Watts v Chief Commissioner of State Revenue

[2017] NSWCATAD 320

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Watts v Chief Commissioner of State Revenue [2017] NSWCATAD 320
Hearing dates:	The hearing was held on 30 June 2017. The parties made certain written submissions and provided additional documents after the hearing. The last documents received by the Tribunal from the parties was on 30 August 2017.
Date of orders:	06 November 2017
Decision date:	06 November 2017
Jurisdiction:	Administrative and Equal Opportunity Division
Before:	NS Isenberg, Senior Member
Decision:	The decision under review is confirmed.
Catchwords:	REVENUE LAW – Duties Act 1997 – interest of beneficiary in deceased estate – duty assessed on agreement for sale of land to beneficiary for full consideration - transfer under and in conformity with the trusts in a will – transfer of property the subject of a trust for sale – dutiable transaction.
Legislation Cited:	Administrative Decisions Review Act 1997 Duties Act 1997 Taxation Administration Act 1996
Cases Cited:	B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Dix v Burford 19 Beav 409 Sanders v Chief Commissioner of State Revenue [2002] NSWADT 251 Sanders v Chief Commissioner of State Revenue [2003] NSWADTAP 22
Texts Cited:	Arthur Dean, When Does An Executor Become A Trustee [1938] Res Jud 28 at 92
Category:	Principal judgment
Parties:	Kendall Jonathan Watts (Applicant) Chief Commissioner of State Revenue (Respondent)
Representation:	Counsel: IS Young (Respondent)   Solicitors: Priest Legal (Applicant) NSW Crown Solicitor’s Office (Respondent)
File Number(s):	2017/00030681
Publication restriction:	Nil

REASONS FOR DECISION

Introduction

1. In 2016 the Applicant, Mr Watts, acquired a property situated at Port Macquarie (the Property) from the estate of his late father, Mr Noel William Watts (Mr Watts Senior).

2. Mr Watts executed both a Contract for sale and purchase of land dated 30 May 2016 and an undated Transfer in respect of the Property.

3. The Duties Notice of Assessment issued on 14 June 2016 by the Office of State Revenue (OSR) states duty of $18,100 was assessed on the amount of $502,000 being $18,080.00 on “Agreement for sale of land”, $10.00 duty on a duplicate and $10.00 duty on a transfer.

4. Mr Watts’ objection to the Assessment was disallowed and Mr Watts then applied to the Tribunal for a review of the Assessment (the Application).

Powers of Tribunal on review

5. Section 96 of the Taxation Administration Act 1996 (TA Act) provides that under certain circumstances a taxpayer may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (ADR Act) of a decision (including an assessment) that has been the subject of an objection.

6. The Tribunal may confirm or revoke the assessment or other decision to which the Application relates, or make a decision in place of the reviewable decision and make orders as to costs or otherwise as it thinks fit, s 101(1) of the TA Act.

7. In determining the Application, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law, s 63 ADR Act.

Material before the Tribunal

8. The Respondent relied on a bundle of documents created pursuant to s 58 of the ADR Act and filed on 7 March 2017 (the s 58 documents), written submissions dated and filed 2 May 2017 (RS), supplementary written submissions made after the hearing and filed 2 August 2017 (RSS) and oral submissions made during the hearing by Mr Young.

9. Mr Watts relied on an unpaginated tabbed bundle of documents attached to written submissions dated 4 April 2017 and filed 6 April 2017 (AS), written submissions in reply dated 23 May 2017 and filed 24 May (ASR), supplementary written submissions dated 9 August 2017 and filed 11 August 2017 (ASS), some of the s 58 documents and oral submissions made during the proceedings by Mr N Lawton, solicitor.

10. Unless stated to the contrary, references in these reasons:

1. to paragraphs of written submissions by the Chief Commissioner are to paragraphs of RS;

2. to paragraphs of written submissions by Mr Watts are to paragraphs of AS; and

3. to legislative provisions are to provisions of the Duties Act 1997 as at 30 May 2016, the date of the Contract (the Act).

11. Extracts reproduced in these reasons do not include footnotes.

Factual background

12. Mr Watts conceded at [2] in ASR that the factual background in paragraphs 3(a) – (k) in RS was not disputed. Paragraph 3 of RS relevantly states:

3   The matter arises in the following manner:

(a)    The registered proprietor of the Property was Noel William Watts, the Applicant's father.

(b)   The Applicant was appointed as the sole executor and trustee under the will of [Mr Watts Senior], dated 9 September 2004.

(c)   The first codicil to the last will and testament of [Mr Watts Senior] was executed on 17 July 2015.

(d)   Pursuant to clause 1 of the codicil …. [Mr Watts Senior’s] estate was bequeathed as follows:

"After payment of my funeral and testamentary expenses I give the rest and residue of my estate upon the following trusts:

a.   as to one third to my son KENDALL JONATHAN WATTS;

b.   as to one third to my son ANDREW WILLIAM WATTS;

c.   as to one third to my daughter CATHERINE LOUISE WATTS."

(e)   Pursuant to clause 3 of the codicil …. [Mr Watts Senior] directed that the following clause 7 be inserted into his last will and testament:

"I direct that my son KENDALL JONATHAN WATTS may purchase my house known as …. from the Trustee at a price equivalent to the known market value of the property as determined by an independent valuation, and that any other gift or distribution under this my Will may be adjusted to account for payment of all or part of the purchase price to the Estate. "(Emphasis added by the Chief Commissioner)

(f)   [Mr Watts Senior] died on 28 July 2015 and on 27 November 2015, the Supreme Court of NSW granted probate to the Applicant for the administration of the estate of the late [Mr Watts Senior].

(g)   A valuation of the Property was obtained …. valuing [it] at $502,000.

(h)   The Property was included in the inventory of property of the estate subject to the grant of probate, valued at $502,000.00.

(i)   On 30 May 2016, by contract for the sale of land the Applicant, in his personal capacity, purchased the Property from "Kendall Jonathan Watts as executor of the estate of the late [Mr Watts Senior]", for $502,000.

(j)   By an undated transfer, the Applicant …. transferred "an estate in fee simple" to Kendall Jonathan Watts in his personal capacity, for a consideration of $502,000.00.

(k)   The Applicant, by written submissions dated 4 April 2017 (the "AWS"), …. says that it was the Applicant's financier …. that required "that a contract of sale be drawn up".

Analysis

The legislative scheme

13. The Act creates and charges a number of duties. Relevantly, Chapter 2 imposes duty on certain transactions concerning dutiable property (a defined term), specifies who is liable for duty and when and how much duty is to be paid, and provides for concessions and exemptions from liability for duty.

Onus of proof

14. There is no dispute that Mr Watts has the onus of proving his case in a review by the Tribunal, s. 100 of the TA Act. The requisite standard of proof in such a review is the “balance of probabilities” Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 at [104].

Issues

15. Mr Watts put forward several alternate submissions to the effect that the Assessment was incorrect, and duty should be assessed at various lower amounts ranging from $10,551 down to $50 and that the transaction had no legal effect and the Assessment should be cancelled and all duty paid should be refunded.

16. Mr Watts submitted that at the date of the Contract he owned a beneficial interest of 1/3rd of the Property. At [27] and [28] he submitted that instead of duty on the transaction being assessed at $18,100, duty should be assessed at $50.00 in relation to the 1/3rd interest in the Property which he owned and on an ad valorem basis at $10,551.50 on the remaining 2/3rd together with $20.00 on the duplicate Contract and Transfer. This submission was based on a proposition that the commercial effect of the transaction was to transfer 2/3rd of the Property to him, not the whole of the Property.

17. Further, Mr Watts submitted at [13] in ASR that the Contract should receive concessional treatment pursuant to section 63 [which imposes duty of $50] or the Assessment should be cancelled pursuant to section 293 [and the whole payment of $18,100 should be refunded].

18. Mr Watts also submitted, at [17] and [18] in ASS, that from the date the Property vested in Mr Watts on 29 April 2016 he held the Property as trustee, and on 30 May 2016, the date of the Contract, he held the property as trustee for sale or an act of assent had occurred. Accordingly, pursuant to s 63 the Contract should be stamped at no more than $50, ASS [26].

19. In summary, the Chief Commissioner submitted that the Assessment should be confirmed and that none of the concessions sought by Mr Watts were applicable.

Consideration of the Act

20. Section 19 provides that duty is charged on the dutiable value of the dutiable property subject to the dutiable transaction at the rate set out in Part 3.

21. There is no dispute that the “dutiable property” the subject of the transaction is the Property. Section 21 provides that the dutiable value of the dutiable property is the greater of:

(a)    the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration), and

(b)    the unencumbered value of the dutiable property.

22. Part 3 includes s 32. Section 32 (1) provides for duty at an increasing rate which rises from $1.25 for every $100 or part of the dutiable value of relevant dutiable property where the value is not more than $14,000 to a rate of $40,490 plus $5.50 for every $100 or part by which the dutiable value exceeds $1 million.

23. Section 32(2) provides that the rate in section 32 (1) “applies unless other provision is made by [Chapter 2]”. Chapter 2 comprises sections 8 to 104F.

24. Mr Watts submitted at 3(e), (f) and (g):

e)   The Applicant applied for a loan to finance the purchase of the property. The Applicant's lender, NAB, had some issues in approving a loan where the documentation (ie the LPI Transfer) indicated a transfer of legal title from Kendall Jonathan Watts to Kendall Jonathan Watts. For their lending purposes, they asked that a contract of sale be drawn up.

f)    As a result, the Applicant, in his capacity as Executor, entered into a contract with himself to purchase the property for the "known market value" of $502,000.

g)    NAB approved the loan to fund the purchase, in the amount of $400,000. The balance of the purchase price came from the Applicants own funds.

25. The only evidence before the Tribunal of any involvement of National Australian Bank Limited (NAB) in any transaction involving the Property are two emails both dated 31 May 2016 appearing at Tab 8 of Mr Watts’ bundle of documents. The first email is from Priest Legal to NAB attaching a copy of an “executed and dated Contract for sale” and awaiting advice from NAB that it is “in a position to book settlement”. The second is a response from NAB that “Docs will be checked. Should look at the end of next week.”

26. It may well be that the multiple facts alleged in the submissions at 3(e) (f) and (g) are correct. However, after having submitted that there had been an involvement by NAB which had required that the Contract be drawn up, Mr Lawton conceded that NAB had no imposed no conditions on the structure of the transaction.

27. There is also no evidence before the Tribunal:

1. in respect of any “issues” which NAB had,

2. that NAB approved any particular loan to fund the acquisition of the Property by Mr Watts, nor

3. that the balance of the purchase price came from Mr Watts’ own funds or from Mr Watts’ interest in Mr Watts Senior’s estate.

28. A copy of the Transfer itself is before the Tribunal at page 19 of the s 58 documents. The Transfer was signed by Mr Watts as transferor, certified correct for the purposes of the Real Property Act 1900 by Mr Lawton as solicitor for the transferee (Mr Watts) and states in relation to “CONSIDERATION”:

“The transferor acknowledges receipt of the consideration of $502,000.00 ….”

29. Accordingly, the unchallenged documentary evidence is that both the consideration for the transaction and the unencumbered value of the Property are $502,000. Mr Watts does not dispute that the Assessment was calculated having regard to that value.

30. There is no dispute that subject to any other provision in Chapter 2 of the Act, the Assessment is correct. Accordingly, in order for Mr Watts to succeed it is necessary for him to prove on the balance of probability that the Chief Commissioner should have had regard to some other provision in Chapter 2 in making the Assessment.

Concessions in the Act.

31. Part 6 of Chapter 2 provides for “Concessional rates of duty”.

32. Division 3 of Chapter 2 provides for miscellaneous concessions. The first section in Division 3 is s 63 which relevantly provides at 63(1) “duty of $50 is chargeable in respect of a transfer of dutiable property by the legal personal representative of a deceased person to a beneficiary being”:

(i)   a transfer made under and in conformity with the trusts contained in the will of the deceased person or arising on an intestacy, or

(ii)   a transfer of property the subject of a trust for sale contained in the will of the deceased person, or ….

33. The parties provided brief oral submissions during the course of the hearing as to whether the Property was transferred pursuant to a “trust for sale” and provided written submissions after the hearing.

A transfer made under and in conformity with the trusts contained in a will – s 63(1)(a)(i)

34. The Chief Commissioner placed substantial reliance on the decision in the former Administrative Decisions Tribunal of New South Wales (ADT) of Block JM in Sanders v Chief Commissioner of State Revenue [2002] NSWADT 251 (Sanders) and on appeal, on the decision of the Appeal Panel in Sanders v Chief Commissioner of State Revenue [2003] NSWADTAP 22 (Sanders Appeal).

35. The factual background in Sanders is similar in relevant respects to the present matter. In Sanders Appeal the Panel summarised the facts and the decision by Block JM at first instance as follows:

1.   The taxpayer, Basil Charles Sanders, is now the owner of his late father's home at Hornsby (the family home). He and his two siblings were the only beneficiaries of his late father's real estate, the home at Hornsby being the principal asset. The will contained a clause dealing with the possible disposal of the real estate to one of the siblings. The taxpayer acquired the family home pursuant to that clause. The clause provided for the trustees to sell the property to one of the children at the price which represented the “medial figure” between two independent valuations. The will then provided for the sum payable to be reduced by the expected distribution that the prospective purchaser would have received from the sale of the property and payment of those proceeds into the residue of the estate.

2.   As the taxpayer had a 40 per cent entitlement in respect of the residue, that meant that he was obligated to find 60 per cent of the purchase amount, which was set (without dispute) at $335,000. This was described by the Commissioner in his submissions and by the Tribunal as an obligation to pay the full consideration subject to a right of set off from the estate in respect of 40%. We agree with that analysis.

3.   When the conveyance from the trustees to the taxpayer was presented for stamping, duty was assessed at $10,656 in respect of a consideration of $335,000. The taxpayer contends that the proper basis for assessment is a consideration of 60 per cent of $335,000, i.e. $201,000.

36. In Sanders there was evidence of execution by some, but not all, parties of an agreement for sale of the subject property. That document was not in evidence before the ADT. Before the matter went to the ADT at first instance certain issues went before the Supreme Court for reasons which were not known to Block JM. Block JM said at [9] and [10] that Bryson J gave directions in the Supreme Court which included the execution of a Memorandum of Transfer for the full value of the property. The applicant submitted in writing that the Memorandum of Transfer reflected “the market value of the property, but this does not reflect the value of the consideration passing as I was only paying 60% proportion of the property to which I was not already entitled under the trusts of the Will”.

37. Block JM held:

16.   The Applicant in this case has advanced a contention, which in my view is fundamentally incorrect. He argues that he had an entitlement to 40% of the property and so that in purchasing the whole property he purchased in reality 60% only. In fact and pursuant to the will he had an entitlement to residue but not to the real property, which was bequeathed to the trustees on trust for sale. The transfer to him of the property was not in conformity with the trusts of the will although it was arguably not inconsistent with the trusts of the will. On this basis the transfer cannot comply with subsection (i) of section 63(a) of the Act. The possibility that subsection (ii) might apply was not raised by either party.

17.   On a proper analysis the Applicant as purchaser was obliged to pay the whole value for the property ($335000) but against which he was given a right to set off what he would receive from his share of the residue in consequence of the sale of the property; put in other words he was given the right to utilise a part of his residue entitlement by way of set off against the purchase consideration payable. Where a person makes a payment by set off he nonetheless makes a payment in accordance with principles of general law; (see "Payment Obligations in Commercial Transactions" by Professor Goode). This being so, there can be no doubt, in my view, that the Applicant gave full consideration for the property. The Supreme Court directions are consistent with this analysis and so for that matter is the transfer, which despite the Applicant’s contentions to the contrary, was in fact the instrument pursuant to which he received the property from the trustees.

18.   It follows then that section 63 can have no operation since each of the subsections on which the Applicant might seek to rely cannot operate where there is consideration, and as I have said, there was full consideration in respect of the whole of the property.

19.   If only for the sake of completeness, I note that I think that there is much to be said for the proposition advanced by the Respondent that the Applicant exercised an option to acquire the whole and not a part only of the property. This is not a case where it is possible to say that he was entitled to 40% of the property since his entitlement was to 40% of the residue only. And although it is my view that he paid for the whole property and as to a part through a set off utilising for this purpose his entitlement in respect of the residue, the provisions of section 21 of the Act which impose duty on the higher of the purchase consideration and the value (and it is common cause that the value was $335000) would then and in any event operate against him. But as I have indicated, I do not think that it is necessary to go that far since in accordance with the relevant clause he paid full consideration for the whole property.

38. The Panel in Sanders Appeal expressly agreed with Block JM’s reasons at [16] to [18].

39. Notwithstanding the Chief Commissioner’s reliance on Sanders in RS, Mr Watts made no written submissions in relation to either the ADT decisions or the Chief Commissioner’s submissions.

40. During the hearing, Mr Lawton orally submitted that Sanders should be distinguished from Mr Watts’ case because the transaction in Sanders involved a family arrangement imposed by order of the Supreme Court and there was in that matter no s 63(a)(ii) trust for sale.

41. I accept Mr Lawton’s submission in the preceding paragraph that the Memorandum of Transfer was made pursuant to an order of the Court, and that in Sanders there was a “family arrangement to vary the trusts of a will” neither of which occurred in relation to Mr Watts. I also observe that, in order to come within the s 63 concession at the time of the events in Sanders it was necessary for the transfer not to have been “made for valuable consideration“. In Sanders the transfer was made for valuable consideration, placing it outside the concession ambit of the then s 63 and this, to an extent, distinguishes Sanders case from that of Mr Watts.

42. However, there is no material difference in the facts in relation to each of Mr Sanders and Mr Watts being residuary beneficiaries; effectively exercising options granted to them by a will; each claiming unsuccessfully that they held a beneficial interest in the relevant property; each receiving or acknowledging that they had received a transfer of the whole interest in the property, and Mr Watts stating that he, on behalf of the estate, had received full consideration for the value of the whole of the property while Block JM found at [19] that Mr Sanders had “in accordance with the relevant clause …. paid full consideration for the whole property”.

43. There is also the role which Mr Watts performed as vendor on behalf of the estate. Having regard to the onus on Mr Watts and his failure to provide evidence as to the extent of the liabilities of the estate and the use to which the proceeds of the sale of the Property were put, I am not satisfied that the sale by him under the Contract was as trustee under and in conformity with the trusts contained in the will, rather than as an executor disposing of an estate asset in order to pay debts of the estate.

A transfer of property the subject of a trust for sale – s 63(1)(a)(ii)

44. In summary, Mr Watts’ argument at [13] in ASS was that he became trustee of the Property once he assented to the legacy in relation to that asset. He said at [14]:

In this instance, Probate of the Will was granted 27 November 2015. The grant discloses assets of the Estate of $1,118,168.58. The Estate had no notable liabilities. There was no claim by any creditor on any asset of the estate. Evidently the property did not need to be sold to satisfy any debts of the Estate. Therefore it is our submission that upon assent, the executor became trustee.

45. Mr Watts submitted at [12] in ASS that he relied on a:

…. summary provided by Arthur Dean, When Does An Executor Become A Trustee [1938] Res Jud 28 at 93, citing Dix v Burford 19 Beav 409:

"The executor's first duty is to pay the debts and the subject of the bequest may be required for this purpose. Where an executor once decides that he will not require the property for this purpose he should "assent" to the legacy. An assent may be express or implied from conduct. Its effect is to vest the legal title to the property in the specific legatee ... But assent has a further consequence. The executor becomes a trustee of the property or fund for the legatee"

46. At [15] and [16] Mr Watts submitted:

15. On the question of assent, and the timing thereof, we note the reasoning in Dix v Burford 19 Beav 409:

"The moment the executors assented to the bequest, they became trustees for their cestuis que trust, the £400 then ceased to be part of the testator's assets, and it became a trust fund for the benefit of the Plaintiff for life, and afterwards for his children, and the executors became mere trustees for them of that fund.

It is impossible for Yells to say that he was not a trustee, because he could not accept the executorship without taking upon himself the trust; they are inseparable arid united, and he is as completely a trustee of this fund as if it had been conveyed to him by the testator, in his lifetime, on these express trusts. It is a case of every day's occurrence for executors to be turned into trustees." (emphasis added)

16.   Adopting the above reasoning, in the very act of applying for Probate (ie accepting the executorship), an Executor assents to hold any asset not subject to liabilities of the Estate as Trustee upon the terms of the Will.

47. I observe that in Dix v Burford 19 Beav 409, Sir John Romilly was required to decide whether on the facts in evidence, the relation of trustee and cestui que trust existed. His Honour found at [412] that there was a specific legacy of a mortgage for a certain amount “and a bequest of the residue to the executors. The moment the executors assented to the bequest, they became trustees for their cestui que trust, the [amount] then ceased to be part of the testator’s assets, and it became a trust fund for the benefit of ….”

48. At [409] in a statement of facts appears the following:

…. Both executors signed the account, it was passed with the concurrence of both, and there is a clear assent to the specific legacy ….

49. There is no dispute that Mr Watts had the benefit of a testamentary option to acquire the Property from the estate by purchasing the Property from the “Trustee” at a price equivalent to the known market value of the Property as determined by an independent valuation. The documentary evidence is that Mr Watts executed the Contract in order to acquire the Property.

50. The article by Arthur Dean LL.M., partly extracted in ASS, considered the question of when an executor became a trustee under three heads: firstly whether property concerned was a specific or pecuniary legacy; secondly where it was residue; and thirdly where there was an intestacy.

51. There is no dispute, and I find, that Mr Watts and his siblings were beneficiaries of the residue of the estate, after payment of funeral and testamentary expenses.

52. At page 94 Mr Dean, in dealing with residuary gifts, referred to In Re Smith 42 Ch D 302 in which a “testatrix left the residue of her estate to an infant and appointed an executor. The Will thus created no trust. Having paid the debts the executor desired power to advance income to the infant under Section 43 of the Conveyancing Act 1881 in accordance with the powers given to trustees. North J .… held that the executor had become a trustee”.

53. Further, at page 94 Mr Dean wrote:

In Re Hird and Hickey’s Contract [[1919] V.L.R. 717] there was a device of land to testator’s widow for life, then to his children. The executors were not expressly constituted as trustees. Several years later the executors entered into a contract to sell the land. Now executors have a power of sale for purposes of administration, but trustees have not, unless it is given by the trust instrument. There is a further rule that persons dealing with executors are entitled to assume, even after a long lapse of time, that the sale is for purposes of administration. But here the purchasers knew that administration had been completed ….

54. In Re Hird, the Full Court upheld an application by the purchasers requiring the beneficiaries to concur in the sale, which some beneficiaries had refused to do. Mr Dean stated that the Full Court had said:

When his executorial functions have been discharged - that is, when debts, funeral and testamentary expenses and legacies have been paid - he becomes a trustee ….

55. Mr Dean referred to several other cases in which an executor was also appointed a trustee by the will. In what was referred to as the leading case of Attenborough v Solomon [1913] A.C. 76 it was held that executors, “by paying debts and legacies and ascertaining residue, and passing the residuary accounts, had become trustees”.

56. The authorities on which Mr Watts expressly relied required an act of assent in order for assets of an estate to be held by persons in the capacity of trustees rather than executors.

57. At [14] in ASS Mr Watts submitted that “upon assent, the executor became trustee.” However, in that paragraph, prior to that submission, Mr Watts stated:

In this instance, Probate of the Will was granted 27 November 2015. The grant discloses assets of the Estate of $1,118,168.58. The Estate had no notable liabilities. There was no claim by any creditor on any asset of the estate. Evidently the property did not need to be sold to satisfy any debts of the Estate.

58. The parties have agreed as to the date of the Grant and that the estimated or known value of the property owned by Mr Watts Senior was as set out in the preceding paragraph.

59. However, there is no material before the Tribunal, other than submissions on behalf of Mr Watts that:

1. Mr Watts Senior’s estate had no liabilities;

2. there was no claim by any creditor;

3. neither the Property nor any other part of the estate needed to be sold to satisfy any debts of the estate.

60. Mr Watts based his whole case on documentary evidence and did not provide any statements whether from himself or from any witnesses. That is his right. However, the onus lies on him to prove his case on the basis of probative evidence, not merely unsubstantiated submissions.

61. No explanation has been provided to the Tribunal as to the reason for the failure to provide evidence in support of the submissions referred to in the penultimate paragraph above nor as to the manner in which the consideration of $502,000, which the Transfer stated had been received by Mr Watts, presumably on behalf of the estate, had been dealt with.

62. To the extent that submissions are made of material factual matters without any evidence being provided to the Tribunal in support of those submissions, I find that Mr Watts has not satisfied his statutory onus. Accordingly, I am not satisfied on the material before the Tribunal that the Property was at the time of the transaction transferred by Mr Watts as trustee rather than as executor.

Section 63(1) generally – whether a “Contract for the sale and purchase of land” is a transfer

63. Section 8 (1) (b) (i) states that Chapter 2 charges duty on “an agreement for the sale or transfer of dutiable property”. Section 9 (1) provides that duty charged by Chapter 2 on a dutiable transaction referred to in s 8 (1) (b) is to be charged as if each such dutiable transaction were a transfer of dutiable property.

64. The Chief Commissioner provided detailed submissions to the effect that deeming provisions such as s 9(1) are required to be construed strictly and narrowly by reference to certain matters. The Chief Commissioner’s argument was that the Contract could not be seen to be a “transfer of dutiable property” and the concessions in s 63 could not apply to the Contract..

65. Mr Watts provided submissions to the contrary and relied on the express wording of ss 8(1)(b)(i) and 9(1).

66. Having regard to my findings in respect of s 63 (1) (a) (i) and (ii) it is not necessary for me to make a decision on this point.

Additional submissions by Mr Watts

Effect of a failed instrument

67. Mr Watts submitted in ASR:

18.   We acknowledge that the Respondents intent is to argue that no "transfer" occurred for the purposes of s63. However, it would seem that if there was no transfer of dutiable property pursuant to the Contract of Sale, then the Contract of Sale:

a.   is not subject to duty; and/or

b. has failed in its intended operation. The Contract of Sale is a failed instrument for the purposes of s293 of the Duties Act and accordingly is not chargeable with duty.

19.    We submit that if either case is correct, then the Applicant would be entitled to a full refund under the current assessment.

68. Notwithstanding this written submission, Mr Lawton orally conceded during the hearing that the effect of the transaction was to transfer “the entire property” to Mr Watts.

69. It is undisputed that the Chief Commissioner’s position is that “no transfer occurred for the purposes of s 63”. This is not a concession by the Chief Commissioner that there was “no transfer of dutiable property pursuant to the Contract …”. The Chief Commissioner’s position at all times was that “the contract was assessed as "an agreement for sale of land"”, see RS at [4].

70. Mr Watts’ submission poses a hypothetical question not supported by any relevant evidence or authority. I reject the submission.

Prior entitlement to a one third beneficial interest in the Property

71. In the objection, and subsequently at 3(h) (j) and 24 in AS, Mr Watts submitted that he was entitled to a one third beneficial interest in the Property at all times prior to settlement of the transfer of the Property.

72. Mr Lawton conceded during the hearing that, notwithstanding the submission at [23] to the effect that “the transaction did not effect any transfer of land in NSW” the effect of the transaction was to transfer “the entire Property” to Mr Watts. I understand Mr Lawton to mean the effect was to transfer the whole beneficial interest in the Property as he also submitted that there was no transfer of the legal title to the Property (by either the Contract or the Transfer).

73. Mr Lawton’s submission appears to be based on an assumption that prior to the date of the Contract, each of the three beneficiaries named in the Will held a one third beneficial interest in each asset in the late Mr Watts Senior’s estate.

74. However, towards the end of the hearing, Mr Lawton conceded that there was no evidence before the Tribunal that, at the date of the Contract, Mr Watts held any interest in the Property. Mr Lawton also conceded that he was not aware of any authorities in support of his submission that Mr Watts was, prior to the execution of the contract, entitled to a one third beneficial interest in the Property.

75. In AS Mr Watts submitted that the effect of holding his 1/3rd beneficial interest in the Property prior to the Contract brought into play a requirement that duty be charged on the basis of what has been described as “taxation by economic equivalence”.

76. Mr Young provided oral submissions in response and RSS provided detailed submissions and authorities to the effect that there is no applicable doctrine.

77. In so far as I have found that Mr Watts did not hold a beneficial interest in the Property prior to the date the Contract there is no need to deal further with the parties’ respective submissions on this point.

Other concessions provided by section 63

78. For completeness I observe that ss 63 (2) and (2A) provide that certain events additional to those in s 63(1) will enjoy the benefit of concessions from duty. Those provisions are set out below:

(2) If a transfer of dutiable property is made by a legal personal representative of a deceased person to a beneficiary under an agreement (whether or not in writing) between the beneficiary and one or more other beneficiaries to vary the trusts contained in a will of the deceased person or arising on intestacy, the dutiable value of the dutiable property is to be reduced by the portion of the dutiable value that is referable to the dutiable property to which the beneficiary had an entitlement arising under the trusts contained in the will or arising on intestacy.

(2A) A transmission application made by a beneficiary under a will, with the consent of the legal personal representative of a deceased person, is taken, for the purposes of this section, to be a transfer of dutiable property by the legal personal representative to the beneficiary.

79. Section 63 (2) only applies if there is an agreement (whether or not in writing) between the beneficiary and one or more other beneficiaries to vary the trusts contained in a will of the deceased person or arising on intestacy. That is not the case before the Tribunal. The evidence is that the Property was transferred from the estate to him under the Contract. There is no evidence of an agreement between Mr Watts and his siblings and s 63(2) does not apply.

80. I also observe that there is no evidence before the Tribunal of a transmission application. Accordingly, s 63(2A) does not apply to the relevant transaction.

Decision

81. Having regard to the above findings on the material before me, the Applicant has not satisfied me on the balance of probability that duty is not payable by him in accordance with the Assessment.

Order

The decision under review is confirmed.

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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: 06 November 2017