Elskaf v Chief Commissioner of State Revenue

[2006] NSWADTAP 10

Appeal Panel - Internal

CITATION:	Elskaf v Chief Commissioner of State Revenue (GD) [2006] NSWADTAP 10
PARTIES:	APPELLANT Ahmed Elskaf RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	059042
HEARING DATES:	24/10/2005
SUBMISSIONS CLOSED:	10/24/2005
DATE OF DECISION:	03/10/2006
BEFORE:	O'Connor K - DCJ (President); Greenwood J - Judicial Member; Bennett C - Non Judicial Member
CATCHWORDS:	costs - no question of law identified
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	043042
DATE OF DECISION UNDER APPEAL:	06/14/2005
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 First Home Owners Grant Act 2000 Taxation Administration Act 1996
CASES CITED:	Elskaf v Chief Commissioner of State Revenue [2005] NSWADT 132 Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158 Snow v Chief Commissioner of State Revenue [2005] NSWADT 24 Allam v Chief Commissioner of State Revenue [2005] NSWADT 172 McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214
REPRESENTATION:	APPELLANT In person RESPONDENT B Baker, solicitor, Crown Solicitor's Office
ORDERS:	1. Appeal dismissed; 2. Appellant to pay the respondent's costs of the appeal in the sum of $1250

1 The Chief Commissioner of State Revenue (the Commissioner) requested repayment of a grant made to the appellant (Mr Elskaf) under the First Home Owner Grant Act 2000 (FHOG Act), the amount being $7000 and imposed a penalty of 30%. Mr Elskaf applied for review of the decision by the Tribunal. The Tribunal dismissed the application, affirming the Commissioner’s decision: see Elskaf v Chief Commissioner of State Revenue [2005] NSWADT 132 (14 June 2005). Mr Elskaf appealed against that decision to the Appeal Panel. His notice of appeal included an application to extend the appeal to the merits.

2 The Appeal Panel heard the appeal on 24 October 2005, and delivered an ex tempore decision at the close of argument dismissing the appeal as it related to the decision to require repayment of the grant. The Appeal Panel reserved its decision in relation to the appeal against penalty. The Commissioner, the respondent to the appeal, applied for an order for the costs of the appeal. The Appeal Panel reserved its decision in relation to that application, and gave directions to the parties to file submissions in relation to penalty and costs.

(1) Liability to Repay

3 This matter is dealt with in detail in the decision under appeal. Mr Elskaf failed to satisfy the Appeal Panel that there was any basis upon which the Tribunal’s finding of fact, that he had not occupied the subject premises as his principal place of residence within 12 months of purchase, should be disturbed.

4 In summary the Tribunal found that Mr Elskaf had failed to discharge the onus of proof. It was clear that the main dwelling on the land purchased by Mr Elskaf had been occupied as from the date of purchase for two years by a tenant. Mr Elskaf’s claim that he had occupied the land as his principal place of residence was based on his alleged occupation of another dwelling on the land described by the Tribunal as a ‘granny flat’, possibly better described, the Appeal Panel thought, by an expression now not so often heard – a ‘sleep-out’, in this instance an area separate from but forming part of the same structure as the lock-up garage. The Tribunal rejected his claim saying at [22]:

‘The weight of the evidence in this case is strongly on the side of the respondent. Apart from the items of correspondence mentioned above, there is no indication whatsoever that Mr Elskaf occupied the premises, let alone as his principal place of residence. None of the documentation supports an inference that he lived at the premises. None of the persons who were aware of his alleged occupation have come forward to corroborate his story.’

5 In our view the Tribunal’s examination of this matter is compelling. Mr Elskaf merely repeated to the Appeal Panel the contentions that had failed before the Tribunal.

(2) Penalty

6 The appeal also related to the penalty imposed. The terms of the Tribunal’s order were: ‘The decision of the Chief Commissioner of State Revenue to reverse the decision to pay a grant of $7000 to the applicant, together with a penalty of 30%, is affirmed.’ The Tribunal’s reasons deal with the decision as to penalty in one sentence at para [24]: ‘In the circumstances, I am not inclined to make any changes to the penalty of 30% levied by the respondent.’

7 Appearing for the Commissioner, Ms Baker, told the Appeal Panel that the matter of penalty had received little attention at the hearing before the Tribunal because the parties had concentrated on the principal issue of liability.

8 It is important, we think, that the penalty element of tax decisions be given separate consideration, and the basis for a conclusion that the penalty should be left stand be exposed. For this reason we reserved on this matter, and gave the parties an opportunity to file any further submissions.

9 The power to impose a penalty in cases where a condition for the grant has not been fulfilled, and the grant is liable to be repaid, is given by the FHOG Act, s 45. Section 45 provides:

‘ 45 Power to require repayment and impose penalty

(1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if:

(a) the amount was paid in error, or

(b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason.

(2) If, as a result of an applicant’s dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.

(3) If an applicant (or former applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay.

(4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner.’

10 In this instance the Commissioner exercised the power given by s 45(3). We agree with the Commissioner’s submission that Mr Elskaf failed to observe a statutory condition of the grant (occupation within 12 months as principal place of residence – see FHOG Act, s 20). This penalty provision works differently to the more typical differentiated interest and penalty tax provisions found in the Taxation Administration Act 1996, Part 5. Here there is simply a flat-rate penalty regime.

11 Mr Elskaf has had the benefit of the $7000 for two years prior to receiving the notice of repayment (issued 16 June 2003). As at the hearing of this appeal the amount had not been repaid. The opportunity loss to the revenue, on its own, is a factor that supports the imposition of a penalty.

12 Moreover this is, in our view, a case with no merit. Mr Elskaf had someone living in the main dwelling as a tenant obliged to pay rent. As it happened, there were defaults leading to Mr Elskaf having to take enforcement action, but nonetheless the amount of the order he obtained is only a small proportion of the rent he would have derived from the tenancy over its two year period – order for $3650 versus rent of $220 per week; see further para [4] of Tribunal’s reasons.

13 The social objective of the first home owner grant scheme is to help give new entrants to the domestic housing market, typically young people – often couples, some assistance in taking that first expensive step. Mr Elskaf had purchased the property for $149,000 and let it through an agent within weeks of purchase for what was a good rent. The 12 months’ rule was a clear one, but Mr Elskaf continued to let the tenancy run beyond that point.

14 The Tribunal has dealt now in a number of decisions with factors relevant to the imposition of penalty under the FHOG Act: see, for example Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158; Snow v Chief Commissioner of State Revenue [2005] NSWADT 24; Allam v Chief Commissioner of State Revenue [2005] NSWADT 172. The Tribunal has indicated its acceptance of the basic approach taken by the Commissioner, which has been to impose a penalty of between 0 and 20% in circumstances where the applicant freely admits to the Tribunal and the Chief Commissioner that they did not occupy the property within the required period. In some cases none or a minimal penalty may be all that should be imposed, such as where the applicant has not been able to move in for reasons largely or wholly beyond their control, or in circumstances where the applicant did move in but did so just outside the 12 month period: see, for example, McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214.

15 This is a case which clearly lies beyond the 20% point. It is clear that 30% is a reasonable penalty in light of the circumstances to which we have referred.

(3) Costs

16 The respondent, the Commissioner, has applied for an order for costs in respect of the appeal to be made against the appellant, Mr Elskaf.

17 The Tribunal has power to make an order for costs. In proceedings of the present kind, involving the review of reviewable decisions, the usual power is to be found in s 88(1) of the Administrative Decisions Tribunal Act 1997 which provides:

‘(1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.’

18 In this instance the legislation conferring the review jurisdiction on the Tribunal, the FHOG Act, also deals with the making of costs orders. Section 29 provides:

‘ 29 Powers of Administrative Decisions Tribunal on review

(1) On a review, the Administrative Decisions Tribunal may:

… (b) make any further orders as to costs or otherwise as it thinks fit.’

19 The Commissioner’s submission is that s 29 prevails, having regard to the opening words of s 88(1) which provide that the provision is ‘subject to … any other Act or law’. In this instance the Parliament has chosen to address the subject-matter of costs separately in the statute conferring the review jurisdiction. The submission of the Commissioner as to the inter-relationship between these two provisions would appear to be correct. There were no competing submissions as to this question from Mr Elskaf.

20 Accordingly, the Tribunal should apply the rule contained at s 29(1)(b) of the FHOG Act when considering applications in proceedings arising under that Act.

21 The Tribunal is left with a broad discretion. In our view the discretion should be exercised in a manner which is mindful of the beneficial nature of this jurisdiction. The Tribunal’s jurisdiction enabling review of revenue decisions commenced on 1 July 2001. Prior to that time revenue decisions normally could only be appealed to the Supreme Court. The aim of merits review is to ascertain what the ‘correct and preferable’ decision is in all the circumstances, with that decision being taken by a reviewer independent of government – the Tribunal. A review applicant should not be at the risk of a costs award simply because they utilise that facility, however weak their case might turn out to be. This philosophy of access is, in our experience, accepted by agencies including by the Commissioner at first instance in this case. However, the Commissioner, as have other agencies at times, questions the appropriateness of the same philosophy being extended to the appeals level of the Tribunal.

22 The Commissioner submits, in essence, that the discretion provided by s 29(1)(b) should be exercised so as to contain the costs he is required to bear in defending an appeal of such a weak kind. The Commissioner submits:

‘The appellant had the benefit of a well-reasoned decision of the Tribunal considering his claims. He gave no reason why the decision was in error.’

23 In our view this was an unmeritorious appeal. There was no point of law raised or point going to the factual determinations of the Tribunal which could give rise to any concern. The only point that had some possible merit was the criticism of the Tribunal’s reasons as they concerned the penalty. The Tribunal did not explain itself on this point. But we accept, having reviewed the underlying file and taking note of the information provided by Ms Baker for the Commissioner, that this element of the original decision was never really agitated as a separate point at first instance. Mr Elskaf’s challenge related to the primary decision of the Commissioner. On closer examination, as the Appeal Panel has done, it is apparent that the penalty was, in fact, a quite reasonable one in the circumstances, and the Tribunal’s conclusion was clearly correct.

24 In these circumstances, in our view the application made by the Commissioner should be granted. The Commissioner does not seek the full costs of defending appeal; but rather the amount of $1250 is sought, representing 5 hours of preparation and appearance by a solicitor advocate employed by the Crown Solicitor’s Office. This amount is in our view reasonable.

Order

1. Appeal dismissed.

2. Appellant to pay the respondent’s costs of the appeal in the sum of $1250.