Commissioner of State Revenue v Paravizzini
[2005] VSC 302
•11 August 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
VICTORIAN TAXATION APEALS
No. 9776 of 2004
| COMMISSIONER OF STATE REVENUE | Applicant |
| v | |
| JOSEPH PARAVIZZINI | Respondent |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 June 2005 | |
DATE OF JUDGMENT: | 11 August 2005 | |
CASE MAY BE CITED AS: | Commissioner of State Revenue v Paravizzini | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 302 | |
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First Home Owner Grant Scheme – Deceased estate – Deceased survived by son and daughters – Will appoints son as executor – House devised to son and daughters – For valuable consideration paid by son the daughters relinquish right to that devise - Transfer of house property by son to himself at direction of sisters – Son then registered as proprietor – Son applies for grant - Whether arrangement between son and daughters a contract for the purchase of a home and thus an ‘eligible transaction’ – Whether ‘eligible transaction’ completed – First Home Owner Grant Act 2000 (Vic), s 5(1), (2)(a) & (3)(c), s 7(1), and s 13(1)(a), (2), (4)(a), (5)(a)(i) & (7)(a).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | A T Broadfoot | Solicitor for the Commissioner of State Revenue |
| For the Respondent | L L A Harrison | Michael V Stapleton |
HIS HONOUR:
Introduction
This is an application by the Commissioner of State Revenue (“the Commissioner”) for leave to appeal from an order of the Victorian Civil and Administrative Tribunal made 30 November 2004 that set aside the determination of the Commissioner made 10 March 2004 refusing an application by Joseph Paravizzini, (“the respondent”) for a first home owner grant in respect of a house at 15 Windsor Crescent, Bundoora. In fact the terms of the order were that the Commissioner’s determination “is varied such that the applicant is held entitled to the Grant”[1]. Under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (“the VCAT Act”) an appeal lies to this Court by leave on a question of law from an order of the Tribunal. The Commissioner contends that the Tribunal erred in law because in the circumstances and on a proper construction of the First Home Owner Grant Act 2000 (Vic) (“the Act”), the respondent was not eligible for the grant.
[1]The order was expressed as a variation of the Commissioner’s determination because, as the Deputy President noted, the power of the Tribunal on review of a determination of the Commissioner was to “confirm or vary the decision on the application for a first home owner grant”; see First Home Owner Grant Act 2000 (Vic) s 33(1). The effect of that order was, and was stated in the reasons of the Deputy President who constituted the Tribunal to be, that the determination of the Commissioner be set aside. The parties accept that the order has that effect.
The application was commenced by Originating Motion filed by the Commissioner on 22 December 2004, supported by an affidavit sworn by a solicitor employed by the State Revenue Office. The affidavit exhibited the reasons for decision of the Tribunal, a proposed notice of appeal, and documents that had been before the Tribunal. The deponent stated that at the hearing there was no dispute in relation to the facts as set out in the latter documents.
On 25 February 2005 directions were made for the conduct of the proceeding. They included provision for the Commissioner to file any further affidavit, the respondent to file any affidavit, for the parties to consult as to the Court Book which the Commissioner was to file containing affidavits and exhibits to be relied upon and any document to be referred to or tendered at the hearing. Provision was also made for the application for leave to be heard at the same time as the appeal, which is in fact what happened.
As it transpired no further affidavit was filed by the Commissioner and no affidavit at all was filed by the respondent. A Court Book was filed which included the documents which had been before the Tribunal and were exhibits to the Commissioner’s affidavit. That was the extent of the evidence before me, just as it was the evidence before the Tribunal. No oral evidence was given at the hearing before the Tribunal.
As appears below, the first home owner grant scheme is a national scheme. Counsel for the Commissioner told me that so far as he is aware this is the first time that a first home owner grant application has been brought on appeal to a State Supreme Court. For that reason, and because the case raises matters of general importance, the Commissioner does not seek costs if the appeal is allowed.
The First Home Owners Scheme
The First Home Owners Scheme was part of a package of measures agreed upon by the Commonwealth and the States and Territories in relation to the introduction of the Goods and Services Tax. The agreement, called 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) which Act, in s 4(2), stated that it was the intention of the State (of Victoria) to comply with, and give effect to, the agreement. Each State and Territory passed like legislation providing for the implementation of the agreement.
Provision was made for the First Home Owners Scheme in paras 15 and 16 of, and Appendix D to, the agreement. In para 15 it is stated 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”. In para 16 it is stated that “the assistance will be provided to first home owners consistent with Appendix D”. Appendix D stated that “the States and Territories will make legislative provision for the [Scheme] from 1 July 2000 which will incorporate programme criteria consistent with the following principles” which were set out in paras (i) to (ix).
As provided in the agreement the Parliament of Victoria enacted the First Home Owner Grant Act 2000 (Vic) (“the Act”) which came into operation on 1 July 2000.
The Act
The purpose of the Act is stated in s 1 to be “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”. The Act contains the scheme under which a person may apply for and receive a grant.
Section 7 provides that:
“(1)A first home owner grant is payable on an application under this Act if –
(a)the applicant … complies with the eligibility criteria at the time that the transaction for which the grant is sought is completed; and
(b) the transaction for which the grant is sought –
(i)is an eligible transaction; and
(ii)has been completed.”
Eligibility criteria for applicants is set out in ss 8 to 12. It is common ground that the respondent was an eligible applicant. Hence there is no need to further refer to those sections.
Section 13 provides that:
“(1) An eligible transaction is –
(a)a contract made on or after 1 July 2000 for the purchase of a home in the State;
(b)…
(c)…
(2)A contract is a contract for the purchase of a home if the contract is a contract for the acquisition of a relevant interest in land on which a home is built.”
The reference to a “relevant interest” in s 13(2) makes it apposite now to refer to s 5, sub-s (1) of which provides that:
“A person is an owner of a home or a home owner if the person has a relevant interest in land on which a home is built.”
A “relevant interest” includes an estate in fee simple in the land[2] but does not include an equitable interest[3] unless the interest is that of a person under a legal disability for whom a guardian holds the interest on trust[4].
[2]Section 5(2)(a).
[3]Section 5(3)(c).
[4]There was no suggestion that that any person involved in the present transaction was under a legal disability.
Returning to s 13, the following provisions are to be noted:
“(4) The commencement date of an eligible transaction is –
(a)in the case of a contract – the date on which the contract is made;
…
(5) 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)…
(6) …
(7) The consideration for an eligible transaction is –
(a)in the case of a contract for the purchase of a home – the consideration for that purchase;”
An application for a grant is made to the Commissioner in an approved form[5], and must be made within the period commencing on the commencement date of the eligible transaction to which the application relates and ending 12 months after the completion of the eligible transaction[6]. If the Commissioner is satisfied that a grant is payable, he or she must authorise payment of the grant[7]. The amount of the grant is the lesser of the consideration for the eligible transaction and $7,000[8].
[5]Section 14(1) and (2).
[6]Section 14(5).
[7]Section 17(1).
[8]Section 18.
An applicant dissatisfied with the Commissioner’s decision may lodge a written objection with the Commissioner[9], which must state the grounds of objection fully and in detail[10]. On an objection the objector has the onus of proving his or her case[11]. The Commissioner must consider the objection, which he or she may allow in whole or in part or disallow[12], and give written notice of the determination giving the reasons for disallowing an objection[13]. An objector dissatisfied with the determination may request the Commissioner to refer the matter to the Tribunal[14]. On such a review the objector is limited to the grounds of the objection and the Commissioner is limited to the grounds on which the objection was disallowed unless the Tribunal otherwise orders[15]. Further, on a review the objector has the onus of proving his or her case[16]. On the review, the Tribunal may “confirm or vary” the Commissioner’s decision[17]. On appeal to this Court however, s 148 of the VCAT Act confers on the court wide powers of disposition. The court may affirm, vary or set aside the order of the Tribunal, make an order that the Tribunal could have made, remit the matter or make any other order thought appropriate[18].
[9]Section 26(1).
[10]Section 26(2).
[11]Section 26(3).
[12]Section 27(1).
[13]Section 27(3) and (4).
[14]Section 29.
[15]Section 31.
[16]Section 32.
[17]Section 33(1).
[18]Victorian Civil and Administrative Tribunal Act s 148(7).
The facts
There was no dispute before me as to the facts, save for one matter which concerned the state of the administration of the estate of the respondent’s deceased mother, of which he was executor, and in particular whether at any relevant time it had progressed to such a stage that he had come to stand as trustee under the trust contained in her will concerning the house, if not of the entire estate. In what follows I set out the facts as stated in the Tribunal’s reasons for decision although in some respects with additional detail.
The respondent’s mother, Maria Paravizzini, owned the house at 15 Windsor Crescent, Bundoora (“the property”). By a will dated 30 May 1989 she appointed the respondent her executor and trustee, and devised and bequeathed to him the whole of her real and personal estate –
“UPON TRUST as follows: -
(i)I GIVE DEVISE AND BEQUEATH the house which I own at the time of my death as follows: -
(a)one half part or share to my son Giuseppe Paravizzini;
(b)one quarter part or share to my daughter Severina Del Toso;
(c)the last quarter part or share to my daughter Vita Selin
(ii)Subject to Clause 1(i) (hereof) I GIVE DEVISE AND BEQUEATH unto my Trustee the whole of my real and personal estate whatsoever and wheresoever situate UPON TRUST as follows:-“ In summary the trust was to sell call in and convert into money the said real and personal estate with power to postpone the sale and from the proceeds thereof to pay all funeral and testamentary expenses and debts and to hold the balance remaining and all other parts of the estate for the time being unsold upon trust for her said son and daughters for their sole use and benefit absolutely as tenants in common in equal shares.
I interpolate that the deceased’s son Guiseppe is known as Joseph.
Mrs Paravizzini died on 21 October 2002 and probate of her will was granted to the respondent on 30 December 2002. On 17 September 2003 solicitors acting for the respondent lodged an application under s 49 of the Transfer of Land Act 1958 (Vic) to have him registered as proprietor of the property in his capacity as executor.
At a time subsequent to the death of their mother, but which time is not established by the evidence, the respondent and his sisters orally agreed that he would purchase their share of the house property. Although no witness gave evidence of the making and terms of such agreement, and the only written assertion of it is in a letter to the Commissioner and the further and better particulars referred to below, the Commissioner did not dispute the assertion of an agreement, and the reasons of the Tribunal reveal that the Tribunal accepted that an agreement was made.
For the purpose of the agreement the respondent obtained a valuation of the property dated 7 October 2003 for $250,000. The parties agreeing that $6,000 be allowed for sale expenses, the net value was accepted as being $244,000, of which one half was $122,000. For the purpose of paying this amount to his sisters (as to one half thereof each) the respondent borrowed $150,000 from Perpetual Trustees Victoria Ltd under a loan contract dated 10 February 2004.
On 29 January 2004 the respondent and his sisters executed a transfer of the property. The transfer is by the respondent as transferor of “All my estate in fee simple” to himself as transferee at the direction of his sisters. The consideration for the transfer was stated to be:
“Firstly pursuant to a devise in the will of Maria Paravizzini (Deceased) and in further consideration of $122,000.00 paid by [the respondent] to [the sisters].”
Notwithstanding the stated consideration of $122,000, the respondent tendered at the hearing before the Tribunal receipts dated 16 November 2004, addressed “To Whom It May Concern” and signed by each sister that confirmed having received $70,000 from the respondent as “payment of my share of the property”. The Tribunal noted the discrepancy between the amount of $140,000 represented by the receipts as having been paid to the sisters ($70,000 to each) and the consideration stated in the transfer of $122,000. This discrepancy was not explained by evidence. Why it was not explained is not clear, as the explanation would seem to bear on the scope and terms of the agreement between the respondent and his sisters. However, it is apparent, for reasons not stated, although it may have been due to the way the case was conducted, that the Tribunal approached the case on the basis that nothing turned on this. It is thus not possible to say more about it. Indeed, in the absence of evidence from the respondent or his sisters it is not possible to resolve the discrepancy, or find when the respondent actually paid money to his sisters.
On 13 February 2004 the transfer was stamped at the State Revenue Office and lodged for registration, and the respondent was duly registered that day as the proprietor of the fee simple interest in the property.
On 18 February 2004 the respondent lodged an application for a first home owner grant (“the grant”).
On 10 March 2004 a delegate of the Commissioner wrote to the respondent advising that he was ineligible to receive the grant on the basis of the information provided because:
“The transaction is not a completed eligible transaction for the purposes of the First Home Owner Grant Act 2000. Section 13(5)(a)(i) of the Act provides that the eligible transaction is completed when you become entitled to possession of the home under a contract. However, you became entitled to possession not under a contract but under your existing interest/ownership of the home by way of the will of Maria Paravizzini”.
On 4 May 2004 the respondent’s solicitor wrote to the Commissioner stating the following grounds of objection to the Commissioner’s refusal of the grant:
“1. The Act allows grants in the event of obtaining possession of the property by way of agreement. A contract of sale is not the only eligible manner of possession.
My client obtained possession by purchasing the property from the estate of his deceased mother by way of agreement. The agreement is evidenced by the independent valuations of the property obtained on behalf of the estate, and the transfer of land to my client confirms that he paid his sisters valuable consideration for their share of the estate. My client obtained a loan secured by way of mortgage over the property and a settlement was effected with his sisters.
The consideration paid represented a one-half share of the value of the property and my client left his share in the transaction.
The applicant acted as executor of the estate and accordingly, he was registered as proprietor as the legal representative of the estate (as required by law) and then subsequently he was registered as proprietor as the purchaser of the property, although both registrations were effected under the one transfer of land.
…
2. I am aware of like cases of approval of the grant where a beneficiary has purchased the property from the estate by agreement, paid out the other beneficiaries their share of the value of the property, and taken a transfer of land.”
On 8 June 2004 a delegate of the Commissioner wrote to the respondent’s solicitor, advising that the objection had been disallowed. The letter referred to s 7(1) and s 13(5)(a)(i) of the Act and stated that the respondent was not eligible for the grant because there was no eligible transaction. First, the “interests in the Property accrued by force of the Will on due administration and distribution of the Estate’s assets, prior to any contract to purchase the Property”. Secondly, “the transaction to acquire the half interest cannot be completed as [the respondent] was beneficially entitled to a half interest in the Property under the Will and therefore entitled to possession of the Property to the exclusion of all others (save for the beneficial interests of his sisters). Therefore, the right to possession of the Property flows from the beneficial entitlement under the Will and not pursuant to any contract”. Accordingly, the original refusal of the grant was correct. The acquisition of the property was not an “eligible transaction” which “has been completed” within the meaning of the Act.
The respondent’s solicitor then requested the Commissioner to refer the matter to the Tribunal for review.
While the review was pending the respondent provided further and better particulars of his objection pursuant to a request of the Commissioner. In response to a request for particulars of the claim that the respondent purchased the house property from the estate by an agreement, it was stated that:
“Following the death of their mother, the objector reached an oral agreement with his 2 sisters that he would purchase their share of the Bundoora property. The agreement was that the property would be independently valued, and a reduction would be allowed for sale expenses, and the objector would pay the sisters their share and he would take title to the property. This agreement was conveyed to the Solicitor acting on behalf of the estate. The objector is the executor of the estate.”
It was then stated that the respondent obtained the valuation of $250,000, that $6,000 was agreed as sale expenses and that the parties accepted a net value of $244,000 which produced the amount of $122,000 stated in the transfer for a half share of the property. It was further stated that the respondent obtained the loan of $150,000 from Perpetual Trustees Victoria Ltd which was settled on production of a clear title to the property and which was drawn down by cheques payable to the sisters for the total amount of $122,000 being a one-half share of the net value of the property. The valuation and the loan contract were among the documents provided to the Tribunal and to me.
It is to be noted that neither the respondent nor his sisters gave evidence before the Tribunal to establish the oral agreement alleged in the further and better particulars.
The Tribunal decision
In his decision the Deputy President who constituted the Tribunal set out the relevant facts, legislation and background information and then (correctly in my view) characterised the issue in the case as being whether the respondent’s acquisition of the property was an “eligible transaction” within the meaning of the Act[19]. The Deputy President stated that “[t]he first and most important thing to note is that the transfer …was a direction transfer”[20]. He referred to several cases concerning direction transfers, including the decision of the New South Wales Court of Appeal in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd[21]. In that case, a purchaser of land under an uncompleted terms contract onsold the land to another purchaser. For the purpose of settlement the first purchaser gave the second purchaser particulars of title and advised that the transfer to the purchaser would be by the head vendor by direction of the first purchaser. Being dissatisfied with the vendor’s title the second purchaser sought to rescind the contract which rescission was accepted. In a suit by the second purchaser against the agent for return of the deposit the Court of Appeal held that the purchaser could have been compelled to accept a transfer by direction in the circumstances.
[19]Paravizzini v Commissioner of State Revenue T 56 of 2004 at [7].
[20]At [24].
[21](1969) 89 WN (Pt 1) (NSW) 568.
The Tribunal said that this suggested that the respondent’s sisters were “intermediate parties in the same way as the intermediate vendor and directing party in the Jonray case was”[22]. The Deputy President then noted the observation of the parties that as executor the respondent had no power of sale aside from that necessary to provide funds to pay the debts and testamentary expenses of the deceased, and stated that[23]:
“the transaction which [the respondent] as executor undertook here is not a sale. He distributed the half share in the property to which he was personally entitled by transfer to himself. Other things being equal his two sisters would have been entitled to a transfer of two, [sic] one-quarter shares to themselves. As it was however, they entered into an arrangement whereby they sold those shares to [the respondent] and like the intermediate purchaser in the Jonray case directed that the distribution be completed by transfer not to them but to the person to whom they had sold their entitlements viz. [the respondent] himself.
26. The sisters’ shares transferred to [the respondent] at their direction, constituted in my view the purchase of a home. A person purchases a home if he becomes an owner of that home. Section 5(1)… provides, inter alia:
A person who [sic] is an owner of a home…if the person has a relevant interest in land on which the home is built.”
[22]At [25].
[23]At [25].
The Deputy President concluded at [27] of the reasons that the respondent had acquired a legal interest in the fee simple estate which thus satisfied the requirement in s 5(1) that he hold a relevant interest in the land. It is useful to set out what the Deputy President said. After referring to s 5(2) he said[24]:
“Section 5(3) of the Act excludes purely equitable interests from the concept of relevant interests. The sisters had only equitable interests. But Mr Paravizzini acquired a legal interest under the transfer. What counts for these purposes is what interest the grant applicant obtained.”
The Deputy President thus concluded that the transaction was an “eligible transaction”.
[24]At [27].
Then, at [28], the Deputy President considered an argument based on the agreement between the respondent and his sisters not having been in writing. The argument, which he rejected, was not raised before me and accordingly I do not further refer to it.
The Deputy President then, at [30], considered the “final question” whether the “eligible transaction” had been completed, according to the terms of s 13(5)(a) of the Act. He noted the Commissioner’s argument that the respondent had already been entitled to possession of the property as executor and thus could not become entitled to possession of the home under the contract. The Deputy President rejected the argument, drawing the analogy of the owner of a chattel who enters into a sale and leaseback arrangement. Before the arrangement takes effect, the owner is entitled to possession of the chattel as owner, but after the leaseback takes effect his entitlement to possession arises from his status as bailee under the arrangement. Although he did not expressly say so, the Deputy President likened the respondent’s situation to that of the bailee. His entitlement to possession of the home arose in two separate capacities, first as executor and then as transferee on completion of the contract. Thus, he became entitled to possession under the transfer.
Having concluded that the respondent should succeed the Tribunal made the order referred to earlier that the Commissioner’s determination of 10 March 2004 refusing the grant be varied, “such that the [respondent] is held entitled to the Grant”.
Submissions in this Court
Commissioner
Counsel made two principal arguments.
(a)That the Tribunal erred in characterising the transaction as an “eligible transaction within the meaning of s 13(1)(a) and (2)”; and
(b)Even if the transaction were an “eligible transaction”, it was not “completed” within the meaning of s 13(5)(a)(i).
In developing the first argument, counsel submitted that the transaction was not a “contract for the purchase of a home”, within the meaning of s 13(1)(a), because it was not “a contract for the acquisition of a relevant interest in land on which a home is built” as provided in s 13(2). Rather, the contract was one between the respondent and each sister for the disclaiming of an interest in the estate. Contrary to what the respondent stated in his grounds of objection, the respondent did not purchase the house property from the estate. First, there was no power of sale under the will and, unless the house property was required to be sold for the purpose of meeting liabilities of the estate, the respondent was not entitled to sell it[25]. Secondly, there was no evidence that any consideration was paid to the estate, as opposed to the sisters. In the absence of any evidence of an agreement between all the beneficiaries for the property to be purchased from the estate, the only conclusion open to the Tribunal was that the contract was between the respondent and his sisters and was for the disclaiming of an interest in the estate. The Tribunal actually said, at [25] of its reasons, that “the transaction which [the respondent] as executor undertook here is not a sale”[26]. Counsel said that the agreement was that, in consideration of the $70,000 paid by the respondent to each sister, each sister disclaimed her interest in the estate. The legal consequence was that the contract did not assign or dispose of any property, but rather prevented property from vesting in the sisters as it otherwise would have in accordance with the terms of the will[27]. As such, it could not be a contract for the “acquisition of a relevant interest in land”. Even so, the ultimate practical consequence was that upon administration of the estate and transfer of the legal interest in the property to the respondent as the sole remaining beneficiary, he became the sole owner of the property.
[25]Pagels v MacDonald (1936) 54 CLR 519.
[26]See the passage quoted at [32] above.
[27]Probert v Commissioner of State Taxation (1998) 72 SASR 48 at 54.
However, it was submitted, the Tribunal erred by focusing on the ultimate practical consequence of the transaction rather than the nature of the contract. Counsel referred to [26] of the Tribunal reasons, where the Deputy President said “A person purchases a home if he becomes an owner of that home.” Although the respondent became the owner of the property, it did not follow that he had purchased a home. Counsel then referred to [27] of the Tribunal reasons, where the following was said:
“The sisters had only equitable interests. But [the respondent] acquired a legal interest under the transfer. What counts for these purposes is what interest the grant applicant obtained”.
The reference to “what interest the grant applicant obtained” again demonstrated that the Tribunal had focused on the end result rather than the proper enquiry which was to ascertain the nature and subject-matter of the contract. The reference to the sisters having had equitable interests was in any case incorrect. Upon the respondent’s mother’s death, legal title in her property vested in the respondent as executor of her will[28], but until administration of the estate was complete all that the beneficiaries had was a chose in action to secure the proper administration of the estate and an expectation that property would pass on completion of the administration[29]. Neither the respondent (in his personal capacity) nor his sisters had any proprietary interest in the estate property. As to the course of administration of the estate and the stage it had reached at any relevant time, the respondent gave no evidence before the Tribunal[30] and did not file any affidavit in this Court.
[28]Administration and Probate Act 1958 (Vic) s 13.
[29]Commissioner of Stamp Duties v Livingston [1965] AC 694 at 707-708; Re Tyrie [1970] VR 264 at 275-6; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312-314.
[30]Further, neither the affidavit in support of the grant of probate nor the inventory of estate assets were before the Tribunal.
Counsel for the Commissioner specifically rejected the suggestion that the reference to “equitable interests” in the Tribunal’s reasons carried an implicit finding that the respondent had become trustee. If there was such an implicit finding, it was not supported by any evidence as to the progress of the administration. Even assuming that such a finding were open and that the sisters did have equitable interests, the respondent’s purchase of those interests was not the acquisition of a “relevant interest” within the meaning of the Act[31].
[31]Section 5(3)(c).
Counsel submitted further that the word “acquisition” must be understood in its proper context. He referred to the statement of purpose in s 1 of the Act and the principles as to eligibility criteria in Appendix D to the Intergovernmental Agreement, para (iii) of which states that “eligible applicants must be natural persons…who are buying or building their first home in Australia” (counsel’s emphasis). He submitted that the use of the word “buying” supported the proposition that Parliament never intended that the first home owner grant be available to persons who simply acquire a first home without purchasing it under a contract of sale. Thus, the word “acquisition” as it appears in s 13(2) required more than the mere adjustment or modification of rights between various beneficiaries under a will which the present transaction effected. As the sisters did not dispose of any “relevant interest” under the relevant contract, the respondent could not acquire any “relevant interest” under that contract.
Counsel then submitted that even if there were an eligible transaction, it was not completed within the meaning of s 13(5)(a) of the Act. This was because the respondent did not become entitled to possession of the home under the contract. Rather, he became entitled to possession of the property by virtue of his remaining the sole beneficiary of the estate under the will. Even if it were the case that the administration had concluded at the time of the contract – whenever that was - such that the respondent and his sisters had equitable interests in the property, they would have acquired those equitable interests as a consequence of the administration of the estate and would have already become entitled to possession of the home by virtue of those equitable interests.
Finally, counsel submitted that the decision in Jonray[32] was irrelevant in the present case. Where a transfer by direction is concerned, the intermediate purchaser or the directing party has an equitable interest or at least a personal right in the property. Here the sisters had no such right. Even if they did hold a transfer from the estate (which they did not), in the absence of registration and as volunteers they could hold neither a legal nor an equitable interest in the property.
[32]See [31] above.
Respondent
Counsel for the respondent submitted that although there was no explicit evidence before the Tribunal or this Court as to when administration of the estate was completed, it should be inferred that the Tribunal concluded that administration had been completed with the result that the respondent had stood as trustee of the trusts contained in the will and the beneficiaries held an equitable interest in the property, albeit that the conclusion was not expressly stated in the reasons. Counsel submitted that the property was held subject to the trust at least from the date of valuation of the house, 7 October 2003, which valuation, she said, was obtained specifically for the purpose of the respondent’s mortgage[33] and the discussions between the respondent and his sisters as to the terms of the contract of sale or agreement. At this time, or at least by the time the transfer was executed, administration of the estate was complete such that the respondent stood in the position of trustee in relation to the estate assets. The transfer itself showed that the property was “clearly ready to distribute” and the fact that the consideration was paid to the sisters showed that “clearly the money was not needed for the administration of the estate.” Counsel submitted that I should infer that the house property was not required for the administration of the estate. Further, if the sisters had merely sold their right to due administration, it would have been unnecessary to make them directing parties on the transfer. Given these circumstances, the sisters had equitable interests in the property at the time of the contract.
[33]It seems that the respondent granted a mortgage to Perpetual Trustees Victoria Ltd as security for repayment of the loan.
Turning to the nature of the contract, counsel referred to the Tribunal’s “emphasis… on the transfer of land that actually conveyed the interest of the estate in fee simple to the respondent”. In her written submission she said that the “contract of sale” was partly contained in the transfer of land, although, I interpolate, the Deputy President described it as an oral contract. In her oral address she submitted that the transfer of land constituted the relevant terms of an oral contract, relying on the transfer “as a record of what the arrangement was”. In short, the respondent and his sisters agreed that the respondent would purchase their shares (that is to say each sister’s quarter share) in the property devised under the will, for a consideration of $122,000[34]. Those shares were equitable interests in the property. The Tribunal was correct to draw the analogy with the Jonray decision because here, as in that case, the sisters were directing parties on the transfer and held equitable interests. Upon executing and registering the transfer, the respondent acquired an estate in fee simple.
[34]Although note the discrepancy with the figure of $140,000 referred to above.
As to possession, counsel drew a distinction between the respondent’s possession of the property as trustee and his becoming entitled to possession of the property as a purchaser under the contract, as evidenced by the transfer. The effect of the transaction was that the respondent’s equitable interest (as beneficiary) was transferred simultaneously with the equitable interests of his sisters that he purchased. It was this acquisition of the fee simple pursuant to the contract which gave him possession of the property to the exclusion of all others.
Decision
The fundamental issue to determine is whether the transaction in respect of which the respondent sought a grant was an eligible transaction. If it was not an eligible transaction, the respondent was not entitled to the grant. If it was an eligible transaction, however, the question of whether the transaction was completed still arises. That is to say, at the time of his application for the grant, had the respondent become entitled to possession of the home under the contract?
The transaction could only be an eligible transaction if it were “a contract made on or after 1 July 2000 for the purchase of a home in the State”[35], that is to say “a contract for the acquisition of a relevant interest in land on which a home is built”[36]. It is therefore necessary to analyse the nature of the transaction and, more precisely, to identify the contract.
[35] Section 13(1)(a).
[36] Section 13(2).
What was the contract? Counsel for the respondent did not answer this question with precision. That is not surprising considering the failure of the respondent and his sisters to give evidence of the making and terms of the contract. Counsel’s written submission states that “[o]n or about October 2003 [the respondent] entered into a contract with his sisters to purchase their shares in the property, s 13(1)(a)”. The submission then states that “[o]n 13 February 2004 [the day of executing the transfer] the respondent entered into a contract with his sisters to purchase their shares and to acquire an interest in fee simple in the land on which a home is built, s 13(2)”. Counsel said that “shares” referred to the sisters’ equitable interest in the property, which arose by virtue of the fact that administration of the estate had concluded. I interpolate that, on a review before the Tribunal, the objector is limited to the grounds of objection unless otherwise ordered. Because the respondent’s ground of objection was, in essence, that he had obtained possession of the property by purchasing the property from the estate, pursuant to an agreement with his sisters, counsel was limited to that ground. Counsel thus contended that there was an oral contract between the respondent and his sisters whereby the three beneficiaries under the will agreed that the respondent would purchase the property from the estate. The relevant terms of this oral contract were, it was said, contained on the face of the transfer of land document.
I reject this submission as to the nature of the contract. There was simply no evidence that there was a contract between the respondent as executor (representing the estate) and the respondent in his personal capacity whereby the latter purchased the property from the estate. On the contrary, the respondent paid the consideration directly to his sisters. I accept the Commissioner’s argument that, in the absence of any evidence of an agreement between all the beneficiaries that the property be purchased from the estate, the only conclusion open to the Tribunal was that there was a contract between the respondent (in his personal capacity) and his sisters whereby the sisters disclaimed the gift of the property under the will, in consideration of money paid to them by the respondent. That, of course, did not affect their right to share in the residuary estate, or at least there is no evidence that the sisters gave up that right, just as there is no evidence as to the overall assets and liabilities of the estate.
I also reject counsel’s submission that I should infer that the Tribunal found as a fact that the administration of the estate was complete as at the date of the contract or at least as at the date of executing the transfer. Neither expressly or inferentially was that finding made. Indeed the Deputy President did not deal with that issue. That may have been because there was no evidence upon which such a finding could have been made. I interpolate that the respondent could so easily have put forward evidence as to the course and state of the administration at any relevant time but did not do so. There is no reason to suppose that the failure to do this was not advised.
In saying what I have I do not overlook that in his reasons at [27] the Deputy President said that the sisters “had only equitable interests”. I do not read that as a finding that the respondent had completed administration of the estate. The statement was not explained and was not preceded by a finding that, or even a discussion as to whether, administration had been completed and, if so, when. For reasons I have given, such a finding was not open to be made. It seems more likely that the Deputy President simply meant that at most the sisters had only an equitable interest which thus could not be a relevant interest, and that in that respect he had in mind the observations of the High Court in Official Receiver in Bankruptcy v Schultz[37]. That would seem likely in light of the reference in [25] of the Deputy President’s reasons to the sisters having sold their “shares” which, other things being equal, the sisters would have been entitled to. In summary, even if the Tribunal had found that the administration had been completed, the finding could not stand as there was simply no evidence as to the discharge of the estate’s liabilities such that it could be concluded that the respondent had become trustee of the property. In these circumstances the correct conclusion is that the sisters’ rights were and remained choses in action to compel due administration of the will according to its terms. I do not overlook counsel’s submission that if the sisters had merely sold their right to due administration, it would have been unnecessary to make them directing parties on the transfer. However, that is equivocal and, as I said to counsel during argument, the reference to directing parties may have been nothing more than a way of explaining why the executor of the estate was transferring the property to himself.
[37](1990) 170 CLR 306 at 313.
Even if the sisters did have equitable interests in the property at the time of the contract, the respondent did not – in acquiring those interests - acquire a “relevant interest” under the contract within the meaning of the Act.
The Tribunal was correct to state at [25] of its reasons that “the transaction which [the respondent] as executor undertook here is not a sale.” However, the corollary of that point is that the respondent (in his personal capacity) did not purchase the property from the estate. Thus, the respondent’s ground of objection was without substance.
I also reject counsel’s submission that the transfer of land records, wholly or in part, the oral contract between the respondent and his sisters. In the first instance there is the difficulty of the lack of evidence of the arrangement. Further, in my view the transfer was simply the mechanism by which the respondent (as executor) transferred the fee simple in the property to himself in his personal capacity. The naming of the sisters as directing parties was consistent with, and did no more than reflect, the fact that, having relinquished or agreed to relinquish any right they might have had to the property under the will, the sisters were directing the respondent to transfer the property to himself as though they no longer existed as beneficiaries under the will. However, the sisters had no equitable interest at this stage. This situation is quite distinct from the circumstances in the Jonray decision.
The Tribunal stated at [26] of its reasons that “the sisters’ shares transferred to [the respondent] at their direction, constituted in my view the purchase of a home. A person purchases a home if he becomes an owner of that home”. The Deputy President then referred s 5 which states that “A person is an owner of a home… if the person has a relevant interest in land on which a home is built.” With respect, these passages demonstrate several errors. First, the Tribunal focused on what it considered to be a transfer by direction rather than identifying the contract by which the respondent acquired a relevant interest. Secondly, the statement “A person purchases a home if he becomes an owner of that home” is plainly erroneous. A person who receives a home as a gift certainly does not purchase that home. Thirdly, by incorrectly equating ownership with purchase, the Tribunal used a true premise (namely, that a person who has a relevant interest in land is a homeowner, as defined in the Act) to found a false conclusion, namely that a person who has a relevant interest must have purchased the home. The error engendered in this approach is apparent in [27] of the reasons where the Tribunal emphasised that the respondent (in his personal capacity) acquired a legal interest in the property under the transfer. Although it was true that he acquired the legal interest upon registration of the transfer, this was beside the point as it did not address the proper enquiry. The issue was whether the respondent entered into a contract for the acquisition of a relevant interest in the property and, if so, whether he had completed the contract by becoming entitled to possession of the property under the contract.
Finally, while I have referred to the Intergovernmental Agreement as providing a useful background to the First Home Owner Scheme, I have found it unnecessary for the purpose of applying the Act to rely on the extrinsic material to which counsel for the Commissioner referred me. Section 13(2) is clear in its terms and it is unnecessary to import the word “buying”[38] to aid the interpretation of the word “acquisition” which is used in the context of “purchase” in that sub-section.
[38]See [42] above.
For these reasons, the contract between the respondent and his sisters was not a contract for the acquisition of a relevant interest in the property. Thus, there was no eligible transaction within the meaning of the Act. That being the case, the respondent was not eligible for the grant. It is unnecessary to decide whether the transaction was completed.
There will be leave to appeal and the appeal will be allowed. It will be further ordered that the order of the Victorian Civil and Administrative Tribunal made 30 November 2004 be set aside and in lieu thereof it will be ordered that the determination of the Commissioner of State Revenue made 10 March 2004 be confirmed. There will be no order as to costs both of the review before the Tribunal and the appeal to this Court.
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