Western City Developments Pty Ltd v Chief Commissioner of State Revenue [

[2009] NSWADTAP 54

Appeal Panel - Internal

CITATION:	Western City Developments Pty Ltd v Chief Commissioner of State Revenue [ [2009] NSWADTAP 54
PARTIES:	APPLICANT Western City Developments Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	089078
HEARING DATES:	6 May 2009
DATE OF DECISION:	28 September 2009
BEFORE:	Needham J SC - Deputy President; Verick A - Judicial Member; Blake C - Non-Judicial Member
CATCHWORDS:	evidence – onus of proof – relevance of Practice Note 14 and CCSR Duties Ruling 012 – procedural fairness – self-represented litigant – adjournment – extension to the merits
DECISION UNDER APPEAL:	Western City Developments Pty Ltd v. Chief Commissioner of State Revenue [2008] NSWADT 293
FILE NUMBER UNDER APPEAL:	086009
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Duties Act 1997
CASES CITED:	Western City Developments Pty Ltd v. Chief Commissioner of State Revenue [2008] NSWADT 293
REPRESENTATION:	APPLICANT S Phillips, barrister RESPONDENT P Singleton, barrister
ORDERS:	1.Appeal allowed 2.List matter for directions on 6 November 2009 at 9.30am before Judicial Member Hirschhorn for directions for the future question of these proceedings 3.Reserve questions of costs.

REASONS FOR DECISION

1 Western City Developments Pty Ltd (“the appellant”) appeals from a decision of the Tribunal constituted by Ms Hirschhorn, Judicial Member, given on 29 October 2009 (Western City Developments Pty Ltd v. Chief Commissioner of State Revenue [2008] NSWADT 293).

2 The issue before the Tribunal was what was the correct “dutiable value” of the property for the purposes of the Duties Act 1997 (“the Act”).

3 The appeal was filed on 2 December 2008 (and is thus within time) and is both an appeal on a question of law pursuant to s 113(2)(a) of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”) and seeks leave to extend the appeal to the merits of the decision pursuant to s 113(2)(b) of the ADT Act.

Facts

4 The appellant owns land located at West Gosford. It paid duty on the purchase of that property and sought a return of part of the amount of duty paid pursuant to s 21 of the Duties Act 1997.

5 The Chief Commissioner of State Revenue (“the Commissioner” or “the respondent”) assessed duty on a dutiable value of $3,400,000, being the price shown on the contract as being the consideration paid for the property.

6 However, it is common ground that a reduced sum of $2,420,000 changed hands between the vendor and the purchaser, the vendor being keen to sell and giving a “rebate” off the purchase price pursuant to clause 53 of the contract, and a “further discount” of $180,000 which discount was reflected in the settlement schedule.

Question for the Tribunal

7 The learned Tribunal member identified, correctly, the question in the case as being “what the correct “dutiable value” of the property was for the purposes of s 21 of the [Act] upon which duty should have been calculated”.

8 The learned Tribunal Member found that:-

a)the Commissioner was wrong in treating the “consideration” for the purchase as the sum shown on the contract as the “purchase price” of $3,400,000;
b)the rebate of $800,000 represented a reduction in the consideration for the property;
c)there was insufficient explanation as to the $180,000 for the Member to be able to find that it was a reduction in consideration, and the Applicant (here, the appellant) did not discharge its onus of proof in relation to that sum; and
d)despite the finding in (b) above, the test in s 21 of the Act was that the dutiable value was the greater of consideration and the unencumbered value of the dutiable property. Section 31 of the Act requires the Commissioner to reassess duty only where the consideration is reduced to not less than the unencumbered value of the property at the time the consideration is reduced.

9 The learned Tribunal member found that as the appellant did not provide evidence of the unencumbered value of the property, apart from two one-page expressions of opinion of value from local real estate agents, there was no evidence as to the unencumbered value of the property.

10 Relying on the onus on the applicant for review to prove its case (see s 100(3) of the Taxation Administration Act, B&L Linings Pty Ltd & anor v. Chief Commissioner of State Revenue [2006] NSWADTAP 32 and [2008] NSWCA 187), the learned Tribunal member held that it was necessary for the Applicant to show, not just that the consideration had been reduced but also to prove the unencumbered value of the property at the time the consideration was reduced.

11 Accordingly, despite the finding that the consideration was reduced from that shown on the contract for sale, the decision under review was affirmed.

12 The Notice of Appeal raised the following questions of law:-

a)whether the Tribunal erred in requiring the appellant to adduce evidence of the unencumbered value of the property and whether the appellant bore the onus to do so;
b)whether the Tribunal member should have rejected the tender of letters from local agents “purportedly providing independent valuations of the property” given that the Tribunal is not bound by the rules of evidence;
c)whether the Tribunal, after rejecting the letters, should have afforded the appellant an opportunity for an adjournment in order to provide further and better evidence of the value of the property.

13 The Notice of Appeal also sought leave to extend the appeal to the merits of the decision. The grounds may be summarised as being related to the overall justice of the matter given that the Tribunal found in favour of the appellant on the primary question of whether the consideration had been reduced, and finding against the appellant on a question of onus and proof when attempts had been made by the representative of the appellant – who was a director of the appellant with no legal training – to prove the value of the property.

14 Written submissions were filed by each party and oral argument by each of the counsel representing the parties was heard on 9 May 2009. Each party was most ably represented and the Appeal Panel is satisfied that everything that could be said on behalf of each party has been said.

15 The relevant parts of the Act are as follows:-

21 What is the “dutiable value” of dutiable property?
(1) The dutiable value of dutiable property that is subject to a dutiable transaction 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.
.....
31 Effect of alteration in purchase price
(1) If after an agreement for the sale or transfer of dutiable property is entered into and before the property is transferred:
(a) the consideration under the agreement is reduced and the reduced consideration is not less than the unencumbered value of the dutiable property when the consideration was reduced, or
(b) the consideration under the agreement is reduced because the parties have agreed not to transfer some of the dutiable property previously agreed to be transferred and the reduced consideration is not less than the unencumbered value of the dutiable property that remained to be transferred when the consideration was reduced, or
(c) the consideration under the agreement is increased and the dutiable value when the consideration was increased is greater than the dutiable value when the agreement was entered into,
the Chief Commissioner must assess or reassess the liability to duty of the agreement in accordance with the change in the consideration.
(2) The liability to pay additional duty arising from an increase in the consideration occurs on the date the consideration is agreed to be increased.

16 The appellant submitted that there were, in essence, three grounds on which the appeal was made. They are:-

a)the Tribunal erred in placing the evidentiary onus on the appellant to prove the unencumbered value of the property;
b)the Tribunal erred in rejecting the “agents’ letters” (as they were known during the hearing and appeal) in light of the role and evidentiary requirements of the Tribunal pursuant to the ADT Act; and
c)the Tribunal failed to afford procedural fairness to the applicant, given that it was not legally represented at the hearing.

17 As to the first ground, the matter of evidentiary onus, the appellant says that the finding of the Tribunal was that it bore the onus of proving the unencumbered value of the property; it attempted to do so, but once that tender was rejected, it failed to discharge that onus. The appellant says that on a proper construction of s 31(1)(a) of the Act did not require the appellant to prove in an affirmative way that the unencumbered value of the property was not less than the (reduced) purchase price. The appellant sought to have recourse to B&L Linings Pty Ltd v. Chief Commissioner of State Revenue (No 2) [2006] NSWADTAP 32 (at par [65]) and to the principle that no onus arises when a question of legal principle is in question (see pars [16] and [17] of B&L Linings before the Appeal Panel). It also had regard to s 73 of the ADT Act, which is a broad section empowering the Tribunal to determine its own procedure, and reliving it from being bound by the rules of evidence (subject to the rules of natural justice). The appellant placed reliance in particular on sub-ss (3) and (4) which provide:-

“(3) The Tribunal is to act with as little formality as the circumstances of the case permit, and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms.
(4) The Tribunal is to take such measures as are reasonably practicable:-
(a) to ensure that the parties to the proceedings before it understand the nature of the assertions made in the proceedings and the legal implications of those assertions, and ...
(c) to ensure that the parties have the fullest opportunity practicable to be heard or otherwise have their submissions considered in the proceedings”.

18 The appellant, further, drew the attention of the Appeal Panel to Revenue Ruling DUT 012 which provides:-

“In most cases where the parties are unrelated, duty will be assessed on the amount of the consideration, because in such circumstances the unencumbered value of the property is likely to be equivalent to the amount of the consideration”.

19 It was accepted in the decision below that the parties were unrelated, and that there were good reasons for the reduction of purchase price. The appellant submitted that the Commissioner’s own internal practice should be had regard to in the Tribunal and that that approach should have been applied by the Tribunal.

20 The second ground of appeal is that the learned Tribunal member erred in rejecting the agents’ letters, acknowledging that she was not strictly bound by the rules of evidence (see T:32.38). It is submitted that in rejecting the agents’ letters she:-

a)was acting in an overly technical and legalistic way;
b)applied Practice Note 14 when it did not in terms apply to the agents’ letters (as they were not “engaged” to provide a report) and, in doing so, gave more weight to the provisions of Practice Note 14 than she did to the provisions of s 73; and
c)excluded the evidence based on a failure to comply with the Practice Note without establishing whether the Practice Note should apply at all.

21 It was submitted that the proper approach would have been to have admitted the agents’ letters and then to determine the weight which should be given to those letters, which, admittedly, may have been slight, rather than having excluded them all together.

22 The third ground of appeal is that the learned Tribunal member failed to afford the parties natural justice by failing to grant or offer an adjournment to enable the appellant to obtain expert evidence in relation to the issue of expert evidence.

23 The appellant relied upon a statement in Pearce – Administrative Appeals Tribunal (2003) Lexis Nexis Butterworths at [7.64] to the effect that “if a tribunal fails to use its power to adjourn to enable additional information to be obtained it will have made an error of law” and the statement of Wilcox J in Adamou v. Director-General of Social Security (1985) 7 ALN N203:-

“Nevertheless it was the duty of the Tribunal to address this matter, doing the best it could upon the material which it had. If this material was thought to be so inadequate as to provide no proper basis for a conclusion, the Tribunal could have adjourned the hearing for the purpose of having the parties place relevant evidence before it: see s 33(1)(a) of the Administrative Appeals Tribunal Act 1975 ... However it was to be managed it was incumbent upon the Tribunal to make a finding on this question. Its failure to do so constitutes an error in law in respect of the [relevant] finding ...”.
(see also re Kizin v. Commonwealth (1986) 9 ALN N218). It is submitted that s 33(1)(a) is similar in terms to s 73 of the ADT Act.

24 The written submissions of the appellant put this submission frankly (in par [39(c)]). “... having decided to reject the agents’ letters, the Tribunal did not offer or even raise the possibility of an adjournment with Mr Comer. Failure to do so is of particular significance as the primary, or even sole, ground upon which the Tribunal found against the Appellant was a lack of evidence of value – the very issue to which the agents’ letters were directed”.

25 It is clear from the above submission as well as from the transcript that no adjournment was sought or, following from that, refused.

26 The appellant was unaware of the terms of the Practice Note which dealt with expert evidence, and was not, as noted above, legally represented. Mr Comer was provided with a copy of DUT012, a Duties Ruling on “Dutiable Transactions – Evidence of Value” which provides:-

2. ... Section 305 authorises the Chief Commissioner to require a person who is liable to duty “to provide a declaration by a competent valuer as to the unencumbered value of the property or to provide such other evidence of that value as the Chief Commissioner thinks fit.” The Act does not prescribe the circumstances in which evidence of value may be required.
3. A decision to require a person liable to duty to provide evidence of value, and the type of evidence required, are at the discretion of the Chief Commissioner. This Ruling provides some general guidelines as to when evidence of value will be required ...
4. In general, evidence of value will be required in 2 circumstances:
if there is no consideration or nominal consideration; and
if the Chief Commissioner is not satisfied that the consideration is an adequate indication of the unencumbered value of the property.
5. Where there is a monetary consideration for a transaction, evidence of value is only required if there is some indication that the consideration is less than the unencumbered value of the property. In most cases where the parties to a transaction are unrelated, duty will be assessed on the amount of the consideration, because in such circumstances the unencumbered value of the property is likely to be equivalent to the amount of the consideration”.

27 The appellant raised the issue that had an adjournment been sought by Mr Comer (who was not legally represented), there was no prejudice to the respondent in such an adjournment being granted, as the duty had been paid and has been retained by the respondent.

The respondent’s submissions

28 The respondent filed written submissions and made oral submissions in expansion and supplementation.

29 As to the first ground, the respondent analysed the legislation in answering the question, “what is the dutiable value?”. He relied on s 21 (which defined the thing to which the duty attaches) and s 31, which referred back to s 21 in reducing consideration in certain circumstances. It was submitted that s 31 did not displace s 21. In order to succeed, it was submitted, the appellant had to satisfy both limbs of s 21(1); that is, that the consideration paid was $2,420,000, not $3,400,000, and that the unencumbered value of the dutiable property was less than or equal to $2,420,000.

30 The respondent contended that the learned Tribunal member erred in finding that the consideration had been reduced, but did not err on the second limb. The respondent submitted that “the question in this case is what was the consideration that was paid for the dutiable transaction?” It was submitted that the contract specified, as part of a promise to provide something in return for a particular payment, that the sale price was $3,400,000. The respondent pointed to the deposit being 10% of $3,400,000, or $340,000, and the transfer and settlement sheet referring to the sum of $3,400,000.

31 Taking all those factors, the respondent submitted that the dutiable value was $3,400,000 (or more, if the unencumbered value were more) and the “rebates” or the “discounts” were not reductions in the dutiable value.

32 The respondent submitted that “dutiable value” does not equate to “amount paid at settlement by a purchaser to a vendor”. It was submitted that there are many reasons for this – a purchaser may be directed to pay out a mortgage rather than pay the vendor, but that does not exclude that part of the payment from the dutiable value or from the purchase price.

33 On the basis of Mr Comer’s evidence that the $800,000 “discount” was “purely an inducement to settle on time”, the Commissioner submits that the first issue was wrongly decided by the Tribunal and there should have been no reductions from the “dutiable value”.

34 As to the application of s 31(1)(a) of a change of consideration, the Commissioner submits that the Tribunal did not consider, as required by Chief Commissioner of State Revenue v. Dick Smith Electronics Holdings Pty Ltd (2005] 221 CLR 496, exactly what it was that was “received by the Vendors so as to move the transfers to the Purchaser as stipulated by the Agreement”, nor did it assess the transaction on the basis that the contract was performed according to its terms (Dick Smith, supra, at 516; Tribunal at [47]).

35 The respondent submits that what moved the transfer was a consideration of $3,400,000; the vendor would have been entitled to this sum had the purchaser not settled on time, and it was thus the full contract amount which moved the sale. The rebate, it was submitted, was not a change of price but a recognition that completion on time was worth $800,000 to the vendor. The respondent submitted that the rebate was neither a reduction in the purchase price, nor was that reduction effected “immediately” before the transfer.

36 On the basis that the Tribunal erred, for the above various grounds, as to the consideration payable under the contract, the respondent submitted that the appeal should be dismissed.

37 As to the second limb of the argument, the respondent maintained that the onus of proving the unencumbered value is borne by the appellant. In so contending, the respondent noted that there was no proven fact by which the Tribunal could find an unencumbered value, whether it be $3,400,000 or $2,600,000.

38 As for the appellant’s submissions as to DUT012, the respondent says that the Ruling applies to “most”, not “all”, and the appellant’s reliance upon that ruling is misplaced.

39 The respondent further submits that the Ruling was the subject of a “cogent” determination by the Tribunal.

40 As to the second ground, the respondent noted that the rules of evidence do not apply to Tribunal proceedings, while recognising that this does not allow the Tribunal to “act without reference to cogent evidentiary material”. The respondent submitted that the Tribunal properly informed itself and made no error in doing so.

41 The respondent submitted that the letters could only be of value as opinion evidence as to the question of unencumbered value. For those letters to be taken into account, they should comply with the requirements of the Tribunal and they did not. Thus, they were properly excluded.

42 As to the third ground, the respondent submitted that the learned Tribunal member was careful to provide the parties with procedural fairness and pointed to the transcript where this care was exhibited.

43 Dealing with the question of whether the appellant should have been offered an adjournment, the respondent said:-

a)there is no rule that an adjournment must be offered to a litigant;
b)this is not a case where an adjournment should have been offered as a fair hearing was provided;
c)the transcript indicates that the failure to get formal valuations was a commercial decision, consciously made by Mr Comer. Mr Comer’s evidence was that (at T:10) that “she [Ms Tacadena for the respondent] wanted a registered valuation but commercially ... we can’t spend another ... $16,000 to $18,000 getting a registered valuation”; and
d)natural justice does not require that the parties be given, in effect, a second hearing in a case where Practice Note 14 sets out the requirements for expert evidence and the need for a valuation was drawn to the appellant’s attention.

The appellant’s submissions in reply

44 Briefly stated, the appellant submitted that the proper focus of the Appeal Panel should be, not on s 21, but on the requirements of s 31(a), in that the consideration was reduced to an amount not less than the unencumbered value of the property.

45 As to the attack upon the finding of the Tribunal to the effect of the amount of consideration, the appellant also makes use of statements in Dick Smith (supra) and notes that Gummow, Kirby and Hayne JJ at [77] note that in either applying s 21 or s 31, the Chief Commissioner (and thus the Tribunal and Appeal Panel) should consider the intended result of the transaction as a whole which was, it was submitted, that the Vendors receive the sum of $2,400,000, unless the purchaser failed to settle on time, in which case it was $3,400,000.

46 As to the onus of proof, the appellant says that the mere fact of payment of $2,600,000 in an arms’ length contract was sufficient to show that the unencumbered value was not more than $2,600,000, and in doing so should have followed DUT 012.

47 The appellant submitted that the letters could have been taken into account, being expressions of matters relevant to value, and that an expert’s report should only be rejected when the evidence is unsound (see Kirch Communications v. Gene Engineering [2002] NSWSC 485 per Campbell J).

48 The appellant deals with the submission of the respondent on the issue of natural justice by pointing out that it was not until the hearing that the appellant was told that the respondent would object to the agents’ letters. It is also submitted that the transcript shows that the counsel for the Commissioner did not have a copy of the Practice Direction no 14 at the hearing, and Mr Comer was only provided with the Revenue Ruling after he had made his submissions on the question of admission of the agents’ letters.

49 The Commissioner argues that the decision of the learned Tribunal member was incorrect in treating the “consideration” as having been reduced by the various sums, and submitted that because the contract reflected a price of $3,400,000, and the vendor would have been entitled to that sum had the purchaser not settled on time, the sum of $3,400,000 was the proper consideration. The Appeal Panel does not agree. Each party points to the decision in Dick Smith (supra) as supporting their position. In the majority judgment of Gummow, Kirby and Hayne JJ , in the context of a much more complex transaction, said:-

“[79] The consideration for each of those promises is to be found in the promises made by the opposite party (Chitty on Contracts, 29th ed (2004) at 217 [3–004] concerning the need to distinguish between (and the law's concern for) the consideration for a promise as distinct from consideration for a contract). However, what for the purposes of s 21(1) of the Act moved the transfers by the Vendors was performance of all of the various stipulations in the Agreement, not merely the promises which the Purchaser made. To put the same point in other words: why identify the consideration "for" the transfers as only what the Purchaser gives up? The Vendors transferred the Shares in return for receiving some $114 million, of which part was received from the Company because the parties had agreed that this should be so.
[80] To identify, as the submissions for the Purchaser would have it, promise 4 as one which leads to the creation of an asset which the Purchaser will hold (the debt owed by the Company to the Purchaser) is apt to mislead. Promise 2, although made by the Vendors, is a promise whose performance works to the advantage of both sides. The Vendors receive money. The Purchaser, because of promises 2 and 4, satisfies the Vendors' desire for money by a means which gives the Purchaser the asset of a debt as distinct from the indirect interest it would have obtained as shareholder in what but for the dividend would have been larger and more valuable assets of the Company.

50 Here, each party gave up something; the vendor, a portion of the purchase price; and the Purchaser, the luxury of an extended settlement. It seems to the Appeal Panel that the combination of those factors results in the proper consideration for this particular dutiable transaction being that which the learned Tribunal member found; that is, $2,600,000.

51 Accordingly, the Appeal Panel does not agree with the submissions of the Commissioner that the appeal should be rejected because the Tribunal erred in the assessment of the consideration for the transaction, and the appellants’ arguments fall to be considered in detail.

Consideration – agents’ letters issue

52 Starting with the least complex issue first, that of admissibility of the agents’ letters; the letters from the agents appear to be have been properly rejected. The terms of the letters make it clear that the agents had not been asked to value the property, much less to turn their minds to the statutory requirement of the “unencumbered value”, and they are the kinds of letters which agents, perhaps interested in taking a new listing, provide to prospective vendors. It is telling that one is couched as an “appraisal” (albeit by the agent who sold the property to the vendor) and the other lists “achievable” prices for the property with no mention of comparable sales. Even in a Tribunal not bound by the rules of evidence, as this one is, the letters cannot provide a proper foundation for a positive finding of unencumbered value.

53 Whether the letters would have been seen as “expert evidence” or not, the fact remains that they were of very little weight and were nothing more than expressions of opinion, without displaying most of the factors which make opinion evidence admissible and reliable (for example, the bases upon which the opinion is based, and an outline of the expertise by which the expert professes his or her specialised knowledge and expertise). While the writers of the letters express to have put some reliance on other sales, there is little indication of what makes those sales comparable, nor is there any accounting for differences in value. The writers of the letters were not, it appears, available for cross-examination. In short, they were of so little weight that the Tribunal member was correct to reject them.

Consideration – onus of proving “unencumbered value”

54 The next point is to decided whether, in the absence of the letters, the onus was on the appellant to prove the unencumbered value of the property. It seems to the Appeal Panel that the answer must be “yes”.

55 The reason for this determination is found in s 100(3) and (4) of the Taxation Administration Act (NSW) 1996. Those sub-section provide:-

“(3) The applicant has the onus of proving the applicant’s case in an application for review.
(4) If the applicant or respondent appeals against a decision of the Administrative Decisions Tribunal in an application for review to an Appeal Panel of the Tribunal, the applicant in the application for review continues to bear the onus of proving the applicant’s case in the appeal if the Appeal Panel grants leave for the appeal to extend to a review of the merits of the decision.”

56 The provisions of s 31 of the Act provide, in effect, for a variation to the usual rule that stamp duty would be paid on the consideration as reflected in the contract. In order to show that the reduced price is that upon which duty should be paid, the appellant has to contend that the reduced price is the greater of that and the unencumbered value of the property. A necessary adjunct of that process is proof of the unencumbered value.

57 The appellant called in aid a number of issues to argue that the unencumbered value may be proved by means other than direct, expert evidence on that point. It pointed to the provisions of DUT012 and noted that this is not a case in which the Commissioner had, or would usually, require evidence of value, there being a monetary consideration paid by parties who were acting at arm’s length. It was also argued that the fact of the payment itself was sufficient to give an indication of market value.

58 However, neither of those issues really aids the appellant. The fact is that the statutory onus to prove its case, and the questions arising out of the reduction of the purchase price, means that the learned Tribunal member was correct to find that there was no evidence of value such that she could find that the consideration paid was greater than the unencumbered market value of the property. Accordingly, no error is shown.

59 The appellant is accordingly left with a requirement to prove that the unencumbered value of the property is less than the consideration noted on the contract, and the rejection of the only direct evidence brought in support of the value contended for by it.

Consideration – should an adjournment have been offered the appellant?

60 The question here is whether, in the circumstances of the appellant having sought to put forward evidence of value, and that evidence being rejected, did natural justice require that an adjournment be offered to the appellant to put his evidence in proper form? The factors are finely balanced both in favour of, and against, that proposition.

61 Against whether the learned Tribunal member erred in not offering an adjournment is the well-established requirement that parties attempt to discharge their onus, or not, on their best case at first instance, and not treat the appellate process as a second go at getting their evidence right. In this, the appellant had been told that the Commissioner required a valuation to be satisfied that the value was less than the consideration, but decided, on a commercial basis, not to make that expenditure. It appears, therefore, that it was a deliberate decision not to bring the valuation evidence, rather than an oversight or a lack of understanding that a valuation may be required.

62 In favour of an adjournment are the relevant factors that the appellant was not legally represented, and was unaware of the intricacies of the Tribunal Practice Note dealing with expert evidence. The Commissioner had not sought, pursuant to s 305 of the Taxation Administration Act, to require the appellant to furnish a valuation. Nor was the appellant aware of the provisions of the Duties Ruling DUT012 which, while it indicates that the current situation may not be one where a valuation was required, would have put the appellant on notice that proof of value may require a valuer. There was no prejudice to the respondent except for one of cost which would put the respondent in a position of difficulty in dealing with the evidence. Valuation of a property in a retrospective manner, while not an easy exercise, is one which registered valuers undertake frequently and the evidence could have been obtained in a relatively short compass, with a further, short hearing to make the experts available for cross-examination.

63 As we have said, it is not an easy decision. The Appeal Panel however is of the view that this is a circumstance where an adjournment should have been offered, and the Member should have granted that adjournment had the appellant wished to take advantage of it. The requirement of reaching the “correct and preferable decision” should not be founded solely on the rejection of evidence against an unrepresented or legally unqualified party where an attempt has been made to obtain that evidence in a relatively informal way. In particular, where there would have been no real prejudice to the respondent in the Tribunal below, the adjournment should have been offered and the appellant given the opportunity to put on further evidence.

64 In so finding, it should be said that the learned Tribunal Member obviously took care to hear both sides and in determining that an adjournment should have been offered, it is noted that one was not sought. The hearing was otherwise conducted in a reasonable, impartial and fair manner.

65 In the circumstances, the proper order is to enable the party to have the remedy otherwise denied it. The Appeal Panel has the powers given to it in the ADT Act as follows:-

114 Appeals on questions of law
(1) If an appeal under this Part is restricted to questions of law, the Appeal Panel is to determine the appeal and may make such orders as it thinks appropriate in light of its decision.
(2) The orders that may be made by the Appeal Panel on any such appeal include, but are not limited to, any of the following:
(a) an order affirming or setting aside the decision of the Tribunal (as originally constituted),
(b) an order remitting the whole or any part of the case to be heard and decided again by the Tribunal (as originally or similarly constituted), either with or without the hearing of further evidence, in accordance with the directions of the Appeal Panel,
(c) an order made in substitution for an order made by the Tribunal.

Consideration - Extension to the merits

66 In addition to the grounds relied upon, the appellant also sought an extension of the appeal to the merits. The appellant indicated in its written submissions that a valuation was on the way and would be served when ready. In making a determination whether to grant leave to extend the hearing of the appeal to the merits, there is no need first to find that there has been an error of law – see Lloyd v Veterinary Surgeons Investigating Committee [2005] NSWCA 456.

67 The power to extend an appeal to the merits of the decision is found in s 113(2)(b) of the ADT Act. The principles upon which the Appeal Panel should act when deciding to extend an appeal to the merits is usefully and comprehensively set out in Building Professionals Board v Hans [2008] NSWADTAP 13 at [28] ff.

68 In Hans, the Appeal Panel sets out five factors relating to the granting of leave and the hearing of further evidence. These appear at paragraphs [53] to [57] and we set them out below. The factors here relevant (numbers 2, 4 and 5) are (the following quotes are abridgments of the paragraphs referred to above):-

2: if the Appeal Panel is to exercise its discretion in favour of the party applying for leave, it must be ‘affirmatively satisfied’ that, having regard to the findings of the Tribunal at first instance, the further evidence, if tendered at the hearing conducted by the Tribunal was ‘likely to have produced a different result’ – see CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67 at [149].
4: the stress, inconvenience, uncertainty and additional financial cost to the parties that would be occasioned by a grant of leave must be taken into account (see CDJ v VAJ at [149]).
5: unless the further evidence in respect of which leave is sought was deliberately withheld from the hearing conducted by the Tribunal, ‘the failure to call the evidence even it could have been discovered by the exercise of reasonable diligence may be of little significance’ (see CDJ v VAJ at [116]).

69 It seems to us that factor 2 would be satisfied in the circumstances of this case. The reason for rejection of the claim is that there was no evidence of the unencumbered value; if there were such evidence, it would be likely to produce a different result.

70 Factor 4 is a significant question. For the Appeal Panel to receive the evidence, a further hearing would be required and the Chief Commissioner would need both to be represented and to make submissions. There would be an impost on him as to costs and time.

71 There may be some argument as to whether the evidence was “deliberately withheld”, in accordance with factor 5, given the advice by the Chief Commissioner’s employee Ms Tacadena that a valuation should be obtained. The High Court in CDJ v. VAJ at [116] said:

“Where the evidence has been deliberately withheld, the failure to call it will ordinarily weigh heavily in the exercise of the discretion.”

72 On an extension to the merits, the Appeal Panel has the following powers:-

115 Appeals on the merits
(1) If an appeal under this Part extends to a review of the merits of an appealable decision, the Appeal Panel is to decide what the correct and preferable decision is having regard to the material then before it, including the following:
(a) any relevant factual material,
(b) any applicable written or unwritten law.
(2) The Appeal Panel may exercise all the functions that are conferred or imposed by or under any relevant enactment or this Act on the Tribunal at first instance to make the appealable decision concerned.
(3) In determining any such appeal, the Appeal Panel may decide:
(a) to affirm the decision, or
(b) to vary the decision, or
(c) to set aside the decision and make a decision in substitution for the decision it set aside.

73 When leave to extend to the merits is granted, the appeal should be conducted as a rehearing, not a hearing de novo – see Commissioner of Corrective Services v Aldridge (no 1) [2000] NSWADTAP 5 [94 – 98], which preliminary view (as to a rehearing) was confirmed in Commissioner of Corrective Services v Aldridge (no 2) [2002] NSWADTAP 6 at [20] and [[26].

74 Accordingly, where leave is granted to extend the appeal to the merits, the Appeal Panel should determine the matter on the basis of the evidence below, together with such documentary evidence which may be sought to be adduced by the parties. As the Appeal Panel said in Aldridge (no 1) at [98]:-

“Unless there are exceptional circumstances the appeal should be determined by considering the transcript, the documents admitted as exhibits, any additional factual material in documentary form, which we choose to take into account and the submissions by the parties or their legal representatives.”

75 It appears to the Appeal Panel that the better course, in the light of the remedies available to us, is to remit the matter to the learned Tribunal member for the purpose of hearing and determining the question of the value of the property. This has the benefit of having a short hearing, at the level of the Tribunal, on a question of fact where the witnesses may be called and cross-examined. This is a more satisfactory outcome than having the Appeal Panel hear a question of fact, most likely on the papers.

76 Accordingly, in our view, there is no need for an extension of the appeal to the merits given that the finding on the question of procedural fairness can result in a remission to the Tribunal below.

Costs

77 The parties sought leave to make submissions on costs. This matter should be reserved until after the final determination of the proceedings, at which time the matter may be listed for directions before Deputy President Needham SC at a time suitable to the parties.

78 We make the following orders:-

a)Appeal allowed;
b)List matter for directions on 6 November 2009 at 9.30am before Judicial Member Hirschhorn for directions for the future question of these proceedings.
c)Reserve questions of costs.