Melteal Pty Ltd v Chief Commissioner of State Revenue

[2010] NSWADT 116

CITATION:	Melteal Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADT 116
DIVISION:	Revenue Division
PARTIES:	APPLICANT Melteal Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096121
HEARING DATES:	14 May 2010
SUBMISSIONS CLOSED:	14 May 2010
DATE OF DECISION:	19 May 2010
BEFORE:	Block J - Judicial Member
CATCHWORDS:	Application for refund – consideration of “void” and “voidable”- when transfer becomes useless
LEGISLATION CITED:	Duties Act 1997
CASES CITED:	Gardiner v CCSR [2004] NSWSC 107 Gibbons and Wright 91 C.L.R 423 DKLR Holding Co (No 2) v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431
REPRESENTATION:	APPLICANT C Birtles, solicitor RESPONDENT ML Robertson, barrister
ORDERS:	The decision under review is affirmed and the claim for a refund of duty is denied.

REASONS FOR DECISION

Part A; preliminary and background

1 The decision under review is the refusal by the Chief Commissioner of an application for a refund of duty amounting to $40,490 which was paid in respect of a transfer dated 1 December 2000 ("the relevant transfer") by Tsung-Ching Lin (“Mr. Lin”) as transferor, in favour of the Applicant as transferee, of Unit 6, 5-15 Dunning Avenue, Rosebery in the state of New South Wales ("the relevant property"); the relevant transfer was registered on 9 January 2001.

2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; in addition it received two sets of written submissions on behalf of the Applicant and written submissions on behalf of the Chief Commissioner.

3 There is no dispute between the parties as to the facts which fall within a narrow compass. The Saul Family Trust (the Trust”) was established by a deed of settlement made on 10 November 2000; the Applicant was appointed as the trustee of the Trust; and the Applicant acquired the relevant property pursuant to the relevant transfer in its capacity as trustee of the Trust. The relevant transfer records that in consideration of an amount of one dollar, the Applicant received the fee simple in respect of the relevant property. The directors of the Applicant are Mr Michael Saul and Mrs Jennifer Saul; Mrs Saul is the daughter of Mr Lin

4 As set out previously in these reasons the relevant transfer was duly registered. Mr Birtles, who appeared on behalf of the Applicant, furnished the Tribunal with a diagram which, in respect of the relevant transfer described three possibilities; under one possibility the relevant transfer involved the transfer of the legal estate only in respect of the relevant property; under the second possibility it involved the transfer of the equitable estate only in the relevant property and under the third possibility it involved the transfer of both the equal and the equitable estates in the relevant property.

5 On 5 July 2007 and in consequence of legal action which had been instituted in the Supreme Court of New South Wales, the Supreme Court declared that the relevant transfer was void. In consequence of that declaration, the Supreme Court made a number of orders and including an order that the relevant property be transferred back to Mr Lin, and also an order that Mr Lin’s estate be subject to management under the Protected Estates Act 1983.

6 The Applicant seeks a refund of the duty which was paid in respect of the relevant transfer and relies in this regard on section 293 of the Duties Act 1997 (“the Duties Act”) or in the alternative on section 56 of the Duties Act

Part B; The provisions of the Duties Act referred to by the parties.

7 Section 50 of the Duties Act reads as follows:

DUTIES ACT 1997 - SECT 50
Cancelled agreements
50 Cancelled agreements
(1) An agreement for the sale or transfer of dutiable property that is cancelled is not liable to duty under this Chapter if the Chief Commissioner is satisfied:
(a) that the agreement was not cancelled to give effect to a subsale, or
(b) that the purchaser or transferee under the agreement is a promoter of a named company proposed to be incorporated and that the company is the purchaser or transferee of the dutiable property under a subsequent agreement, or
(c) that the purchaser or transferee under the agreement and the purchaser or transferee under a subsequent agreement relating to the same dutiable property were related persons when the agreement that is cancelled was entered into.
(2) If duty has been paid on an agreement that is not liable to duty under this Chapter because of this section, the Chief Commissioner must reassess and refund the duty if an application for a refund is made within:
(a) 5 years of the initial assessment, or
(b) 12 months after the agreement is cancelled ,
whichever is the later.
(3) In this section, "cancelled" means rescinded, annulled or otherwise terminated without completion

8 Section 293 of the Duties Act reads as follows

Reassessments-failed instruments
293 Reassessments-failed instruments
(1) An instrument that fails in its intended operation and becomes useless is not chargeable with duty under this Act.
(2) The Chief Commissioner must make a reassessment of duty in respect of such an instrument if an application for a reassessment is made within:
(a) 5 years after the initial assessment, or
(b) 12 months after the instrument has failed,
whichever is the later.
(3) The instrument in respect of which the application is made must be produced to the Chief Commissioner unless the Chief Commissioner dispenses with its production.
(4) This section does not apply in respect of an instrument that effects a transfer of dutiable property

9 Section 50A of the Duties Act reads as follows

Cancelled transfers of dutiable property
50A Cancelled transfers of dutiable property
(1) A transfer of dutiable property that is effected by a written instrument is not liable to duty under this Chapter if the Chief Commissioner is satisfied that:
(a) the transfer instrument has been cancelled and the dutiable property has not been transferred to the transferee , and
(b) the transfer was not cancelled to give effect to a subsale.
(2) If duty has been paid on a transfer of dutiable property that is not liable to duty under this Chapter because of this section, the Chief Commissioner must reassess and refund the duty if an application for a refund is made within 5 years of the initial assessment.
(3) The transfer instrument in respect of which the application is made must be surrendered to the Chief Commissioner unless the Chief Commissioner dispenses with that requirement.
(4) In this section, "cancelled" includes abandoned.

10 Section 56 of the Duties Act reads as follows:

Transfers back from a nominee
56 Transfers back from a nominee
(1) If:
(a) dutiable property (other than marketable securities) that was transferred to a person to be held by that person as trustee for the transferor is transferred back to the transferor by the trustee , and
(b) no person other than the transferor has had a beneficial interest in the dutiable property (other than the trustee ’s operates right of indemnity) between its transfer to the trustee and its transfer back to the transferor ,
the duty chargeable on the transfer of the dutiable property back to the transferor is $50.
(2) If duty of $50 has been paid on a transfer under subsection (1), the initial transfer to the trustee is also chargeable with duty of $50. The Chief Commissioner must reassess the initial transfer and refund any duty paid in excess of $50 if an application for a refund is made within:
(a) 5 years after the initial assessment, or
(b) 12 months after the transfer back to the original transferor ,
whichever is the later.
(3) In this section, "trustee" includes a trustee appointed in substitution for a trustee or a trustee appointed in addition to a trustee or trustees .

11 It is important to note that subsection (4) of section 293 and section 50A of the Duties Act to the Duties Act were enacted in point of time after the relevant transfer was executed and registered and it is a common cause between the parties that those provisions are not relevant for the purposes of this decision; it follows that section 293 of the Duties Act should for the purposes of this decision be read as if it did not include subsection (4).

12 The Applicant contends that it is entitled to the refund of duty referred to in clause 1 in accordance with section 293 of the Duties Act (read on the basis that it does not include subsection (4) or in the alternative under 56 of the Duties Act.

Part C; Consideration of case law and relevant statutory provisions.

13 The Applicant in its written submissions contended that the judgment of His Honour Gzell J in Gardiner v CCSR [2004] NSWSC 107 is not relevant for the purposes of this case. The Tribunal refers in this context to clause 2.1 of the Applicant’s submissions dated 14 May 20010 reading: “His Honour Justice Gzell’s comments in Gardiner v CCSR……… are distinguished as His Honour had regard to section 293(4) which does not apply.” The Tribunal disagrees and considers that the judgment in Gardener is both relevant and binding and that it did not rely on subsection (4); Gardiner’s case will be dealt with more fully later in these reasons.

14 As set out previously, the Applicant furnished the Tribunal with a diagram as to the three possibilities referred to in clause 4.. The Applicant dealt with the alternatives at some length; as we understood Mr Birtles, the Applicant contends in particular that the relevant transfer related to the legal estate in the relevant property. The Tribunal considers that that argument can be disposed of quite simply having regard to the judgment in DKLR Holding Co (No 2) v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; the relevant transfer related in fact to both the legal estate and the beneficial state in the relevant property.

15 It is relevant to note that this is a matter in respect of which there was no agreement for sale or agreement for transfer. The relevant transfer itself was the instrument which attracted duty and as set out previously it was duly stamped and registered.

16 The judgment in Gardiner is relevant precisely because the transaction with which that judgment was concerned occurred (as did the transaction in this case) prior to the enactment of subsection (4) of section 293 and section 50A of the Duties Act. In Gardiner's case a father executed a transfer of residential property in favour of his daughter in an attempt to protect that residential property against a possible claim by his wife. The transfer was stamped but it was not registered. Some time after the transfer was executed and stamped and at a time when it had not been submitted for registration the father died and the residential property was transferred to the daughter by his executor in accordance with his will. His Honour Gzell J held that the applicant in that case (the daughter) was entitled to a refund of the duty pursuant to section 293 of the Duties Act because the transfer had failed in its intended operation and had become useless. The Tribunal refers in particular to the following extract from the judgment in Gardiner

43 In my view, the legislative purpose of the Duties Act 1997 , s 293(2) was to provide relief when an instrument, stamped in advance of a transfer or other dutiable transaction it was proposed to effect, was subsequently found not to effect that transfer or other dutiable transaction.

44 Here the instrument of transfer was intended to effect a transfer of the legal title to the land if registered. It was delivered to the plaintiff on the basis that it should be registered to achieve that end, if necessary. When the extrinsic evidence is taken into account to determine the real nature of the transaction to which the instrument of transfer relates (Commissioner of Stamp Duties (Qld) v Hopkins [1945] HCA 14 ; (1945) 71 CLR 351) , it is plain that what was intended by the parties was that the instrument of transfer should effect a transfer of the land by registration if a problem arose with the devise under the will. The instrument was stamped on that basis and, in my view, that was its intended operation for the purpose of the Duties Act 1997 , s 293(1) and s 293(2).

45 The weight of authority supports the view that the plaintiff was entitled to register the instrument of transfer after the death of her father (Brunker at 585, Corin at 566). The plaintiff chose not to do so and to take, instead, by transmission under the will. That course having been adopted, the instrument of transfer could not operate to effect the transfer of the land.

46 There is nothing in the Duties Act 1997, s 293(1) or s 293(2) or elsewhere that limits relief to circumstances beyond the control of a party to the instrument in question. If the failure of intended operation was brought about by a party, there is no reason to deny the relief afforded by those provisions.

47 Upon registration of the plaintiff as proprietor of the land pursuant to the transmission application, the intended operation of the instrument of transfer failed and, in consequence, it became useless. The Duties Act 1997, s 293(2) was then enlivened. In my view the Appeal Panel erred in law in concluding to the contrary.”

17 . The Applicant contended that the relevant transfer was void and referred in particular to the declaration by the Supreme Court to this effect. It is fundamental to this decision that, having regard to the judgment of the High Court in Gibbons and Wright 91 C.L.R 423 the relevant transfer was not, when it was executed, void. The relevant transfer was in fact then voidable in that it could thereafter be claimed (as occurred in this case) that Mr. Lin lacked the necessary capacity to execute the relevant transfer but until such a claim was made the relevant transfer operated according to its terms. The mere fact that the declaration by the Supreme Court uses the word "void” is not determinative of the matter. The Supreme Court could hardly have issued a declaration to the effect that the relevant transfer was voidable; it was issuing a declaration that the relevant transfer was void in consequence of a claim that Mr Lin had lacked the necessary capacity The following extract from the judgment in Gibbons and Wright is relevant:

14…………………... Indeed, after Molton v. Camroux [1848] EngR 611 ; [1848] EngR 611 ; (1848) 2 Exch 487 (154 ER 584) ; (1849) 4 Exch 17 (154 ER 1107) , whatever doubt may have persisted as to what must be proved in addition to mental incapacity in order to avoid a contract, it was the settled doctrine of English law that the contract of a lunatic was not void but was voidable only. Subsequent cases have confirmed this: Beavan v. McDonnell [1854] EngR 101 ; (1854) 9 Exch 309 ; 10 Exch 184 ; Imperial Loan Co. v. Stone (1892) 1 QB 599 ; Tremills v. Benton (1892) 18 VLR 607 ; Baldwyn v. Smith (1900) 1 Ch 588 ; Bawlf Grain Co. v. Ross (1917) 55 Can SCR 232 ; York Glass Co. v. Jubb (1925) 134 LT 36 . (at p444)
15. This being the state of the law with respect to contracts, how can it be otherwise with respect to conveyances? If the only objection to a conveyance is that the conveyor was incapable of understanding what he was doing by executing it, there is no ground for denying that it was in truth signed, sealed and delivered by the conveyor as his deed. If it be said that the mind of the conveyor did not go with his acts, the answer applies with no less force than it does in the case of a contract that that is not what is established by proof of a mere absence of capacity to understand the nature of the document. We need not stay to consider whether, in order to avoid the deed, it is necessary to prove, in addition to the conveyor's incapacity, knowledge on the part of the conveyee that the incapacity exists, or whether other circumstances making the transaction less than fair to the conveyor will suffice. (Even in regard to contracts, the question whether unfairness matters, if the party dealing with a person of unsound mind is ignorant of his condition, appears not yet to have been finally resolved: per Sargant L.J. in York Glass Co. v. Jubb (1925) 134 LT, at p 43 ). The point to be observed here is that proof of a conveyor's incapacity to understand the nature of the instrument is not proof that it is not his deed, and it therefore provides no logical ground for holding that the deed is void. …………

18 It will be remembered that the relevant transfer was executed in December 2000 and registered in January 2001. The declaration that the relevant transfer was void occurred in 2007. There can be no doubt, having regard to the High Court judgment in Gibbons and Wright that until the Supreme Court ruled that the relevant transfer was void, it was merely voidable and was thus, and until such ruling, of full force and effect.

19 The Applicant contended that the relevant transfer was intended to constitute the relevant property an asset of the Trust . . The relevant transfer says nothing whatever about the existence of the Trust or for that matter any trust and consistently with section 82 of the Real Property Act 1900 which provides that the title created by registration cannot be title as a trustee.

20 That the relevant transfer was fully operative according to its terms from the date of its execution and registration until the Supreme Court declared that it was void is consistent with section 42 of the Real Property Act 1900 as to the integrity of the Torrens title system. The matter can be tested by the following hypothesis. If at any time during that period the Applicant had sold the relevant property a purchaser without knowledge of any defects would unquestionably have obtained a good title to the relevant property.

21 In Gardiner’s case the transfer of the residential property failed from the date on which the executor in the father's estate transferred the residential property to the daughter. Had she attempted to register the transfer at any time thereafter her attempt would have failed simply because she had at that time already become the registered owner of the residential property in question. The facts in this case differ in that the relevant transfer was executed in order to transfer the relevant property from Mr Lin to the Applicant and it succeeded in that purpose when it was registered. It cannot be said that it ever failed in its intended purpose or became useless. The stark difference between this case and Gardiner is that the transfer in question was not registered whereas in this case it was. Put in other words it did what it was intended to do.

22 I have included section 50 of the Duties Act (in part B of these reasons) purely for the sake of completeness and because it was referred to in the submissions. It was clearly of no relevance whatever; moreover section 50A and subsection (4) of section 293 have been included for the same reason and although, and as set out previously, the parties were agreed that they were not relevant for the purposes of this decision.

23 This application was brought some considerable time after the expiry of the time periods prescribed by section 293 of the Duties Act.. Dr Robertson confirmed that the fact that this was so was not relevant to the purposes of this decision and need not be taken into account.

24 Section 293 of the Duties Act cannot assist the Applicant simply because the relevant transfer did not ever fail in its intended operation and did not become useless. On the contrary it was executed and registered and did indeed satisfied the purpose for which it was intended.

25 In respect of section 56 of the Duties Act the Applicant cannot succeed unless it can satisfy both of paragraphs (a) and (b) of section 56(1).This is so because of the use of the word “and” at the end of paragraph (a) The Applicant cannot satisfy either of the paragraphs. In respect of paragraph (b) it is clear that during the period from the date of the relevant transfer until the date of the court declaration it is not possible to say that no person other than Mr Lin had an interest in the relevant property. On the contrary and during that period the beneficiaries of the Trust the whole of the interest in the relevant property. In relation to paragraph (a) is clear that Mr Lin did not transfer the relevant property to the Applicant with the intent that the Applicant would hold the relevant property as trustee for Mr Lin. On the contrary the relevant property was until the relevant transfer was declared to be void, held, as set out previously, for the beneficiaries of the Trust. Section 56 operates in a bare trust situation which would be entirely inapposite on these facts.

26 Mr Birtles contended that the declaration by the court that the relevant transfer was void gave rise to a resulting trust in favour of Mr. Lin. It is unnecessary for me to deal with this contention at any length having regard to the fact that until the court declared that the relevant transfer was void it was of full force and effect and so that there was no question of any trust in favour of Mr. Lin prior to the declaration.

27 Other cases were cited to the Tribunal but I do not think it necessary to refer to them.

Part D Conclusion

28 In summary the Applicant cannot succeed under section 50 of the Duties Act and it must be noted that although there is reference in the papers to this section the Applicant (correctly) made no such claim at the hearing,

29 One of the most important aspects of this decision is the fact that the relevant transfer was until it was declared to be void by the Supreme Court voidable and thus operated until that time according to its terms. This being so the Applicant cannot, for the reasons set out in clause 25 succeed under section 56 of the Duties Act and it cannot succeed under section 293 of the Duties Act because the relevant transfer did not fail in its intended operation or become useless.

30 Accordingly the decision under review must be affirmed and the claim for a refund of duty denied