WEST and COMMISSIONER OF STATE REVENUE
[2015] WASAT 36
•10 APRIL 2015
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: DUTIES ACT 2008 (WA)
TAXATION ADMINISTRATION ACT 2003 (WA)
CITATION: WEST and COMMISSIONER OF STATE REVENUE [2015] WASAT 36
MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)
HEARD: 12 DECEMBER 2014 AND 3 MARCH 2015
DELIVERED : 10 APRIL 2015
FILE NO/S: CC 865 of 2014
BETWEEN: DARREN WEST
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Taxation Duties Farming property Exempt family farm transaction Partnership Meaning of 'using' Whether applicant must personally use the farming property in the business of primary production Use through a related partnership
Legislation:
Duties Act 2008 (WA), s 3, s 10, s 11(1), s 11(1)(b), s 15(a), s 99, s 99(1), s 100, s 102, s 103, Div 1 Pt 6
Duties Bill 2007 (WA), cl 102, cl 103
Interpretation Act 1984 (WA), s 19
Partnership Act 1891 (Qld)
Partnership Act 1895 (WA), s 7
Stamp Act 1921 (WA)
Stamp Amendment Bill (No 2) 1994 (WA)
State Administrative Tribunal Act 2004 (WA), s 17, s 27(1), s 29(1)
Taxation Administration Act 2003 (WA), s 34, s 40(1)
Result:
Application dismissed
Summary of Tribunal's decision:
As part of the settlement of certain Supreme Court proceedings, Mr Dale West transferred his onethird share in a farming property to his brother, Darren West, and to his mother, Lynette Ruth West. The transferees of the property maintained that this was an exempt family farm transaction under the Duties Act 2008 (WA) and that duty was not chargeable on the transfer.
The Commissioner disagreed. The Commissioner accepted that the land was farming property and that the transferees were family members of the transferor. However, the Commissioner said that another condition for the exemption to apply is that the transferor must have been using the land in question in the business of primary production before the transfer and the transferees must be intending to use the land in question in the business of primary production after the transfer. In this case, the Commissioner said, although the land was used both before and after the transfer in the business of primary production, that use was not by the individuals but by a partnership called HJ & LR West.
The Act expressly allows for the exemption to apply if the relevant use is through a partnership, but the partnership needs to be 'related' to the transferor or the transferee as the case may be. For the transferor to be related to a partnership he needs to be a partner and every other partner needs to be a family member of the transferor. For the transferees to be related to a partnership they need to be partners and they and every other partner needs to be a family member of the transferor.
In this case, one of the partners of the relevant partnership is a corporation, which by definition is not a family member of the transferor.
The Commissioner concluded that because neither the transferor nor the transferees were 'related to' the partnership within the meaning of the Act at the relevant times, the transfer was not exempt.
The applicant, being one of the transferees, objected to the Commissioner's decision. He accepted that the property was being used by the partnership in the business of primary production, but said that a partnership was not a legal entity in law. Accordingly, in the applicant's view, a distinction should not be drawn between the use of the property by the partnership on the one hand and by those of the partners who are individuals. He said that the fact that those parties and the partnership were not 'related' within the meaning of the Act was irrelevant.
The Commissioner rejected the applicant's objection and applicant sought a review of the Commissioner's decision by the Tribunal.
The Tribunal considered the relevant provisions of the Act and concluded that for the purposes of the Act the partnership was in fact a separate entity. The Tribunal found that the property was used by the partnership in the business of primary production and therefore that, for the exemption from duty to apply, the transferor and the transferees all need to be 'related' to the partnership.
The Tribunal found that neither the transferor nor the transferees were 'related' to the partnership. The Tribunal therefore concluded that the Commissioner's decision was correct and dismissed the application.
Category: B
Representation:
Counsel:
Applicant: Mr S Hicks
Respondent: Ms R Panetta
Solicitors:
Applicant: Lawfield Legal Practice
Respondent: State Solicitor's Office
Case(s) referred to in decision(s):
Atwell v Roberts [2013] WASCA 37
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211
Commissioner of the Australian Federal Police v Courtenay Investments Ltd (No 2) [2014] WASC 55
Commonwealth v Baume (1905) CLR 405
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 293 ALR 257
Hibben & Ors and Commissioner of State Revenue [2012] WASAT 234
Ivankovic and Commissioner of State Revenue [2013] WASAT 21
Re Carey and Commissioner of State Revenue (2006) 62 ATR 616
SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
This matter comes before the Tribunal by way of an application made by the applicant on 24 June 2014.
The applicant and Lynette Ruth West (Lynette West) are the transferees under a transfer of land dated 5 July 2013. The respondent (Commissioner) assessed the transfer of land as a dutiable transaction under s 11(1) of the Duties Act 2008 (WA) (Duties Act). The applicant objected to the assessment, saying that the transfer is exempt from duty under s 103 of the Duties Act because it is an 'exempt family farm transaction'. The Commissioner disallowed the objection, saying that the transaction did not fall within the exemption.
The applicant then applied to the Tribunal under s 40(1) of the Taxation Administration Act 2003 (WA) (TA Act), seeking a review of the Commissioner's decision on the objection.
The hearing and the materials before the Tribunal
The application was filed on 24 June 2014. The parties filed a statement of agreed facts on 22 August 2014. The Commissioner filed his statement of issues and contentions on 2 September 2014 and the applicant filed his statement of issues and contentions on 17 September 2014. The Commissioner filed his response to the applicant's statement of issues and contentions on 23 September 2014 and the applicant filed his reply to that response on 9 October 2014.
The Commissioner filed an agreed bundle of documents on 2 September 2014 (Commissioner's bundle).
The matter was part heard on 12 December 2014 and was then adjourned to 3 March 2015 when it was finally heard. Prior to the final day of the hearing, the parties filed an amended statement of agreed facts. The Commissioner then filed further submissions on 24 February 2015. The applicant filed his further submissions on 26 February 2015 and the Commissioner filed responsive submissions on 27 February 2015.
Also on the final day of the hearing, the applicant tendered witness statements from, respectively, the applicant and Lynette West.
Facts
The following facts are agreed between the parties and these are my findings of fact.
Westworks Holdings Pty Ltd
1)On 14 January 2002, Westworks Holdings Pty Ltd (Westworks) was incorporated.
2)At all relevant times, Lynette West was the sole director and shareholder of Westworks.
3)Westworks does not have a registered Australian Business Number.
4)Westworks is a partner in the partnership named HJ & LR West (the partnership) but does not independently carry on any business outside the partnership.
HJ & LR West
5)The partnership's business name was registered on 2 September 2002.
6)The founding partners of the partnership were:
a)Lynette West;
b)Lynette West as executor of the estate of HJ West; and
c)Westworks
7)On 1 May 2004, Dale West, Lisa West, the applicant and Lesley West were all admitted as additional partners to the partnership.
Owners of the relevant land at the date of the transaction
8)As at 31 December 2004, the applicant, Dale West and Lynette West were the registered proprietors, as tenants in common, of land in Western Australia known as Loughmore, Passmore and Ridgewood (Land).
Supreme Court proceedings
9)In 2012, Dale West and Lisa West as plaintiffs instigated legal proceedings against Lynette West, the applicant, Lesley West and Westworks as defendants (Supreme Court CIV 2738 of 2012).
10)In May 2013, the parties to those proceedings entered into a deed of settlement to settle the unheard matter of CIV 2738 of 2012, the terms of which included:
a)the defendants agreeing to pay to the plaintiffs the sum of $1,500,000;
b)the plaintiffs agreeing to transfer all interests in the partnership to the defendants; and
c)for ongoing partnership purposes, the parties agreeing to treat the deed of settlement as a retirement of the plaintiffs from the partnership, the partnership otherwise to continue despite the change in constitution of the partnership.
Relevant transaction
11)On 24 May 2013, a Transfer of Land with a stated execution date of 5 July 2013 (Transfer of Land) (Commissioner's bundle pages 3 to 6) was submitted to the Office of State Revenue for assessment of duty.
12)The Transfer of Land is a transfer of the Land from Dale West, the applicant and Lynette West in favour of Lynette West and the applicant as tenants in common in equal shares. Consideration for the transfer was stated as being 'As per Deed of Settlement undated but executed on 13 May 2013'.
13)Immediately before the transaction took place:
a)the applicant, Dale West and Lynette West were the registered proprietors, as tenants in common, of the Land; and
b)the Land was used by the partnership to carry on a business of primary production, namely sheep breeding and cereal crop growing.
14)Immediately before the transaction took place, the partners of the partnership were Lynette West, Lynette West as executor of the estate of HJ West, Westworks, Dale West, Lisa West, the applicant and Lesley West.
15)When liability to duty arose:
a)Lynette West and the applicant were the beneficial owners of the Land; and
b)Lynette West intended that the Land continue to be used by the partnership in the carrying on of a business of primary production, namely sheep breeding and cereal crop growing.
16)When liability to duty arose:
a)Lynette West and the applicant were the beneficial owners of the Land; and
b)the applicant intended that the Land continue to be used by the partnership in the carrying on of a business of primary production, namely sheep breeding and cereal crop growing.
17)When liability to duty arose, the partners of the partnership were Lynette West, Lynette West as executor of the estate of HJ West, Westworks, Dale West, Lisa West, the applicant and Lesley West.
General
18)The relevant transaction for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act is the transaction recorded on the Transfer of Land.
19)The Land is 'farming land' for the purposes of the Duties Act.
20)The Land is 'farming property' for the purposes of the Duties Act.
21)At all relevant times, the Land was used by the partnership but was not an asset of that partnership, although it was treated as an asset of the partnership for the purposes of settling the legal proceedings in the Supreme Court.
22)The applicant is Dale West's brother.
23)Lynette West is the mother of the applicant and Dale West.
24)The applicant and Lynette West are 'family members' of the 'transferor' for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act.
25)The applicant and Lynette West are 'transferees' for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act.
Further, I accept the Commissioner's submission that the Transfer of Land is in effect a transfer by Dale West of his one third interest in the Land in favour of the applicant and Lynette West as tenants in common in equal shares. It follows that I accept that Dale West is the 'transferor' for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act.
The legislation
Taxation Administration Act 2003 (WA)
Section 34 of the TA Act allows a taxpayer the right to object to an assessment made by the Commissioner.
Section 40(1) of the TA Act then relevantly provides that where a taxpayer is dissatisfied with the Commissioner's decision on an objection, they may apply to the Tribunal for a review of that decision.
State Administrative Tribunal Act 2004 (WA)
These proceedings fall within the Tribunal's review jurisdiction in accordance with s 17 of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The review is to be by way of hearing de novo; s 27(1) of the SAT Act.
The Tribunal has all the functions and discretions corresponding to those exercisable by the decisionmaker in making the reviewable decision; s 29(1) of the SAT Act.
Duties Act 2008 (WA)
The Duties Act imposes duty on dutiable transactions; s 10 of the Duties Act. A transfer of dutiable property is a dutiable transaction; s 11(1)(b) of the Duties Act.
'Dutiable property' includes land in Western Australia; s 15(a) of the Duties Act.
Section 103 of the Duties Act provides that 'duty is not chargeable on an exempt family farm transaction'.
The phrase 'exempt family farm transaction' is defined in s 99(1) of the Duties Act in the following manner:
In this Subdivision
exempt family farm transaction has the meaning given in section 102;
Section 102 of the Duties Act provides:
References to exempt family farm transaction
(1)A reference in this Subdivision to an exempt family farm transaction is to a dutiable transaction to the extent to which the subject of the transaction is farming property which, as a result of the transaction is, or is to be, acquired by a transferee or transferees.
(2)A transaction is an exempt family farm transaction only if
(a)each transferor was using the farming property in the business of primary production immediately before the transaction took place; and
(b)when liability to duty on the transaction arose, each transferee intends to continue to use the farming property in the business of primary production.
(3)It is irrelevant for the purposes of subsection (2) whether a transferor was using, or a transferee intends to continue to use, the farming property in the business of primary production
(a)personally; or
(b)through a trust, corporation or partnership (an entity) to which the transferor or transferee, as is relevant, is related; or
(c)through a combination of entities to which the transferor or transferee, as is relevant, is related.
(4)In subsection (3), a transferor is related to an entity if
(a)the transferor is a beneficiary of a trust
(i)other than a unit trust scheme or a discretionary trust; and
(ii)in which every other beneficiary is a family member of the transferor;
or
(b)the transferor has a share or interest in trust property, whether vested or contingent, held by the trustee of a discretionary trust and every other person who holds such a share or interest in that property, or who may benefit from that trust, is a family member of the transferor; or
(c)the transferor holds units in a unit trust scheme and every other person who holds a unit in that unit trust scheme is a family member of the transferor; or
(d)the transferor is a shareholder in a corporation in which every other shareholder is a family member of the transferor; or
(e)the transferor is a partner in a partnership in which every other partner is a family member of the transferor.
(5)In subsection (3), a transferee is related to an entity if
(a)the transferee is a beneficiary of a trust
(i)other than a unit trust scheme or a discretionary trust; and
(ii)in which every other beneficiary is a family member of the transferor;
or
(b)the transferee has a share or interest in trust property, whether vested or contingent, held by the trustee of a discretionary trust and
(i)every other person who holds such a share or interest in that property, or who may benefit from that trust, is a family member of the transferor; and
(ii)the transferor does not control the trust;
or
(c)the transferee holds units in a unit trust scheme and every other person who holds a unit in that unit trust scheme is a family member of the transferor; or
(d)the transferee is a shareholder in a corporation in which every other shareholder is a family member of the transferor; or
(e)the transferee is a partner in a partnership in which every other partner is a family member of the transferor.
(6)For the purposes of subsection (2), a farming property is being used in the business of primary production even if
(a)some, but not all, of the farming land of that property is leased to another person; and
(b)under the lease, the lessee is using the leased land solely or dominantly for the purposes of silviculture or reafforestation.
Section 100 of the Duties Act provides:
References to family member
A reference in this Subdivision to a family member of a person is to
(a)a child or remoter lineal descendant of the person; or
(b)a parent or remoter lineal ancestor of the person; or
(c)a brother or sister of the person or remoter lineal descendant of a brother or sister of the person; or
(d)an aunt or uncle of the person; or
(e)the spouse, former spouse, de facto partner of 2 years or former de facto partner of 2 years of the person; or
(f)the spouse or de facto partner of 2 years of a person mentioned in paragraph (a), (b), (c) or (d),
or more than one of them.
Finally, s 101(a) of the Duties Act relevantly provides:
A reference in this Subdivision to a transferee in respect of a dutiable transaction the subject of which is farming property is …
(a)a family member of the transferor, if the family member does not intend to hold the farming property as agent, trustee or otherwise on behalf of any other person[.]
Issues
The parties agree that the determinative issue in this matter is whether the transfer of a onethird interest in the Land from Dale West to Lynette West and the applicant is an exempt family farm transaction for the purposes of s 103 of the Duties Act.
The Commissioner says that this issue gives rise to the following subissues.
1)Was Dale West, as transferor, using the Land, being farming property, in the business of primary production immediately before the transfer took place for the purposes of s 102(2)(a) of the Duties Act?
2)When liability to duty on the transfer arose, did Lynette West, as one transferee, intend to use the Land, being farming property, in the business of primary production for the purposes of s 102(2)(b) of the Duties Act?
3)When liability to duty on the transfer arose, did the applicant, as the other transferee, intend to use the Land, being farming property, in the business of primary production for the purposes of s 102(2)(b) of the Duties Act?
The applicant on the other hand says that the subissues are whether:
a)an 'exempt family farm transaction' is defined in s 102(2) of the Duties Act; and
b)subsections 102(3), (4) and (5) define an exempt family farm transaction or merely define what is irrelevant to the consideration of whether a transaction is an exempt family farm transaction under s 102(2).
The Commissioner's decision
The Commissioner says that the Transfer of Land is exempt from duty only if it satisfies all the requirements of an exempt family farm transaction as set out in the entirety of s 102 of the Duties Act. In particular, the Commissioner says that s 102(2) cannot be regarded as standing on its own. It must be read with s 102(3), which gives meaning to s 102(2) by listing the only permissible circumstances in which the tests stipulated in s 102(2) can be said to be satisfied.
One requirement under s 102(2) of the Duties Act is that, immediately before the transaction took place, the relevant land must have been farming property and the transferor must have been using the farming property in the business of primary production.
It is not in issue that, for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act, the Land was at the relevant date 'farming property' and was being used in the business of primary production immediately before the transfer took place. However, the Commissioner points out that the transferor is Dale West and, while he may have been carrying out farm work on the Land, it is an undisputed fact that it was the partnership which was at the time using the Land in the business of primary production.
The Commissioner considers that this in itself does not mean that the exemption is lost. The Commissioner says that, for the purposes of s 102(2)(a) of the Duties Act, the exemption may still apply if a transferor was using the farming property in the business of primary production through a partnership to which the transferor 'is related'; s 102(3)(b) of the Duties Act.
For the transferor to be related to a partnership, he must be a partner and every other partner of the partnership must be a 'family member' of the transferor; s 102(4)(e) of the Duties Act.
The Commissioner accepts that Dale West was a partner in the partnership, but points out that one of the other partners of the partnership is Westworks. The Commissioner says that Westworks cannot be a 'family member' of Dale West for the purposes of the Duties Act because a 'family member' for the purposes of the Duties Act can only be a natural person; s 100 of the Duties Act. It follows, in the Commissioner's submission, that the partnership is not a partnership to which Dale West is related.
Accordingly, the requirements of s 102(2)(a) of the Duties Act are not fully satisfied.
Another requirement under s 102(2) of the Duties Act is that, at the time when liability to duty on the transaction arose, each transferee must be a family member of the transferor and intend to continue to use the farming property in the business of primary production.
The Commissioner accepts that Lynette West and the applicant are both family members of the transferor and transferees of farming property for the purposes of Subdivision 3 of Div 1 of Pt 6 of Chapter 2 of the Duties Act. However, the Commissioner says that even though they both may have been carrying out farm work on the Land at the relevant date, it is also an undisputed fact that Lynette West and the applicant intended to continue to use the Land through the partnership in the business of primary production.
Again, the Commissioner considers that this in itself does not mean that the exemption is lost. The Commissioner says that, for the purposes of s 102(2)(b) of the Duties Act, the exemption may still apply if at the relevant date the transferee intends to use the farming property in the business of primary production through a partnership to which the transferee 'is related'; s 102(3)(b) of the Duties Act.
For a transferee to be related to a partnership, he or she must be a partner in a partnership in which every other partner is a 'family member' of the transferor; s 102(5)(e) of the Duties Act. For the reasons already given, the Commissioner does not accept that one of the partners at the relevant time, Westworks, is a 'family member' of the transferor, Dale West, for the purposes of the Duties Act.
The Commissioner therefore concludes that for the purposes of the Duties Act, when liability to duty on the transaction arose, the partnership was not a partnership to which either Lynette West or the applicant was related.
Accordingly, the requirements of s 102(2)(b) of the Duties Act are not fully satisfied.
For those reasons, Commissioner's decision is that the transfer of a onethird interest in the Land from Dale West to the applicant and Lynette West is not an exempt family farm transaction for the purposes of s 103 of the Duties Act.
The applicant's case
The applicant on the other hand contends that an 'exempt family farm transaction' is defined entirely within s 102(2) of the Duties Act. The applicant says that the scope of s 102(2) is broad enough to cover the circumstances set out in s 102(3) without the need to refer to s 102(3) at all.
Accordingly, in the applicant's view, the issue is simply whether the circumstances of this case satisfy the following elements of that definition, namely that:
a)immediately before the transaction took place each transferor was using the farming property in the business of primary production; and
b)when liability to duty on the transaction arose, each transferee was a family member of the transferor and intends to continue to use the farming property in the business of primary production.
In the applicant's submission, element (a) is satisfied because, immediately before the transaction took place, Dale West was using the Land, being farming property, in the business of primary production through the partnership. Element (b) is satisfied because, when liability to duty arose, both Lynette West and the applicant intended to continue to use the Land in the business of primary production through the partnership. Therefore, the applicant concludes, the elements of the definition in s 102(2) of the Duties Act are satisfied.
The applicant says that the Commissioner's contention that the transaction must satisfy s 102(3), s 102(4) and s 102(5) in order for the exemption to apply is erroneous. The opening words of s 102(3) are 'It is irrelevant for the purposes of subsection (2) whether …' and therefore subsections (3), (4) and (5) do not define the exemption. Instead, they set out what is expressly stated to be irrelevant to the definition of the exemption in s 102(2).
The applicant says that if the circumstances of a particular case do not fall within s 102(3) and s 102(4) or s 102(5), that merely means that the circumstances are not 'irrelevant' but it does not follow that the definition of the exemption is not satisfied.
I have some difficulty in understanding this aspect of the applicant's argument and I am not assisted by the following further explanation which he provides. The applicant goes on to say that it is his submission that the correct interpretation of s 102 is that if the circumstances of the case do not satisfy s 102(3) and s 102(4) or s 102(5) then:
a)the circumstances are not 'irrelevant', therefore
b)the circumstances are 'relevant' to the definition in s 102(2), and
c)the elements of the definition in s 102(2) are satisfied and the transaction is an exempt family farm transaction.
The applicant says that if the Commissioner's interpretation is correct, then the opening words of s 102(3) would be something to the effect that 'It is necessary for the purposes of subsection (2) that a transferor was using …'.
The applicant submits that the intention of s 102(3) is to extend the exemption in s 102(2) to related entities, not to limit the scope of that exemption. Section 103, in the applicant's view, provides 'safe harbours' of circumstances which satisfy subsection (2) but do not limit other circumstances which may also satisfy subsection (2). The applicant says that s 102(2) provides the overarching test for the exemption in broad terms and that subsections (3), (4) and (5) are intended to extend the definition, not limit it.
The applicant considers that there is no need to be concerned with the involvement of the partnership because, under the Partnership Act 1895 (WA) (Partnership Act), a partnership has no legal personality distinct from that of the individual partners. It is no more than a collective title for the individuals who comprise it and has no existence. Therefore, the applicant says, it cannot be contended that the partnership was carrying on the business of primary production but not Dale West, Lynette West and the applicant as individuals. It follows, in the applicant's submission, that as a matter of law Dale West, Lynette West and the applicant were at the relevant times carrying on the business of primary production. The applicant says that this is consistent with what both the applicant and Lynette West say in their respective witness statements; applicant's witness statement at paragraph 5 and Lynette West's witness statement at paragraph 7.
The applicant cites a number of cases as authority for his proposition, including Atwell v Roberts [2013] WASCA 37 (Atwell) at [121] [124].
In Atwell, Buss JA at [123] approved the following passage from SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87 at 90, stating at [123] that these observations concerning the Partnership Act 1891 (Qld) apply to the Partnership Act:
… Underlying the provisions particularly of Cll.7.2 and 8, and implicit in the description 'unit' partnership, is the notion that a partnership like this enjoys a corporate or at least quasicorporate existence apart from the members who comprise it. That is, of course, quite foreign to the conception of a partnership as understood by English law, which regards any change in membership as destroying the identity of the firm. See Lindley on Partnership, 15th ed., at 34, 50 and 543. Hence it is that under our law the transfer of a share to a nonpartner inevitably breaks the continuity of the firm, thus constituting a new firm or partnership of those members of the former partnership who remain, together with the newcomer. This approach is sometimes contrasted with that of continental legal systems and of Scotland, where a partnership is seen as possessing at least some features or attributes of distinct legal personality. It was to accommodate this difference that in the United Kingdom s.4(2) of the Partnership Act 1890, a provision naturally omitted from the corresponding Queensland Act of 1891, provides that in Scotland a firm is a legal person distinct from the partners of whom it is composed. Use of the word 'firm' to describe the members of a partnership under English law as in the course of time helped to promote the reception of this foreign heresy; but the rule nevertheless remains, as a recent Scots writer on the subject has accurately observed, that in our legal system the word 'firm' is no more than 'a collective title for the individuals who comprise it' (J B. Miller, The Law of Partnership in Scotland, at 451452; Edinburgh W. Green & Son Ltd 1973). In Queensland, as in England, a firm as such still has, as Farwell J. expressed it in Sadler v. Whiteman [1910] 1 K.B. 868, 889, 'no existence'.
The applicant concludes that no duty is chargeable on the Transfer of Land and that the applicant is entitled to a refund of the duty paid.
The applicant says that the Tribunal's decisions in Ivankovic and Commissioner of State Revenue [2013] WASAT 21 (Ivankovic) and Hibben & Ors and Commissioner of State Revenue [2012] WASAT 234 (Hibben) are of limited relevance to this matter because both concerned corporations. The applicant points out that a corporation has a separate legal existence, unlike this matter which involves a partnership.
Further, the property was not leased to a third party and so the Tribunal's decision in Re Carey and Commissioner of State Revenue (2006) 62 ATR 616 also has no application.
Findings
Interpretation of s 102 and s 103 general principles to be applied
As Buss JA said in Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211 (Abbotts) at [160]:
The modern approach to statutory construction is purposive. The statutory text is the surest guide to Parliament's intention. A decision as to the meaning of the text must begin by considering the context, in its widest sense. This will include the general purpose and policy of the provision. (Citations omitted)
This approach to statutory interpretation in Western Australia is reflected in Commissioner of the Australian Federal Police v Courtenay Investments Ltd (No 2) [2014] WASC 55 where Edelman J said at [14]:
The key integers in the exercise of determining the effect of Parliament's intention in [section x] are statutory text, context and purpose. The starting point, and the end point, is the text. But, although the statutory text is the 'surest guide' to Parliament's intention, the text must be read in the widest sense of context, including the general purpose and policy of the provision.
I may also have regard to extrinsic material without necessarily invoking the provisions of s 19 of the Interpretation Act 1984 (WA). As Buss JA has also said in Abbotts at [91]:
At common law (that is, independently of s 19 of the Interpretation Act), this court is permitted, in construing a statutory provision, to have regard to the words used by Parliament in their legal and historical context and, if appropriate, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. The context includes reference to the legislative history of the provision and any relevant reports of law reform bodies which describe the matters requiring legislative reform.
However, legislative history and extrinsic materials cannot be relied upon to displace the clear meaning of the text; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 293 ALR 257 at [39].
The proper construction of the statutory construction of s 102 of the Duties Act requires a consideration of the text itself, in its statutory context.
The proper statutory context of a provision includes:
a)the relevant Act as a whole;
b)the general purpose, policy and legislative history of the provision; and
c)the mischief which a statute was intended to remedy; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408, endorsed in Abbotts at [91].
The text of s 102 and s 103 in the context of the Duties Act as a whole
Central to the applicant's application is his contention that the meaning of 'exempt family farm transaction' is found entirely within s 102(2) of the Duties Act and that s 102(3) is intended to merely extend the scope of that definition, not to limit it.
However, that approach ignores the fact that s 99 provides that the phrase 'exempt family farm transaction' has the meaning given in s 102, not s 102(2). I consider that to have been a deliberate approach taken by the draftsperson.
It also ignores the fact that the words of s 102(1) are necessary to clarify that the transferee or transferees must be family members of the transferor.
I accept that the opening words of s 102(3), namely 'It is irrelevant for the purposes of subsection (2) …' are at first sight somewhat curious. If I apply the applicant's interpretation of those words, s 102(3) may be relied upon to deal with cases where the farming property is used through, relevantly, 'related' partnerships. However, in the applicant's submission, there would then never be any need to resort to that part of s 102(3) because, on the applicant's analysis, use through partnerships, whether or not 'related', is already included in s 102(2). If I accept the applicant's interpretation, it would therefore seem that the words in s 102(3) 'or partnership … to which the transferor or transferee, as is relevant, is related' are superfluous.
It would follow that s 102(4)(e) and s 102(5)(e) would also be superfluous.
It is not open to me to regard these provisions as superfluous; Commonwealth v Baume (1905) CLR 405 at 414.
There is an interpretation which does not have that effect. The opening words of s 102(3) are:
It is irrelevant for the purposes of subsection (2) whether a transferor was using, or a transferee intends to continue to use the farming property in the business of primary production …
The purpose of subsection (2) is clear from its opening words, 'A transaction is an exempt family farm transaction only if …' (my emphasis). The purpose of subsection (2) is to limit the exemption for family farm transactions to a particular set of circumstances. In my view, the opening words in s 102(3) should be read to mean that for the purpose of establishing what is not an exempt family farm transaction, it may be disregarded whether the use is personal, or through a particular 'related' entity.
I consider that interpretation to be the appropriate one. I therefore agree with the Commissioner that, to come within the relevant exemption, it is necessary that the relevant use of the farming property in the business of primary production is by the transferor or the transferee, as defined in s 101, in one of the capacities set out in s 102(3)(a), (b) or (c).
Further, I do not consider that the use or intended use of the farming property in the business of primary production personally by the transferor or transferee as the case may be includes that use through a partnership other than a 'related' partnership.
I accept that, by definition, a partnership is the relation which subsists between persons carrying on a business in common with a view to profit; s 3 of the Duties Act and s 7 of the Partnership Act. I also accept that a partnership has no legal personality separate from that of the individual partners; Atwell at [121]. However, I see no reason why a partnership cannot be a separate entity for the purposes of the Duties Act if the Duties Act so provides. It does so provide, at s 102(3), when it defines 'entity' to mean a company, trust or partnership.
It is my finding of fact that the partnership was using the farming property in the business of primary production immediately before the transaction took place and that it is the partnership (either as originally constituted or as reconstituted following the retirement of Dale West) which intends to continue to use the farming property in the business of primary production. This is an agreed fact and is consistent with the evidence of the applicant and Lynette West. Both the applicant and Lynette West state that it is the partnership which carries on the business of primary production. They both then go on to describe their involvement in that business which I understand to be the carrying out of physical farm work.
I do not consider that conducting a farm business and carrying out the work of the farm can be regarded as the same thing. The argument, in the context of land tax, that 'where actual farming work is being undertaken by the owners of the land, the exemption should apply regardless of the entity through which they conduct their business' was expressly rejected by the Tribunal; Hibben at [45] - [46]. I would also reject that argument in the context of the Duties Act.
Is this interpretation consistent with the purpose and policy of the legislation?
The predecessor to the Duties Act was the Stamp Act 1921 (WA) (Stamp Act). The equivalent exemption to the exempt family farm transaction was introduced by the Stamp Amendment Bill (No 2) 1994 (WA). The second reading speech for that Bill provided that the intention was to remove a disincentive to the transfer of farming property in favour of those family members undertaking most of the work on the farm. Ownership of the farm would be expected to increase the commitment of those family members to its long term performance. The exemption would not apply unless all of the transferees were family members. The 'family members to whom the farming property is transferred must themselves … continue to undertake the business of primary production.'; Western Australia, Parliamentary Debates, Legislative Assembly, 22 November 1994 (Mr Court, Treasurer).
It is clear from the extrinsic material that sections 102(3), 102(4) and 102(5) of the Duties Act represent 'an extension of the family farm exemption'.
The Stamp Act family farm exemption provisions were:
… introduced in 1994 to remove the stamp duty barrier to a farmer transferring ownership of the family farm to the younger generation. It was aimed at enhancing the younger generation's incentive to improve the property and introduce more efficient farming techniques. It also provided the younger generation with certainty of ownership, rather than having to wait for the property to be distributed by way of the terms of a will.
(see Committee Debates of the Duties Bill 2007 (WA), Legislative Council, 2 April 2008, page 1623 and Commissioner's Bundle page 158)
The second reading speech for the Duties Bill 2007 (WA) in the Legislative Assembly provided that:
A number of proposals that were considered and supported through the state tax review process have been included in the Duties Bill. These are; … extending the availability of the family farm exemption to situations where a related family entity uses the farming property in the business of primary production. Western Australia, Parliamentary Debates, Legislative Assembly, 28 November 2007 (Mr Ripper, Treasurer). (Commissioner's bundle page 171)
The explanatory memorandum accompanying the Duties Bill 2007 (WA) explains in relation to cl 103:
If a transaction satisfied the requirements set out in clause 102, then no duty is chargeable on the transaction.
(Commissioner's Bundle page 176)
That explanatory memorandum also explains in relation to cl 102:
This clause sets out the conditions that must be satisfied for a dutiable transaction the subject of which is farming property, to be an exempt family farm transaction.
…
Subclause (2) clarifies that for a dutiable transaction to be an exempt family farm transaction, each transferor must have been using the farming property in the business of primary production immediately before the transaction, and it must be the intention of each transferee at the time the liability to duty arises on the transaction that they will continue to use the farming property in the business of primary production. 'Primary production' is defined in clause 3.
It should be noted that subclause (3) allows related entities to be using the farming property in the business of primary production in certain circumstances. Further, the reference to 'use' refers to physical use of the farming property by the transferor or transferee. It would not, for example, be acceptable for the transferee to rent the farm and move to the city to take up other employment, as the policy of the exemption is to encourage younger generations to stay in the farming business.
Subclause (3) allows a transferee to continue to use the farming property in the business of primary production personally or through an interest in a trust, corporation or partnership to which they are related, or through a combination of the aforementioned entities. This was a recommendation of the State Tax Review and is intended to recognise that the business of primary production is often carried on through an entity, rather than by a natural person. Although it is proposed that there be an extension to the related entities that are permitted to use the farming property in the business of primary production, it is still a condition of the exemption that the person that is the transferee must continue to physically use the farming property in the business of primary production, although this may be in their capacity as having an interest in the related entity.
A similar change has been made in the respect of the transferor's use of the property in the business of primary production immediately before the transaction took place, to accommodate the transferor conducting the business in conjunction with related entities.
(Commissioner's Bundle pages 174-176)
I consider that the legislative history of s 102 and s 103 of the Duties Act supports my conclusion that the exemption from duty of family farm transactions under s 103 of the Duties Act will only apply if one of the circumstances set out in s 102(3) is met.
Conclusion
It follows from what I have said that these are my conclusions.
a)It is a requirement of an exempt family farm transaction that, immediately before the transaction took place, the transferor was using the farming property in the business of primary production; s 102(2)(a) of the Duties Act.
b)For the purposes of s 102(2)(a) of the Duties Act, it is permissible if the transferor was using the farming property in the business of primary production through a partnership to which the transferor is related; s 102(3)(b) of the Duties Act.
c)A transferor is related to a partnership if the transferor is a partner in that partnership and every other partner of that partnership is a family member of the transferor; s 102(4)(e) of the Duties Act.
d)The transferor in this case, Dale West, was using the farming property in the business of primary production immediately before the relevant transaction took place through the partnership.
e)Immediately before the relevant transaction took place, one of the partners of the partnership was Westworks.
f)Westworks was not at the relevant time a 'family member' of the transferor for the purposes of the Duties Act. This is because a 'family member' for the purposes of the Duties Act can only be a natural person; s 100 of the Duties Act.
g)Accordingly, the transferor was not using the farming property in the business of primary production immediately before the transfer took place for the purposes of s 102(2)(a) of the Duties Act, because he was not using the farming property in the business of primary production either personally or through a partnership to which he was relevantly related.
h)Further, it is also a requirement of an exempt family farm transaction that, when liability to duty on the transaction arose, each transferee is a family member of the transferor and each intended to continue to use the farming property in the business of primary production; s 102(2)(b) of the Duties Act.
i)For the purposes of s 102(2)(a) of the Duties Act, it is permissible if the transferees intend to continue to use the farming property in the business of primary production through a partnership to which the transferees are related; s 102(3)(b) of the Duties Act.
j)A transferee is related to a partnership if the transferee is a partner in a partnership in which every other partner is a family member of the transferor; s 102(5)(e) of the Duties Act.
k)When liability to duty arose, the applicant and Lynette West intended to continue to use the farming property in the business of primary production through the partnership.
l)When liability to duty arose, Westworks was a partner in the partnership. Westworks, as a corporation, cannot be a 'family member' of the transferor for the purposes of the Duties Act, because a 'family member' for the purposes of the Duties Act can only be a natural person; s 100 of the Duties Act.
m)Accordingly, the transferees of the land were not intending to use the farming property in the business of primary production when liability to duty arose for the purposes of s 102(2)(b) of the Duties Act, because they did not intend to use the farming property through a partnership to which they were relevantly related.
n)The dutiable transaction is therefore not an exempt family farm transaction.
Orders
1.The decision of the Commissioner of State Revenue dismissing the objection to the assessment of duty of the applicant is affirmed.
2.The applicant's application is dismissed.
I certify that this and the preceding [78] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE T SHARP, DEPUTY PRESIDENT
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