision‑making in this regard.
To sum up the current position therefore:
•On the current information available to the Tribunal, the Tribunal, like the officer of the Office of the Commissioner, currently finds it difficult to be satisfied that there were exceptional circumstances that led to the applicant and his wife and child returning to China before the residency condition had been satisfied.
•However, there is a possibility that if further information can be supplied to the Tribunal, particularly information given to the Tribunal directly by the applicant and/or his wife concerning the reasons they returned to China, the Tribunal could be satisfied that exceptional circumstances truly existed.
In those circumstances, rather than at this point dismiss the review application of the applicant, the Tribunal considers it appropriate to adjourn the proceedings to a further hearing date to enable the applicant or his brother, as his representative, to arrange for the further information or evidence suggested above; for a medical practitioner at the Belridge Medical Group, and the applicant himself, through an interpreter, to give evidence to the Tribunal.
The Tribunal appreciates that the applicant himself does not speak good English. However, as in the case of the visit of the applicant and his wife to the Joondalup Health Campus, he would be able to give the Tribunal evidence through an appropriate interpreter. The applicant could also, if he is still in China, give his evidence to the Tribunal through an interpreter by telephone.
In light of these interim reasons for decision, the Tribunal will list the current review proceedings for a further hearing on a date to be fixed following discussions with the parties or their representatives as to an appropriate date.
The Tribunal should make it clear that it will be unnecessary for the Commissioner to present any further evidence in the matter, unless the Commissioner wishes to do so, but it will be important for the applicant to provide further evidence along the lines suggested above.

Interim orderly

The Tribunal orders that:
1.The application be relisted for further evidence and submissions.

I certify that this and the preceding [70] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: FIRST HOME OWNER GRANT ACT 2000 (WA)

CITATION: CHENG & ANOR and COMMISSIONER OF STATE REVENUE [2008] WASAT 52 (S)

MEMBER: JUSTICE M L BARKER (PRESIDENT)

HEARD: 16 MAY 2008 AND DETERMINED ON THE DOCUMENTS

DELIVERED : 6 MARCH 2008

SUPPLEMENTARY
DECISION :1 AUGUST 2008

FILE NO/S: CC 1958 of 2007

BETWEEN: BING CHENG
XIAO YAN GE
Applicants
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

First Home Owner Grant Act 2000 (WA) - Residency requirement not met by applicants - Determination to require repayment of grant and concession on stamp duty - Determination to impose penalty tax of 20% - Applicant claimed exceptional circumstances, namely child's ill health and misunderstanding due to poor command of English

Legislation:

First Home Owner Grant Act 2000 (WA), s 13, s 13(3), s 21(5), s 29
Stamp Act 1921 (WA), s 75AG
State Administrative Tribunal Act 2004 (WA), s 27, s 27(2)
Taxation Administration Act 2003 (WA), s 26, s 37(2), s 43(3)

Result:

Application is allowed
Commissioner to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owner grant, together with interest
No order as to costs

Category: B

Representation:

Counsel:

Applicants: Mr Y Cheng (Representative)
Respondent: Ms J Jones

Solicitors:

Applicants: Mr Y Cheng (Representative)
Respondent: State Solicitor's Office

Case(s) referred to in decision(s):

Cheng and Commissioner of State Revenue [2008] WASAT 52
Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicants purchased a property in Western Australia in August 2005. They lived in the property until October 2005, when they moved back to China.
The Commissioner of State Revenue paid the first home owner grant in September 2005, and later sought repayment of the grant and the concession on stamp duty when the Commissioner determined that the applicants had not satisfied the residency requirement set out in s 13 of the First Home Owner Grant Act 2000 (WA).
The applicants, through their representative, objected to the decision to require repayment of the grant and the decision to impose penalty tax.
The Commissioner disallowed the objection.
The applicant, again through his representative, then sought review by the Tribunal.
After an initial finding in Cheng and Commissioner of State Revenue [2008] WASAT 52 that the Tribunal did not have sufficient evidence to determine whether exceptional circumstances existed, the Tribunal received further evidence from one of the applicants, Mr Bing Cheng.
The Tribunal found that an exceptional circumstance arose in which it was not unreasonable for the applicants to return to China and accordingly that the residence condition should be waived.
The Tribunal held that the applicants should not have been obliged to refund the amount of the first home owner grant provided with penalty tax, or repay the amount of the concession on stamp duty provided with penalty tax.

Accordingly, the Tribunal allowed the application and ordered the amounts paid by the applicants to be refunded.

Issues

The issues for determination in these proceedings are whether the Commissioner of State Revenue (Commissioner) was correct in disallowing the applicants' objection to the Commissioner's decision to require the applicants to repay a first home owner grant and a concession on stamp duty and pay penalty tax in relation to those repayments under the First Home Owner Grant Act 2000 (WA) (FHOG Act), Stamp Act 1921 (WA) (Stamp Act) and the Taxation Administration Act 2003 (WA) (TA Act).

Background to this decision

In its earlier decision in relation to these same issues in Cheng and Commissioner of State Revenue [2008] WASAT 52, the Tribunal explained that it was unable to conclude the review application because it considered that more relevant information may be available for presentation to the Tribunal to assist it in making its final determination.
The Tribunal further explained, for example at [12], that the Tribunal would like to hear directly from the applicants concerning the circumstances in which they ceased living in the home the subject of the first home owner grant and also to receive appropriate medical evidence concerning the health of the applicants' infant son at the time the family left Australia and returned to China in October 2005.
Since that decision was published the Tribunal has received further evidence in the matter on these issues, through one of the applicants, Mr Bing Cheng.

Evidence of the applicant

On 16 May 2008, Mr Bing Cheng gave evidence in the proceedings. Mr Bing Cheng gave his evidence by telephone from Shanghai, China. Mr Bing Cheng gave his evidence through a Mandarin speaking interpreter based in Perth. The applicants continued to be represented in the proceedings by Mr Bing Cheng's brother, Mr Yong Cheng, who speaks both Mandarin and English.
Mr Bing Cheng in his evidence confirmed that he and his wife Xiao Yan Ge, are the parents of their son Ye Cheng, who was born on 7 December 2003.
Mr Bing Cheng also confirmed that he is a Buddhist. He speaks Mandarin and only speaks English a little and not very well.
At the time of giving evidence, Mr Cheng was living in Shanghai and was unemployed.
At the time Mr Bing Cheng and his wife purchased the property the subject of these proceedings in Perth their infant son was a little over one and a half years of age.
Mr Bing Cheng said that he did not understand that the first home owner grant he received in relation to the purchase of the property was subject to a condition that he should occupy the home for a continuous period of six months after he commenced occupation.
As to the length of occupation, Mr Bing Cheng confirmed that after about three months he and his wife and infant son had returned to China. He said that the reason was that his child got sick and the condition was becoming worse.
In relation to the child's illness Mr Bing Cheng explained through the interpreter that:
Since birth and then before they arrived in Australia the child's health was always in good condition. However, after their arrival the child started to cough a lot, and non-stop. They went to see a doctor many times, even the child was sent to the hospital a few times, and Mr Cheng told me one incident - he could not remember which day, but it was in the month of September. The child was - had a very high temperature, to such a stage that the child had the - you know when someone has high fever and they try to - they will have a fit …
Mr Bing Cheng gave evidence about the child's illness and hospitalisation and general medical treatment and that was by and large consistent with notes concerning hospitalisation and medical treatment of the child previously presented to the Tribunal and noted in the earlier decision.
Mr Bing Cheng said that when he, with his wife, returned to Shanghai it was because of the child's health:
What he has just told me was to them, the child is the most important person in the family, especially for a boy, and then the reason they returned to Shanghai, the main reason is for the child's health. They wanted to go back to China to wait until the child's health is - has fully recovered, then they will come back to Australia later.
Mr Bing Cheng further explained the importance of the child in the family in these terms:
On our Chinese culture offspring is very important, so my boy is just, like - is all of myself, and also my boy is to - my wife only got one elder sister, and then she only - she doesn't have any boys, and then so my boy will help me to extend our family names and all those - so boys in our Chinese culture is very important.
In response to a question from the Tribunal as to why the applicants could not have stayed in Perth and with the help of the doctors and hospitals assist their son to full recovery, Mr Bing Cheng responded:
This is one thing I wanted to let you know earlier, but I didn't have a time in my first explanation. On the day that my child had high fever, we went - we went to Joondalup Hospital, and then due to language barriers the hospital organised an interpreter for us. Perhaps the interpreter didn't explain very clearly for us, and then we had to wait a few hours before my son could be treated. Under this environment I not very happy about it, and then lack of confidence - and other thing is when I bought the house, there are a few things I was not satisfied about as well.
So when I look back to the accommodation and health system in Perth, plus my language barrier, I - I lost confidence in the - in this environment, and compare with that - in Shanghai, which - where I was - I'm more familiar with the system, and I found that it would be a better alternative for my child to receive treatment back in Shanghai, because at least everything is more convenient for us.
Mr Bing Cheng indicated to the Tribunal that generally having returned to Shanghai, his boy is now a lot better compared to his time in Perth.
Mr Bing Cheng indicated that the only property he now has in Perth is a car.
He also indicated that he came back to Perth last summer to look around to see if there were any business opportunities for him.
Mr Bing Cheng was cross-examined by counsel for the Commissioner, particularly relating to the means of funding the purchase of the property and the allocation of the proceeds of sale when he later sold the property. The applicant confirmed that he purchased the property from his brother, Mr Yong Cheng (who was appearing for him in the proceeding) and had also obtained finance through a financial institution. Generally speaking it had appeared that the house property was purchased for about $260,000 with $160,000 lent by the finance institution. The applicant borrowed from his brother in respect of the balance of about $100,000.
Mr Bing Cheng indicated he initially brought to Australia about $100,000 and was planning to use that money to start up an information technology business.
Mr Bing Cheng explained that he did not immediately repay his brother the money he borrowed from him, because "he is my brother".
As to the $100,000 that he borrowed from his brother the applicant indicated that he has made an arrangement with his brother that he would pay him later, and still owes the money.
Mr Bing Cheng explained that at the time he sold the property after leaving Australia, he asked his brother to hold the proceeds of sale because, when he eventually returns to Australia, his brother will return the funds to him. Mr Bing Cheng explained that if he took the proceeds of sale out of Australia back to China then he may have problems in taking the money out of China again.
Mr Bing Cheng further explained in cross-examination his living arrangements in China and relationship with his parents.

Commissioner's final submissions

Counsel for the Commissioner submits that the applicants bear the onus of establishing that the decision to which an objection relates is incorrect under s 29 of the FHOG Act and by reason of what was said in Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82 (Serana) at [106], [166] and [171].
The Commissioner submits that the applicants have failed to meet the burden of proof as the evidence adduced is insufficient to satisfy the Tribunal that there are good reasons to reduce the required residency period.
The Commissioner emphasises that he is responsible for the administration of first home owner grants on behalf of the Commonwealth of Australia. The object of the grant is to assist first home owners to purchase their first home. Consequently there is a residency requirement to ensure that that objective is met.
The residency requirement as set out under s 13 of the FHOG Act, requires that applicants with a grant live in the property for a continuous period of six months commencing in the first 12 months after the completion date of the transaction.
The Commissioner points out, as is the case, the applicant was in occupation for a period of less than three months and accordingly did not satisfy the residence requirement.
Section 13(3) of the FHOG Act provides the Commissioner with the discretion, however, to reduce the period that the applicants are required to occupy the property if satisfied that there are good reasons for doing so.
The Commissioner says that, as administrator of the FHOG Act, he is required to treat all applicants "equitably".
The Commissioner says that it would be inappropriate for him in the administration of the FHOG Act to allow an applicant to avoid the obligations attached to a grant by accepting an applicant's explanations as to why he failed to comply, absent any objective evidence to support the explanation. To do so would create problems in the administration of the FHOG Act and would allow applicants to easily circumvent the obligations imposed.
Consequently the Commissioner requires applicants to adduce objective evidence to substantiate their inability to reside in a property for the requisite period.
The Commissioner says that his practice, developed in consultation with other Australian jurisdictions who administer the grants, is to be satisfied that there are good reasons to reduce the residency period if circumstances arise that are "exceptional and unforeseeable" at the time of the eligible transaction. These circumstances may relate to the grant property itself but may relate to other circumstances concerning an applicant.
Counsel for the Commissioner refers to the evidence given by Mr Bing Cheng by telephone from Shanghai, including that portion of the transcript referred to above. Counsel also refers to further transcript of the evidence of the applicant from p 27 as follows:
INTERPRETER: It's not - I have said to you before that not just because of my child's sickness that we returned to China. The main reason is the fear that we had, because his situation is getting worse and worse here, and then we worried about him, and then we were - we were in fear of his health situation being worse and worse. It's a kind of fear.
BARKER J: Yes, thank you. Ms Jones, any more questions?
JONES, MS: Yes, your Honour. The medical notes that have been provided to the Tribunal show that the child wasn't getting worse; that he was actually getting well. Do you remember going to see the doctor in October 2005, and they said your baby was getting well?
INTERPRETER: I cannot remember when - why we saw the doctor in October - in October 2005, but around that time we have already determined to return to China due to our fear, and then also at that time she (sic) was coughing. Actually my child has been coughing all the time until before he was - before we went back to China.
And then when the child had a high temperature and a seizure it occurred twice, and then three, four days after this incident, we bought ticket to return to China.
Counsel for the Commissioner notes this evidence of Mr Bing Cheng as well as the medical records referred to in the earlier proceeding and earlier decision and submits that the applicants' child was not diagnosed with a medical condition that required any ongoing medical treatment.
Counsel submits that although the medical certificates provided by the applicants show that the child had a cough and required hospitalisation on one occasion, there is no evidence that links living in the grant property or living in Australia to the cough or fever or convulsion or that the child had an illness which prevented the applicant occupying the grant property or living in Australia. That is to say the child did not have an illness that needed to be treated outside Perth or Australia.
In summary then, the Commissioner submits that the evidence presented to the Tribunal was not that the child had an ongoing medical condition which prevented the applicant from remaining in the grant property but rather it appears that they returned to China based upon their "feelings and emotions" including:
•the fear that their child would have poor health if they remained in Australia;
•dissatisfaction with the grant property they had purchased, notwithstanding the applicants had stayed in the grant property while purchasing it;
•dissatisfaction with Australia's medical system; and
•problems associated with the applicants' understanding of English.
Counsel for the Commissioner submits that this evidence should be insufficient to satisfy the Tribunal that there are exceptional or unforeseeable circumstances and this evidence merely constitutes the applicants' feelings and does not evidence an inability to reside at the property or in Australia.
Counsel submits that to accept the applicants' explanation and not to require repayment of the grant would "undermine the integrity of the FHOG Act".

Final submission made on behalf of the applicants

Mr Yong Cheng as representative of the applicants filed a long written submission of some 27 pages, following the taking of the telephone evidence of Mr Bing Cheng. The submission contained a number of references to past aspects of the handling of the matter by the Office of State Revenue, as well as references to the dealings of solicitors in the State Solicitor's Office in relation to the matter, and of counsel who represented the Commissioner at the hearings.
The various comments made by Mr Yong Cheng in this regard were inappropriate and out of place and need not be referred to or detailed here in any further respect. Mr Yong Cheng is not a lawyer and in many respects does not seem to fully appreciate that the Tribunal's task on review proceedings such as this is to make the "correct and preferable" decision under s 27(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), as at the time of the decision upon review, and not by reference to past times.
In any event, so far as the Tribunal's experience is concerned, the various comments made by Mr Yong Cheng in his written submission about various persons involved for or on behalf of the Commissioner are not only inappropriate but plainly misconceived and wrong.

The Tribunal's decision

The Tribunal, having received the direct telephone evidence of Mr Bing Cheng about the circumstances in which he decided to leave Australia, considers that this is not a case where the applicants should be obliged to refund the grant initially made.
The Tribunal considers this position to be so whether or not the applicants bear any onus of establishing that the decision on the application to which an objection relates is incorrect, pursuant to s 29 of the FHOG Act.
It must be borne in mind that in creating this onus, s 29 of the FHOG Act appears in subdivision 2 of division 6 of the FHOG Act, dealing with objections before the Commissioner. Subdivision 3 deals with the review before the Tribunal and there is no separate onus provision in this subdivision. Rather, the Tribunal is obliged by s 27 of the SAT Act to produce the correct and preferable decision at the time the decision is being reviewed. No formal onus provision appears to exist in such circumstances.
Counsel for the Commissioner submits that the onus created by s 29(2) of the FHOG Act not only applies in objection proceedings before the Commissioner but also in review proceedings before the Tribunal. Support for this proposition is said to be given by observations of Buss JA in Serana at [106], [166] and [171]. Martin CJ however did not make any express reference to this provision in his judgment, with which Steytler P agreed. However, Steytler P also agreed with the reasons given by Buss JA for dismissing the appeal.
Buss JA at [106] expressly noted the onus provision (in that case s 37(2) of the TA Act) that applies to an objection proceeding before the Commissioner, and at [107] expressly recognised that in review proceedings in the Tribunal, under s 27 of the SAT Act, those proceedings are de novo and that the correct and preferable decision must be made at the time of the decision.
While at [166] and [171] Buss JA makes reference to the onus provision, as I understand what his Honour there said, he was making the point that a practical onus fell on the applicant when it sought review of the Commissioner's decision in the Tribunal disallowing an objection, to negative certain propositions.
In any event, whether or not there is an onus on the applicant in revenue proceedings in the Tribunal establishing that the application to which an objection relates is incorrect, I am satisfied here that it has been met on the evidence I have received.
I do not think it is appropriate to characterise the applicants' decision to cease occupying the grant property and return to China with their family as merely as one based upon their "feelings and emotions".
It is more correct to say that the applicants found themselves in a new country with which they were generally unfamiliar, and not speaking English as their first language and being faced with the health difficulties of their child, understandably sought refuge in their country of origin. This is an unusual circumstance, and one that undoubtedly involves the subjective decision making of the applicants. That they chose to return to China to live in such circumstances may not have been a decision that every person in their circumstances would necessarily have made. To some extent it may be said that their concerns about the health of their child were a little unrealistic in light of the medical evidence. Nonetheless to characterise their decision as subjective is not to say that it was not honestly held and from their perspective not reasonable.
In the event, taking into account the circumstances in which the applicants found themselves, I am satisfied that an exceptional circumstance arose in which it was not unreasonable for the applicants with their infant son to return to China.
In so finding, I am content to apply the test ordinarily applied by the Commissioner that an applicant should display an exceptional or unforseen circumstance before the residence condition is in effect waived.
For these reasons, the applicants should not be obliged to refund the grant initially made.
For these same reasons, this is not an appropriate case for the imposition of a penalty under s 21(5) of the FHOG Act.
In relation to the reduction of stamp duty, s 75AG(9) of the Stamp Act provides that:
If a transferee is required to repay an amount under section 21 or 51 of the FHOG Act, or would be required to repay an amount if a first home owner grant had been paid to the transferee, duty on the instrument of transfer is not, or is no longer (as the case requires) chargeable under this section.
As I have held that the applicants are not obliged to repay the first home owner grant payment, s 75AG(9) of the Stamp Act read with s 75AG(10) does not require or entitle a reassessment of the stamp duty liability.
Accordingly, the applicants are not obliged to repay the concession they received on stamp duty.

It follows from this that no penalty tax under the Stamp Act is payable by the applicants. Although the applicants failed to provide information required by a taxation act, namely that they had not complied with the residency requirement, the amount of penalty tax payable in this instance is $0. Under s 26(3) of the TA Act the amount of penalty tax is equal to the amount the taxpayer would be liable to pay if the circumstances giving rise to the liability to pay penalty tax had not occurred. As I have found that the applicants are not required to repay the concession they received on stamp duty, the breach of s 26(1) of the TA Act had no material effect on the applicants' taxation liability.

Conclusion and Order

For the above reasons, the applicants are not required to repay the amount of the first home owner grant, the amount of concession on stamp duty, or any penalty tax.
The Tribunal orders that:
1.The application is allowed.
2.The Commissioner is to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owners grant together with interest at the prescribed rate of 6% pursuant to s 43(3) of the Taxation Administration Act 2003 (WA).
3.There is no order as to costs.

I certify that this and the preceding [72] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT