MOTOR YACHT MARINE HOLDINGS PTY LTD and COMMISSIONER OF STATE REVENUE - [2013] WASAT 52

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION: MOTOR YACHT MARINE HOLDINGS PTY LTD and COMMISSIONER OF STATE REVENUE [2013] WASAT 52

MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)

HEARD: 23 MARCH 2013

DELIVERED : 23 APRIL 2013

FILE NO/S: CC 1763 of 2012

BETWEEN: MOTOR YACHT MARINE HOLDINGS PTY LTD
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Transfer of interest in Crown land - Ministerial consent - Agreement void, voidable or unenforceable - Assessment of duty - Lodgement of documents - Penalty for late lodgement - Commissioner's Practice - Remission of penalty tax

Legislation:

Duties Act 2008 (WA), s 3, s 10, s 11, s 15, s 19, s 23(3)(b), s 25, s 25(1), s 25(2)(a), s 87
Land Administration Act 1997 (WA), s 7(1), s 18, s 18(1), s 18(6), s 18(8), s 18(8)(a), s 41, s 46(3)(a), s 46(3b)
Marine and Harbours Act 1981 (WA), s 8(1), s 9, s 12(2)
Mining Act 1978 (WA), s 64(1)(b)
Sale of Land Act 1970 (WA), s 13
Taxation Administration Act 2003 (WA), s 26(1)(b), s 26(3), s 27, s 27(1), s 29, s 30, s 40(1)

Result:

The application is dismissed

Summary of Tribunal's decision:

In 2010, the applicant entered into a contract for the purchase of a lease of Crown land at 12 Mews Road, Fremantle. The contract was conditional on, amongst other things, obtaining the consent of the Minister for Transport to the assignment of the lease. The applicant submitted the contract to the Commissioner of State Revenue for assessment of duty. Duty was assessed, but the Commissioner formed the view that the document was lodged beyond the time permitted and also applied penalty tax, remitted to 2.5% of the amount of the duty paid.
The applicant objected to the imposition of penalty tax but that objection was disallowed. The applicant applied to the Tribunal for a review of the disallowance.
The Tribunal considered the applicant's argument that liability for duty arose on the date of the Minister for Transport's consent to the contract and that therefore the contract had been lodged within time. The Tribunal rejected that argument on the basis that liability for duty arose on the date of execution of the contract, irrespective of the fact that the contract was conditional on Ministerial consent which was not obtained until some time later.
The Tribunal also considered the applicant's alternative argument that the Commissioner should have further remitted the penalty tax. This was on the basis that the applicant had made every effort to assist the Commissioner with assessment of duty and that the instrument was lodged late only by a month and two days.
The Tribunal concluded that the penalty tax was appropriately remitted. It was remitted in accordance with the Commissioner's Practice and it is in the interests of fairness and transparency that penalty tax should be consistently applied. The Tribunal considered that the policy contained in the Commissioner's Practice should be adhered to and applied in accordance with its terms.

Category: B

Representation:

Counsel:

Applicant: Mr J Syminton
Respondent: Ms K Dodd

Solicitors:

Applicant: Warren Syminton Ralph Pty Ltd
Respondent: State Solicitor for Western Australia

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

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101
Anderson v Commissioner of State Revenue [2008] WASAT 11
Midstyle Nominees Pty Ltd v Jordon [2013] WASC 85
Miller v Commissioner of State Revenue [2006] WASAT 336
Roach v Bickle (1915) 20 CLR 663
Yango Pastoral Company Pty Limited and Others v First Chicago Australia Limited and Others (1978) 139 CLR 410

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

In 2010, the applicant entered into a contract for the purchase of a lease of Crown land at 12 Mews Road, Fremantle. The contract was conditional on, amongst other things, obtaining the consent of the Minister for Transport to the assignment of the lease.
The applicant submitted the contract to the respondent (Commissioner) for assessment of duty. Duty was assessed, but the Commissioner formed the view that the document was lodged beyond the time permitted and applied in addition penalty tax of 2.5% of the amount of the duty paid.
The applicant objected to the imposition of penalty tax, but the Commissioner disallowed the objection. The applicant applied to the Tribunal for a review of the disallowance.

The material before the Tribunal

Prior to the hearing of this matter on 21March2013, the parties filed an agreed statement of issues and facts (Agreed Statement) and an agreed bundle of documents. The Commissioner also submitted a further copy of the sale agreement because the copy of that document included in the agreed bundle was incomplete.

The facts

The facts which I now set out have been drawn from the Agreed Statement and are therefore not in contention.
In 1982, the land generally known as Fremantle Fishing Boat Harbour was vested in the Minister for Transport under s 9 of the Marine and Harbours Act 1981 (WA) (Marine and Harbours Act). The Minister for Transport for that purpose and throughout these reasons is the body corporate established under s 8(1) of the Marine and Harbours Act. The land included Lot 1888 and Lot 1889 on Deposited Plan 209838 (subject Crown Land), being the whole of the land now comprised in Certificates of Title Volume LR 3128 Folio 544 and Folio 545.
On 16 May 2003, a Management Order in respect of the land was registered in favour of the Minister for Transport. The Management Order ordered that the care, control and management of the subject Crown Land be placed with the Minister for Transport 'for the purpose for which the land is reserved under s 41 of the Land Administration Act 1997 (WA) (Land Administration Act), and for purposes ancillary or beneficial to that purpose'.
On 18 November 2010 (Contract Date), the then lessee of the subject Crown Land as seller entered into an agreement with the applicant as purchaser entitled 'Land Purchase 12 Mews Road Fremantle Offer To Purchase' (Land Sale Agreement).
The applicant in the Land Sale Agreement was erroneously named as NRS Properties (NSW) Pty Ltd, not NRS Properties Pty Ltd as the applicant was then known. This was corrected under an agreement executed on 19 November 2011. At a later date, the applicant changed its name to Motor Yacht Marine Holdings Pty Ltd.
The parties agree that the subject Crown Land is subject to the provisions of the Land Administration Act. The parties also agree that the Minister responsible for the administration of the Land Administration Act is the Minister for Regional Development and Lands (Lands Minister).
On 5 September 2011, the Minister for Transport agreed to give consent to the assignment of the lease of the subject Crown Land and signed relevant documents. On 14 September 2011, the Minister for Transport accepted a surrender of that lease and granted a new lease over the Crown Land in favour of the applicant.
On 4 November 2011, the applicant received various documents from the Minister for Transport. Those documents included the deed of assignment of the lease of the subject Crown Land showing that the Minister for Transport's common seal had been affixed to it on 5 September 2011.
The Land Sale Agreement and associated documents were lodged with the Commissioner for assessment on 20 December 2011. On 1 February 2012, duty was assessed on the Land Sale Agreement. The agreement notice provided that the duty was to be paid on 1 March 2012. The duty was paid on that date. However, in the meantime, the applicant sought a reassessment of the duty payable on the basis that GST was not payable on the transaction. The Commissioner reassessed the duty at a lower amount and refunded the balance to the applicant. However, when the Commissioner reassessed the duty, he also assessed a penalty tax payable of $5,024 because the Land Sale Agreement was not lodged within the time permitted. The applicant objected to that imposition of penalty tax and on 31 August 2012 the Commissioner disallowed the objection. The applicant then applied to the Tribunal for a review of that disallowance as mentioned earlier in these reasons

Statutory Framework

Duties Act

Section 10 of the Duties Act 2008 (WA) (Duties Act) imposes a duty upon dutiable transactions.
Section 11 of the DutiesAct relevantly provides that a transfer of dutiable property and an agreement for the transfer of dutiable property, whether conditional or not, are both dutiable transactions.
Dutiable property is defined to include land in Western Australia; s15 of the DutiesAct. Land includes an interest in land; s 3 of the Duties Act.
Section19 of the DutiesAct provides that where a dutiable transaction is effected by an instrument, liability for duty on the transaction arises when the instrument is executed.
Section 23(3)(b) of the Duties Act, as it was enacted on the Contract Date, provided that, in the case of a 'general conditional agreement', the instrument evidencing the transaction was required to be lodged within (i) 12 months after the date of execution of the agreement or (ii) two months after the date upon which the agreement became unconditional, whichever is the earlier date.
Under s 9 of the Duties Act, a general conditional agreement is any 'conditional agreement' other than four specific types of conditional agreements, none of which are applicable for the purpose of these reasons. The term 'conditional agreement' is defined in s 87 of the Duties Act. The parties appear to accept that the Land Sale Agreement is a conditional agreement and I have no reason to disagree.
Section 25(1) of the Duties Act (as it was enacted on the Contract Date) provided that duty was required to be paid '…within one month after the date of the assessment notice …'.
Both s 23 and s 25 of the Duties Act have been subsequently amended with effect from 1 March 2011.

Taxation Administration Act

Under the Taxation Administration Act 2003 (WA) (TA Act), a taxpayer is liable to pay penalty tax if he or she does not lodge an instrument that is required to be lodged under a taxation Act; s 26(1)(b) of the TA Act.
The amount of the penalty tax payable is the amount equal to the taxpayer's primary liability; s 26(3)(a) of the TA Act.
Section 29 of the TA Act provides that the Commissioner may remit penalty tax wholly or in part and s 30 provides that the Commissioner is required to publish the policy that he will follow when deciding whether or not to remit penalty tax.

Land Administration Act

Section 18(1) of the Land Administration Act provides that a person must not without authorisation of the Minister under subsection (7) assign, sell, transfer or otherwise deal with interests in Crown land or create or grant an interest in Crown land.
The 'Minister' means the Minister in his or her capacity as the body corporate continued under s 7(1) of the Land Administration Act.
Section 18(6) provides that an act done in contravention of subsection (1) is void.
Section 18(8) provides that s 18 does not apply to a transaction relating to an interest in Crown land if:
a)that land is set aside under, dedicated or vested for the purposes of an Act other than this Act, and the transaction is authorised under that Act; or
b)that interest may be created, granted, transferred or otherwise dealt with under an Act other than -
(i)this Act; or
(ii)a prescribed Act;
or
(c)an agreement, ratified or approved by another Act, has the effect that consent to the transaction was not required under section 143 of the repealed Act; or
(d)the transaction is a lease, sublease or licence and the approval of the Minister is not required under section 46(3b).

Marine and Harbours Act

Section 8(1) of the Marine and Harbours Act provides that the Minister for the purposes of the Marine and Harbours Act is a body corporate under the name of the Minister for Transport.
Under s 9 of the Marine and Harbours Act, the Governor may vest any real or personal property in the Minister for Transport.
The Minister for Transport may grant a lease of land or other property vested in the Minister under s 12(2) of the Marine and Harbours Act.

The agreed issue

The parties agree that the first issue to be determined is whether or not the Commissioner was correct in determining that the Land Sale Agreement required to be lodged within 12 months from the Contract Date, 18 November 2010.
If that question is answered in the affirmative, then the parties agree that the second issue to be determined is whether the Commissioner should have remitted the penalty tax in whole or in part.
I agree that these are the issues to be determined.

The parties submissions and the Tribunal's findings

The applicant's position, in summary, is this:
•The Land Sale Agreement is void under s 18(1) and s 18(6) of the Land Administration Act because neither the Lands Minister nor the Minister being the body corporate referred to in s 7(1) of the Land Administration Act consented to the Land Sale Agreement.
•The Land Sale Agreement 'came to life' when the Minister for Transport consented to it, at which point the relevant Act was the Marine and Harbours Act. Up until this point, the applicant says that the relevant Act is the Land Administration Act.
•Liability for duty only arose when the Minister for Transport consented to the Land Sale Agreement.
•The applicant therefore lodged the Land Sale Agreement within the time permitted, being within two months of the date of the Minister for Transport's consent.
The Commissioner, on the other hand, contends that:
•If s 18 of the Land Administration Act applies at all, then s 18(1) and s 18(6) do not apply to the Land Sale Agreement, but only to the dealing contemplated by the Land Sale Agreement.
•In any event, s 18 of the Land Administration Act does not apply at all because of s 18(8).
•Liability for duty therefore arose when the Land Sale Agreement was executed and it should have been lodged as a conditional agreement within 12 months of the date of its execution.

Status of the Land Sale Agreement

The applicant submits that under s 18(1) and s 18(6) of the Land Administration Act, the Land Sale Agreement was 'void' from the date of its execution until the date when the Minister for Transport consented to that document. Until that consent was given, the applicant says that the agreement did not need to be lodged with the Commissioner because it was incapable of being assessed. Once that consent had been obtained, the applicant says that it then had two months within which to lodge the Land Sale Agreement with the Commissioner, and it complied with that requirement.
In support, the applicant relies on the decision of Beech J in Midstyle Nominees Pty Ltd v Jordon [2013] WASC 85 (Midstyle). That case concerns the legality of a contract entered into in contravention of s 13 of the Sale of Land Act 1970 (WA) (Sale of Land Act). Section 13, broadly, prohibits a seller from selling lots in a subdivision or proposed subdivision until the seller is the proprietor of the relevant land. His Honour, citing Yango Pastoral Company Pty Limited and Others v First Chicago Australia Limited and Others (1978) 139 CLR 410 at 413 said that whether or not a contract is void under a statute is a question which must be determined in accordance with the ordinary principles that govern the construction of statutes. His Honour considered the language, context, scope and evident purpose of s 13 of the Sale of Land Act and took the construction of the section that best advanced its purpose. He found that the contract in question was voidable but only at the instance of the buyer, and only until the seller became the proprietor of the relevant land.
I do not consider that the decision in Midstyle supports the applicant's position. Section 13 of the Sale of Land Act differs considerably from s 18(1) of the Land Administration Act. Section 13 does not provide that the effect of a breach of that section is that the sale is void. Rather, the effect of a breach of that section is a monetary penalty. Also, the word 'sell' in that section expressly includes entering into an executory contract for the relevant sale, whereas the word 'deal' in the Land Administration Act is not so defined.
Further, the issue in Midstyle was not whether or not the contract was void (his Honour did however expressly reject the 'void' construction). The issue was whether or not the contract in question was either voidable at the election of the buyer or unenforceable by the seller and also whether a contravention of the section had any effect at all on the legal enforceability of the contract.
I do not understand the applicant to be arguing that the Land Sale Agreement, prior to the Minister for Transport's consent, was voidable or unenforceable. Nor do I understand the applicant to be arguing that the Minister for Transport's consent was a condition precedent to the formation of the contract. The applicant's express view is that the Land Sale Agreement was void until the date when it received notice of the Minister for Transport's consent, at which time 'it becomes [sic] back to life' as an unconditional agreement (T: 1617, 21.03.13).
The applicant says that this is what is contemplated by s 18 of the Land Administration Act. The holder of an interest in Crown land must first obtain the Minister's consent, and then and only then can it enter into an agreement to dispose of or otherwise deal with that interest.
The applicant says that this is 'quite easy to do. Parties often sit down and agree something and then put it to (the Minister) to grant approval'; (T:16, 21.03.12).
I have a great deal of difficulty with this. I accept the applicant's submission that the intention of s 18 of the Land Administration Act is to prevent the unregulated sale or disposal of an interest in Crown land outside the provisions of the Land Administration Act. Also, one of the aims of the Land Administration Act is to promote efficiency in the way in which dealings in Crown land are administered. It therefore seems unlikely that the Parliament intended that a party must obtain the Minister's consent to a proposed dealing with an interest in Crown land before an agreement can be entered into in respect of that dealing. The process for obtaining that consent can, as it did in this case, take several months. Having obtained that consent, and assuming that such consent would be qualified and subject to the provision of information such as the identity of the buyer, the seller would then need to negotiate the terms of the contract for that dealing with a prospective buyer. The terms of that contract would presumably then need to be provided once more to the Minister for some form of final approval.
This could not have been the process contemplated by the Parliament. I believe that it is more consistent with the intention of the Land Administration Act to interpret s 18(1) and s 18(6) to mean that, while a dealing with an interest in Crown land without consent is void, a contract for that dealing which is expressly conditional upon the Minister's consent being obtained is not.
This conclusion is supported by the decision in Roach v Bickle (1915) 20 CLR 663 (Roach). There, the High Court found that there had been no breach of a statutory prohibition against dealings with Crown land without consent where a contract had been entered into subject to the granting of that consent. It was held that the contract concerned '… ought to be construed as not attempting to violate the law, and therefore as not intended to effect a dealing forbidden. In other words, the bargain was not absolute, but inchoate only, …' Roach at 671.
A similar approach was taken in Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101(Anaconda). The Court considered s 64(1)(b) of the Mining Act 1978 (WA), which prohibits transferring or dealing with a legal or equitable interest in or affecting an exploration licence without the consent of the Minister for Mines. Section 64(1)(b) was construed in that decision as prohibiting the relevant transfer or dealing, but not prohibiting a contract purporting to have that effect; Anaconda at [98][108], [182].

Applying the same reasoning, I therefore find that the Land Sale Agreement does not constitute a dealing under s 18(1) and is not void under s 18(6) of the Land Administration Act. The Land Sale Agreement upon execution was a general conditional agreement as defined in s 9 of the Duties Act.

Does s 18 in any event apply to the Land Sale Agreement?

I now turn to the Commissioner's submission that s 18(1) of the Land Administration Act does not in any event apply. The Commissioner says that the subject Crown Land is vested in the Minister for Transport under the Marine and Harbours Act and therefore, under s 18(8)(a) of the Land Administration Act, s 18(1) has no application and has never applied to the Land Sale Agreement or the transactions contemplated by it.
The applicant rejects the Commissioner's argument that, under s 18(8)(a) of the Land Administration Act, s 18(1) does not apply. The applicant accepts that the subject Crown Land is vested in the Minister for Transport and that a management order has been registered. However, the applicant points out that under s 18(8)(a), it is also necessary that 'the transaction is authorised under (the Marine and Harbours Act)'. The applicant says that until 4 November 2011, the Minister for Transport had not authorised the 'transaction' under the Marine and Harbours Act and that therefore until that date s 18(1) of the Land Administration Act continued to apply.
The applicant's contention in this respect cannot be correct. Clearly, the applicant considers the 'transaction' to be the Land Sale Agreement. The applicant then appears to be arguing that the Minister for Transport does not have the power to approve the transaction until it has 'authorised' that transaction. However, it is unclear to me how the Minister for Transport can 'authorise' the transaction when it does not have the jurisdiction to do so until that authorisation has been given.
In my opinion, because of s 18(8)(a), s 18 of the Land Administration Act does not apply to the assignment of the lease of the subject Crown Land. The 'transaction' referred to is the act of assigning, selling, transferring or otherwise dealing with the lease of the subject Crown Land. I do not consider that the word 'transaction' includes entering into the Land Sale Agreement, for the same reasons that I do not consider that the Land Sale Agreement is a 'dealing' under s 18(1). I consider that it is open to the parties to enter into the Land Sale Agreement subject to the condition that the Minister for Transport must authorise the assignment of the lease under the Marine and Harbours Act.
The Commissioner at a late stage in the hearing also sought to rely on s 18(8)(b). This was not part of the Commissioner's written submissions. The applicant has not addressed the effect of this subsection in written submissions, nor did Counsel for the applicant seek to do so at the hearing. Given the lack of significance of the subsection in terms of the outcome of the application and because I have not had the benefit of argument from the applicant on the point, I do not propose to consider the Commissioner's oral submission in respect of this subsection.

Conclusion as to the first issue

For the reasons set out above, I find that under s 23(3)(b) of the Duties Act the Land Sale Agreement should have been lodged within 12 months after the date of its signing.

Penalty tax

The Commissioner has published a document entitled Commissioner's Practice TAA 18.2 (Commissioner's Practice). This practice is valid from 1 March 2011 to the present.
The Commissioner's Practice provides for a policy on remission of penalty tax under s 29 of the TA Act. In the submission of the Commissioner, this policy provides a degree of flexibility in the application of penalty tax but the Commissioner says that it would not be appropriate to extend that flexibility beyond what is contained within the policy.
Under para 19 of the Commissioner's Practice, if an instrument required to be lodged is lodged voluntarily, then penalty tax will be remitted in accordance with the 'voluntary' rates of remission set out in para 23. That paragraph relevantly provides that if an instrument is voluntarily lodged within four months of the required lodgement date, then the penalty tax will be remitted to 2.5% of the primary tax liability.
The Commissioner's Practice also provides that the Commissioner will only consider a further remission of penalty tax in exceptional circumstances. Some of those circumstances are set out in para 27 of the Commissioner's Practice.
The applicant does not argue that any of those specified circumstances apply in this case. However, the applicant submits the circumstances were exceptional. The applicant says that the lodgement provisions in the Duties Act were at the relevant time confusing and difficult. This is evidenced by the fact that some of the relevant provisions of the Duties Act have been subsequently amended. The applicant also argues that the detailed covering letter which it provided to the Commissioner when the instrument was lodged would have greatly assisted the Commissioner with what would otherwise have been a complex assessment.
Finally, the applicant submits that in the alternative, the Tribunal should remit the penalty tax to the level provided in the Commissioner's Practice for instruments lodged with one month of the required date, namely 1.25% of the primary tax liability. The applicant says that the instrument was lodged one month and two days after the due date and if the Commissioner allowed a period of grace of seven days then that would bring the penalty tax within the lower rate of remission.

Conclusion as to the second issue

The Tribunal has previously acknowledged the appropriateness of having a policy concerning the remission of penalty; Miller v Commissioner of State Revenue [2006] WASAT 336 at [16][18], Anderson v Commissioner of State Revenue [2008] WASAT 11 at [49]. This ensures fairness and transparency in the Commissioner's application of remission of penalty tax under s 29 of the TA Act and consistency in the manner in which it is applied.
The Tribunal continues to hold the view that the policy must be adhered to and applied in accordance with its terms.
The applicant has not demonstrated that any of the exceptional circumstances listed in the Commissioner's Practice exist. I do not agree that the transaction to which this proceeding relates was overly complicated or complex. The applicant's solicitor is a senior practitioner with extensive experience in this area. Nor do I accept that the relevant provisions of the Duties Act were particularly confusing. In any event, there would have been nothing to prevent the applicant from lodging the instrument on time and undertaking to provide details of the transaction at some later time.
As far as allowing some days of grace before applying a higher rate of penalty tax is concerned, I note that the policy itself does not provide for this. As I have already said, it is appropriate that the policy must be adhered to and applied in accordance with its terms.
Therefore I find that the Commissioner was correct to remit the penalty tax to 2.5% of the primary tax liability

Orders

The Tribunal orders that:
1.The application is dismissed.

I certify that this and the preceding [66] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE T SHARP, DEPUTY PRESIDENT