Pundir v Chief Commissioner of State Revenue

[2005] NSWADT 108

CITATION:	Pundir v Chief Commissioner of State Revenue [2005] NSWADT 108
DIVISION:	General Division
PARTIES:	APPLICANTS Chaman Singh Pundir and Olga Pundir RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	043397
HEARING DATES:	15/04/2005
SUBMISSIONS CLOSED:	04/15/2005
DATE OF DECISION:	05/13/2005
BEFORE:	Higgins S - Judicial Member
APPLICATION:	first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 First Home Owners Grant Act 2000
CASES CITED:	Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADT AP 41; Bates v Chief Commissioner of State Revenue [2004] NSWADT 13; McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22; Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53; Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158
REPRESENTATION:	APPLICANTS In person RESPONDENT S Benjamin, solicitor
ORDERS:	The Tribunal:; a) affirms the decision of the Chief Commissioner to:; i. reverse, pursuant to s.23 of the First Home Owner Grant Act 2000, a previous decision made under that Act to pay the applicants a grant of $7,000; ii. require, pursuant to s.45(1) of the First Home Owner Grant Act 2000, the applicants to repay the grant of $7,000; and; b) varies the decision of the Chief Commissioner to impose, pursuant to s.45(3) First Home Owner Grant Act 2000, a penalty of 20% of the grant and in its place imposes a penalty of 5% of the grant (i.e. $350.00).

Background

1 This is an application made by Chaman Singh Pundir and Olga Pundir (“the applicants”), seeking review of a decision of a delegate of the Chief Commissioner of State Revenue (“the Commissioner”) to dismiss their objection to the Commissioner’s decision to request that they repay the $7,000 first home owner grant that they had been paid pursuant to the First Home Owner Grant Act 2000 (“the FHOG Act”). The application for review also sought review of the Commissioner’s decision to impose a penalty of $1,400 in respect of the grant.

2 The basis of the Commissioner’s decision was the applicants’ failure to occupy, as their principal place of residence, the property to which the grant related, as required under s.12 of the FHOG Act.

Issues

3 There are only three issues in this matter. These are:

(a) whether the applicants had “occupied” the property the subject of the FHO grant as their principal place of residence within 12 months of having purchased the property;

(b) if the answer to (a) above is in the negative, whether the Commissioner decision to reverse his previous decision and request repayment of the grant was the correct and preferred decision. Related to this issue was the question as to whether the Commissioner had a discretion under ss. 23 and 45(1) of the FHOG Act; and

(c) in the event the Tribunal finds that the applicants failed to meet the occupancy requirements, and the decision of the Commissioner to reverse his previous decision and request repayment of the grant was the correct and preferred decision, whether a penalty of 20% was appropriate in the circumstances.

The Evidence

4 In this application, the applicants bear the onus in establishing their claim: see s.28(3) FHOG Act. That is, they are required to prove the facts on which they rely.

5 In support of their claim, the applicants relied on the material that they had previously provided to the Commissioner, together with the evidence given by Mr Pundir at the hearing of the matter. In that material and in the oral evidence Mr Pundir said the following:

(a) during the latter part of 2002, he and his wife looked at several houses to purchase as their home. At the end of November early December 2002, they found the property for which they sought the FHOG Act grant;

(b) prior to exchanging contracts on the property, the applicants made an application with a bank to secure a loan to purchase the property. In making the application, the bank also provided the applicants with an application for a FHOG Act grant. A copy of that application was provided by the applicants to the Tribunal. It appears to have been signed and dated by Mr Pundir on 2 December 2002. However, it would appear that Mrs Pundir did not sign or date the application until 8 January 2003;

(c) contracts were exchanged on the property on or about 9 December 2002;

(d) at the time of making his loan application and the application for the FHOG Act grant, the applicants’ intention was that following settlement, they and their child would occupy the property as their principal place of residence;

(e) the sale of the property was settled on 20 January 2003. Contrary to their previous intention, the applicants did not move into the property at that time. Mr Pundir explained that about a week before settlement, he had decided to rent the property for a six month period because he was feeling unwell and did not believe he could handle the stress of moving at that time. I understood Mr Pundir to have been suffering from depression at that time and that he believed his depressive illness would improve over in the following six months;

(f) following his decision not to move into the property at the time of settlement, Mr Pundir arranged, through a real estate agent, to tenant the property. The property was tenanted shortly thereafter and remained tenanted until early 2005;

(g) by mid-2003, Mr Pundir’s illness had not improved, it had deteriorated and he was suffering from high blood pressure due to stress and was prescribed medication by his doctor. His doctor also advised him not to move into the property until his health had improved. Despite the medication, his health continued to deteriorate and he was required to take time off work as well as work shorter hours;

(h) in mid-2004, the applicants received a show cause letter from the Commissioner. In response to that letter, Mr Pundir acknowledged that he had not occupied the property within the prescribed period of time. He also advised the Commissioner that he and his family had not moved because of his illness. He also explained that his doctor advised him that he should not move for another 6 months, and he provided a certificate from his doctor to this effect. In addition to this, the applicant requested an extension of another 4-6 months to move into the property. In this regard I note that the certificate of Dr C. Bonovas, dated 30 July 2004, states that the applicant’s medical condition was depression and stress, and on regular medication, and would be unfit for moving houses from that date until 30 July 2005;

(i) in September 2004, Mr Pundir provided the Commissioner with a further certificate from Dr Bonovas, stating that the applicant had been taking medication from January 2003 and was continuing to take that medication and was not fit for moving houses at that time and up to mid 2004;

(j) during the hearing Mr Pundir explained that during his illness he was also concerned abut the loss of his job. Had he moved he would have had to travel 100km, five to six times a week, which in his depressed state he could not do;

(j) Mr Pundir and his wife moved into the property in February 2005. He explained that he was able to move at that time because his illness had improved following the reduction of the amount of medication he was on;

6 The relevant legislation is contained in the FHOG Act. That Act establishes a scheme to assist persons buying or building their first home by providing them with a grant of a prescribed amount of money. To be eligible for a grant, an applicant must satisfy the five eligibility criteria that are contained in Division 2 of Part 2 of that Act. The fifth criteria is set out in s.12(1) of the FOGH Act and provides, so far as is relevant, as follows:

“s.12(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence within twelve months after completion of the eligible transaction or a longer period approved by the Commissioner. ”

7 Sub-section 13(1) of the FHOG Act defines the term an “eligible transaction” for the purposes of the Act. In this case, there is no dispute the property purchased by the applicants was an “eligible transaction” as defined. Sub-section 13(5) provides that this transaction is completed when the purchaser becomes entitled to possession of the property that is the subject of the grant. In this case that was on 20 January 2003.

8 Section 20(1)(b) of the FHOG Act provides that the Commissioner may authorise the payment of a grant “in anticipation of compliance” with the “resident requirement”, if the Commissioner is satisfied that the applicant who is required to comply, but has not complied, with the residency requirement, intends to occupy the home as his/her principal place of residence within twelve months after completion of the eligible transaction. That is, under this paragraph the Commissioner is given power to issue a grant prior to an applicant occupying the property as his/her principal place of residence. The sub-section also gives the Commissioner power to extend the period within which the applicant must take up occupancy of the property as his/her principal place of residence.

9 Sub-section 20(3) of the FHOG Act provides that where a grant is paid “in anticipation of compliance” with the “resident requirement”, such payment is made on condition that, if the “resident requirement” is not complied with the applicant will within fourteen days after the end of the period allowed for compliance, give written notice of that fact to the Commissioner and repay the amount of the grant. The term “resident requirement” is defined in s.3 of the FHOG Act in similar terms to that contained in s.12. A failure to comply with subsection 20(3) constitutes an offence, which is punishable by a maximum penalty of 50 penalty units.

10 Section 23(1) of the FHOG Act provides that the Commissioner “may” vary or reverse a decision he has made in respect of an application for a grant where he is later satisfied that the decision is incorrect. However, he is required to do so within five years of the original decision having been made: see s.23(2).

11 Section 24(1) of the FHOG Act provides that where the Commissioner decides to reverse an earlier decision on an application for a grant, the Commissioner is required to give the applicant written notice of the reversal and state in the notice the reasons for the reversal.

12 Section 45 of the FHOG Act provides that the Commissioner “may” request the repayment of the grant. That power can only be exercised in circumstances where the grant was paid in error (see s.45(1)(a)) or where the Commissioner has reversed the decision under which the grant was made (see s.45(1)(b)).

Conclusions

13 I found Mr Pundir to have given truthful evidence and I accept that at the time contracts were exchanged for the purchase of the property that he and his wife intended to make the property their permanent home some time after settlement. However, their intention was not the only basis on which the Commissioner made the grant. As stated above the grant was also made on the “anticipation of compliance” with the “residency requirements”: see s.20(1) of the FHOG Act. That is, it was made on the basis that they would meet these requirements and occupy the unit as their permanent home before 20 January 2004. This they did not do and as has been pointed out in the above mentioned decisions, this means that they failed to meet the residency eligibility requirements of s.12(1) of the FHOG Act: see Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADT AP 41; Bates v Chief Commissioner of State Revenue [2004] NSWADT 13; McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22; Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53; Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158.

14 In addition to this the applicants failed to meet a condition of the grant and were required to repay the grant pursuant to s.20(3) of that Act.

15 The Commissioner acknowledges that the applicants were free to make an application for an extension of time within which to move into the property. However, it was submitted that such an application had to be made within the 12 month period from settlement and could not be made after this date as the breach had already occurred. In my opinion this is not necessarily consistent with the wording of s.20(1)(b) of the FHOG Act. However, I have considered this issue no further as this was not a basis on which the applicants sought review.

16 What was in issue was whether the Commissioner had a discretion under s.23(1) (the power to vary or reverse a previous decision) and s.45(1) (the power to require repayment) of the FHOG Act and whether that discretion had been exercised appropriately having regard to the applicant’s circumstances. I considered the question of discretion in Gregoriou v Chief Commissioner of State Revenue [2003] NSWADT 145 and in Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 at [46]. The decision in Gregoriou was set aside, by consent of the parties, on appeal and the Appeal Panel did not consider any of the issues raised in the appeal application. I also not that there are contrary decisions of the Tribunal in respect of the Commissioner’s power under s.23(1) of the FHOG Act: see Small v Chief Commissioner of State Revenue [2004] NSWADT 18 at [29] and Tarak Adasic v Chief Commissioner of State Revenue (Unreported, 27 September 2004).

17 In my opinion it is unnecessary to determine this issue as in my opinion even if the Commissioner were to be found to have a discretion under s.23(1) and 45(1) of the FHOG Act, that discretion was exercised correctly in this case.

18 While I accept that Mr Pundir’s health deteriorated during 2003 I do not accept that he was so incapacitated that he was unable to inform the Commissioner that he was unable to meet the residency requirements of s.12 of the FHOG Act. This was a requirement that he clearly understood he needed to meet in order to be eligible for the grant. Mr Pundir submitted that the application form he signed, unlike the current application form, did not advise he and his wife that they were required to advise the Commissioner of their failure to meet the residency requirements within 14 days after that requirement was to have been met. In my opinion, nothing turns on this difference. Mr Pundir is clearly an intelligent and careful man. The declaration that he signed on his application form contained a declaration that he would occupy the property as his principal place of residence within 12 months of settlement (see declaration 4) and that he would notify the Commissioner of any “notifiable event” relevant to the legislative requirements of the FHOG Act (see declaration 9). The term “notifiable event” was defined on the application form to mean “any circumstances that may affect their eligibility for the grant, for example, where the residency requirement is not met.” As I have mentioned, in my opinion, at no time was the condition of Mr Pundir’s health so severe that he or his wife were unable to advise the Commissioner of their failure to meet the residence requirements. The evidence was that Mr Pundir continued to work, even though it was for restricted hours. On all accounts it would appear that Mr and Mrs Pundir continued to live a normal life. In doing so I do not accept Mr Pundir’s explanation that he and his wife forgot about their obligations to the Commissioner.

19 Accordingly, in my opinion, the Commissioner made the correct and preferred decision when he determined to reverse the decision to pay the applicant the first home owner grant of $7,000. I make a similar finding in respect of the Commissioner’s decision to require the applicant to repay that grant.

Penalty

20 Where the Commissioner requests the re-payment of a grant pursuant to sub-s.45(1) of the FHOG Act, sub-s.45(2) & (3) enables the Commissioner to impose a penalty. These sub-ss provide as follows:

“45. …

(2) If, as a result of an applicant’s dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.

(3) If an applicant (or a former applicant) for a first home owner grant failed to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay”.

21 The terms of the Commissioner’s notice of 9 September 2004, pursuant to s.45 of the FHOG Act, do not clearly state under which particular sub-section the penalty was imposed. However, the notice does mention the grounds on which the penalty was imposed. These were stated to be the applicants’ failure to advise the Commissioner, prior to the expiration of the prescribed 12 month period, that he and his family would not be occupying the property as their principal place of residence, and the fact that he had breached a condition of the grant in not repaying the grant amount within the prescribed time.

22 This means that the Commissioner was not imposing the penalty on the grounds that the applicant had failed to repay the grant pursuant to the s.45 notice. As pointed out in Calcaro (supra) at [58], a notice for a payment cannot simultaneously impose a penalty for the non-repayment of the grant as requested in the same notice.

23 Accordingly, the Commissioner was entitled to impose a penalty only on the basis of alleged dishonesty (s.45)(2)), or the fact that the applicant had breached the condition of the grant set out in s.20(3) of the FHOG Act (s.45(3)). In both cases the decision to impose a penalty is a discretionary one.

24 In light of my findings there is no basis on which to make a finding that the applicants acted dishonestly in respect to their application for a grant.

25 On the other hand, there is no dispute that the applicants failed to comply with s.20(3) of the FHOG Act in that they failed to repay the grant within 14 days after the period in which they were required to occupy the property as their principal place of residence (i.e. 14 days after 19 January 2004). Accordingly, the only basis on which the Commissioner was entitled to impose a penalty was pursuant to s.45(3) of the FHOG Act.

26 In this case the Commissioner imposed a penalty of 20%. Mr Pundir, submitted that the penalty imposed by the Commissioner had failed to take into account the special circumstances of his health, the fact that he and his wife had at all times intended to make the property their home and still intended to do so. Subsequent to the Commissioner having issued his notice under s.45 of the FHOG Act, the applicants had in fact made the property their home.

27 Mr Benjamin, who appeared on behalf of the Commissioner, submitted that the decision of the Commissioner was correct in that the applicants had lodged their application on the basis that they would make the property their home within 12 months of purchase and that they then failed to repay the grant, as they were required to do, when they did not make the property their home. He also submitted that the FHOG Act specifically gives applicants, who are given a grant, 12 months to sort out their personal circumstances and if it cannot be done in this time they are able to seek an extended period of time. This the applicants did not do.

28 Mr Benjamin also provided the Tribunal with a copy of the Commissioner’s policy in respect of how his discretion is to be exercised under s.45 of the FHOG Act. In summary that policy provides as follows:

a) no penalty where an applicant makes a voluntary disclosure and re-pays the grant within the time prescribed under the Act;

b) 5% penalty where an applicant makes a voluntary disclosure and re-pays the grant outside the time prescribed under the Act;

c) 20% penalty where an applicant makes an immediate voluntary disclosure following a “show cause letter” from the Commissioner;

d) 30% penalty where an applicant is unable to satisfy the residence requirements or other eligibility requirements following a “show cause letter” from the Commissioner;

e) 100% penalty where there is an intentional disregard for the law by the applicant.

29 In my opinion there are considerable difficulties with this policy. For example, the first mentioned circumstances (i.e. (a) above) are circumstances in which the Commissioner could not impose a penalty, as s.45 of the FHOG Act would not apply, unless there was evidence of dishonesty, which would be very unlikely. The policy is also very general in nature and it does not distinguish between penalties imposed by reason of dishonesty pursuant to s.45(2) and those imposed pursuant to s.45(3). Nor does the policy allow for taking into consideration matters that are specific to a particular applicant. Notwithstanding these discrepancies I have had regard to the policy as providing general guidance on the levels of penalty.

30 In my opinion a much more helpful guide on what factors are to be taken into account when exercising this particular discretion is that set out by Judicial Member Molony in Calcaro v Chief Commissioner of State Revenue (supra) at [51]-[54]. These factors are:

a) the deterrent effect of the penalty;

b) the nature and extent of the contravention;

c) any loss or damage suffered, or gain made, as a result of the contravention;

d) the circumstances in which the contravention took place, including deliberateness of the conduct and the period over which it extended;

e) whether professional advice had been obtained in relation to the contravention, prior to the breach;

f) whether the person has previously been found by a court to have engaged in any related or similar conduct;

g) the degree of co-operation with the authorities; and

h) in the case of a natural person, the attitude of the offender.

31 Having regard to these factors and the Commissioner’s policy, in my opinion, it is appropriate that a penalty be imposed as a result of the applicants’ failure to meet the conditions of the grant. However, I find that the Commissioner’s decision of a penalty of 20% is not the correct and preferred decision. In my opinion the correct and preferred decision is a penalty of $350.00 or 5% of the grant amount, having regard to the following matters and findings:

a) there is a need to deter others from not complying with the FHOG Act;

b) the applicants have at all times intend to occupy the property as their principal place of residence and that due to Mr Pundir’s health they failed to do so within the prescribed time;

c) the applicants have recently made the property their home after Mr Pundir’s health had improved;

d) the applicants have at all times co-operated with the Commissioner; and

e) the applicants have received the benefit of the grant in that they were able to purchase the property, receive rent from the property for 2 years. In this regard I note that the FHOG Act did not prohibit the applicants from tenanting the unit during the first 12 months.

32 For the reasons set out above, the Tribunal:

a) affirms the decision of the Chief Commissioner to:
i. reverse, pursuant to s.23 of the First Home Owner Grant Act 2000, a previous decision made under that Act to pay the applicants a grant of $7,000;

ii. require, pursuant to s.45(1) of the First Home Owner Grant Act 2000, the applicants to repay the grant of $7,000; and

b) varies the decision of the Chief Commissioner to impose, pursuant to s.45(3) First Home Owner Grant Act 2000, a penalty of 20% of the grant and in its place imposes a penalty of 5% of the grant (i.e. $350.00).