Fresh Fields Aged Care Pty Ltd and Commissioner Of State Revenue - [2008] WASAT 263

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION: FRESH FIELDS AGED CARE PTY LTD and COMMISSIONER OF STATE REVENUE [2008] WASAT 263

MEMBER: JUDGE J CHANEY (DEPUTY PRESIDENT)

HEARD: 25 AUGUST 2008

DELIVERED : 11 NOVEMBER 2008

FILE NO/S: CC 349 of 2008

BETWEEN: FRESH FIELDS AGED CARE PTY LTD
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Stamp duty Sale agreement Sale of aged care places Whether places properly situated in Western Australia Nature of places Whether places simply a component of entitlement to aged care subsidies Most definite association test

Legislation:

Aged Care Act 1997 (Cth), Pt 2.2 Div 16, Pt 2.3, s 21, s 126, s 14, s 16, s 171, s 211, s 413, s 421(1), s 431(2), s 434, s 442, s 961
Broadcasting and Television Act 1942 (Cth)
Duties Act 2008 (WA)
Stamp Act 1921 (WA), s 16, Second Schedule, Third Schedule
Stamp Duties Act 1920 (NSW)

Result:

Assessment confirmed

Category: B

Representation:

Counsel:

Applicant: Mr M Richards and Mr T MacFarlane
Respondent: Ms C L Conley

Solicitors:

Applicant: Corrs Chambers Westgarth
Respondent: State Solicitor's Office

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

2 Day FM Australia Pty Ltd v Commissioner of Stamp Duties (NSW) (1989) 20 ATR 1131
McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

Fresh Fields Aged Care Pty Ltd sought a review of the decision of the Commissioner of State Revenue to treat a sale of 'Places' under the Aged Care Act 1997 (Cth) as the sale of property situated in Western Australia for stamp duty purposes. The applicant contended that, because Places were simply a mechanism to gain an entitlement to a Commonwealth aged care subsidy, they were property situated either in the Australian Capital Territory or the Commonwealth generally.
The Tribunal examined the provisions of the Aged Care Act 1997 (Cth) and concluded that the essential connection between the Places and the location where services were provided meant that the Places were most definitely associated with Western Australia and were property situated in Western Australia for the purposes of the Stamp Act 1921 (WA).
Accordingly, the Tribunal upheld the Commissioner's determination.

The issue

The issue in these proceedings is whether high care 'Places' under the Aged Care Act 1997 (Cth) (AC Act) which were purchased by the applicant from Western Health Care Group Ltd pursuant to an agreement dated 17 July 2002 (Agreement) are 'property situated in Western Australia' for the purposes of the Stamp Act 1921 (WA) (Stamp Act).

Background

The Cabrini Aged Care facility is a business which provides geriatric and aged care services in Western Australia.
On 17 July 2002, Western Health Care Group Pty Ltd (WHCG) entered into the Agreement with Fresh Fields Aged Care Pty Ltd (Fresh Fields) for the sale and purchase of the Cabrini Aged Care facility. Each of the parties to the Agreement is located in Western Australia and the Agreement was executed in Western Australia.
By cl 2.1 of the Agreement, WHCG sold, and Fresh Fields purchased, the business of the Cabrini Aged Care facility as a going concern together with all rights attaching to the business including, without limitation, the Assets. The Assets were defined to include business names, business records, contract benefits, goodwill, the 'Licences' and the Tangible Assets.
The parties allocated the whole of the purchase price of $892,119.50 entirely to the Licences. The reason for that allocation was that it was at all times intended to relocate the places from the premises where the Cabrini facility was being operated in Maylands to the Ascot Nursing Home premises operated by the WHCG or some related entity.
Clause 1.1 of the Agreement defined 'Licenses' to include 38 high care Places used by WHCG in the operation of the business. 'Places' were defined to bear the meaning of that term as defined under the AC Act. Under cl 5.1(c)(i) of the Agreement, it was a condition precedent to completion of the sale that the consent or approval in principle to the transfer be first issued by the relevant competent authority 'so as to permit the purchaser to lawfully and properly operate the business'.
Under cl 19.8 of the Agreement, the Agreement is to be construed in accordance with the laws applicable in Western Australia.
Around 25 June 2004, Fresh Fields applied to the Department of Health Care and Ageing under s 16‑2 of the AC Act for a transfer of the Places from WHCG to Fresh Fields. The transfer was approved on or about 22 July 2004 and the Agreement was completed on 12 August 2004.
On 19 July 2004, the Commissioner assessed stamp duty on the Agreement in the sum of $42,871 as an Agreement for the sale of property in Western Australia, being the Places, for a consideration of $892,119.50. The applicant applied for reassessment of the duty, but the Commissioner assessed the original application as correct. The subsequent objection to the assessment was disallowed. The applicant brings these proceedings for a review of that decision.

Relevant provisions of the Stamp Act

Liability of the Agreement to stamp duty is governed by the provisions of the Stamp Act. Although the Stamp Act ceased operation upon the coming into force of the Duties Act 2008 (WA), execution of the Agreement pre-dated the legislative change and the provisions of the Stamp Act are to be applied to assess the duty payable.
Section 16 of the Stamp Act provides that duties are to be charged on instruments specified in the Second Schedule in accordance with the duties specified by that schedule.
Conveyances or transfers of property are specified by Item 4 of the Second Schedule as instruments attracting duty calculated at the rate specified in the Second Schedule.
A conveyance or transfer of any estate or interest in any real or personal property locally situated out of Western Australia is exempt from stamp duty Item 2(7) of the Third Schedule of the Stamp Act. It is that exemption which gives rise to the issue in these proceedings.

The Places are property

The applicant concedes, in my view rightly, that Places under the AC Act are property for the purposes of the Stamp Act. Thus the sole question for determination is where the property is locally situated.

The test as to situation of the property

The parties were agreed that, for proprietary rights not associated with a tangible object, 'conventional rules have been adopted by which (the property) is regarded as situated in the Place with which it is most definitely associated' - see McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192 at 201 per Jordan CJ; 2 Day FM Australia Pty Ltd v Commissioner of Stamp Duties (NSW) (1989) 20 ATR 1131 (2 Day FM) at 1137 per Sully J. I accept that that is the appropriate test.

The Aged Care Act

In order to identify where the Places are most definitely associated, regard must be had to the legislative scheme of the AC Act.
The objects of the AC Act are set out in s 2-1. Amongst those objects is the provision of funding of aged care taking account of a number of considerations. The objects also include planning effectively for the delivery of aged care services in areas of greatest need, and the avoidance of duplication of services.
The expression 'aged care' is defined to mean 'residential care', 'community care' or 'flexible care'. 'Residential care' is relevant to this case, and is defined by s 41-3 to mean:
… personal care or nursing care, or both personal care and nursing care, that:
(a)is provided to a person in a residential facility in which the person is also provided with accommodation that includes:
(i)appropriate staffing to meet the nursing and personal care needs of the person; and
(ii) meals and cleaning services; and
(iii)furnishings, furniture and equipment for the provision of that care and accommodation; and
(b)meets any other requirements specified in the Residential Care Subsidy Principles.
The word 'care' is defined to mean:
… services, or accommodation and services, provided to a person whose physical, mental or social functioning is affected to such a degree that the person cannot maintain himself or herself independently.
Chapter 3 of the AC Act deals with the payment by the Commonwealth of subsidies to approved providers of residential care. Section 42-1(1) sets out the circumstances in which a person is eligible for a residential care subsidy. That section provides:
An approved provider is eligible for *residential care subsidy in respect of a day if the Secretary is satisfied that, during that day:
(a)the approved provider holds an allocation of *Places for residential care subsidy that is in force under Part 2.2 (not being a *provisional allocation); and
(b)the approved provider provides residential care to a care recipient in respect of whom an approval is in force under Part 2.3 as a recipient of residential care; and
(c)the residential care service through which the care is provided meets its *accreditation requirement (if any) applying at that time (see section 42‑4).
Section 43‑1(2) provides that residential care subsidies are separately payable by the Commonwealth in respect of each residential care service through which the approved provider provides residential care.
Both WHCG and Fresh Fields were, at the relevant time, approved providers.
'Place' is defined to mean '… a capacity within an aged care service for the provision of residential care, community care or flexible care to an individual' - Schedule 1 of the AC Act. The expression 'capacity' is not defined.
The allocation of Places to an approved provider is dealt with by Pt 2.2 of the AC Act and the Allocation Principles made by the Minister for Health and Aged Care under s 96‑1 of the AC Act. Section 14‑1 empowers the Secretary of the Department to allocate Places in respect of particular types of subsidy under ch 3 to a person 'to provide aged care services to a region'. Regions within a state or territory are determined by the Secretary under s 12‑6, but in default of a determination, the whole of a state or territory comprises a region. The allocation of Places must be one that the Secretary is satisfied would best meet the needs of the aged care community in the region concerned ‑ see s 14‑1(3).
It is a condition of every allocation of a Place that the Place is allocated in respect of a specific location, a particular aged care service and also that any care provided, in respect of the Place, must be provided in that location and through that service ‑ see s 14‑5(3).
A subsidy cannot be paid to an approved provider for providing residential care to a person unless that person is approved under Pt 2.3 (s 21‑1).
The amount of the residential care subsidy payable to an approved provider is calculated in accordance with the formula set out in s 44‑2. Section 43‑4 requires that the provider submit a claim in an approved form to the Secretary each month. The AC Act does not specify that the subsidy be actually applied to a particular aged care service to which the Places were allocated. Given that the amount paid is calculated taking into account the days during the period of the claim that care was provided to each recipient in respect of whom there was eligibility for the subsidy, it is clear that the scheme of the AC Act is that the subsidy amounts, in effect, to reimbursement for the costs of providing that care at the specified location.
Part 2.2 Division 16 of the AC Act deals with how allocated Places are transferred from one person to another. Section 16‑1 provides:
(1)A transfer of an allocated *Place from one person to another is of no effect unless it is approved by the Secretary.
(2)The Secretary must approve the transfer of a *Place if, and only if:
(a)an allocation of that Place has taken effect under Division 15; and
(b) an application for transfer is made under section 16‑2; and
(c)the Secretary is satisfied under section 16‑4 that the transfer is justified in the circumstances; and
(d)the transferee is an approved provider when the transfer is completed; and
(e)the transfer would not have the effect of the care to which the Place relates being provided in a different State or Territory.
(3)If the transfer is approved:
(a)the transferee is taken, from the transfer day (see section 16‑7), to be the person to whom the *Place is allocated under this Division; and
(b)if, as part of the transfer, approval is sought for one or more variations of the conditions to which the allocation is subject under section 14‑5 - the Secretary is taken to have made such variation of the conditions as is specified in the instrument of approval.
It is significant that it is a precondition to approval of a transfer that the transfer not have the effect of the care to which the Place relates being provided in a different state or territory. The same precondition applies to approval under s 17‑1 of the variation of the conditions to which the allocation of a Place is subject.
Section 16‑11 provides that on transfer, any entitlement of the transferor to a subsidy under ch 3 passes to the transferee, and the transferee assumes certain specified obligations of the transferor.
From that analysis, it can be seen that the holding of an allocation of Places for the residential care subsidy is one of a number of preconditions to an entitlement to a residential care subsidy. The other preconditions are that the provider must be approved, the care must be provided to an approved care recipient, and the care must be provided through an accredited residential care service. The entitlement to a subsidy is dependent upon the provisions of services at the location to which the relevant Place attaches.

Application of the most definite association test

The applicant submits, and I accept, that in order to determine the location of intangible property for stamp duty purposes, it is necessary to examine the nature of the property right being conveyed and the matters which connect it to one jurisdiction or another, having regard to substance and not form. In my view, however, that approach leads to the conclusion that Places allocated to a region within Western Australia are property situated in Western Australia.
The applicant relied upon a witness statement of Mr Guy Matthew Tuxworth, the Director Corporate Planning and Development of Hall and Prior Aged Care Group, of which Fresh Fields 'operates as a subsidiary'. Mr Tuxworth stated, and I accept, that if subsidies were not provided, the provision of aged care services to residents at aged care facilities such as the Cabrini facility, would not be economically viable to the Hall and Prior group. A report to the Minister for Ageing by Professor WP Hogan, dated 5 April 2004, reports that providers obtain 75% of their income from subsidies, with the balance from care fees and accommodation charges paid by residents. It can be accepted that the viability of the provision of residential aged care services is dependent upon the receipt of subsidies.
The applicant contends that the true nature of Places is that they are merely incidental machinery regulating the manner in which a holder can make a claim against the Commonwealth for a subsidy under the AC Act. It contends that Places are distinguishable from the statutory licence the subject of the 2 Day FM decision upon which the Commissioner relied.
2 Day FM concerned a question whether a commercial broadcasting licence issued under the Broadcasting and Television Act 1942 (Cth) (BT Act) was 'property in NSW' so that an agreement for its sale attracted ad valorem duty under the Stamp Duties Act 1920 (NSW). The BT Act prohibited broadcasting without a licence, and Sully J concluded that the licence conferred upon the grantee or transferee a transferable personal right to use, to the exclusion of all others, the airwaves in an appointed area for the transmission of commercial radio broadcasts. It was a real and valuable commercial right which constituted property for the purposes of the Act. As to the location of the property, Sully J rejected an argument that because the source of the right arose under Commonwealth legislation, the licence was property situated in the Commonwealth rather than in NSW. His Honour concluded that by reason of the fact that the licence conferred an exclusive right to operate the particular licensed service in a specifically designated area of NSW, it was property in NSW. His Honour also relied upon a recital to the Agreement under consideration that the vendor carried on the business in NSW of the operation of commercial radio broadcasting.
The applicant contends that a Place under the AC Act is property of a different nature from the licence considered in 2 Day FM. The distinction lies in the fact that, unlike the commercial broadcasting licence, a Place under the Act does not confer a right to do something in a particular location. Rather, the holding of a Place constitutes fulfilment of one of the several prerequisites to payment of a subsidy by the Commonwealth. Fresh Fields contends that the factors that should be taken into account in determining the jurisdiction with which the Places are most definitely associated are:
(a)Places allocated under the AC Act exist by virtue of a grant from the Crown in right of the Commonwealth;
(b)Places are allocated in respect of a particular type of subsidy payable by the Commonwealth under Chapter 3 of the Act, and the only purpose served by an allocation of Places is to enable an aged care provider to claim the subsidy;
(c) the subsidy is a claim against the Crown in right of the Commonwealth;
(d)while Places are allocated to a particular aged care service at a specified location in a particular state or territory, and cannot be transferred to another aged care service outside that state or territory, there is no requirement that the subsidy to which the Places relate be used in that particular aged care service (or the state or territory where it is located) – it can be used in another state or territory if the aged care provider so chooses;
(e)what is of value to an aged care provider is not the Places themselves but the subsidy to which they relate.
The location of the provision of residential care and the proper distribution of residential services throughout different states and territories clearly forms part of the scheme of the AC Act. The allocation of Places is an integral part of that scheme ‑ see s 16‑1 and s 17‑1. Places are allocated by reference to the particular aged care service to be provided in particular locations ‑ s 14-1 and s14‑5(3). From a practical perspective, as Mr Tuxworth deposed, residential aged care can only be viably provided in any particular location if Places are allocated for the recipients of those services so that funding by way of subsidies can be obtained. They are described by the AC Act as being 'a capacity' to provide care. In a practical sense, they amount to a capacity to provide care services in an economically viable way at a particular location.
The contentions by the applicant do not, in my view, give sufficient weight to the proscription on transfer of a Place if the transfer would result in services being provided in a different state or territory, or the linkage between an allocated place and the locations where the relevant services must be provided. In substance, an allocated Place can only exist so long as it remains tied to the provision of services within the state in respect of which it has been allocated.

The applicant relies upon the proposition that there is no requirement that the subsidy to which the Place relates be spent in a particular aged care service. The difficulty with that argument is that the subsidy is paid in respect of services which have already been performed. Those services that have been performed and the costs of those services incurred, at the location to which the Places are attached. The fact that a provider may mix funds received by way of subsidies from services in various states does not seem to me greatly to matter. What is important is that subsidies can only be claimed as a result of services having been provided in the particular location to which the allocated Place applies.
As has been observed, the allocation of a Place is an essential prerequisite to an entitlement to receive a subsidy from the Commonwealth. As the applicant rightly acknowledged, it is not the only prerequisite. I do not agree that the only purpose of the allocation of a place is to enable an aged care provider to claim a subsidy. The provisions of the AC Act referred to above demonstrate that the allocation of Places to specific regions is a mechanism by which the Commonwealth controls the geographic distribution of aged care services. Places are inextricably linked to the location at which aged care services are provided. Even though there may be a distinction in the precise character of the Places when compared to the licence in 2 Day FM, the geographic connection to the rights conveyed in each case is, in my view, determinative of the question as to where the property is most definitely associated.
The Places the subject of the Agreement were an integral part of the business of the Cabrini Aged Care facility, a business conducted in Western Australia. The Places, which could only be applied to services provided within Western Australia, constitute property most definitely associated with Western Australia.
It follows that the Commissioner's decision to disallow the objection to the assessment should be affirmed, and the application for review should be dismissed.

I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE J CHANEY, DEPUTY PRESIDENT