Tzovaras v Chief Commissioner of State Revenue

[2020] NSWCATAD 265

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Tzovaras v Chief Commissioner of State Revenue [2020] NSWCATAD 265

Hearing dates:

24 July 2020

Date of orders:

27 October 2020

Decision date:

27 October 2020

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

AR Boxall, Senior Member

Decision:

1. The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent’s decisions:

(1) to assess the Declaration of Trust with duty of $28,722.50, and

(2) to charge interest by reference to both the market rate component and the premium rate component in respect of the duty assessed but unpaid.

Catchwords:

TAXES AND DUTIES — Dutiable transactions — Dutiable property — Declaration of trust

TAXES AND DUTIES — Administration — Interest — Remission

Legislation Cited:

Administrative Decisions Review Act 1997 ss 58, 63

Duties Act 1997 ss 8, 9, 11, 12, 16, 55

Taxation Administration Act 1996 ss 21, 25, 89, 90, 96, 99, 100, 101

Cases Cited:

Calverley v Green (1984) 155 C.L.R. 242

Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Limited [2017] NSWCA 184

Texts Cited:

Ruling DUT 030 dated 13 November 2006, entitled “Property Vested in an Apparent Purchaser”

Category:

Principal judgment

Parties:

Alexander Michael Tzovaras (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel:
H Morgan (Respondent)

Solicitors:
Tzovaras Legal (Australia) Pty Ltd (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2019/00216727

Publication restriction:

None

REASONS FOR DECISION

APPLICATION TO REVIEW DECISIONS OF THE CHIEF COMMISSIONER of STATE REVENUE

Introduction

1. This is an application for review by the Tribunal of a decision made by the Respondent on 18 October 2017 (the Assessment) which:

1. assessed with ad valorem duty under Chapter 2 of the Duties Act 1997 (the Duties Act) a declaration of trust (the Declaration of Trust) made by the Applicant on 6 May 2015 over real property located in Zetland NSW (the Property), and

2. charged interest under the provisions of the Taxation Administration Act 1996 (the TAA) on the unpaid duty so assessed.

2. In these reasons references to the Section 58 Documents are to the bundle of documents filed by the Respondent with the Tribunal on 12 August 2019 pursuant to section 58 of the Administrative Decisions Review Act 1997 (ADRA).

Procedural history

3. On 2 May 2018, the Applicant’s solicitors lodged an objection to the Assessment (the Objection) with the Respondent. This was nearly 6 months outside the 60-day period for lodging objections provided for under section 89(1) of the TAA. However, in his letter to the Applicant’s solicitors dated 10 May 2018 the Respondent indicated that he was proceeding to determine the objection in the ordinary way. The Respondent must thus be taken to have decided under section 90(1) of the TAA to accept the Objection despite its lateness.

4. Further correspondence between the Applicant’s solicitors and the Respondent followed over a quite protracted period, and on 13 May 2019 the Respondent issued a letter to the Applicant’s solicitors, informing them of the Respondent’s decision to disallow the Objection.

5. On 12 July 2019, the Applicant’s solicitors lodged with the Tribunal an Administrative Review Application Form, seeking review by the Tribunal of the Assessment under section 96 of the TAA.

6. That section permits a taxpayer to apply to the Tribunal for the review of a decision made by the Respondent if:

1. The decision has itself been the subject of an objection lodged by the taxpayer under Division 1 of the TAA; and

2. The taxpayer is dissatisfied with the Respondent’s determination of the objection.

Both conditions were clearly satisfied.

7. Section 99 of the TAA provides that the application for review must be made no later than 60 days after the date of issue of the notice of the Respondent’s determination of the objection. the application for review was received by the Tribunal on 12 July 2019, within the prescribed period.

8. The Applicant lodged on 18 March 2020 an amended application for review, which contained expanded and additional grounds for review. In the Tribunal’s view the Applicant’s amendment of his application in that way does not detract from the application’s timeliness.

9. The application was listed for hearing on 24 July 2020. The Applicant’s solicitor asked that the matter be decided on the papers, and the Respondent’s advocate was agreeable to doing so, provided that she have the opportunity to make further submissions summarising the arguments which she would otherwise have made orally.

10. Accordingly, the Tribunal ordered that the matter be determined on the papers, with the Respondent having until 31 July 2020 to make any further written submissions, and the Applicant until 7 August to do likewise.

11. On 31 July 2020, the Respondent’s further submissions were provided to the Tribunal and the Applicant. No further submissions were received from the Applicant.

Factual background

12. On 6 May 2015, the Applicant entered into a contract for the purchase by him of the Property (the Contract). The consideration for the purchase was $736,500, of which $257,292.60 was expressed to be payable as a deposit (the Deposit) and the balance of $479,207.40 was payable on completion.

13. On that same day, the Declaration of Trust was executed. It was between: (1) the Applicant, as Trustee; (2) Lesley Anne Tzovaras (described in it as the “Mother”), the Trustee, Melissa Elizabeth Phillips (née Tzovaras), Natalie Helen Tzovaras and Philip Anthony Tzovaras (the last four of whom are described in it as the “Children”), all as the “Purchasers”; (3) TL Consulting Pty Ltd ACN 109 109 168 (described as the “Original Trustee”); and (4) Ted Dorotheos Tzovaras, described in it as the “Father”). These definitions will be used where appropriate in these reasons.

14. The Declaration of Trust recites in summary as follows:

1. In Recital A, that the Applicant has entered into the Contract at the request of the Purchasers, the Father and the Original Trustee.

2. In Recital B, that the Applicant has agreed to complete the Contract and become the registered proprietor of the Property at the request of the Purchasers, the Father and the Original Trustee.

3. In Recital C, that the purchase price is being provided as follows:

1. As to the Deposit of $257,292.60, by the Original Trustee; and

2. As to the balance, from the proceeds of a loan (the “Loan”) obtained by the Applicant from Bendigo and Adelaide Bank Limited (the Bank), on security of a first mortgage over the Property.

4. In Recital D, that the Father has undertaken to pay all monthly instalments on, and ultimately to repay in full, that Loan.

5. In Recital E, that the purchase of the Property is made by the Applicant for the benefit of the Purchasers, to be held in trust for the Mother for her life, and as to the remainder for the Children in equal shares.

15. The Declaration of Trust’s operative provisions are quite brief, comprising four clauses:

1. Clause 1 contains certain acknowledgements by the Applicant as Trustee:

1. In clause 1(a), he acknowledges that he purchases the Property as nominee for the Purchasers;

2. In clause 1(b), he acknowledges that the Purchasers will be beneficially entitled to the Property as follows:

1. A life estate for the Mother, and

2. The remainder to the Children in equal shares; and

3. In clause 1(c), that the Purchasers will be entitled to be registered as proprietors of the Property to reflect their respective interests.

2. In clause 2, he agrees to execute a transfer and other documents required to have the Purchasers (or their respective assigns) registered as proprietors of their respective interests in the Property as contemplated in clause 1 of the Declaration of Trust.

3. In clause 3, the Applicant as Trustee agrees not to grant any mortgage, charge or other encumbrance of the Property, other than the mortgage in favour of the Bank referred to in Recital C.

4. In clause 4:

1. The Father and the Purchasers jointly and severally agree to indemnify the Applicant as Trustee from and against any liability incurred by him because of having purchased the Property in his name; and

2. The Purchasers in particular agree to pay punctually:

1. all rates taxes and other outgoings for the Property, and

2. the principal, interest and all other money due and payable under any Mortgage or other charge which, at the request of the Purchasers, the Applicant executes over the Property.

16. The Contract was lodged with the Respondent and, according to the Respondent’s stamped marking on it, duty of $28,722.50 was paid on it on 10 June 2015, consistently with Chapter 2 of the Duties Act.

17. The Property was registered in the Applicant’s name on or about 3 July 2015 pursuant to a transfer with the dealing number *****594. A mortgage of the Property in favour of the Bank, with the immediately succeeding dealing number *****595, was also registered against the Property.

18. On 10 April 2017, the Applicant’s solicitors lodged the Declaration of Trust with the Respondent for the assessment and payment of duty. This was over 23 months after the Declaration of Trust was executed, and more than 20 months after the latest date by which it was required under section 16 of the Duties Act to be lodged for assessment. At the time of lodgement, the solicitors submitted without detailed explanation that the Declaration of Trust should be charged with nominal duty only under Chapter 2.

19. On 22 April 2017, the Respondent issued a Duties Notice of Assessment in relation to the Declaration of Trust, assessing it with duty of $20,415 and interest of $3,506.45. Handwritten notes on the Respondent’s copy of the solicitors’ covering letter to the Respondent submitting the Declaration of Trust for assessment, apparently made by an officer of the Respondent, suggest that:

1. The original basis for seeking an assessment of fixed duty on the Declaration of Trust had been that the beneficiaries of the trust had provided the purchase monies for the Property, but that the Respondent was unconvinced by this argument; and

2. The Respondent assessed duty on the Declaration of Trust not by reference to the price paid for the Property under the Contract, but rather by reference to three-quarters of that amount.

20. On or about 10 July 2017 the solicitors for the Applicant lodged an objection dated 5 July 2017 to that assessment, on the following grounds:

1. The Property is vested in the apparent purchaser, the Applicant, upon trust for the real purchasers, the Purchasers; and

2. The Purchasers provided the money for the purchase of the Property, in that they were jointly and severally liable to repay the Loan borrowed by the Applicant to fund the purchase of the Property.

21. On 18 October 2017, the Respondent:

1. Disallowed that objection; and

2. Issued a reassessment of duty in relation to the Declaration of Trust, calculated by reference to the full purchase price for the Property rather than the fractional amount used in assessing duty on 22 April 2017.

22. On 1 May 2018, the Applicant’s solicitors wrote to the Respondent:

1. outlining the Applicant’s then somewhat financially straitened circumstances,

2. submitting that as the result of them he was “... unable to pay the outstanding amount of stamp duty now or in the foreseeable future”, and

3. requesting that the Respondent refrain from taking any legal steps for the recovery of the outstanding amount of stamp duty due, pending the final determination of the various objections.

23. There then began on 2 May 2018 the objection process which has culminated in the present application for review.

24. On 16 March 2020, the Applicant, the Purchasers and the Father executed an amendment deed to the Declaration of Trust (the “Amendment Deed”). Relevantly, it provides as follows:

1. It recites that the Original Trustee was deregistered as a company on 6 October 2019.

2. It recites too that the parties:

1. have become aware of “... several factual and other errors contained in the Principal Deed, including the erroneous inclusion of TL Consulting Pty Ltd (A.C.N. 109 109 168) and the Father as parties ...” ; and

2. wish to amend the Declaration of Trust accordingly.

3. It takes effect on 16 March 2020.

4. It removes all references to the Original Trustee and the Father from the Declaration of Trust, including provisions to the effect that:

1. The Original Trustee agreed to pay the Deposit to purchase the Property;

2. The Father has agreed to pay all Loan instalments; and

3. The Father agrees to indemnify the Applicant in respect of amounts liabilities in relation to the purchase of the Property.

5. It recites that the Deposit for purchase of the Property was in fact provided by the Trustee in his personal capacity for and on behalf of the Purchasers (including himself).

6. It inserts quite elaborate provisions into the Declaration of Trust in the forms of new clauses 5, 6 and 7, the apparent effect of which is to establish a regime under which the Purchasers each acknowledge an obligation to contribute 20% of the costs of purchasing the Property, including the purchase price and Loan repayments, including reimbursing their respective shares of the Deposit to the Applicant.

25. There has been some confusion about the source of the Deposit:

1. The Declaration of Trust, at least until 16 March 2020, expressly stated that the Deposit for the purchase of the Property had been paid by the Original Trustee.

2. This position was reiterated by the Applicant himself in a statutory declaration dated 28 June 2017, made in connection with the first objection dated 5 July 2017. In paragraph 6 of that statutory declaration the Applicant states as follows:

“Under the Contract, the deposit payable was provided by the Original Trustee for the benefit of the Purchasers”.

3. However, in his statutory declaration dated 2 May 2018, made in connection with his second objection, the Applicant said that the statement made by him quoted above as to the source of the Deposit was “... an erroneous statement that I inadvertently made”. The true situation, he said, was that the Deposit of $257,292.60 was a debt owed by the vendor of the Property (the Vendor) to him, and that under Special Condition 37 of the contract for purchase of the Property (which he sets out in his statutory declaration) the Vendor both acknowledged that indebtedness to him and agreed to accept its forgiveness as payment of the Deposit.

4. In his letter to the Applicant’s solicitors dated 13 May 2019, informing them of his decision to disallow the second objection, the Respondent noted this explanation of the arrangements for payment of the Deposit stated as follows:

“I am satisfied that the deposit was not paid by the trustee company as stipulated in the Trust Deed”.

26. Amongst the Section 58 Documents are, relevantly:

1. A copy of a loan approval dated 14 May 2015 addressed to the Applicant by Mortgage Ezy Pty Limited, informing him that approval had been given for a 30 year loan to him of $516,950 to be secured by a mortgage over the Property and requiring the Bank’s interest to be noted on the insurances for the Property;

2. A document headed “100% Offset Home Loan contract” between the Applicant and the Bank, providing for a loan to him consistent with that loan approval;

3. A title search for the Property, recording the Applicant as registered proprietor and the Bank as mortgagee;

4. Statements in relation to the Applicant’s account with Westpac Banking Corporation, recording 33 loan repayments made by him to the Bank during the period from 27 July 2015 to 26 March 2018;

5. Statements in relation to the Applicant’s Loan account with the Bank, issued by Ezy Mortgage Pty Limited, covering the period starting on 18 May 2015 and ending on 30 November 2018; these record the receipt of the payments referred to in (4) above, together with:

1. In January 2016, unscheduled prepayments of principal under the Loan totalling a little over $218,000, made by a person identified as “Prominence”; the name of the Vendor was Prominence Apartments Pty Limited, although it is not at all apparent why that company (if in fact it is the same entity as “Prominence” referred to in the bank statements) should choose to make repayments of the Applicant’s mortgage; this, however, is but one of several small financial mysteries in this matter;

2. In that same month, a little under $218,000 was paid into the offset account linked to the Applicant’s Loan account with the Bank, by a gentleman identified as “Ted Tzovaras”; he presumably was the Father;

3. Thereafter, a succession of regular payments to the Loan account described as “Standing Order Autopay”, with no identification of the payer; these include receipts which correspond to the 33 payments by the Applicant identifiable from his Westpac statements;

4. In addition to those payments, from July 2017 there was a succession of occasional redraws (some large, and some small) and unscheduled repayments of principal, without any particular pattern; and

5. In November 2018, there was a payment on the Loan account by the Applicant’s brother.

27. There were also produced a supplementary bundle of statements relating to the Loan account, for the period 1 December 2018 to 29 February 2020. These suggest that over that period the economic (although not the legal) burden of meeting mortgage payments for the Property was effectively taken over by the Applicant’s brother, Phillip. Initially this was through a series of credits and debits to an offset account linked to the Loan account, and later by means of direct payments to the Loan account by Philip, accompanied by matching reimbursements to the Applicant. There was, however, no evidence of any change in the contractual arrangements between the Applicant and the Bank concerning the Loan, under which the Applicant continued to be solely liable to the Bank as borrower of the Loan. These statements also indicate three payments totalling a little over $15,000 into the Loan offset account made by Tzovaras Legal, the Applicant’s solicitors.

28. None of the documents provided, whether in the Section 58 Documents or in this supplementary bundle:

1. disclose any payments by any beneficiary of the trust other than the Applicant and his brother Phillip, either directly towards the initial acquisition of the Property or towards repayment of the Loan obtained by the Applicant; or

2. reveal the existence of any liability incurred by any beneficiary of the trust, other than the Applicant, to the Bank for the Loan; there is no evidence to suggest that any of them was at any time a co-borrower with the Applicant, or that any of them had provided any form of guarantee, indemnity or other form of suretyship to the Bank in support of the Applicant’s liability.

The parties’ arguments

29. The Applicant says in summary that:

1. The Declaration of Trust should be subject to nominal duty only as it satisfied section 55(1)(a)(ii) of the Duties Act, since the Property is vested in the Applicant as apparent purchaser only, whereas in fact he holds it in trust for the Purchasers (including the Applicant in his personal capacity) as the real purchasers.

2. The Purchasers should be considered as the real purchasers of the Property because they have effectively provided the money to purchase the Property.

3. The effect of the Declaration of Trust and the Amendment Deed is:

1. To adjust as between the Purchasers their respective contribution obligations towards the liabilities incurred by the Applicant as trustee; and

2. To establish that the payments made by the Applicant for the purchase of the Property, by way of Deposit and application of the Loan proceeds, were made “... on the basis of the Purchasers’ agreement comprised in the Trust Deed, particularly the Indemnity Agreement and Repayment Agreement comprised in clauses 4, 5, 6 and 7 thereof, having the effect that each of the Purchasers contribute equally towards the purchase of the Property”; the reference to clause 4, 5, 6 and 7 is apparently to clause 4 of the Declaration of Trust, as amended by the Amendment Deed, and clauses 5, 6 and 7 inserted into it by the Amendment Deed.

4. The purchase price for the Property was provided by the Applicant in two ways:

1. By applying the debt owed to him by the Vendor as a Deposit for the Property; and

2. As to the balance, from the Loan raised by him for that purpose.

5. The Purchasers are legally obliged, as against the Applicant in his trustee capacity, to pay the purchase price. They have incurred this obligation by means of their respective commitments, set out in Clause 4 of the Declaration of Trust and in the Amendment Deed, to indemnify the Applicant against liabilities incurred by him in connection with the purchase of the Property, and in particular their undertaking to meet mortgage payments. They are thus properly considered as having provided the purchase moneys for the Property, and in consequence as its real purchasers.

6. Moreover, because the Purchasers are in reality the joint and several real purchasers of the Property, it is sufficient that payment of the purchase price be made by one of them in order to attract the operation of section 55(1)(a)(ii) of the Duties Act.

7. In consequence, the Respondent should be so satisfied and assess the Declaration of Trust with fixed duty of $50 only in accordance with section 55(1)(a)(ii) of the Duties Act.

8. Alternatively, the Declaration of Trust and the Contract give effect to a single transaction, being the acquisition of the Property by the Purchasers as beneficial owners. The provisions of section 18 of the Duties Act thus apply, which provide that where a dutiable transaction is effected by more than one instrument, one only of those instruments is to be stamped with ad valorem duty and each other instrument is to be stamped with fixed duty of $50. In consequence, since the Contract has been stamped with ad valorem duty, the Declaration of Trust should be stamped with fixed duty only.

30. The Respondent says that:

1. The concession under section 55(1)(a)(ii) of the Duties Act is not satisfied because the Applicant has not established that the money for the purchase of the Property was provided by the Purchasers rather than the Applicant.

2. The liability of the Declaration of Trust to duty is to be determined as at the date of its execution.

3. The Declaration of Trust and the Contract are separate and distinct transactions. The provisions of section 18 of the Duties Act do not therefore apply.

The nature of the review

31. The provisions of section 100 of the TAA apply to this review. Notably:

1. sub-section 100(2) of that Act provides that neither the Applicant nor the Respondent is limited in the present application to the grounds of the Objection; and

2. sub-section 100(3) of that Act provides that the Applicant has “… the onus of proving the applicant’s case in an application for review”, an onus which is discharged by reference to the ordinary civil standard: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481.

32. Under section 63(1) of the ADRA, in conducting a review the Tribunal “..  is to decide what the correct and preferable decision is having regard to the material then before it, including the following:

1. any relevant factual material,

2. any applicable written or unwritten law”.

33. Moreover, under section 63(2) of that Act 1997, in doing so the Tribunal “… may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision”.

Reasoning: liability to ad valorem duty

34. There is no debate that the Property is land in New South Wales within the meaning of the Duties Act, and thus dutiable property under section 11(1)(a) of that Act.

35. These reasons will deal first with the argument that section 18 of the Duties Act requires that the Declaration of Trust be stamped with fixed duty only.

36. Section 18(1) provides as follows:

If a dutiable transaction is effected by more than one instrument, one instrument is to be stamped with the duty payable on the dutiable transaction and each other instrument is chargeable with duty of $50.

37. Section 8 of the Duties Act provides relevantly as follows:

8 Imposition of duty on certain transactions concerning dutiable property

(1)   This Chapter charges duty on--

(a)   a transfer of dutiable property, and

(b)   the following transactions--

(i)   an agreement for the sale or transfer of dutiable property,

(ii)   a declaration of trust over dutiable property,

(iii)   .......................................................

(2)   Such a transfer or transaction is a "dutiable transaction" for the purposes of this Act.

38. It is unarguable in consequence that:

1. the Contract is charged with duty under section 8(1)(b)(i) of the Duties Act;

2. the Declaration of Trust is charged with duty under section 8(1)(b)(ii); and

3. Each of the Contract and the Declaration of Trust is individually a dutiable transaction.

39. Section 18(1) might well have a role to play if:

1. the agreement for the Applicant’s purchase of the Property comprised several individual instruments which, taken as a whole, gave rise to that single agreement, or

2. the creation of a trust over the Property by the Applicant in favour of the Purchasers had been effected by several individual documents which, taken as a whole, amounted to a declaration of trust.

In those circumstances, section 18(1) would protect the taxpayer against the unfair imposition of multiple ad valorem liabilities solely as a result of the documentary structure of the particular transaction. That, however, is not the case here: each of the Contract and the Declaration of Trust is a complete and self-contained instrument, the legal effect of which meets the description of a dutiable transaction set out in section 8 of the Duties Act. Section 18(1) therefore cannot apply. This is because there is not a single dutiable transaction effected by multiple documents, but rather two dutiable transactions, each of which is given effect to by a discrete instrument.

40. Underlying the Applicant’s argument is the idea that, taken as a whole, the Contract and the Declaration of Trust are directed at achieving a wider commercial end, being the acquisition of the Property with a view to its being beneficially owned by the Purchasers on the trusts set out in the Declaration of Trust. That may well be the case, but the existence of such an overarching commercial objective does not mean that the Contract and the Declaration of Trust automatically cease to be distinct dutiable transactions. If that commercial objective is achieved by means of multiple dutiable transactions, the logical consequence is that its participants are exposed to a corresponding multiplicity of charges to ad valorem duty, subject to whatever express relief the Duties Act may offer. That, in the Tribunal’s view, is the position here.

41. The Duties Act does offer some express relief from double duty in the context of declarations of trust, through the provisions of section 55 of the Duties Act. It is on this section that the Applicant’s other arguments rely.

42. Section 55 provides relevantly as follows:

55 Property vested in an apparent purchaser

(1)   Duty of $50 is chargeable in respect of--

(a)   a declaration of trust made by an apparent purchaser in respect of identified dutiable property--

(i)   vested in the apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property, or

(ii)   to be vested in the apparent purchaser upon trust for the real purchaser, if the Chief Commissioner is satisfied that the money for the purchase of the dutiable property has been or will be provided by the real purchaser, or

(b)   a transfer of dutiable property from an apparent purchaser to the real purchaser if--

(i)   the dutiable property is property, or part of property, vested in the apparent purchaser upon trust for the real purchaser, and

(ii)   the real purchaser provided the money for the purchase of the dutiable property and for any improvements made to the dutiable property after the purchase.

(1A)   For the purposes of subsection (1), money provided by a person other than the real purchaser is taken to have been provided by the real purchaser if the Chief Commissioner is satisfied that the money was provided as a loan and has been or will be repaid by the real purchaser.

(1B)   This section applies whether or not there has been a change in the legal description of the dutiable property between the purchase of the property by the apparent purchaser and the transfer to the real purchaser.

43. Section 9 of the Duties Act homologises the duty regimes for transfers of dutiable property and other categories of dutiable transactions:

9 Imposition of duty on dutiable transactions that are not transfers

(1) The duty charged by this Chapter on a dutiable transaction referred to in section 8 (1) (b) is to be charged as if each such dutiable transaction were a transfer of dutiable property.

(2)   Accordingly, for the purpose of charging duty under this Chapter, in relation to a dutiable transaction specified in Column 1 of the following Table--

(a)   the property specified opposite the dutiable transaction in Column 2 is taken to be the property transferred (and a reference in this Act to property transferred includes a reference to such property), and

(b)   the person specified opposite the dutiable transaction in Column 3 is taken to be the transferee of the dutiable property (and a reference in this Act to a transferee includes a reference to such a person), and

(c)   the transfer of the dutiable property is taken to have occurred at the time specified opposite the dutiable transaction in Column 4 (and a reference in this Act to the time at which a transfer occurs includes a reference to such a time).

Table

Column 1	Column 2	Column 3	Column 4
Dutiable transaction	Property transferred	Transferee	When transfer occurs
agreement for sale or transfer	the property agreed to be sold or transferred	the purchaser or transferee	when the agreement is entered into
declaration of trust	the property vested or to be vested in the declarant	the person declaring the trust	when the declaration is made
surrender	the surrendered property	the person to whom the property is surrendered	when the surrender takes place
foreclosure	the mortgaged property	the mortgagee	when the foreclosure order is made
vesting by court order	the vested property	the person in whom the property is vested	when the order is made
enlargement of a term in land into a fee simple	the estate in fee simple	the person who acquires the estate in fee simple	when the term is enlarged
vesting by statute law	the vested land in New South Wales	the person in whom the land is vested	when the vesting by statute law occurs
lease	the leased property	the lessee	when the lease is entered into

44. Also relevant is section 12 of the Duties Act, which provides as follows:

12 When does a liability for duty arise?

(1)   A liability for duty charged by this Chapter arises when a transfer of dutiable property occurs.

(2)   However, if a transfer of dutiable property is effected by an instrument, liability for duty charged by this Chapter arises when the instrument is first executed.

45. Since the Contract and the Declaration of Trust were executed on the same day, 6 May 2015, and completion of the Contract took place sometime afterwards, on or about 3 July 2015:

1. the applicable provision is section 55(1)(a)(i), which imposes fixed duty of $50 on “.. a declaration of trust made by an apparent purchaser in respect of identified dutiable property .... to be vested in the apparent purchaser [underlining added] upon trust for the real purchaser” if the Respondent “.... is satisfied that the money for the purchase of the dutiable property has been or will be provided by the real purchaser”; for purposes of this provision, the Applicant is the “apparent purchaser” while the Purchasers are the “real purchaser”; and

2. the time as at which duty on the Declaration of Trust is to be assessed is 6 May 2015, consistently with the provisions applicable to declarations of trust in Column 4 of the table to section 9.

46. The consequence of this is that the Amendment Deed dated 6 March 2020 is of no relevance to this review, except to the extent that the fact of its execution may bear upon the Respondent’s decision to charge interest:

1. It was not in existence at the time at which the Declaration of Trust was executed on 6 May 2015 and thus it can be of no relevance in determining the liability to duty of the Declaration of Trust at the date at which that liability arose, namely on 6 May 2015.

2. Moreover, it is expressed to take effect on 6 March 2020 and so even by its own terms it could not be considered as purporting to apply with retrospective effect.

47. The preceding observation should not be taken as suggesting that, even if drafted in a way which made its retrospective effect clear, the Tribunal would accept such a retrospective amendment as capable of affecting the Declaration of Trust’s liability to duty at 6 May 2015. Leeming JA’s observations in the Court of Appeal’s decision in Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Limited [2017] NSWCA 184 at [6] are apposite:

.... it is one thing for private parties to agree that their legal relations are to have been conducted on a particular basis, and for that agreement to have retrospective effect as between themselves. It is an entirely different thing for parties by their private agreement to alter with retrospective effect their relations with a third party.

The provisions of the Amendment Deed may well be of some utility as between the parties in regulating more precisely their relationships concerning the Property. They cannot, however, affect the Declaration of Trust’s liability to duty as at its first execution on 6 May 2015.

48. The issue before the Tribunal is to determine whether the Respondent’s decision that he was not satisfied that purchase money for the Property “has been or will be provided by the real purchaser” is the correct and preferable decision.

49. In clause 4, the Declaration of Trust as summarised above provides as follows:

“The Father and the Purchasers for themselves, their executors, administrators and assigns jointly and severally will indemnify the Trustee from and against all liability which the Trustee incurs or may have already incurred because of having purchased the Property in its name. In particular, the Purchasers will punctually pay:

(a)   all rates, taxes and other outgoings for the Property;

(b)   the principal, interest and all other money due and payable under any Mortgage or other charge which, at the request of the Purchasers and the Father, the Trustee executes over the Property”.

50. The effect of this provision is to transfer as between the Applicant, the Father and the Purchasers (one of whom is the Applicant in his personal capacity), the financial burden of purchasing and owning the Property (including meeting the Deposit) and of servicing and repaying the Loan. It operates only as between the relevant parties to the Declaration of Trust, and leaves the Applicant solely liable as against:

1. the Vendor of the Property, to pay the purchase price, and

2. the Bank, to repay principal and to pay interest and fees on the Loan.

51. The position, then, is that, on settlement of the purchase of the Property in July 2015:

1. The Deposit was paid either:

1. By the Applicant through forgiveness of a debt owed to him by the Vendor, if one accepts (as the Respondent did) the Applicant’s revised version of matters in his statutory declaration of 2 May 2018; or

2. By the Original Trustee, as provided for in the Declaration of Trust and confirmed in the Applicant’s first statutory declaration dated 28 June 2017; and

2. The balance of the purchase price was paid by the Applicant, using the proceeds of the Loan for which he was solely personally liable to the Bank, without any other beneficiary of the trust providing any form of suretyship to the Bank.

52. The analysis by Mason and Brennan JJ in Calverley v Green (1984) 155 C.L.R. 242, at pages 257 and 258, is instructive:

“The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the price was $27,750, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly. The balance was paid by the defendant out of his own funds, being part of the proceeds of the sale of the Mount Pritchard property. Thus the plaintiff and the defendant both contributed to the purchase price of the Baulkham Hills property. They mortgaged that property to secure the performance of their joint and several obligations to repay principal and to pay interest. The payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased”.

53. In that case their Honours concluded (and the other justices agreed) that both the plaintiff and the defendant had contributed to the purchase price, such as to give the plaintiff an equitable interest in the property under a resulting trust. The defendant had paid the deposit for the purchase, and the payment of instalments under the mortgage did not, as their Honours made clear, of itself amount to a payment of the purchase price. What follows is that the crucial element in the conclusion that the plaintiff had an interest in the property was the fact of the plaintiff’s incurring a personal liability to the mortgagee to repay principal and pay interest on the loan used partly to fund purchase of the property. That liability was the plaintiff’s contribution to the purchase price. This analysis is directly relevant to the present case.

54. The evidence is clear, that:

1. As to the Deposit:

1. If (as the Respondent did) one accepts the Applicant’s revised version of events set out in his statutory declaration of 2 May 2018, he was the only person who paid – or, more precisely, satisfied through his off-set arrangements with the Vendor – the Deposit; and

2. Alternatively, if one does not accept that version, then it was the Original Trustee who did so, as set out in the Declaration of Trust and the Applicant’s first statutory declaration;

2. In either case, however, no Purchaser other than the Applicant could have paid the Deposit;

3. The Applicant was the only person who incurred any liability to the Bank under or for the loan arrangements entered into with the Bank in order to raise the Loan needed to meet the balance of the purchase price; applying the principle in Calverley v Green, the Applicant was thus the only person who could be considered to have contributed to the payment of the balance of the purchase price;

4. Payment of the Deposit and the proceeds of the Loan satisfied the purchase price in full, so that after 3 July 2015 there was no further component of the purchase price to be paid or provided; there was thus no possibility that any other Purchaser could pay any portion of the purchase price, because none remained to be paid; and

5. The Loan remained to be repaid to the Bank but, as Calverley v Green makes clear, its repayment is an entirely separate transaction from (and does not amount to) payment of the purchase price.

55. What follows is that, subject to any effect of section 55(1A) of the Duties Act, the Applicant (either alone, or along with the Original Trustee as to the Deposit) was the only Purchaser who paid the purchase price for the Property.

56. This conclusion, it should be noted, is consistent with the approach to such matters set out in the Respondent’s published policy, namely ruling number DUT 030 dated 13 November 2006, entitled “Property Vested in an Apparent Purchaser”. The Respondent outlines in Paragraph 6 of that Ruling that:

“Where part of the purchase price is provided by means of a loan secured by a mortgage over the property, the persons who are under an obligation to repay the loan are taken to have provided that part of the purchase price, regardless of who actually makes those repayments”.

57. Section 55(1A) of the Duties Act provides that “.. money provided by a person other than the real purchaser is taken to have been provided by the real purchaser if the Chief Commissioner is satisfied that the money was provided as a loan and has been or will be repaid by the real purchaser”. There are several observations to be made concerning the application of this provision in the present case.

58. As for the Deposit:

1. The evidence in paragraph 6 of the Applicant’s statutory declaration of 2 May 2018 concerning the Deposit is quite explicit:

“The correct factual situation was that the amount of the deposit was in the nature of a debt that was due to me by the vendor, which debt was applied as the deposit under the Contract in discharge of the vendor’s indebtedness to me”.

There was no evidence provided as to how that debt came to be owed by the Vendor to the Applicant, but the Applicant’s evidence, that it was a debt owed to him by the Vendor, is clear.

2. Turning to the alternative hypothesis, that the Deposit was in fact paid by the Original Trustee, there was no evidence provided by the Applicant which could characterise that payment as a loan by the Original Trustee.

3. There is thus no room for section 55(1A) to operate in relation to the Deposit.

59. So far as the Loan from the Bank is concerned, clause 4 of the Declaration of Trust imposes obligations:

1. on the Purchasers and the Father to indemnify the Applicant against liabilities incurred because of the purchase of the Property, and

2. on the Purchasers, to pay principal, interest and other amounts in connection with the Loan.

60. The statutory test, however, is not that the real purchaser has a contractual or equitable obligation to the loan. Rather it is whether the Respondent is satisfied that the Loan “has been or will be repaid by the real purchaser”. The evidence on this is as follows:

1. At all relevant times there has been principal under the Loan outstanding, according to the financial evidence provided in the form of bank statements up to and including 29 February 2020. There is thus no evidence to suggest that the Loan has been finally repaid.

2. At the time at which the Respondent made the assessment under review, on 18 October 2017, the only evidence which it had concerning the actual repayment of the Loan was the Applicant’s statutory declaration dated 28 June 2017, in which he stated as follows:

“8. It was my intention at the time of execution of the Trust Deed that the Purchasers be jointly and severally liable for the payment of the principal, interest and all other money payable under the Mortgage, and all rates, taxes and other outgoings for the Property, and clause 4 of the Trust Deed so provides.

9. In accordance with clause 4 of the Trust Deed, all payments under the Mortgage have been made by or on behalf of the Purchasers, including myself”.

3. These statements said nothing as to either:

1. who had made any Loan repayments, or

2. any programme or arrangements which had been established to ensure practically that the Purchasers complied with their respective undertakings to contribute to mortgage repayments.

Paragraph 9 is couched in the passive voice and is coyly discreet as to who actually made repayments. This evidence was thus inadequate for the Respondent to conclude that the Loan “... will be repaid by the real purchaser”.

4. Nothing in the subsequent evidence provided by the Applicant, whether in connection with his second Objection or this review, changes matters:

1. The bank statements provided show, as summarised above, a large number of Loan repayments by the Applicant, a smaller number of repayments by his brother (who is a Purchaser), several large payments to the Loan offset account by the Father, several large repayments made by an entity known as “Prominence” and a small number of minor payments made by the Applicant’s solicitors;

2. They do not show a single repayment to have been made by any of the three other Purchasers;

3. In paragraph 7 of the Applicant’s second statutory declaration, dated 2 May 2018, he reiterates his intentions referred to in paragraph 8 of his first statutory declaration, while stating as follows:

“Although clause D of the introduction/recitals provides that the Father has undertaken to pay all monthly instalments under the Mortgage, such undertaking was given in the family context and not one which was legally binding. In any event, the father did not at any time make any repayments under the mortgage”.

4. The notion of “family context” as a solvent which excuses a family member who is a party to the Declaration of Trust from complying with his obligations under clause 4 does nothing to assist in concluding that the Loan “... will be repaid by the real purchaser”. Indeed, its effect is quite the reverse.

5. The Applicant has not, therefore, provided evidence sufficient to convince the Tribunal that any part of the Loan used to fund the purchase price for the Property will be repaid by the Purchasers. At most, the evidence suggests that only a limited sub-set of the Purchasers have contributed (or could realistically be expected to contribute) to the repayment of the Loan.

61. The Tribunal can, therefore, see no basis for departing from the Respondent’s decision under review, so far as his assessment of ad valorem duty on the Declaration of Trust as a dutiable transaction is concerned.

Reasoning: interest

62. The Applicant also seeks the remission of interest assessed by the Respondent.

63. His position is that if, as he argues, the Declaration of Trust is assessed with fixed duty only, then logically no interest should be charged in respect of the late payment of that duty. That argument would be compelling if in fact the Declaration of Trust were subject to fixed duty of $50 only. Since, however, for the reasons outlined above, the Tribunal considers that the Respondent’s assessment of ad valorem duty on the Declaration of Trust was the correct and preferable decision, the question of interest cannot be disposed of quite as simply as the Applicant might have hoped.

64. In her submissions, the Respondent’s advocate says that:

1. interest owing as at 16 April 2020 was $13,195.03, comprising both market and premium components as provided for under the TAA; and

2. there is no basis to remit either component of interest.

65. The Applicant has provided no submissions or evidence as to why, if the assessment is confirmed, interest should be remitted.

66. The TAA imposes in section 21 interest in respect of any tax debt, while allowing the Respondent under section 25 a discretion to remit interest. In the absence of any such submissions or evidence from the Applicant concerning interest, the Tribunal has no basis on which to reach any conclusion different from the Respondent’s.

67. The Tribunal notes that:

1. The Applicant has not paid the duty;

2. There is an apparent discrepancy between:

1. on the one hand, the Applicant’s solicitors’ representations in their letter to the Respondent of 1 May 2018, to the effect that “.. due to his [ie the Applicant’s] current financial hardship, he is unable to pay the outstanding amount of stamp duty now or in the foreseeable future ...” and their request for the Respondent’s indulgence by refraining from steps for the recovery of the duty; and

2. on the other, the evidence contained in the bank statements provided by the Applicant that in January 2016 the Loan account was prepaid by five payments totalling $218,455 and that during the year beginning 1 January 2018 principal totalling over $90,000 was redrawn under the Loan account;

3. this discrepancy suggests that in May 2018 the Applicant in fact had the resources available to pay the duty, by means of a relatively modest redrawing of prepaid principal under the Loan, but chose not to use them in that way; and

4. it cannot be concluded that the Applicant has made reasonable efforts to comply with the Act since:

1. he failed to lodge the Declaration of Trust for assessment in a timely way; and

2. the information provided to the Respondent by the Applicant has been inconsistent, as his two inconsistent statutory declarations demonstrate.

Orders

68. The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent’s decisions:

1. to assess the Declaration of Trust with duty of $28,722.50, and

2. to charge interest by reference to both the market rate component and the premium rate component in respect of the duty assessed but unpaid.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 27 October 2020