TONKIN and COMMISSIONER OF STATE REVENUE
[2018] WASAT 129
•27 NOVEMBER 2018
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: TAXATION ADMINISTRATION ACT 2003 (WA)
DUTIES ACT 2008 (WA)
CITATION: TONKIN and COMMISSIONER OF STATE REVENUE [2018] WASAT 129
MEMBER: PRESIDENT (ACTING), JUDGE SHARP
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 27 NOVEMBER 2018
FILE NO/S: CC 1261 of 2018
BETWEEN: IAN JAMES TONKIN
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Dutiable transaction - Transfer of dutiable property - Liability for duty at time agreement made - Late lodgement penalty - Review of Commissioner's decision on objection - Whether offer and acceptance lodged within required time - Whether penalty tax imposed should have been remitted in whole or part
Legislation:
Duties Act 2008 (WA), s 10, s 11(1)(b), s 19(1), s 20, s 23, s 23(1), Sch 1
State Administrative Tribunal Act 2004 (WA), s 60(2)
Taxation Administration Act 2003 (WA), s 3(1)(ca), s 26, s 26(1), s 29, s 29(1), s 30, s 30(1)
Result:
Decision of respondent affirmed
Application dismissed
Category: B
Representation:
Counsel:
| Applicant | : | Ms L Ellery |
| Respondent | : | Ms R Panetta |
Solicitors:
| Applicant | : | Ellery Brookman |
| Respondent | : | State Solicitor's Office |
Case(s) referred to in decision(s):
Anderson and Commissioner of State Revenue [2008] WASAT 11
Benyon v Wongala Holdings Pty Ltd [1999] NSWCA 66; (1999) 9 BPR 16,781
Bettison and Commissioner of State Revenue [2011] WASAT 183
Miller & Anor and Commissioner of State Revenue [2006] WASAT 336
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
This matter comes before the Tribunal by way of an application from the applicant under s 40 of the Taxation Administration Act 2003 (WA) (TA Act) dated and lodged with the Tribunal on 22 June 2018.
The applicant as purchaser on 4 September 2017 signed an offer to purchase land described in the offer as '"Palomar", Flat Rocks Road, Broomehill Comprising Approx 2156 Hectares'. On 7 September2017, Eticup Grazing Pty Ltd (Eticup) as vendor accepted the offer.
The respondent (Commissioner) on 19 January 2018 assessed the resultant contract for duty and also imposed a late lodgement penalty of$11,429.
The applicant objected to the assessment and the Commissioner disallowed the objection.
The applicant then applied to the Tribunal for a review of the Commissioner's decision on objection.
Proceedings in the Tribunal
The first directions hearing was held on 9 July 2018 and the matter was referred to a mediation conference on 7 August 2018.
The matter was not resolved at mediation and at a further directions hearing on 20 August 2018, programming orders were made. The parties filed a statement of agreed facts and issues on 3 September 2018. TheCommissioner filed her statement of contentions on 17 September 2018 along with her bundle of documents. The applicant filed his statement of contentions on 2 October 2018.
The Commissioner filed a reply on 15 October 2018 and the matter was determined entirely on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA).
Agreed facts
The following facts have been drawn from the statement of agreed facts and issues. The Tribunal makes these findings of fact on the basis that these facts are agreed or, alternatively, are uncontroversial.
Initial execution of the offer and acceptance form
On 4 September 2017, the applicant as purchaser signed an offer using a common form entitled 'contract for sale of land or strata title by offer and acceptance' in relation to property described as:
'Palomar', Flat Rocks Road Broomehill Comprising Approx 2156 Hectares as per Annexure A[.]
(Offer and Acceptance)
Annexure A to the Offer and Acceptance described the land as follows:
Lot Plan/Dia Vol/Fol 4465 126637 549/65a 3369 134907 549/68a 3370 134907 549/68a 4142 126644 549/67a 5487 133469 549/68a 4466 126645 549/58a 4467 126639 549/59a 5202 129505 549/58a 5203 129506 549/58a 3228 121204 2109/13 5989 138656 2109/14 3559 171703 2109/14 1052 101612 2109/14 3230 120536 2109/14 3938 126981 2109/14 3229 120537 2109/14 32 002851 549/69a 3170 120533 1530/563 1132 103642 1530/563 1056 101607 1530/563 1057 101608 1530/563 3292 120534 1530/563 1958 110752 1530/563 2061 110751 1530/563 2060 110750 1530/563 5921 079226 1530/563 3384 126304 2109/12 3891 121957 2109/12 3892 121956 2109/12 6425 080186 1503/349
On 7 September 2017, Eticup as vendor signed the Offer and Acceptance by way of acceptance.
Alterations made to the Offer and Acceptance
On or about 20 September 2017 the applicant and Eticup became aware of mistakes in the land descriptions in Annexure A to the Offer and Acceptance.
On 21 December 2017, the applicant as purchaser and Eticup as vendor initialled three alterations made to Annexure A of the Offer and Acceptance, namely:
Lot Plan/Dia Vol/Fol 5487 133469 549/68a549/58a3228 121204 2109/132109/143559 1717031212032109/14
Lodgement of Offer and Acceptance for duty
On 17 January 2018, Summerly Enterprises Pty Ltd t/a Compass Conveyancing (WA) (Compass) on behalf of the applicant lodged a Dutiable Transaction Electronic Lodgement Form with the Office of State Revenue in relation to the Offer and Acceptance.
Manual issue of Duties Assessment Notice
On 19 January 2018, the Commissioner issued to Compass a Duties Assessment Notice. This assessment notice included a late lodgement penalty of $11,429 as well as the duty assessed on the Offer and Acceptance.
On 25 January 2018, Leanne Watson, Senior Settlement Assistant with Compass, wrote by email to the Commissioner requesting an amendment to the assessment. The email noted that the Duties Assessment Notice 'has the incorrect Contract date shown'. The email went on and explained:
When entering the information into Online Duties we entered the correct Contract date of 21 December 2017. Even though the Contract was originally drawn up & signed on 7 September 2017, amendments were made to the listing of Title details (Annexure A of the Contract) on 21 December 2017 thus making this the date of Contract[.]
We confirm the following:-
The Contract was received at our office 29th September 2017 from Agent with incorrect land title details (multiple lots).
Agent advised that they will amend the Contract and have parties initial. No amendments received from Agents.
Buyer attended office on 21 December to confirm correct properties and Title Details - amended Contract to correct and Title details. He was unable to attend our office any earlier as he was busy with harvest.
Until the correct details were verified we were unable to lodge the Contract for Duties Assessment. There are multiple lots (10 Titles and 30 Lots).
On 30 January 2018, the applicant and his wife completed a Substituted Transferees Application Form in relation to five of the lots that were the subject of the Offer and Acceptance.
On 5 February 2018, two Transfer of Land forms were executed in relation to the lots of land.
Lodgement of objection
On 9 March 2018, Compass on behalf of the applicant lodged an objection in relation to the assessment stating:
When acting on behalf of a Buyer and preparing to lodge a Contract for Assessment of Duty we are reliant on receipt of a 'dutiable document'. When the document has substantial errors or misdescription that affects the legality of the Agreement, we claim it is not a 'dutiable document' until any errors or misdescription is (sic) rectified to reflect the 'true and legal agreement' between the parties.
Determination of objection
On 23 April 2018, the Commissioner disallowed the objection, stating in conclusion:
The Contract, being a dutiable document, is liable for duty. The Contract was executed by the Seller and the Buyer on 7 September 2017. Annexure A to the Contract listed the legal description of the land that was being purchased. Therefore Annexure A is an attachment to the Contract.
Accordingly, any subsequent amendments to Annexure A cannot alter the date the Contract was executed.
As a result, pursuant to section 19(a)(b) of the Duties Act, the transaction which has been effected by the Contract became liable for duty on the date that the Contract was executed. That date of execution was a binding agreement between both parties for the sale and purchase of Palomar Farm.
…
The Contract is the sale of farming property known as Palomar Farm from the Seller to the Buyer. That is the intention of the parties. Therefore the errors in Annexure A will not detract the substance of the Contract.
In any event, Annexure A is an attachment to the Contract and the Contract was not varied in any way. Therefore it is the date of the Contract that is the date liability for duty arose and the lodgement provisions under the Duties Act will take effect from that date.
…
… I note that the three errors to the land description and certificate of title were noticed within 2 weeks of the execution date of the Contract. Therefore there were many ways in which the parties could have provided their acceptance of the correct land details (e.g. via electronic communication).
In any event, there was nothing preventing you from lodging the Contract on time and undertaking to confirm that the Parties will initial the amendments at some later time.
You also state that there was difficulty when lodging the Contract via Duties Online on 16 January 2018 with the correct land details and would have encountered issues if the Contract was lodged earlier with the incorrect land details.
As stated above, you were already aware of the correct land details within two weeks of the execution of the Contract and if the Contract was lodged within the lodgement provision of the Duties Act you would have been in a position to enter the correct land details.
Application to Tribunal
On 22 June 2018, the applicant applied to the Tribunal for review of the Commissioner's decision on objection.
Issues
The parties have agreed that the primary issue to be determined in this case is whether the Offer and Acceptance was lodged within the required time for the purposes of s 23(1) of the Duties Act 2008 (WA) (Duties Act).
If the Offer and Acceptance was not lodged within the required time, a further issue to be determined is whether the penalty tax imposed should have been remitted in whole or part in all the circumstances.
Legislative scheme
Duties Act 2008
Under s 10 of the Duties Act, duty is imposed on dutiable transactions.
An agreement for the transfer of dutiable property, whether conditional or not, is a dutiable transaction; s 11(1)(b) of the Duties Act.
The purchaser or transferee is the person liable to pay duty on the Offer and Acceptance; s 20 and Sch 1 of the Duties Act.
Liability for duty on a dutiable transaction arises at the earlier of when the instrument is executed or when the agreement is made; s 19(1) and Sch 1 of the Duties Act.
Section 23 of the Duties Act relevantly provides as follows:
(1)Subject to subsection (2), the person liable to pay duty on a dutiable transaction must lodge
(a)if the transaction is effected by an instrument in hard copy form that instrument and if there is more than one such instrument, each of them; or
(b)…
within 2 months after the day on which liability for duty on the transaction arises[.]
Taxation Administration Act 2003
Section 26 of the TA Act provides:
(1)A taxpayer is liable to pay penalty tax in the following circumstances
…
(b)where the taxpayer does not lodge an instrument in accordance with a taxation Act;
…
(2)If there are reasonable grounds for suspecting that a taxpayer is liable to pay penalty tax, the Commissioner may assess the amount of penalty tax payable by the taxpayer.
(3)The amount of penalty tax payable is the amount equal to
(a)the amount of the taxpayer’s primary liability; or
(b)the amount that the taxpayer would have been liable to pay if the circumstances giving rise to the liability to penalty tax had not occurred,
as the case requires.
The Duties Act is a taxation Act; s 3(1)(ca) of the TA Act.
Under s 29(1) of the TA Act, the Commissioner may remit the penalty tax in whole or in part.
Section 30 of the TA Act states:
(1)The Commissioner must publish the policy followed by the Commissioner when deciding whether or not to remit penalty tax under section 29.
(2)The Commissioner must, at the request of a taxpayer, make a copy of the guidelines available to the taxpayer.
Commissioner's decision
The Commissioner considered that the liability for duty on the Offer and Acceptance arose on 7 September 2017, the date upon which the Offer and Acceptance was accepted by Eticup as vendor and the contract between the parties thereby formed. The Commissioner, while conceding that an agreement is not binding if it is uncertain or incomplete, considered that the contract constituted by the execution of the Offer and Acceptance was sufficiently precise and clear in the language used. In particular, the parties had agreed to sell and purchase '"Palomar", Flat Rocks Road Broomehill Comprising Approx 2156 Hectares' and that therefore the contract was 'certain' in the relevant contract law sense. The errors in the contract, in the Commissioner's view, could have been corrected through contract construction principles or by rectification. Although the alterations to the land description in the contract were initialled by the parties on 21 December 2017, the Commissioner considered that liability for duty arose on 7 September 2017, the date of acceptance by Eticup of the applicant's offer to purchase.
Accordingly, the Commissioner took the view that the Offer and Acceptance was required to be lodged for assessment of duty by 8 November 2017.
Because the Offer and Acceptance was not lodged for assessment of duty until 17 January 2018, the Commissioner considered that it was appropriate to impose a late lodgement penalty pursuant to s 26(1) of the TA Act.
The Commissioner then applied Commissioner's Practice TAA 18.2; Remission of Penalty Tax (CPTAA 18.2) and remitted the penalty to an amount equal to 2.5% of the duty payable.
The Commissioner considered in accordance with the provisions of CPTAA 18.2 whether any further remission of penalty should be applied but concluded that there were no other applicable exceptional circumstances and declined to apply any further remission.
Applicant's submissions
The applicant submits that the contract constituted by the Offer and Acceptance was not binding on the parties until 21 December 2017. The applicant says that the Offer and Acceptance, as at 7 September 2017, did not clearly identify the land being transacted and therefore would not entitle the purchaser to indefeasible title to the land it intended to purchase.
The applicant says that the parties' inaction in addressing the errors or progressing the transaction until 'after harvest' suggests that neither of them believed that the agreement was binding at that time, in that a reasonable person would draw that conclusion from that conduct.
The applicant submits that the Commissioner, by proceeding on the basis that the land could be and was identified by the name of the relevant farm, made a decision based on irrelevant matters and in any event has taken into account a matter which is not supported by evidence. The errors in the land description in the Offer and Acceptance were not matters which could be corrected as a matter of contract construction or rectification.
The applicant submits that it is obvious from the face of the Offer and Acceptance that it contained three typographical errors, describing land which does not exist. The applicant submits that it is not obvious what land was intended to be described. The applicant says that it would have been 'near impossible for a court of construction to determine' what changes were required to be made to the Offer and Acceptance and impossible without reference to extrinsic material; applicant's statement of contentions dated 1 October 2018 at para 5(c)(iv).
The applicant submits that the contract remained incomplete or uncertain until 21 December 2017 and therefore that is the date on which the parties entered into an agreement for the sale and purchase of identifiable land.
The applicant says that rectification is an equitable remedy subject to the discretion of the court which must be exercised according to general equitable principles. Rectification, the applicant goes on, is intended to prevent a party from unconscionably relying on rights it may have at common law against another party. It is not intended to be used against a party to an agreement by a third party. In this case, the applicant says, the parties were in agreement that the contract had no application until 21 December 2017. Neither was seeking to enforce it against the other.
The applicant says that therefore the equitable jurisdiction is not enlivened and could never be enlivened where the party seeking to rely on the existence of a contract is a third party (the Commissioner) whose opinion on the validity of the contract is at odds with the intention of both parties to the contract.
Turning to the penalty for late lodgement, the applicant says that, if the Tribunal nonetheless finds that the Offer and Acceptance was lodged out of time, the circumstances are so exceptional that a full remission is warranted. The applicant says that it is unreasonable to expect that the applicant should have lodged the Offer and Acceptance after correction but before the parties had initialled the changes. The applicant says that such a lodgement could only have been based on an assumption about what land the parties had intended to deal with. The applicant says that until the written contract is in place, it could not be expected to make an assumption about the vendor's intentions as to what land was to be sold. The applicant says that these circumstances amount to exceptional circumstances justifying remission of the penalty.
Disposition
It is not in dispute, and it is readily apparent that the land in question is dutiable property and that the Offer and Acceptance is an agreement for the transfer of dutiable property.
The issue to be determined is the date upon which liability for duty on the Offer and Acceptance arose.
The circumstances of this matter are not dissimilar to the facts in Benyon v Wongala Holdings Pty Ltd [1999] NSWCA 66; (1999) 9 BPR 16,781 (Benyon). While the decision in Benyon centred on whether a vendor of land was entitled to specific performance and therefore damages from the purchaser for loss resulting in the purchaser's failure to comply with a notice to complete, the findings in Benyon are entirely relevant here.
The contract under consideration in Benyon described the two properties the subject of the sale and purchase as respectively 'Inglebar Homestead' and 'Inglebar North'. The specific lots and titles, however, were misdescribed in the contract in the sense that the various lot numbers on the Deposited Plans were correctly stated but the Deposited Plans themselves were given incorrect numbers. Justice Meagher considered that, despite the 'formidable appearance of the list of misdescriptions' they were only of minor importance. His Honour accepted that the documents could have been rectified by the vendor before settlement or by the purchasers after settlement. His Honour considered that his conclusions, while amply supported by the evidence, were in any event 'obvious enough'. His Honour concluded that the vendor was entitled to specific performance, was entitled to rectification of the contact and the purchasers were not justified in their attempt to terminate the contract.
In this case, the property concerned was identified in the Offer and Acceptance as 'Palomar', comprising thirty lots in total, described in the Offer and Acceptance by way of thirty separate lot numbers, followed by the diagram or plan numbers in each case and the relevant Certificate of Title details in each case. Of these thirty lots, all were given their correct lot numbers. However, three of those lots included either incorrect plan or diagram numbers or incorrect Certificate of Title details.
These errors are immediately apparent upon comparison with the relevant Certificates of Title. Lot 5487 on Plan 133469 is not the land comprised in Certificate of Title Volume 549 Folio 68a, but there is a Lot 5487 on Plan 133469 comprised in Certificate of Title Volume 549 Folio 58a. The same applies to Lot 3228 on Plan 121204. That land is not comprised in Certificate of Title Volume 2109 Folio 13, but that lot on that plan is comprised in Certificate of Title Volume 2109 Folio 14. Further, Lot 3559 on Plan 171703 is not the land comprised in Certificate of Title Volume 2109 Folio 14, but there is a Lot 3559 on Plan 121203 comprised in Certificate of Title Volume 2109 Folio 14.
These errors would have been, and perhaps were, noticed when the relevant Transfer of Land form was prepared. The errors were corrected by hand some two weeks after Eticup accepted the applicant's offer on 7 September 2017. However, those corrections were not initialled by the parties until 21 December 2017, presumably after 'harvest'.
Although the parties to the Offer and Acceptance did not give evidence, I consider, on the facts agreed and found by the Tribunal, that it is open to infer, and I so infer, that on 7 September 2017 the parties considered that they had contracted to buy and sell the property known as 'Palomar' comprising of thirty lots. The Offer and Acceptance did not contain any provision to the effect that the contract was conditional on any subsequent enquiry as to what lots comprised 'Palomar', and, in any event, all of the lot numbers set out in the Offer and Acceptance were correctly stated.
The Commissioner says, and it is not disputed by the applicant, that the three lots in question as originally described in the Offer and Acceptance did not exist and, for that reason, the errors would have been easy to identify. Clearly those lots were described incorrectly and, although there is no evidence to support this, it is my view obvious that these errors were typographical only. Once those errors were noticed, the appropriate amendments to be made would have been, and apparently were, simple to identify.
I therefore reject the applicant's submission that 'the parties' inaction in addressing the errors or progressing the transaction (despite being identified within two weeks of 7 September 2017) until after harvest suggests that neither of them believed that the agreement was binding at the time'; applicant's statement of contentions at para 2c.
In my view, the contract constituted by the Offer and Acceptance was complete and certain and came into existence on 7 September 2017, despite the three typographical errors. Even if the errors had not been noticed until after the price was paid, I consider that it would have been open to the applicant, in the absence of cooperation from Eticup, to seek specific performance and would have been entitled to rectification of the contract.
It follows that I consider that the date when liability for duty arose on the Offer and Acceptance is 7 September 2017. Accordingly, the Offer and Acceptance should have been lodged by the date two months after 7 September 2017. The Commissioner's decision in this regard is affirmed. The Offer and Acceptance was not lodged until around 17 January 2018.
Penalty for late lodgement
The Offer and Acceptance was lodged for assessment of duty out of time and I consider that the applicant is liable to pay penalty tax under s 26(1) of the TA Act. The amount of penalty tax is the amount equal to the amount of the primary liability, although the Commissioner may remit the penalty tax in whole or in part under s 29(1) of the TA Act.
The issue is then whether the penalty tax should have been so remitted.
As required by s 30(1) of the TA Act, the Commissioner published CPTAA 18.2, which sets out the Commissioner's practice on remission of penalty tax on, amongst other things, late lodgement of instruments. CPTAA 18.2 is valid from 1 March 2011 to the present.
CPTAA 18.2 relevantly provides that it is the Commissioner's practice to remit that penalty tax in certain circumstances. In this case, the circumstances gave rise to the Commissioner remitting the penalty tax to 2.5% of the primary liability. Accordingly, the Commissioner assessed penalty tax at $11,429, being 2.5% of $457,190.50.
This Tribunal on a number of occasions has expressed the view that there are sound policy reasons to follow the Commissioner's published practices; for example Miller & Anor and Commissioner of State Revenue [2006] WASAT 336; Anderson and Commissioner of State Revenue [2008] WASAT 11; Bettison and Commissioner of State Revenue [2011] WASAT 183. As the Tribunal has previously remarked, this ensures fairness and transparency in the Commissioner's application of remission of penalty tax under s 29 of the TA Act. The Tribunal considers that it is important that the Commissioner adheres to this policy so as to provide a consistency in the manner in which it is applied.
In this case, it is therefore appropriate for the Commissioner to remit the penalty in accordance with CPTAA 18.2. I consider that CPTAA 18.2 was properly applied. CPTAA 18.2 provides that no further remission of penalty tax will be allowed unless there are 'exceptional circumstances'.
In this case, no such exceptional circumstances have been identified by the applicant, nor has the Tribunal been able to identify any. It was always open to the applicant to lodge the Offer and Acceptance for assessment of duty prior to the amendments having been made and initialled by the parties. I can see no reason why the applicant did not do so.
For that reason, the decision of the Commissioner to assess penalty tax at $11,429, being 2.5% of the penalty tax which would otherwise be payable under s 26 of the TA Act, is affirmed.
Orders
1.The decision by the respondent dated 23 April 2018 to disallow the applicant's objection is affirmed.
2.The application dated 22 June 2018 for review of the respondent's decision is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
JUDGE T SHARP, ACTING PRESIDENT
27 NOVEMBER 2018
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