John Mastoris v the Commissioner for Act Revenue (Administrative Review) - [2010] ACAT 75

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

JOHN MASTORIS V THE COMMISSIONER FOR ACT REVENUE (Administrative Review) [2010] ACAT 75

AT10/18
Catchwords: Administrative review - land tax liability - intention to enter legal relationship

Land Tax Act 2004 S 7
Toll (FGCT) Pty Limited v Alphapharm Pty Limited and Ors

[2004] HCA 52

Tribunal: Mr Brian Hatch, Senior Member

Date of Orders: 1 November 2010
Date of Reasons for Decision: 1 November 2010

AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL )

AT10/18

BETWEEN:

JOHN MASTORIS
Applicant

AND:

COMMISSIONER FOR ACT REVENUE
Respondent

TRIBUNAL: Mr Brian Hatch, Senior Member

DATE: 1 November 2010

ORDER

1. The Decision under Review is Set Aside and the following substitute decision is made:
The property at Block 37 Section 96 Ainslie was not subject to land tax under the Rates and Land Tax Act 1926 or the Land Tax Act 2004 from July 2000 to December 2008.

………………………………..
Brian Hatch

Senior Member

REASONS FOR DECISION

This is a review of a decision of the Respondent of 15 December 2009. That decision was as a result of an objection lodged by the Applicant to the original decision of the Respondent of 23 March 2009 to impose land tax, interest and penalties in relation to Block 37 Section 96 Ainslie, being 3 Dibbs Street Ainslie(the property).
The Applicant purchased the property in 2000. The Respondent made a search of ACTEWAGL records which show that the account for certain utilities from 15 September 2009 had been in the name of “G Servos” until about December 2009. During that time until December 2009 the house was occupied by George and Paula Servos. Paula Servos is the sister of the Applicant.
The Applicant made a statement that was tendered into evidence (Ex 1) and he also gave evidence. His evidence is that he comes from a family which is very close, and he said that is partly due to the family’s Greek background. The Applicant is a truck driver and he has always lived at home with his parents, including up to the present time when he is in a defacto relationship and his defacto wife is expecting their first child.
In 2000 the Applicant says that his mother told him to buy a house and that it should be rented. The house at 3 Dibbs Street was purchased and it was in poor condition. The house cost $179,000.00 and the Applicant borrowed more than that to purchase the house. The Applicant said that his mother provided security for the purchase through the family home in McKellar.
According to the Applicant the previous owner of the property was an elderly lady who stayed beyond settlement. After she moved out, and it is not clear to me that the Applicant’s recollection of the elderly lady staying much past settlement occurred if at all, the Applicant undertook some repairs to the house to ready it to be rented.

The Applicant gave evidence that his sister had given him $4,000.00 for his 21^st birthday. The Applicant was born on 26 July 1977. The Applicant’s sister Paula, Mrs Zervos, also gave evidence that she gave the Applicant the $4,000.00.
From the time of the purchase the Applicant was paying $2,000.00 per month for the mortgage. Mrs Zervos and her husband George and one child needed somewhere to live and the Applicant agreed that they could live in the property. According to the Applicant he gave little thought as to how long this would be for and he gave no thought as to Mrs Zervos paying rent. The Applicant says that at that time he had enough money and things were going well. In addition, as Mrs Zervos had given him the $4,000.00 he clearly felt good will towards her. The Applicant gave evidence that he did not expect his sister to pay rent.
Mr and Mrs Zervos told the Applicant that they needed some time to undertake extensive renovations to a house in Sydney owned by Mr Zervos’s parents. The intention was for that house to be occupied by those parents on the ground floor and with Mr and Mrs Zervos on the first floor. The Applicant expected that they would move to Sydney once those renovations where completed. The evidence suggested to me that upto a year was contemplated, although it is unclear whether this was explicitly discussed between the Applicant and Mr and Mrs Zervos.
The Sydney renovations were a disaster. A lot of money was borrowed and things went badly and much money was lost. It seems a lot of money was paid to the builder who then went broke and the money was lost. At the same time Paula and George Zervos were expecting their second child. Further, Mrs Zervos had a hairdressing salon in Manuka. That salon was not a good business proposition according to Mrs Zervos. The Applicant realised the extent of the problem at the salon when Mrs Zervos asked him if she could borrow money from him for the rent for the salon.
Then the Applicant’s trucking business went bad and he had problems meeting his financial obligations. Again, I found it difficult to know the time at which this occurred but it may have been the reason that the Applicant re-financed the borrowing for the property in 2004. The Applicant gave evidence that he went to the salon on a few occasions to confront his sister, and that he got very angry. He gave evidence that his mother then spoke to him about all the problems Mrs Zervos was having, and as a result he did not confront these issues again in that way. He did not really confront these issues in any real way again, it seems.
Eventually a fight ensued between the Applicant and Mrs Zervos in 2008. Mrs Zervos and her family then moved to a house in Latham owned by the Applicant’s parents, this occurred in about December 2008. The Applicant’s mother told the Applicant that Mrs Zervos and her family were not paying rent and could not afford a bond.
In 2004 the Applicant refinanced the property. The loan application is in the Tribunal documents. Those documents have the Applicant saying that the property is rented for $350.00 per week, and that he is the owner/manager of a fast food shop. The Applicant said that he signed the loan application but did not closely read it. The Applicant now says that he never received rent and that he worked for his parents in their fast food shop, as he still does but he has never been an owner or manager. He says that he relied on the advice of the mortgage broker who filled out the forms on his behalf. The hand writing on the forms shows that the Applicant did not complete the form, although he clearly signed it.
The Applicant gave evidence that he has never paid rent while living with his parents.
Mrs Paula Zervos gave evidence. She lives in Latham with her husband and 3 children. She is 7 years older than the Applicant and lived at home with her parents until the age of 30, including the last period when she was married and they had their first child. After that time she moved to Dibbs Street with her husband and first child. They lived there for about 8 to 9 years.
At that time Mrs Zervos was not sure if the salon would be successful, but in the long run it was never very successful. At the same time she and her husband borrowed money to renovate the Sydney house for her and George and his parents. The money was paid over and the builder went broke. They can no longer afford to do any work to that house, over $500,000.00 is owed and George’s parents are now elderly and it is there wish to stay in the house until they die.
Mrs Zervos gave evidence that when she moved into the property there was no discussion about paying rent. The Applicant thought they would leave within a year, according to Mrs Zervos. In about 2005 Mrs Zervos went to Centrelink to seek assistance. She gave evidence that she was told that as she was paying over $4,000.00 per month for the Sydney mortgage, she was eligible for rental assistance. This evidence seemed confused to me but I accept that for whatever reason Mrs Zervos claimed rental assistance, even though she says that she was not paying rent. Eventually Centrelink recovered that amount from her.
Mrs Zervos gave evidence that her life is a mess and that she has been drowning in debt for 10 years.
The Applicant’s defacto wife Ms Rozi Dukic gave evidence. She has lived with the Applicant at McKellar for 18 months. Ms Dukic attempted to assist the Applicant. She tried to get an understanding of what had occurred. She gave evidence that by the time she was trying to piece together the story the issue was already very heated in the family and the discussion between the Applicant and his parents would begin in English and as it became more angry and heated would be argued in Greek, the native language of the Applicant’s parents. Ms Dukic does not understand Greek.
As a result Ms Dukic dealt with the Respondent on a number of occasions and at one point said that rent of $350.00 was being paid. Ms Dukic gave evidence that over the years she was told a number of things and that most of the discussions were heated and filled with frustration and that she heard multiple points of view.
The Land Tax Act 2004 and its predecessor impose land tax on rented property. The prior legislation was much the same and I do not see any need to distinguish between the old and current legislation. The relevant definitions under the Land Tax Act are:
Definitions for pt 2
In this part:
rent means valuable consideration for which a tenant is liable under a tenancy agreement in relation to the tenancy or a period of the tenancy.
tenancy agreement—
(a)means an agreement under which a person grants to someone else for value a right of occupation of a parcel of land for use as a residence—
(i)whether the right of occupation is exclusive or not; and
(ii)whether the agreement is express or implied; and
(iii)whether the agreement is in writing, is oral, or is partly in writing and partly oral; but
(b)does not include an agreement giving a right of occupation only as a boarder or lodger.
tenant means a person with a right of occupation under a tenancy agreement.
Mr Livingston appeared for the Applicant. He submitted that the Applicant is a simple man who is angry at the situation in which he finds himself. Having seen the Applicant give evidence I accept that he is an unsophisticated man. The evidence of his defacto wife supports this view. In addition he is a man with a strong sense of family responsibility and this extended to the point of taking his mother’s advice to buy a house and then again heed her advice to not make life more difficult for his sister by forcing her to leave the property.
Mr Livingston also made submissions that the Evidence of Mrs Zervos shows her to be distressed and ashamed. I accept that submission. I further formed the view that while Mrs Zervos attended and gave evidence she was not happy to do so and that any relationship she now has with the Applicant is at best strained.
I further formed the view that each witness gave evidence without any suggestion that there had been any collusion between them. Mr Livingston also made that submission, and I also noted that the Applicant and Mrs Zervos did not agree about the detail of the $4,000.00 amount. Each seemed to have a different time frame as to when it was given. Had these witnesses colluded in any way I would have expected them to have at least got that detail correct. I was left with the impression that these 2 witnesses were trying to be truthful, and that their relationship is such that rather than collude they probably never talk to each other than to be polite in the presence of family at family gatherings, perhaps not even then.
Mrs Zervos gave her brother $4,000.00. The Respondent contended that the $4,000.00 was paid as rent for the property. Some of the evidence was to the issue as to whether the $4,000.00 was to assist in purchasing the property and the benefit to Mrs Zervos was occupation of the property. I do not accept that. I find the $4,000.00 was a gift, with no expectation by Mrs Zervos as to anything in return.
The role of Ms Dukic was to do no more than try to help. In this she failed through no fault of her own. Her attempts to sort out the mess, as she seems to have seen it, made matters worse as she left the Respondent with the view that rent was being paid, or at least it was meant to be paid and was being avoided by Mr and Mrs Zervos. Ms Dukic was trying to balance the emotions in a family in which she was the new-comer, in circumstances where those emotions meant she had difficulties understanding what had occurred. This was clearly made worse by the language barrier.
Dr Jarvis for the Respondent submitted that the telling documents were the loan application. The Applicant signed documents saying that he was receiving rent for the property. Dr Jarvis referred to Toll (FGCT) Pty Limited v Alphapharm Pty Limited and Ors [2004] HCA 52. That case sets out the law as to execution of documents. Two paragraphs are worth setting out:

42. Consistent with this objective approach to the determination of the rights and liabilities of contracting parties is the significance which the law attaches to the signature (or execution) of a contractual document. In Parker v South Eastern Railway Company(1877) 2 CPD 416 at 421 Mellish LJ drew a significant distinction as follows:
"In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents. The parties may, however, reduce their agreement into writing, so that the writing constitutes the sole evidence of the agreement, without signing it; but in that case there must be evidence independently of the agreement itself to prove that the defendant has assented to it."

47. The importance which, for a very long time, [1998] 4 VR 661 at 667. the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature.[1998] 4 VR 661 at 667. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.

These cases deal with the relationship between the contracting parties. The issue is whether there is privity of contract. This may not necessarily be a universal rule but it is applicable in this case. Had the lender concerned brought some sort of action based on the loan application then the outcome may be quite different, but in this case a party with no relationship to the loan contract is seeking to rely upon a document which formed part of the contract. I do not consider that the Respondent can rely upon the loan application in that way.
The Respondent is attempting to suggest that the Applicant has not been truthful in regard to the relationship between himself and his sister with respect to the arrangement as to whether rent was to be paid. That is a valid argument, but having seen the Applicant and his sister and the Applicant’s defacto give evidence I have formed the view that no legal relationship ever existed between the Applicant and his sister and that there was probably never any intention for a legal relationship to exist. At some time the Applicant seemed to want the arrangement to be formalised but he was thwarted by his mother, and also his sister who never expected a legal relationship to exist.
In this matter I find that there was no tenancy agreement or rent payable in the terms of the Land Tax act 2004. The circumstances in which Mr and Mrs Zervos lived in the property was not an arrangement whereby the property is subject to land tax and accordingly I set aside the Decision under review.

………………………………..
Mr B. Hatch

Senior Member

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A FILE NO: AT 10/18

APPLICANT: JOHN MASTORIS
RESPONDENT: COMMISSIONER FOR ACT REVENUE

COUNSEL APPEARING: APPLICANT:

RESPONDENT:

SOLICITORS: APPLICANT: Ms L. Tomlins, ACT Government Solicitor

RESPONDENT: Mr Harris, O’Connor

OTHER: APPLICANT:

RESPONDENT:
TRIBUNAL MEMBER/S: Mr B. Hatch, Senior Member

DATE/S OF HEARING: 6 & 7 Sept 2010 PLACE: CANBERRA

DATE/S OF DECISION: 1 November 2010 PLACE: CANBERRA

PART B

RECOMMENDATION:

FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )

COMMENTS: