Western City Developments Pty Ltd v Chief Commissioner of State Revenue

[2008] NSWADT 293

CITATION:	Western City Developments Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 293
DIVISION:	Revenue Division
PARTIES:	APPLICANT Western City Developments Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086009
HEARING DATES:	29 July 2008
SUBMISSIONS CLOSED:	29 July 2008
DATE OF DECISION:	29 October 2008
BEFORE:	Hirschhorn M - Judicial Member
CATCHWORDS:	Dutiable value - consideration
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Duties Act 1997 Taxation Administration Act 1996
CASES CITED:	Spencer v The Commonwealth [1907] 5 CLR 429 Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496 McTackett v Chief Commissioner of State Revenue [2003] NSWADT 154 Ambiance (Arncliffe) Pty Limited v Chief Commissioner of State Revenue [2002] NSWADT 206 B&L Linings Pty Ltd & anor v Chief Commissioner of State Revenue [2006] NSWADTAP 32 B&L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187)
REPRESENTATION:	APPLICANT In Person RESPONDENT P Singleton, barrister
ORDERS:	The decision under review is affirmed.

1 Western City Developments Pty Ltd (“the Applicant”) seeks review of a decision of the Chief Commissioner of State Revenue (“the Respondent”) made on 18 December 2007 not to refund part of an amount of duty paid by the Applicant in relation to the purchase of real property at 20-26 Young Street West Gosford being: Lots A & B in Deposited Plan 361958, Lot 15 in Deposited Plan 651895 and Lot 16 in Deposited Plan 667778 (“the property”).

ISSUE

2 The issue in the case concerns what the correct “dutiable value” of the property was for the purposes of section 21 of the Duties Act 1997 (“the Act”) upon which duty should have been calculated.

3 The amount of duty paid by the Applicant to the Office of State Revenue was calculated on the basis that the dutiable value of the property was $3,400,000 which amount corresponded to the “price” shown on the front page of the contract of sale for the property as well as the “consideration” stated in the transfer document for the property.

4 The Applicant claims however that the dutiable value of the property was instead the amount of $2,420,000 as this was the amount of the “consideration” ultimately paid for the property at settlement. The Applicant says that a clause of the contract of sale, namely clause 53, allowed for a rebate of $800,000 off the purchase price (to be deducted from the purchase price at completion) if the Applicant settled on the completion date stated in the contract. As the Applicant settled the contract on the completion date, the Applicant claims that the consideration was reduced in accordance with clause 53 and the Applicant is therefore entitled to a refund of duty.

5 In addition, the Applicant claimed the purchase price was reduced by a further discount of $180,000 although no evidence was provided to the Tribunal about this matter (save for the settlement schedule) at the hearing.

FACTS

6 Mr Comer, a director of the Applicant, gave evidence by written statement and partly orally at the hearing and was not cross-examined. He explained that on or around August 2007 he was approached by a gentleman, Mr Phillip Harris, about the prospect of purchasing the property with a development approval to build 48 apartments and 4 commercial shops.

7 Mr Comer stated that Mr Harris said “the vendors were desperate to sell the property and it had been on the market for $3,400,000 but could be obtained for $2,420,000 for a quick sale”. Mr Comer said that he indicated to Mr Harris that he (Mr Comer) would not exchange contracts until finance had been approved which negated the need for the clause in the contract allowing the discounts. Mr Comer said that as the contract had already been drawn up at the time, it did not seem necessary to change the contract and the purchase price was always going to be $2,420,000.

8 Mr Comer said that the Vendor of the property was not known to Mr Comer or any of his associates prior to this particular transaction. I observed Mr Comer’s demeanour when he gave some evidence at the hearing and he impressed me as being a witness of truth.

9 The Applicant entered into a contract to acquire the property on 31 August 2007 (“the Contract”). The front page of the Contract showed a price for the property of $3,400,000. The completion date was stated to be 15 October 2007. The front page of the Contract also bore the imprint of the stamp of the Office of State Revenue dated 15 October 2007 and indicated that duty was in the amount of $172,490.

10 The Contract contained the following clause on page 7:

“53. The Vendor shall allow to the Purchaser on completion, if the Purchaser settles on the Completion Date as set out in this Contract, a rebate off the purchase price of $800,000.00, the same to be deducted from the purchase price at the time of settlement.

(a) The Vendor shall allow to the Purchaser on completion, if the Purchaser settles on the Completion Date as set out in this Contract, a rebate off the purchase price of $800,000.00, the same to be deducted from the purchase price at the time of settlement.

(b) The Vendor shall allow to the Purchaser on completion, if the Purchaser settles at the time and date and in accordance with any notice to complete issued by the vendor in accordance with this contract*, a rebate off the purchase price of $800,000, the same to be deducted from the purchase price at the time of settlement.

* or any extended period for settlement agreed to by the Vendor, (Note: the aforementioned words appearing in italics were a handwritten amendment to clause 53(b) of the contract)

(c) If the Purchaser does not effect settlement in accordance with clauses 53(a) or 53(b), then the Purchaser shall not be entitled to any rebate.

(d) If the Vendor issues a notice to complete and the vendor is solely responsible for a delay in completion, then the purchaser will be entitled to the rebate referred to in this clause if the Purchaser effects settlement pursuant to this Contract in accordance with and by the date set out in the notice to complete, such date only extended by the period of the Vendor’s delay”.

11 It should be noted that the Tribunal had in evidence before it, only the front page of the contract and page 7 that contained clause 53. Neither party sought to provide the remaining pages of the contract as evidence before the Tribunal and when I questioned the parties about this matter, the Applicant said that the remainder of the contract was not relevant to the matter before the Tribunal.

12 Mr Comer stated that he rang the Office of State Revenue (‘OSR”) on or around 10 October 2007 because stamp duty needed to be paid on the contract. Mr Comer said that he spoke to a female officer of the OSR and gave evidence of their conversation that was consistent with the description of the same conversation contained in the objection filed for the Applicant (the terms of which are repeated in paragraph 20 below).

13 Mr Comer says that he then called his solicitor, Mr Rod Harris and passed on the information he had received from the officer of the OSR and asked him to verify that information again with the OSR. Mr Comer stated that Mr Harris did this and confirmed to Mr Comer that he would attend to the refund request immediately after settlement. Mr Harris did not give evidence at the hearing.

14 The transfer document in respect of the property that was in evidence before the Tribunal was dated 15 October 2007 and stated that:

“The transferor acknowledges receipt of the consideration of $3,400,000.00 and as regards the land specified above transfers to the transferee an estate in fee simple”.

15 The transfer document bore the imprint of a stamp of the Office of State revenue and showed duty in the amount of $2. The transfer document was signed for the Applicant (as transferee) by his solicitor.

16 A settlement statement, in evidence before the Tribunal was dated 23 October 2007 and thus appears to have been prepared following completion on 15 October 2007. The settlement schedule showed the following information:

“Purchase Price	$3,400,000.00
Less deposit	$25,000.00
$3,375,000.00
Less discount	$800,000.00
$2,575,000.00
Less further discount	$180,000.00
Balance due	$2,395,000.00”

17 The settlement schedule then showed a number of “adjustments” for items such as rates and water. The ultimate balance after adjustments was stated as $2,401,695.96 (of which the Applicant’s bank provided $1,850,328.94 and the Applicant provided $551,367.02)

18 On 8 November 2007, the Applicant’s solicitor wrote a letter to the Respondent (attaching a copy of the settlement schedule) and stated the following:

“We wish to advise that we act for the Purchaser in the abovementioned matter. We paid stamp duty on behalf of our client amounting to $172,490.00 on the understanding that the consideration was $3,400,000.00. On settlement because of certain discount allowances the purchase price was reduced to $2,420,000.00. Our client has requested a refund of duty and to support our application we enclose a copy of our settlement statement together with the original Contract for sale bearing the imprint of the duty paid”.

19 On 20 November 2007, the Respondent responded to the Applicant by letter and disallowed any refund of duty on the basis that duty was to be assessed on the original purchase price expressed in the contract. The letter noted that the rebate under the special condition and the further rebate were not considered to be reductions in the purchase price but were merely offsets against the balance of the purchase price payable at settlement.

20 The Applicant then made an objection (undated) against the decision of the Respondent in its letter of 20 November 2007. In his objection, the Applicant made reference to his contact with the Office of State Revenue (“OSR”) on or about 9 October 2007 to enquire about the process for payment of stamp duty in relation to the contract for the purchase of the property. He also stated the following in his objection:

“…The contract of sale was initially worded with a purchase price of $3,400,000.00 as set out by the vendor who was in dire straits with his bankers.

The so–called discount of $980,000.00 was never intended to be a discount but purely as an inducement to settle on time. We would not have entered into the contract unless we were certain that settlement could take place within the required time frame

My enquiries to the Office of state revenue gave me two options:

(a) To rescind the contract and reissue a new contract with the purchase price of $2,420,000.00

(b) In accordance with the advice given by OSR that we could apply for a refund of stamp duty after settlement has taken place.

The lady officer I spoke to said “You must pay the stamp duty on the full amount of the contract prior to settlement because we will not know what the end purchase price is until after settlement”. She then went on to say, “that an application for a refund must be lodged by our solicitor with a copy of the settlement statement confirming the purchase price”.

This all made a lot of sense to us, and eliminated the necessity to rescind the contract and have new ones reissued. Based on that advice we followed those instructions to the letter. Subsequently our lawyer RB Harris confirmed the advice given independently with the O.S.R.”

21 The objection decision of the Respondent was dated 18 December 2007 and disallowed the objection in full.

22 Mr Comer rang the OSR about the objection decision on 22 January 2008. On 23 January 2008, the Respondent issued a further letter to the Applicant which stated, amongst other things:

“There is no provision in the legislation to allow the reassessment to proceed on the amount of $2,420,000.00. Irrespective of the reply given to your query, the legislation states that stamp duty is payable on the greater of either the consideration or value. In an arm’s length transaction the total “consideration” (purchase price expressed in the contract) will generally reflect the full value of all of the property and rights being dealt with. The rebate does not alter the value. The contract states that $3.4M is the amount agreed between a willing vendor and a willing purchaser at that time, otherwise the transaction is rescinded”.

23 On 4 February 2008, the Applicant lodged an application for the Tribunal to review the decision of the Respondent. The application was made within time.

24 Mr Comer sent a further letter to the OSR dated 29 February 2008. In that letter he enclosed copies of letters from Richardson & Wrench and LJ Hooker at Gosford, which he stated were “independent valuations” of the property. Mr Comer also sought to tender these documents in evidence at the hearing but on the objection of Counsel for the Respondent, the tender was disallowed. I provided oral reasons to the parties at the hearing for allowing the Respondent’s objection. A summary of my reasons are referred to briefly again in paragraph [63] below.

LEGISLATION

25 The Duties Act 1997 (“the Act”) charges duty, amongst other things, on a transfer of dutiable property (section 8(1)) or an agreement for the sale or transfer of dutiable property (section 8(1)(b)(i)). Such transfers or transactions are “dutiable transactions” for the purposes of the Act (section 8(2)).

26 Land in NSW is “dutiable property” pursuant to section 11(1)(a).

27 Where the dutiable transaction is “an agreement for the sale or transfer of dutiable property under section 8(1)(b)(i), then s.9 provides that duty is to be charged as if the dutiable transaction were a transfer of dutiable property. The table in section 9 specifies that:

i. The property sold or transferred is the property agreed to be sold or transferred

ii. The transferee is the purchaser or the transferee; and

iii. The transfer occurs when the agreement is entered into.

28 Duty is charged on the “dutiable value” of the dutiable property subject to the dutiable transaction at the relevant rate set out in Part 3 of the Act (section 19).

29 Where a transfer of dutiable property is effected by a written instrument, the liability for duty arises when the instrument is first executed (sections12(2)).

30 Sub-section 21(1) provides the meaning of the “dutiable value” of dutiable property, 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 The “consideration” for the transfer of dutiable property is taken to include the amount or value of all encumbrances, whether certain or contingent, subject to which the dutiable property is transferred (sections 22(1)).

32 The “unencumbered value” of dutiable property is the value of the property determined without regard to any encumbrance to which the property is subject (sections 23(1)).

33 Section 31 of the Act is a provision concerned with the effect of a change in consideration for the sale or transfer of dutiable property after the agreement has been entered into but before the property is transferred:

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.

34 Finally, in an application for review, like the present case, section 100(3) of the Taxation Administration Act 1996 (“TAA”) provides that the applicant has the onus of proving the applicant’s case.

THE APPLICANT’S SUBMISSIONS

35 Mr Comer filed written submissions and made oral submissions on behalf of the Applicant at the hearing. In addition to the matters raised in the objection and his correspondence with the OSR, in summary, Mr Comer submitted that:

a. The monetary consideration for the purchase of the property was clearly $2,420,000 as evidenced by the settlement schedule. The consideration changed from the time of the contract to the time of settlement.

b. The price in the contract of $3,400,000 was never intended to be fulfilled at any stage. The Applicant had its finance arranged before the contracts were exchanged. The contract was an older contract issued by the Vendors when they anticipated potential purchasers.

c. The Applicant contacted the OSR prior to completion and was given the option of (1) either paying the full amount of stamp duty on the contract price and claiming a refund after settlement or (2) rescind the contract and issue a new contract. Mr Comer says the option (1) was followed on the basis of advice he received from the OSR.

d. The Applicant had been invited at one point by an officer of the OSR to provide a valuation of the property from a registered valuer but Mr Comer said that he thought the cost was in the vicinity of $16,000. Accordingly Mr Comer had sought to obtain the letters from Richardson & Wrench and LJ Hooker (the tender of which was ultimately disallowed at the hearing).

e. For the purposes of capital gains tax, the cost base of the property would only be what the Applicant paid for the property ($2,420,000) and not $3,400,000 when calculating the gain on any future sale of the property.

THE RESPONDENT’S SUBMISSIONS

36 The Respondent filed written submissions and made oral submissions at the hearing. In summary, the Respondent submitted that:

a. To succeed on the application the Applicant needed to satisfy both limbs of section 21(1) of the Act by establishing the consideration paid for the dutiable property was $2,420,000 not $3,400,000 and that the unencumbered value was less than $2,420,000.

b. The term consideration referred to that which each party promised to give to the other party (in exchange for the consideration received from the other party). The contract of sale specified the sale price was $3,400,000 and the deposit ($340,000) was 10% of this amount. The registered transfer stated the purchase price was $3,400,000 and the settlement schedule also referred to a purchase price of $3,400,000.

c. It is plain that the dutiable value was not the amount paid at settlement by a purchaser to a vendor. In many real property sales, the amount paid to the vendor was below the sale price in situations where a mortgage was being discharged (i.e. the mortgagee receives the payment) or where there were adjustments for council and water rates.

d. The “true nature” of the discounts was explained by Mr Comer in the objection letter to the effect that “the so-called discount of $980,000 was never intended to be a discount but purely as an inducement to settle on time”. The amounts of $800,000 and $180,000 were not alterations of the sale price but were the consideration paid to the Applicant by the Vendor for a collateral matter – prompt settlement of the contract.

e. The Applicant failed under section 21(1)(b) because he adduced no evidence upon which the Tribunal could conclude that unencumbered value was less than $3,400,000 or less than $2,420,000.

f. The call centre operator to whom Mr Comer spoke was not identified but in any case the law must be applied and could not be affected by anything a call centre operator said or may have said.

The conversation between Mr Comer and the OSR call-centre

37 I deal firstly with the evidence and submissions of the Applicant regarding conversations between Mr Comer and an unknown operator at the OSR call-centre on or around 10 October 2007 as this matter was prominent in both the Applicant’s written and oral submissions.

38 The essence of Mr Comer’s submission was that he had called the OSR call centre on or about 10 October 2007 and had informed an operator that the price on the contract of $3,400,000 was not really the price as it would be reduced to $2,420,000 on settlement. He says that the operator informed him that:

The Applicant had to pay duty on the full contract price of $3,400,000 as the OSR would not know the consideration until settlement.

He had two options being (1) apply for a refund once settlement had occurred (the OSR would need evidence in the form of the settlement schedule) or (2) rescind the contract entirely and enter into a new contract with the price of $2, 420,000.

39 Mr Comer says that he did not write down the name of the operator. He says that based on the operator’s advice, he chose option 1 and thus proceeded to apply for a refund of duty after settlement. Mr Comer also says that his solicitor, Mr Harris, called the OSR and received the same advice.

40 The Respondent said that it could not meet Mr Comer’s evidence about this matter because he did not identify the call centre operator’s name. The Respondent indicated that the call-centre staff seek to assist callers but do not provide legal advice. In any case, the Respondent said that the question of dutiable value must be answered by applying the statute to the facts of the property sale and the result of this exercise could not be affected by anything said by a call-centre operator.

41 Even though I do find that Mr Comer rang the OSR on or about 10 October 2007 and received advice as to two options available to him as he has described, ultimately, I agree with the Respondent’s submission that statements by a call-centre operator cannot displace the proper application of the Act. There are numerous authorities cited and discussed in McTackett v Chief Commissioner of State Revenue [2003] NSWADT 154 at [15] – [16] that have established that the doctrine of “estoppel” cannot be invoked by a taxpayer so as to prevent the Chief Commissioner of State Revenue (or for that matter, the Commissioner of Taxation of the Commonwealth) assessing tax pursuant to the statutory duty to do so.

42 In Ambiance (Arncliffe) Pty Limited v Chief Commissioner of State Revenue [2002] NSWADT 206, Judicial Member Block referred to evidence regarding advice provided by an assessor with the Stamp Duty Information Line and stated at paragraph 32-33:

“32. It may be thought that it is odd that a solicitor asked to give advice on a legal matter, should do so on the strength of a conversation with an unknown assessor who was, having regard to manner in which the conversation evolved, probably junior. There is of course nothing wrong with seeking advice from the Respondent's staff but in such event the solicitor would surely ensure that he was dealing with someone senior (and qualified) and who was known to him, and would in any event have checked that advice for its accuracy.

33. It is my view in the first instance that any claim founded on an estoppel because of the conversation in May 2001 must fail because that conversation could not have been relied upon by the Applicant.”

43 The present case must be decided on the correct application of the Act to the facts as found. This cannot be affected by anything that a call-centre operator said or omitted to say to Mr Comer on 10 October 2007 and/or afterwards to his solicitor, Mr Harris, notwithstanding that the Applicant may have relied on the same. Even though Mr Comer says that he did not ask for legal advice and only sought clarification about procedure, the matter that he was asking about did ultimately involve the question being decided in this case about the correct dutiable value of the property under the Act.

The consideration for duty purposes

44 Neither party referred in their submissions to any authorities in support of their submissions regarding the operation of the provisions of the Act. At the hearing, I raised this matter with Counsel for the Respondent but I was not provided with references to any authorities. I observed that the case of Spencer v The Commonwealth [1907] 5 CLR 429 had been cited in the objection decision but I was informed that the Respondent did not rely on this decision. Clearly some authorities do exist in relation to the relevant provisions of the Act and must therefore be taken into account in the interpretation of the same.

45 The meaning of “consideration” for the purposes of section 21 of the Act was considered by the High Court in Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496 at 517. The majority in that case noted at 517 that consistently with decisions relating to earlier stamp duty legislation of NSW:

“…consideration in section 21 of the Act is not to be read as requiring identification of the consideration sufficient to support a contract. So much follows inevitably from the recognition of the fact that section 21(1)(a) (and the expression “the consideration…for the dutiable transaction”) will find application in cases in which a transfer of dutiable property is not made pursuant to contract. So, as Dixon J pointed out in Archibald Howie((1948) 77 CLR 143 at 152):

“the word consideration” should receive the wider meaning or operation that belongs to it in conveyancing rather than the more precise meaning of the law of simple contracts”.
That is, as his Honour went on to say (36), “the consideration is rather the money or value passing which moves the conveyance or transfer”.

46 The majority stated also at 518 (in respect of the facts of that case):

“The criterion in the Act of consideration “for” the transaction, being the Agreement for the sale and transfer of the Shares to the Purchaser, upon whom section 13 imposes the liability to pay the duty, looks to what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement”. (underlining added)

47 In the present case, the “transaction” was the entry into the contract for the sale of the property (section 8 (1)(b)(i)) and duty is charged as if the dutiable transaction were a transfer of dutiable property (section 9) The transfer is deemed to have occurred when the agreement is entered into and a liability for duty arises at that time (section 12 (1)). However the transaction is to be assessed on the footing that the contract was performed according to its terms (Dick Smith, supra at 516).

48 At the time the contract for the property was entered into, I am of the view that the consideration was $3,400,000 and the Respondent was correct to treat this amount as the dutiable value of the dutiable transaction at that time. Any “rebate off the purchase price of $800,000” under clause 53 was contingent on settlement of the contract by the Purchaser on the agreed completion date.

49 However I have considered whether section 31 of the Act applied in the present case i.e. if after the contract was entered into and before the property was transferred, the consideration under the agreement was reduced (and the reduced consideration was not less than the unencumbered value of the dutiable property when the consideration was reduced). If this is the case, section 31 imposes an obligation on the Chief Commissioner to reassess the liability to duty of the agreement in accordance with the change in the consideration.

50 During the hearing of the matter, I was briefly referred to section 31 by Counsel for the Respondent for “reasons of propriety”. Counsel stated that the Respondent did not rely on the section and did not consider that “consideration” was reduced in the present case.

51 As to whether the consideration was reduced prior to the property being transferred, it is necessary to consider what what was received by the Vendor so as to move the transfer of the property to the Applicant. There are two ways of looking at this in terms of the present case:

a. The first is the approach of the Respondent, that is, the consideration for the transfer by the Vendors remained the “purchase price” in the contract of $3,400,000 and there was a separate allowance of $800,000 made by the Vendor to the Applicant in respect of a collateral matter which just happened to be offset (in a mechanical sense) against the purchase price in the same manner as other adjustments for water rates etc. In other words, clause 53 represented a separate bargain between the parties in relation to the timely completion of the contract. In exchange for timely performance of the contract by the Applicant, the Vendor gave a benefit to the Applicant of $800,000 that was satisfied by an offset against the purchase price.

b. Alternatively, the view could be taken that the contract and its terms and conditions were one overall “transaction”. Notwithstanding that the contract initially provided a purchase price of $3,400,000, the fulfilment of one of the conditions of the contract by the Applicant (being settlement on the completion date) caused the purchase price to be reduced in the amount of $800,000. It is noteworthy that clause 53 referred to a “rebate off the purchase price of $800,000, the same to be deducted from the purchase price at the time of settlement”. It was not only a “rebate” that was to be mechanically dealt with by offsetting it against the purchase price, as the Respondent submitted, but rather from the language in the contract appears to have been intended to be a rebate off (i.e. reduction to) the actual purchase price that was then to be deducted from the purchase price at the time of settlement.

52 The transfer document itself seems to support the first approach on the basis that it recorded the consideration as $3,400,000. As stated above, it is dated 15 October 2007 and was prepared by the Applicant’s solicitor. On the other hand, the same solicitor appears to have written to the OSR on 8 November 2007 and stated that “on settlement because of certain discount allowances the purchase price was reduced to $2,420,000” and requested a refund of part of the duty paid.

53 The settlement schedule (albeit prepared for the Applicant) seems to indicate that what was received by the Vendors was a purchase price of $3,400,000 less:

a. a “discount” of $800,000 (which, it was common ground between the parties, related to the operation of clause 53 of the contract );

b. a further “discount” of ($180,000) (which was not explained by the Applicant at the hearing); and

c. “adjustments”.

54 The adjustments that appear on the settlement schedule for water consumption and rates were of the type commonly found in contracts for the sale of property and, for present purposes, can be contrasted with the discount of $800,000 under clause 53 which was explicitly expressed in the contract to be a “rebate off the purchase price”.

55 Clause 53 also stated that the “rebate off the purchase price of $800,000” was to be deducted from the purchase price at settlement. Accordingly I do not consider it unusual that the settlement schedule still referred to a “purchase price” of $3,400,000 and then showed the relevant reduction.

56 Having regard to the three pieces of evidence referred to above being, the transfer document, the letter from the Applicant’s solicitor dated 8 November 2007 and the settlement schedule together with clause 53 of the contract, I have concluded that the transfer document was in error in recording the amount of the “consideration” for the transfer as $3,400,000.

57 It seems to me that having regard to the explicit language of clause 53 and the approach of the majority in the Dick Smith decision referred to above, the amount of $800,000 represented a reduction in the consideration for the property. The amount that the Vendor ultimately received that moved the transfer of the property to the Applicant was $3,400,000 less $800,000 being $2,600,000.

58 Accordingly, I am of the opinion that the consideration for the transfer of the dutiable property (for the purposes of section 21 (1)(a) and section 31) in this case was reduced immediately before the transfer in the amount of $800,000 from $3,400,000 to $2,600,000.

59 There was no explanation provided by the Applicant at the hearing as to the reason for a “further discount” of $180,000 from the purchase price that appeared in the settlement schedule. The amount of $180,000 does not appear anywhere in clause 53. As already stated, the Tribunal was not provided with a complete copy of the contract. It may be that the “discount” of $180,000 was a type of allowance that was simply to be mechanically deducted from the purchase price at settlement as opposed to an actual “rebate off the purchase price” (as was the case with clause 53). Accordingly I am not satisfied that the Applicant has discharged its onus of proof in this application pursuant to section 100 (3) of the TAA that the consideration was reduced by the further amount of $180,000.

The unencumbered value for duty purposes

60 A finding that consideration has been reduced prior to the transfer however is not the end of the matter. As set out above, section 21 of the Act provides that the dutiable value of dutiable property is the greater of (a) consideration and (b) the unencumbered value of the dutiable property. Furthermore, section 31 only requires the Respondent to reassess duty where the consideration is reduced to not less than the unencumbered value of the property at the time the consideration is reduced.

61 The Applicant in the present case did not provide evidence of the unencumbered value of the property for the purposes of section 21 (1)(b) either at the time the contract for sale was entered into (for the purposes of section 9 & section 12) or immediately prior to the transfer time (for the purposes of section 31). As stated previously, the Applicant did attempt to tender two one-page letters from real estate agents purportedly providing “independent valuations” of the property. The Respondent objected to both of these documents being accepted into evidence and I upheld that objection and provided oral reasons to the parties at the hearing.

62 In summary, the objection taken by the Respondent was that the two letters did not comply with the procedures laid down by the Chief Judge of the Tribunal in Practice Note 14 in relation to expert witnesses and expert reports applicable to all divisions of the Tribunal. There was no indication that the witnesses had understood their duty was to the Tribunal and not the Applicant. Further the witnesses had not provided an outline of their qualifications as an expert. Finally the Respondent submitted that, in any event, the letters contained market appraisals of the property as opposed to an expert opinion as to the unencumbered value of the property for the purposes of section 21 (1)(b) of the Act.

63 In upholding the objection I noted that the Tribunal was not bound by the rules of evidence but was bound by its own procedures including those that have been stated in respect of expert witnesses and expert reports. It is important where an opinion is to be given in relation to valuation, that the qualifications of the witness are stated, the instructions given to the witness are clearly identified and that the witness understands that his/her paramount duty is to the Tribunal and not the person engaging the expert in accordance with Practice Note 14. I also agreed with the Respondent that neither letter on its face provided an opinion of the unencumbered value of the property for the purposes of section 21 (1)(b) of the Act.

64 The difficulty for the Applicant in the present case is that in the absence of evidence as to the unencumbered value of the property at the time of the reduction of the consideration (i.e. immediately before the transfer), there is no basis upon which I could determine that “the consideration was not less than the unencumbered value of the dutiable property when the consideration was reduced” for the purposes of section 31 and thereby require the Chief Commissioner to reassess the relevant duty.

65 Section 100(3) of the TAA is clear that the onus lies on the Applicant to prove its case in an application for review (refer also B&L Linings Pty Ltd & anor v Chief Commissioner of State Revenue [2006] NSWADTAP 32 at paragraph [15]-[18] – not disturbed on appeal in B&L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187).

66 I agree with the Respondent that it was necessary in this case for the Applicant to not only show that consideration had been reduced but to also provide evidence as to the unencumbered value of the property at the time the consideration was reduced for the purposes of section 21 (1)(b) and also section 31. The decision of the Respondent therefore stands as the Applicant has not properly discharged its onus of proof.

67 I have taken into account the statement of the Chief Commissioner in Revenue Ruling DUT 12 at paragraph 5:

‘Where there is 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 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”.

68 Although I accept Mr Comer’s statement that the parties to this transaction were unrelated, the actual nature of the “rebate off the purchase price” in this particular case that was contingent on prompt settlement of the contract by the Applicant and Mr Comer’s own evidence that the Vendor was in “dire financial straits with his bankers”, “was desperate to sell the property” and wanted a “quick sale” does in my opinion at least indicate a possibility that the consideration may have been less than the unencumbered value of the property. In the Duties Legislation loose-leaf service (Lawbook Company 2007), the late Hill J stated at paragraph [3.1590]:

“It has been held that the test for ascertaining the value of property for revenue purposes is the same as that which determines value in the assessment of compensation upon a compulsory purchase. See Abrahams v FCT (1944) 70 CLR 23. The test as expressed by the Courts is “the price which a willing but not anxious vendor could reasonably expect to obtain and a hypothetical willing but not too anxious purchaser could reasonably expect to have to pay for the shares if the vendor and purchaser had got together and agreed on a price in a friendly negotiation”. (underlining added)

69 There is no provision in the Act that compels the Respondent to obtain a valuation of the property in the present circumstances. He is empowered to do so by section 305 of the Act where he is not satisfied with the value declared by a competent valuer provided by a person liable to the duty (where the Respondent has required such a person to provide such a declaration) and may pass on the relevant cost to the purchaser.

70 In the context of the present application for review of the decision of the Respondent, it was incumbent upon the Applicant to prove its case, which included providing evidence to the Tribunal as to the unencumbered value of the property.

ORDER

The decision of the Chief Commissioner is affirmed.