Commissioner of State Revenue v Harrison
[2006] VSC 227
•28 June 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
VICTORIAN TAXATION APPEALS
No. 6815 of 2005
| COMMISSIONER OF STATE REVENUE | Appellant |
| V | |
| RICHARD JOHN HARRISON | Respondent |
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JUDGE: | Hollingworth J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 April 2006 | |
DATE OF JUDGMENT: | 28 June 2006 | |
CASE MAY BE CITED AS: | Commissioner of State Revenue v Harrison | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 227 | |
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First home owner grant scheme – Deceased estate – Real property devised to respondent and his sister – Transfer of land from respondent as executor of estate to himself and sister as beneficiaries – Sister sold her half share to respondent – Further transfer from sister to respondent – Respondent registered as proprietor – Respondent applied for first home owner grant – When respondent became entitled to possession under sale contract – Whether appellant should be permitted to raise ineligibility argument for first time on appeal – First Home Owner Grant Act 2000 ss 7, 11(3), 13(5), 31.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr A Broadfoot | Solicitor for the Commissioner of State Revenue |
| For the Respondent | Mr Harrison in person | Tisher Liner & Co |
HER HONOUR:
Introduction
The first home owners grant scheme was introduced in Victoria in 2000, as part of a package of measures agreed upon by the state and federal governments, in connection with the introduction of the goods and services tax (“GST”). That agreement, the “Intergovernmental Agreement on the Reform of Commonwealth - State Financial Relations”, is set out in the schedule to the National Taxation Reform (Consequential Provisions) Act 2000 (Vic).
Paragraph 15 of the intergovernmental agreement provides that “to offset the impact of the introduction of a GST, the states and territories will assist first homebuyers through the funding and administration of a new uniform First Home Owners Scheme”. Details of the uniform scheme are set out in Appendix D of the agreement.
Pursuant to that agreement, the Parliament of Victoria enacted the First Home Owner Grant Act 2000 (“the Act”), which came into operation on 1 July 2000. The purpose of the Act, as stated in s1, is to “encourage and assist home ownership, and to offset the effect of the GST on home ownership, by establishing a scheme for the payment of grants to first home owners”.
This case concerns the entitlement of the respondent to receive a grant of $7,000 under the Act. The respondent acquired his home at 10 Anjaya Court, Blackburn in the following circumstances.
The respondent’s mother, Mrs June Reid-Harrison, died on 16 February 2003. By her will dated 26 December 2002, she appointed her daughter, Ci Priscilla June Reid-Harrison, and the respondent as joint executors and trustees of her estate, and directed that after payment of all expenses, her estate should be held on trust for the respondent and his sister absolutely.
Probate of the will was granted to the respondent on 16 April 2003. Amongst Mrs Reid-Harrison’s assets was the property at 10 Anjaya Court. In October 2003, the property was registered in the respondent’s name, as legal personal representative.
On 6 February 2004 the respondent, in his personal capacity, and his sister entered into a document entitled “Deed of Family Arrangement”. One of the recitals said that the deed was intended to supersede some parts of the will. The parties agreed to treat the value of the property as being $420,000. The respondent’s sister agreed to assign and transfer her interest in the property to the respondent, and forego claims to all other assets of her mother’s estate in consideration of the payment of $210,000. The parties also agreed that they would execute a contract of sale and transfer of land for the property.
On the same day, the respondent and his sister entered into a contract for the sale of the property. The particulars of sale show the respondent’s sister as the vendor and the respondent as purchaser of a “one-half interest or share” in the property, for the sum of $210,000. The contract provided for settlement on 30 March 2004 or earlier by agreement.
Also on 6 February 2004, the respondent and his sister executed two transfer of land forms. The first was a transfer of an estate in fee simple in the property from the respondent, in his capacity as executor, to himself and his sister “as to one equal undivided half part or share as tenants in common” (“the first transfer”). The consideration for the first transfer was described as “pursuant to a devise in the will of June Margaret Reid-Harrison (deceased)”.
The other transfer of land form involved the transfer of one equal undivided half part or share in fee simple from the respondent’s sister to the respondent, for consideration of $210,000 (“the second transfer”).
Settlement took place at the securities department of the National Australia Bank in Collins Street on 13 February 2004. The respondent had arranged for a loan from that bank to fund his purchase of his sister’s share in the property. At settlement, his sister received a bank cheque for $210,000. The bank received both transfers. The first transfer was registered on 26 February 2004. Due to an error, the second transfer was not in fact registered until 2 June 2004. It was not contended by either party that this error had any bearing on the appeal, so it is not necessary for me to go into any more detail about it.
On 22 March 2004, the respondent applied for a first home owner grant under the Act. On 31 March 2004, the Commissioner rejected the application. On 24 May 2004, the respondent lodged an objection. On 24 August 2004, the Commissioner disallowed the objection. The basis of both the Commissioner’s rejection and disallowance was that the transaction was not a “completed” eligible transaction, within the meaning of s13(5)(a)(i) of the Act. The respondent then requested that the matter be referred to the Victorian Civil and Administrative Tribunal (“the Tribunal”) for review, pursuant to s29 of the Act.
On 30 May 2005, the Tribunal found that the respondent’s grant application should have been allowed, and ordered that the Commissioner’s determination be varied so that the respondent be held entitled to the grant.
The Commissioner now seeks leave to appeal to this court from the Tribunal decision. Section 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (“the VCAT Act”) enables a party to a proceeding before the Tribunal to appeal to this court, by leave, on a question of law from an order of the Tribunal made in the proceeding.
The principles which govern such a leave application were discussed at length by the Court of Appeal in Secretary to Department of Premier & Cabinet v Hulls[1]. Generally speaking, it is necessary for an applicant to show that there is a real or significant argument in favour of the appeal on the question of law. Other factors which may be relevant are whether there is any matter of general or public importance raised, as well as the possible injustice of allowing the determination below to stand uncorrected. But Phillips JA, with whom Tadgell and Batt JJA agreed, stressed that the discretion to grant leave, which is conferred by s.148 in untrammelled terms “cannot be fettered, and should not be fettered, by judicial decision”.[2] Ultimately, whether leave is granted or not must always depend upon the justice of the case, as it appears to the court from which leave is sought[3].
[1][1999] VSCA 117.
[2]At [8].
[3]At [16].
The Commissioner says that the decision in this case will impact on other applications made in similar circumstances. If successful in this appeal, the Commissioner says he will not seek any costs from the respondent and will support any application the respondent may make in relation to costs under the Appeal Costs Act 1998.
On 7 April 2006, I heard both the application for leave to appeal and the substantive appeal itself. Although the respondent has solicitors on the record, he chose to argue the matter himself.
The statutory scheme
The Act establishes a scheme for payment of grants of up to $7,000 to first home owners.
Pursuant to s7 of the Act, grants are only payable if:
(a) The applicant meets the “eligibility criteria” set out in ss 8 to 12 of the Act;
(b) The transaction for which the grant is sought is an “eligible transaction”, as defined in the Act; and
(c) The eligible transaction has been “completed” within the meaning of the Act.
An “eligible transaction” is a contract made on or after 1 July 2000 for the purchase of a home in Victoria. A contract is a contract for the purchase of a home if it is a contract for the acquisition of a relevant interest in land on which a home is built[4]. There is no dispute in this case that the contract is an eligible transaction.
[4]Section 13(1) and (2).
A “relevant interest” includes an estate in fee simple[5] in the land, but does not include an interest in the hands of a person who holds it subject to a trust[6].
[5]Section 5(2)(b).
[6]Section 5(3)(b).
Section 13(5) provides that:
“An eligible transaction is “completed” when –
(a) in the case of a contract for the purchase of a home –
(i) the purchaser (or a nominee of the purchaser) becomes entitled to possession of the home under the contract; and
(ii) if further requirements for the completion of the transaction are laid down in the regulations – the further requirements are complied with;”.
As there are no relevant regulations for the purposes of this section of the Act, the only relevant issue relates to s-s (a)(i).
The completion argument
The Tribunal member noted that it is trite law that a tenant in common has a right to possession of the subject property in common with any other co-owners. He held that, upon settlement of the contract, the respondent acquired a right to possession that was “quite distinct and materially different from any right to possession he had acquired as beneficiary on 6 February 2004 (a week previously). Upon settlement of the contract of sale he became entitled to possession exclusive of his sister, rather than in common with her.”[7] Accordingly, the Tribunal member accepted the respondent’s argument that he became entitled to possession of the property under the contract at the settlement on 13 February. I agree with the Tribunal member’s ultimate conclusion, but differ as to the proper construction of s13(5).
[7]Tribunal reasons for decision at [18].
The Commissioner says that the Tribunal member committed the following error: because the respondent acquired a right to possession pursuant to a devise in the will and when he received the first transfer on 6 February, he could never have “become entitled to possession … under the contract”. The Commissioner says that the first transfer was an executed transfer of land in registrable form, which entitled the respondent to immediate possession of the entire property. Accordingly, the respondent already had a pre-existing entitlement to possession of the entire property before the contract was settled and therefore he could not have become entitled to possession under the contract of sale. Therefore, the eligible transaction could never be completed and the respondent could never be entitled to receive a first home owner grant.
In his proposed notice of appeal, the Commissioner has identified the following as the questions of law said to be involved in the decision below:
(1) The proper meaning and construction of sections 5, 7, 11 and 13 of the Act;
(2) Whether the Tribunal erred in holding that the respondent was entitled to the grant in circumstances where he became entitled to possession of the property pursuant to a transfer to him and his sister jointly, in consequence of the administration of his mother’s estate, rather than pursuant to the contract.
Question (1) is framed too generally to identify the specific issue in dispute. As framed by the Commissioner, question (2) is principally a question of fact. In oral argument, the Commissioner says that what is meant by “under the contract” in s13(5)(a)(i) is the relevant question of law.
In fact, it seems to me that the real question of law posed by the parties through their oral and written submissions could be put along the following lines: Properly construed, does s13(5) require that an applicant become entitled to possession of the property for the first time under the relevant contract? The Commissioner says the answer is in the affirmative, the respondent in the negative.
The construction of s13(5) does not appear to have been the subject of judicial consideration, in Victoria or elsewhere under the national grant scheme. The only decision of this court concerning the Act is the decision in Commissioner of State Revenue v Paravizzini[8]. In that case, Hansen J held that there was no “contract for the purchase of a home” (and therefore no “eligible transaction”) within the meaning of s13. It was therefore not necessary for his Honour to decide whether the transaction was “completed” in terms of s.13(5).
[8][2005] VSC 302.
The overriding duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have:
“Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.”[9]
[9]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 384.
The Commissioner’s argument focussed on deconstructing the phrase “becomes entitled to possession of the home under the contract” into its individual components. Certainly, in its ordinary and natural meaning, “becoming” means “coming into being” and conveys a sense of “for the first time”. However, by breaking down the phrase into separate questions, the Commissioner comes to what is, in my opinion, the wrong conclusion. The Commissioner’s argument goes something like this:
Question 1: When did the respondent first “become entitled to possession”?
Answer 1: When he received the first transfer.
Question 2: Did he first become entitled to possession “under the contract”?
Answer 2: No.
Conclusion: The contract was not “completed”.
If the phrase is read as a whole, the only question to ask is this: when did the respondent first “become entitled to possession under the contract”? The answer to that is: at settlement of the contract. The conclusion is that the contract was “completed”.
In my opinion, the latter construction is the most sensible one when regard is had to s13(5), s13 and the Act as a whole.
Part 2 of the Act covers the following areas: entitlement to a grant (division 1), eligibility criteria (division 2), eligible transactions (division 3), applications (division 4), decisions on applications (division 5) and objections and reviews (division 6).
Section 13 is headed “Eligible transaction” and is the first section in division 3. It commences by specifying what types of contract for purchase, building contract, or building construction activities are or are not eligible transactions. It then specifies “the commencement date” of the different types of eligible transaction. Sub-section (5) then specifies when an eligible transaction is “completed”, in the case of a contract for purchase (paragraph (a)), a building contract (paragraph (b)) or building construction by an owner builder (paragraph (c)). In the latter two cases, the eligible transaction is completed when the building is ready for occupation[10].
[10]Subject to any further requirements which may be laid down in regulations.
Without some requirement of “completion”, an otherwise eligible applicant could receive $7,000 merely by entering into a relevant contract, without ever completing the purchase or construction. Accordingly, s7 requires that there be “completion” in accordance with s13(5) before a grant will be payable.
The concept of “completion” is also relevant to the residence requirement imposed by s12 and elsewhere in the Act[11]. In general terms, s12 requires an applicant to occupy the home to which the application relates as his or her principal place of residence for a specified minimum period, commencing within 12 months “immediately after completion of the eligible transaction”.
[11]For example, s8(2)(a).
The role of s13(5) is therefore to indicate when the different types of relevant transaction will be regarded as completed for the various purposes of the Act, given that the relevant transactions give rise to different factual matters and different potential areas of dispute. It is concerned with temporal matters.
Neither s-s(5), nor section 13 as a whole, is concerned with the personal eligibility of an applicant; such matters are dealt with in division 2. In particular, s11 in division 2 provides that applicants are ineligible if they (or their partner) have previously held certain relevant interests in property, including occupancy or residency rights. The Commissioner’s construction effectively requires one to read s-s(5)(a) not as merely a temporal provision, but as an additional ineligibility provision. That construction is unlikely to have been intended to apply to paragraph (a) of s-s(5), when no equivalent ineligibility argument could be read into (b) and (c).
In construing s13(5), I also bear in mind that the purpose of the Act is to encourage and assist home ownership, and to offset the effect of the GST on home ownership, by establishing a scheme for the payment of grants to first home owners[12]. The Act is a type of “remedial legislation” and should be read in the broadest possible sense to favour the individuals who are intended to benefit from it.
[12]Section 1.
For these reasons, I conclude that, on its proper construction, s13(5)(a) does not impose a requirement that an applicant become entitled to possession of the property for the first time under the relevant contract. Rather, an eligible transaction is completed when the purchaser first becomes “entitled to possession under the contract”.
The Tribunal member seems to have considered the relevant question to be: whether the right to possession under the contract is of the same nature and extent as any earlier right to possession of the property. With respect, I do not consider that to raise the correct construction argument.
However, the Tribunal member ultimately came to the correct conclusion, namely, that the eligible transaction was completed upon settlement of the contract of sale. The Commissioner’s determination should therefore be varied.
Accordingly, whilst I would grant leave to the Commissioner to appeal in relation to s13(5), I would dismiss the appeal.
The ineligibility argument
The Commissioner seeks leave to raise a new argument relating to s11(3) of the Act, which provides that:
“An applicant is ineligible if, before the commencement date of the relevant transaction, the applicant, or the applicant’s partner –
(a) held a relevant interest in residential property in Victoria or an interest in residential property in another State or Territory that is a relevant interest under the corresponding law of that State or Territory; and
(b)occupied the property as a place of residence for a continuous period of at least 6 months.”
The Commissioner wishes to argue that the respondent is ineligible for a grant because he meets the criteria in s11(3). The Commissioner did not raise any such issue in the original determination or in his review of the respondent’s objection.
In his reasons for decision, the Tribunal member noted that although the Commissioner’s written submissions had “seemed to flirt with” an eligibility argument, in oral argument the Commissioner had specifically disclaimed any contention that the respondent did not satisfy the eligibility criteria in ss 8 to 12[13].
[13]VCAT reasons at [12] and [13].
Having expressed doubt as to whether the Commissioner would even be entitled to raise such an argument at that late stage[14], the Tribunal member nevertheless went on to make some remarks about the likely outcome of such an argument. In relation to s11(3)(a), he said there was no basis for saying that the respondent held a relevant interest before 6 February, being the commencement date of the relevant transaction. In relation to s11(3)(b), he said that there was no evidence one way or the other as to any prior occupancy of the premises by the respondent. Unfortunately, that latter observation was incorrect. There were several pieces of evidence about the respondent’s prior occupancy. For example, in his grant application, the respondent declared that he had lived continuously in the property since November 2001. It was certainly his address in April 2003, when he swore an affidavit in support of his application for probate.
[14]By reason of s109 of the Taxation Administration Act 1997.
The issues which arise out of s11(3)(a) involve questions of both law and fact, involving the proper construction of the expressions “relevant interest”, “before” and “the commencement date of the relevant transaction”, as well as the application of those expressions to the facts.
Before me, the Commissioner sought leave to argue the s11(3) issue on the basis that:
(a) If the respondent was ineligible because of s11(3), the Commissioner would most likely win the appeal;
(b) There would be no prejudice to the respondent if the point was argued on appeal; and
(c) The Tribunal member thought the matter sufficiently pertinent to say something about it in his reasons. However, he did so in the absence of hearing argument on the point from both sides.
The Commissioner referred me to the decision of this court in Commissioner of State Revenue v Price Brent Services Pty Ltd[15]. In that case, the Full Court granted leave to the Commissioner to raise a legal argument which had not been raised below, on the basis that the argument was unaffected by the evidence and the other party conceded it would not have conducted the proceedings below any differently had the point been taken. As an exercise of the court’s broad discretion on the facts before it, that decision is unremarkable. But the court did not purport to thereby fetter the very broad discretion which an appellate court has in determining whether to grant leave to raise a new point on appeal.
[15][1995] 2 VR 582
One obvious distinguishing feature is that Price Brent involved considerably more money than the amount in dispute in this case. Both parties were also represented by experienced counsel, so the matter could be properly argued.
The respondent objects to the Commissioner being permitted to raise the ineligibility issue. He agrees that there was no relevant evidence that he would have sought to lead, but did not lead, below. He also does not dispute that he has continuously occupied the property for at least 6 months. His primary argument is that he did not hold a “relevant interest” in the property before the date of the eligible transaction.
The respondent also concedes that he would not suffer any prejudice if such leave were granted, as he says that he was in a position to argue the point. Whilst the respondent did a creditable job of representing himself, if, as the Commissioner contends, this is to be a test case as to the meaning of s11(3), in my opinion the court and the interests of justice would be better served by the issues being thoroughly explored by experienced counsel on both sides. This is not a particularly appropriate vehicle to run as some sort of test case.
The respondent argues that the Commissioner ought not be entitled to raise the point for the first time on appeal, particularly given the small amount in dispute. In opposing the application, the respondent relies on the specific provision in s31 of the Act, as well as more general principles about the role of appeal courts.
Section 31 provides that on a review of the Commissioner’s determination by the Tribunal, the objector’s case is limited to the grounds of the objection, and the Commissioner’s case is limited to the grounds on which the objection was disallowed, unless the Tribunal otherwise orders. There are similar provisions in other State revenue legislation. No doubt the purpose behind such provisions is to try to ensure that all areas of dispute are identified as early as reasonably possible. That is particularly important in a case such as this, in which the amount in dispute is relatively small. The early identification of issues allows for more efficient resolution of disputes, either by agreement or by the Tribunal. Of course, the Tribunal has the power to allow a party to raise a matter, but it is a power which should be exercised having regard to the presumed purpose behind s31[16].
[16]By virtue of s148(7)(b) of the VCAT Act, I can make any order the Tribunal could have made in the proceeding before it.
The respondent also says that the decision of Coulton v Holcombe[17] is authority for the proposition that the Commissioner is bound on appeal by the way he conducted the proceeding in the Tribunal below. Whilst that decision did not say that a party is “bound”, the High Court noted that it is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at trial, otherwise the main area of disputes would move to the appeal[18].
[17](1986) 162 CLR 1.
[18]At p 7.
The Commissioner referred to the decisions in Kuswardana v Minister for Immigration and Ethnic Affairs[19] and Director of Housing vMurphy[20] as authority for the proposition that a party is not necessarily precluded by its conduct of a case before a Tribunal from arguing on appeal matters which were expressly conceded below. Nevertheless, those cases acknowledged that the conduct of a party’s case, including any concession made, may be relevant to the court’s discretion as to what course it will take[21]. Here, unlike in either of those cases, the Commissioner’s concession in the Tribunal needs to be considered against a background in which he raised no ineligibility argument in his original determination or in his review of the respondent’s objection.
[19](1981) 35 ALR 186 per Full Federal Court.
[20][2002] VSC 33 per Balmford J.
[21]Kuswardana at 195.
For all of these reasons, in the exercise of my discretion I am not prepared to grant the Commissioner leave to raise the s 11(3) for the first time in this court.
Conclusion
I will hear from the parties as to the precise form of orders and as to costs.
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