Maguire v Commissioner, Office of State Revenue

[2001] NSWADT 172

CITATION:	Maguire -v- Commissioner, Office of State Revenue [2001] NSWADT 172
DIVISION:	General Division
PARTIES:	APPLICANTS Mark Maguire Julia Maguire RESPONDENT Commissioner, Office of State Revenue
FILE NUMBER:	013118
HEARING DATES:	18/06/2001
SUBMISSIONS CLOSED:	06/18/2001
DATE OF DECISION:	10/19/2001
BEFORE:	Hennessy N (Deputy President)
APPLICATION:	first home owners grant - approval of application - First Home Owners Grant Act - first home owners grant - approval of application
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Conveyancing Act 1919 First Home Owners Grant Act 2000
CASES CITED:	Bloch -v- Bloch (1981) 37 ALR 55 Delehunt -v- Carmody (1987) ALR 253 Calverley -v- Green (1984) 155 CLR 242.) Muschinski -v- Dodds (1985) 160 CLR 583 Nelson -v- Nelson (1994) 33 NSWLR 740 Damberg v Damberg & Ors [2001] NSWCA 87 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
REPRESENTATION:	APPLICANTS S Lovett, barrister RESPONDENT I Mescher, barrister
ORDERS:	The decision of the Commissioner not to approve the applicants’ application for a first home owner grant is set aside. In substitution for that decision, a decision is made to approve the applicants’ application for a first home owner grant.

Background

1 On 27 March 2001, the Chief Commissioner, Officer of State Revenue (the Commissioner) decided not to approve Mark and Julia Maguire’s application for a First Home Owner Grant. The reason for not approving the application was that the Maguires did not meet the eligibility requirements. Mark Maguire already held a relevant interest in residential property as at 1 July 2000.

2 On 1 April 2001 the Maguires objected to the refusal of their application. They said in that letter that:
Due to a divorce settlement between his parents and family hardship, Mark was asked to sign by his Mother (Geraldene Maguire, nee: Geraldene Barnfield) a document making him a 1% owner in the property (namely 4 Jerome Avenue, Winston Hills NSW 2153) in 1992.
The State Bank at the time would not allow his Mother to continue the loan solely in her name due to an income assessment.
Mark has made no re-payments on this loan and will receive no benefits or pay out from this 1% ownership. All repayments have been deducted from Geraldene Maguire’s (nee Barnfield) bank account. His Mother has recently refinanced this loan with the bank and his name removed from the property in question.

3 The objection was not granted and on 14 May 2001, Mark and Julia Maguire applied to the Tribunal for a review of the Commissioner’s decision. Geraldene Maguire and her children, including Mark, changed their name from Barnfield (Geraldene’s married name) to Maguire (Geraldene’s maiden name) after Geraldene and her former husband Keith divorced. To avoid confusion, I will refer to members of the Maguire family by their first names.

Relevant legislation

4 Under the First Home Owner Grant Act 2000 (the Act) a first home owner grant is payable if an applicant fulfils certain eligibility criteria. Section 7(1)(a) states that:
1) A first home owner grant is payable on an application under this Act if:
(a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and
(b) the transaction for which the grant is sought:
(i) is an eligible transaction, and
(ii) has been completed.
(2) Despite subsection (1) (a), an applicant need not comply with the eligibility criteria to the extent the applicant is exempted from compliance by section 9 (2) or 12 (2) or both.
(3) Despite subsection (1) (b), a first home owner grant is payable before completion of the relevant eligible transaction, as authorised by section 20.
(4) Only one first home owner grant is payable for the same eligible transaction.

5 The exemptions in s 9(2) and s 12(2) relate to residency and citizenship and do not apply to the circumstances of this case.

6 The relevant eligibility criteria are set out in s 11(1)(a) and (b) in the following terms:
An applicant for a first home owner grant is ineligible for the grant if the applicant or the applicant's spouse has, before 1 July 2000, held:

(a) a relevant interest in residential property in New South Wales, or
(b) an interest in residential property in another State or a Territory that is a relevant interest under the corresponding law of that State or Territory.
(2) In working out for the purposes of subsection (1) whether an applicant held a relevant interest (within the meaning of this Act or a corresponding law) in residential property at a particular time, any deferment of the applicant's right of occupation (because the property was subject to a lease) is to be disregarded.
(3) An applicant is ineligible if the applicant or the applicant's spouse has, on or after 1 July 2000 and before the date on which the application is made, held an interest in property (other than property to which the application relates) used at any time on or after 1 July 2000 as the residence of the applicant or the applicant's spouse, being:
(a) a relevant interest in residential property in New South Wales, or
(b) an interest in residential property in another State or a Territory that is a relevant interest under the corresponding law of that State or Territory.
7 A relevant interest is defined in s 5(2) of the Act to include an estate in fee simple in the land. There was no dispute between the parties that Mark’s interest was an estate in fee simple in the land.

Issues

8 The main issue in the proceedings was whether s 5(2)(b) of the Act applied to the circumstances of this case. That provision states that:
An interest is not a relevant interest in the hands of a person who holds it subject to a trust.

9 If Mark held his interest subject to a trust then it would not be a relevant interest and he and Julia would be entitled to the grant. Two other issues arose in the proceedings. Briefly they were whether Mark was an “owner” of a home as defined in s 5(1) of the Act and secondly whether the Commissioner has a discretion under s 26 of the Act to approve a first home owner grant even if the eligibility criteria are not met.

Evidence

10 Keith and Geraldene purchased a home at 4 Jerome Avenue Winston Hills (the property). They had four children including Mark who is now 28 years old. In 1990 proceedings for dissolution of the marriage were filed in the Family Court. On 24 November 1992 final orders were made in the Family Court in relation to the parties’ marital assets. As a result of those orders Keith transferred his interest in the property to Geraldene. It is not clear from the evidence when this occurred. The date of execution on the transfer document has not been completed.

11 Geraldene subsequently transferred 1/100 of her interest to Mark as a tenant in common on 18 October 1993. That transfer was registered on 13 December 1993.

12 Geraldene gave evidence that when she applied to the State Bank for a home loan of approximately $80,000 to pay out her ex-husband, the bank refused to give her the loan. When she asked again, someone at the Bank suggested that she would be eligible for the loan if another person’s name was on the mortgage as well. Initially, one of Geraldene’s daughters, Donna, agreed to do what the bank asked, but by the time the matter was ready to proceed she was no longer employed. Geraldene then asked Mark if he would sign the mortgage so that she could get the loan. Mark agreed and the mortgage was executed in their joint names on 18 October 1993 and registered on 13 December 1993.

13 Geraldene said that it was her intention that she would continue to own the house and Mark would have his name taken off the title eventually. She said she always intended to leave the house equally to her four children when she died.

14 Geraldene gave evidence that Mark did not pay her any money when she transferred to him a 1% interest in the property as tenants in common. Mark did not make any contribution to the mortgage payments, stamp duty, insurance or any of the household bills. He did pay board of $30 a week initially, rising to $50 a week later on. Mortgage repayments were automatically transferred from Geraldene’s bank account into the loan account.

15 Mark gave evidence that after his parents divorced, he was told that it had been agreed that Geraldene would buy Keith’s share of the property. Geraldene told him that the bank required another name on the mortgage. Mark said that he thought he was a guarantor of the loan and that if Geraldene could not repay, the Bank would “come after” him. Mark said that it was never his understanding that he owned part of the house or that he had a right to the house. He did not receive any legal advice about this matter.

16 Mark said that he did not make any contribution to mortgage repayments. He did pay board which he considered was to help cover expenses such as food and hot water. On 26 August 2001 Mark’s interest in the property was transferred back to Geraldene.

17 The documentary evidence in this matter consisted of statements from Geraldene and Mark and five bundles of documents. These bundles were:

• copy of mortgage and memorandum dated 18/10/93 showing Mark and Geraldene as mortgagors and the State Bank of NSW as mortgagee;
• various insurance and rate notices showing Geraldene as having paid amounts due;
• various cheque butts from Geraldene’s bank account for the period 1993 to 1997 for payment of matters including stamp duty, house insurance, water rates, council rates, electricity and phone bills;
• two transfer documents relating to 4 Jerome Place, Winston Hills (the property); the first showing Keith and Geraldene as joint tenants as the transferor and Geraldene as the transferee (pursuant to a Family Court order dated 24/11/92); and the second dated 18/10/1993 showing Geraldene as transferor and Mark as transferee of 1/100 share of the property; and
• numerous bank statements covering various periods from 1994 to 1999.

Financial Arrangements

18 This evidence was largely unchallenged, however findings need to be made about whether Mark was a guarantor of Geraldene’s loan. Mark gave evidence that he believed he was acting as guarantor for Geraldene, in order for her to obtain the necessary finance. However, other evidence reveals that this was not the case. Mark and Geraldene executed a mortgage over the property as security for the bank loan used to purchase Keith’s share of the property. This was a mortgage for which Mark and Geraldene were jointly and severally liable.

19 This arrangement, and the request from the bank that Mark be registered as having a 1% interest in the property, is what distinguishes Mark’s financial obligation as one of joint mortgagor from that of a guarantor. The fact that Mark was a joint mortgagor is relevant to the issue of whether Mark can be said to have contributed to the purchase price of Keith’s share of the property.

Ownership

20 One of the applicants’ submissions was that although Mark had an estate in fee simple in the property, he did not “own” the property within the ordinary meaning of that word in s 5(1) of the Act. The applicants’ arguments on this point are set out in their written submissions.

21 Section 5(1) of the Act 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.” Relevant interest is defined in s 5(2) to include “an estate in fee simple in the land”. Both parties agreed that a 1% tenancy in common of the property is an “estate in fee simple” in the land. Consequently that interest is a “relevant interest” unless it comes within an exception. The ordinary meaning of “owner” is irrelevant if the applicant comes within the legal definition of a home owner.

Discretion of the Commissioner

22 The second issue raised by the applicant was whether the Commissioner should have allowed the objection under s 26 of the Act. The applicant’s submission was that the Commissioner has a discretion under s 26 to allow an objection even if the applicant is not strictly eligible for the grant. Section 17(1) of the Act requires the Commissioner to pay the grant if he or she is satisfied that a grant is payable.

23 There is provision in the Act for an applicant to object to the Commissioner’s decision if he or she is dissatisfied with that decision: s 25. Section 26 allows the Commissioner to allow or disallow the objection. That section sates that:
After considering an objection, the Chief Commissioner may:

(a) allow the objection in whole or in part or may disallow the objection, and
(b) accordingly reverse, vary or confirm the decision (the original decision) to which the objection was made.
24 The applicant submitted that given the use of the word “may” in s 26, the Commissioner has a discretion to allow an objection even if the applicant does not meet the eligibility criteria. In support of this submission, the applicant’s representative pointed out that the purpose of the Act, as evidenced by its long title, is
. . . to encourage and assist home ownership, and to offset the effect of the Goods and Services Tax on the acquisition of a first home, by establishing a scheme for the payment of grants to first home owners; to amend the Stamp Duties Act 1920 to exempt such grants from financial institutions duty; and for other purposes

25 The applicant’s representative pointed to other provisions of the Act which used the word “may” (s 23) and “must” (s 17) to highlight their submission that when “may” is use it gives the administrator a discretion, whereas when “must” is used, no such discretion is conferred.

26 The respondent’s submission, with which I agree, was that the discretion in s 26(1) cannot be exercised to override the eligibility criteria which are a pre-requisite to a grant being made. The discretions can operate for example where statutory discretions have been exercised erroneously at first instance or the Commissioner has simply made a mistake about eligibility requirements. It would undermine the intention of the legislative scheme for the Commissioner to have an unfettered discretion to approve a grant when the eligibility requirements have not been met.

Resulting trust

27 The main issue in these proceedings is whether the exception in s 5(3) applies to the facts of this case. That provision states that “an interest is not a relevant interest in the hands of a person who holds it subject to a trust.” The question is whether Mark held his 1% interest on trust for the benefit of himself and/or another person.

28 Both parties agreed that the word “trust” in s 5(3) should be interpreted broadly to cover any type of trust, including a “resulting” trust. Under s 28(3) of the Act, the onus is on the applicant to prove, on the balance of probabilities, that Mark held the 1% interest in the property subject to a trust.

29 The applicants submitted that the evidence raises the presumption of a resulting trust and it is up to the respondent to rebut that presumption by evidence of a contrary intention. The applicants’ representative cited examples of cases where a resulting trust was found to exist on the basis of an express oral agreements. (Bloch v Bloch (1981) 37 ALR 55; Delehunt v Carmody (1987) ALR 253; Calverly v Green (1984) 155 CLR 242.)

30 The respondent submitted that the applicant had not discharged their onus. The Commissioner said that there was insufficient evidence as to the name and location of the account from which all mortgage repayments have been made, the amount of such mortgage repayments and their deposit, if any, into the account held in the joint names of Mark and Geraldene. No evidence has been provided concerning the amount paid for the property in 1993 or the amount borrowed from the State Bank. Similarly, no State Bank documents stating the reason for the inclusion of Mark on the title to the property have been provided. In the respondent’s view, in these circumstances, the Tribunal cannot be satisfied that a resulting trust has been proved.

Reasoning and decision

31 The facts in the High Court decision of Calverley v Green (1984) 155 CLR 242 are similar to those in the present case. Mr Calverley and Miss Green lived together in a de facto relationship. They decided to move from a property owned by Mr Calverley but when Mr Calverley had trouble obtaining finance, he told Miss Green that the finance company required the purchase to be in their joint names. Mr Calverley paid a deposit out of his own funds and both parties then entered into a mortgage to finance the remainder of the purchase price. Both parties were jointly and severally liable to make mortgage repayments, but they agreed that Mr Calverley would make the repayments. The parties were registered as joint tenants of the property. Deane J at p 266-267 set out three presumptions that may be relevant in these kinds of cases:
. . . where a person pays the purchase price of a property and causes it to be transferred to another or another and himself jointly, the property is presumed to be held by the transferee or transferees upon trust for the person who provided the purchase money. The second can properly be seen as complementary of the first. It is: where two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it.
The third presumption usually called the “presumption of advancement”, is not, if viewed in isolation, strictly a presumption at all. It is simply that there are certain relationships in which equity infers that any benefit which was provided by way of "advancement” with the result that the prima facie position remains that the equitable interest is presumed to follow the legal estate and to be at home with the legal title . . .

32 In considering these presumptions, it is necessary to determine what constitutes the “purchase price” of the property. In Calverley v Green, Mason and Brennan JJ differentiated between the situation where the purchase price was paid directly by the purchasers and where the money was raised through a mortgage. Their Honours said, at p 257:
It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed.

33 Their Honours found that because part of the purchase price was borrowed from a financial institution by the parties jointly, they both contributed to the purchase price. Their Honours went on to say that:
They mortgaged that property to secure the performance of their joint and several obligation to repay principal and to pay interest. They payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased. . . .(p 257-258)
As both parties contributed to the purchase price, there could not be a resulting trust in favour of the defendant alone. (s 258)
When two or more purchasers contribute to the purchase of property and the property is conveyed to them as joint tenants the equitable presumption is that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contributions unless their contributions are equal (p 258)

34 The applicants’ representative submitted that Geraldene was the sole provider of the purchase price of the property. To support this submission, evidence was given that Geraldene had been solely responsible for the mortgage payments. In the light of the passages set out above from Mason and Brennan JJ, I cannot accept the applicants’ submission. The money (approximately $80,000) was jointly borrowed by Mark and Geraldene from the State Bank. Consequently Mark contributed to the purchase price of the property. Although Mark and Geraldene contributed equally to the $80,000 (because they were joint mortgagors) the evidence supports an inference that Geraldene and Mark contributed to the overall purchase price of the property in unequal shares. There was no evidence of the value of the house, the extent of Geraldene or Keith’s equity in the house or the amount outstanding on the loan when Keith transferred his interest to Geraldene. The only evidence was that when Geraldene approached the bank to re-finance the loan, she and Mark borrowed approximately $80,000. This amount does not represent the full purchase price of the property. I assume that it represents the value of Keith’s interest in the property plus any outstanding amount owed after discharge of the original mortgage. Because the $80,000 does not represent the full purchase price of the property, Geraldene and Mark contributed to the purchase price in unequal shares. It can also be inferred that these shares were not the same as their share in the legal interest. Assuming that Mark’s contribution was approximately $40,000, the property would have to be worth $4,000,000 for his contribution to be equal to 1/100 of an interest in the property.

35 Given that Mark and Geraldene contributed to the purchase price of the property in unequal shares, and that these shares did not correspond with their share of the legal interest in the property, Deane J’s second presumption applies. That presumption is that the property was held by Geraldene and Mark (as tenants in common) on resulting trust for Geraldene and Mark in shares corresponding to their respective contributions to the purchase price. For example, if we assume that Mark contributed one-tenth of the overall purchase price of the property and Geraldene contributed nine-tenths, Mark and Geraldene hold their legal interests on resulting trust for Mark (as to one-tenth) and Geraldene (as to nine-tenths) of the value of the property. In this case there is insufficient evidence to determine the proportion of Mark and Geraldene’s beneficial interest.

36 Further support for these conclusions can be found in a passage by Gibbs CJ in Calverley v Green at 246-47, where his Honour said:
Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money.

37 Despite Gibb CJ’s reference to a purchase in the joint names of the parties, a presumed resulting trust still arises even where the parties hold the legal title as tenants in common. In Muschinski v Dodds (1985) 160 CLR 583, Gibbs CJ stated at 589 that:
Where, on a purchase, a property is conveyed to two persons, whether as joint tenants or as tenants in common, and one of those persons has provided the whole of the purchase money, the property is presumed to be held in trust for that person, to whom I shall, for convenience, refer as "the real purchaser".

38 Applying these principles, I find that there is a presumption of a resulting trust in favour of Mark and Geraldene in shares corresponding to their respective contributions to the purchase price.

39 Once this presumption is found, the next step is to determine whether the presumption has been rebutted. The two ways in which this presumption can be rebutted are by a contrary presumption of advancement or by evidence that the parties has a contrary intention.

40 A presumption of advancement arises where the legal title is vested in someone whom the provider of the purchase price is obligated to support. Such an obligation would be imposed, for example, on a parent to support his or her child: Nelson v Nelson (1994) 33 NSWLR 740. Where this is the case, the presumption is that the property was vested as an absolute gift or as an advancement. It would then be necessary to rebut this presumption with evidence of a contrary intention: see Damberg v Damberg & Ors [2001] NSWCA 87 at para 42

41 A presumption of advancement does not arise in this case because, as Deane J said in Calverley v Green if the presumption exists, the prima facie position remains that the equitable interest is presumed to follow the legal estate and to be at home with the legal title. In this case it can be inferred that Mark provided a greater proportion of the purchase price than is reflected in his legal interest in the land. There cannot be an assumption that Geraldene gave the 1/100 interest as a gift when Mark’s contribution to the purchase price represented a greater proportion of the value of the property than was reflected in his legal interest.

42 The final question is whether the presumption that the property was held on resulting trust for Mark and Geraldene in shares corresponding to their respective contributions to the purchase price can be rebutted by evidence to the contrary. In this case the main factor relevant to determining whether the presumption is rebutted is the intention of both parties (Muschinski v Dodds (1985) 160 CLR 583 at 590 per Gibbs CJ; Calverley v Green (1984 155 CLR 242 at 261 per Mason and Brennan JJ). The time for determining the beneficial interests of the parties is the time of the transfer of the property: Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364 - 365; Calverley v Green at 251, 261, 269 - 270.)

43 As set out above, Geraldene’s evidence was that she did not intend to give Mark a share in the property. She said it was her intention that she would continue to own the house and would eventually transfer Mark’s share back to herself. This would result in Mark having his name taken off the mortgage. She also said that she intended to leave the property equally to her four children when she died.

44 Similarly Mark’s evidence was that it was never his understanding that he owned part of the house or that he had a right to the house.

45 One interpretation of this evidence is that it was the common intention of Mark and Geraldene that Mark was to hold his legal interest on trust for Geraldene alone. This is contrary to the presumption of a resulting trust in favour of Geraldene and Mark. The question then arises as to whether Mark has purported to dispose of an interest in land (namely his beneficial interest) otherwise than in writing. Subject to certain exceptions which are not applicable in this case, section 23C of the Conveyancing Act 1919 (NSW) requires an interest in land to be disposed of in writing. That sections provides that:
(1) Subject to the provisions of this Act with respect to the creation of interests in land by parol:

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law,
(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will,
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing.
(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.

46 Applying this section to the facts of this case, any disposal of Mark’s beneficial interest to Geraldene would have to have been evidenced in writing. No written document to this effect was ever executed. Consequently, the intention of the parties must be regarded as void and therefore incapable of rebutting the presumption of a resulting trust. Even if Mark and Geraldene’s intention was legally effective, Mark would still hold his legal interest “subject to a trust” and thus come within the exception in s 5(2)(b).

Conclusion

47 In the absence of a presumption of advancement or evidence of a valid contrary intention, Mark and Geraldene held their legal interests in the property on resulting trust in favour of themselves as tenants in common in the proportions in which they contributed to the purchase price. Mark’s interest was therefore held subject to a trust. Even if Mark held his legal interest subject to a trust in favour of Geraldene alone, the interest is still held subject to a trust.

48 I find that Mark did not have a “relevant interest in land” as defined in the Act and is eligible for a first home owner grant.

Orders

49 The decision of the Commissioner not to approve the application is set aside. In substitution for that decision, a decision is made to approve the applicants’ application for a first home owner grant.