WHYTE and COMMISSIONER OF STATE REVENUE
[2011] WASAT 122
•9 AUGUST 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: TAXATION ADMINISTRATION ACT 2003 (WA)
CITATION: WHYTE and COMMISSIONER OF STATE REVENUE [2011] WASAT 122
MEMBER: JUSTICE J A CHANEY (PRESIDENT)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 9 AUGUST 2011
FILE NO/S: CC 1598 of 2010
BETWEEN: PETER WHYTE
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Duty - First home owners concession - Recipient of grant obtained transfer of property through nomination by purchaser - Whether concession applies to contract of sale - Whether novation of contract - Definition of transferee
Legislation:
Duties Act 2008 (WA), s 3, s 10, s 11(1), s 11(1)(a), s 11(1)(b), s 20, s 42(2), s 43. s 141, s 142(1), s 142(1)(b), s 143, s 143(1), s 147, Pt 6, Div 3, Sch 1
First Home Owner Grant Act 2000 (WA)
Result:
Decision under review affirmed
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Mr Peter J Whyte
Respondent: N/A
Solicitors:
Applicant: N/A
Respondent: State Solicitor's Office
Case(s) referred to in decision(s):
Harry v Fidelity Nominees Pty Ltd [1985] 41 SASR 458
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The Tribunal was called upon to determine whether the first home owner grant concessions under the Duties Act 2008 (WA) were available in relation to a contract for the purchase of land. The contact was made by the applicant's sister, as purchaser, with the intention of ultimately passing the benefit of the contract onto the applicant. The sister duly nominated the applicant as purchaser. Duty was paid on the contract of sale. The applicant then sought a refund of the duty following her obtaining a First Home Owners Grant.
The Tribunal considered the relevant provisions of the Duties Act 2008 (WA) and the unusual circumstances of the case. It concluded that, notwithstanding the nomination of the applicant by her sister to obtain a transfer of the land under the contract of sale, the sister remained the 'transferee' for the purposes of the contract of sale and duty was properly charged in relation to that transaction. Accordingly, the application was dismissed.
The issue for determination
Section 143 of the Duties Act 2008 (WA) (Duties Act) provides for a concessional rate of duty to be charged in respect of certain transactions involving transfers to a person paid, or entitled to be paid, a first home owner grant pursuant to the First Home Owner Grant Act 2000 (WA) (FHOG Act).
The applicant is the owner of a property in which she now lives in Kalannie. She was paid a first home owner grant in relation to her purchase of that property. She became the registered proprietor of the property by reason of her nomination by her sister as a substitute purchaser under a contract of offer and acceptance under which the sister contracted to purchase the land from the vendor.
The question for determination in these proceedings is whether the duty paid on the offer and acceptance should be refunded by reason of an entitlement of the applicant to the first home owner concessions in relation to duty.
The facts
In 2009, the Trustee and bankruptcy of the estate of one of the proprietors of a property approximately 2 kilometres south of Kalannie (the property) placed the property on the market by way of 'Dutch Auction' meaning that persons interested in bidding had the right to place only one bid in writing. The applicant, Ms Whyte, was interested in purchasing the property. Her father, a solicitor, Mr Peter Whyte had previously had contact with the Trustee in relation to his daughter's interest in purchasing the property.
Ms Whyte duly put in a bid for $76,000, believing that no one else would be interested in the subject property which had been vacant for some length of time.
The applicant's sister, Ms Katherine Kinley knew that her sister was very anxious to obtain the property. She was concerned that there may be another interested purchaser. Because Ms Whyte was unable to put in a second bid, Ms Kinley made an offer of $83,000 for the property. It was always Ms Kinley's intention that, were she successful in obtaining the property, she would pass the benefit of the contract on to her sister. Acting on the advice of her father, Mr Whyte, she inserted the words 'or nominee' after her name on her bid, which was made by way of a standard offer and acceptance form. Mr Whyte advised Ms Kinley not to name Ms Whyte as the nominee in the offer and acceptance 'as the Trustee could consider it a 'de facto' second bid' by Ms Whyte.
Ms Kinley was then told that another bidder had lodged an offer for precisely the same amount as hers, and she was invited to submit a second offer. Ms Whyte's offer, being for a lesser amount, was obviously therefore unsuccessful.
Ms Kinley made a second offer by way of a fresh offer and acceptance form. She nominated a purchase price of $101,195. Again the name of the buyer was shown as 'Katherine Kinley (or nominee)'. In submitting the second offer and acceptance, Ms Kinley's intention remained that she would pass the benefit of the contract on to her sister and nominate her as the purchaser for the purposes of settlement. That offer was ultimately accepted on 15 October 2009.
A settlement agent was nominated on the offer and acceptance by the purchaser to act on the purchase. The letter of instructions, apparently sent by Mr Whyte to the settlement agent, advised that the purchaser was Ms Kinley, and that her nominee is Sarah Patricia Whyte.
Subsequently, the settlement agent advised Ms Whyte that the preferred method of 'assigning ' or 'novating' a contract for the sale of land when the nominee was a sibling of the original purchaser was to complete a form known as a 'Transfer to substitute a purchaser' (substituted purchaser form). The substituted purchaser form was completed by Ms Whyte on 6 November 2009. The substituted purchaser form is used for the purposes of making application for the relief from duty under s 42(2) of the Duties Act, the substance of which will be outlined below.
Ms Whyte then submitted an application for assessment at the residential rate to the respondent, and that form was presented for assessment of duty along with the substituted purchaser form and the offer and acceptance.
On the same day, duty was assessed on the offer and acceptance at $1,552.65 on the basis of the residential concessional rate under s 147 of the Duties Act. The duty was promptly paid.
On 19 November 2009, a transfer of land form, which showed Ms Whyte as the transferee, was presented for assessment of duty along with the offer and acceptance form and the substituted purchaser form. The transfer of land form was assessed for duty at nil, the Commissioner having regard to the substituted purchaser form and the provisions of s 42(2) and s 43 of the Duties Act.
The transfer of land form was duly registered on 20 November 2009, and the applicant thereupon became the registered proprietor of the property.
On 30 November 2009, Ms Whyte submitted a first home owner grant application in relation to her purchase of the property. That application was initially rejected, but after objection by Ms Whyte through Mr Whyte, the respondent ultimately accepted the eligibility of Ms Whyte for a first home owner grant and she received a grant of $10,500.
On 15 April 2010, Ms Whyte applied to the respondent for a reassessment of the duty paid in relation to the offer and acceptance form on the basis that the first home owner concessional rate under s 143 of the Duties Act was applicable.
On 1 June 2010, the respondent disallowed the request for a refund on the basis that 'the first home owner approved applicant has to be the transferee on the dutiable document' and reference was made to s 141 to s 146 of the Duties Act.
On 24 June 2010, Mr Whyte wrote on behalf of Ms Whyte to the respondent objecting to the decision of 1 June 2010. That objection was disallowed by the respondent on 30 July 2010, and Ms Whyte then applied to the Tribunal for a review of the decision to disallow the objection.
The relevant statutory provisions
Section 10 of the Duties Act provides that duty is imposed on dutiable transactions. Dutiable transactions are defined by s 11(1) relevantly to include any of a number of transactions including:
a)a transfer of dutiable property;
b)an agreement for the transfer of dutiable property, whether conditional or not.
The property is dutiable property for the purposes of the Duties Act.
The person liable to pay transfer duty is, in the case of a transfer (being relevantly for present purposes the transfer of land form) is the 'transferee'. In relation to an agreement for transfer (relevantly in this case the offer and acceptance) the person liable to pay for transfer duty is the 'purchaser or transferee' - Duties Act s 20 and Sch 1.
Part 6 of Chapter 2 of the Duties Act provides for certain exemptions or concessional rates of duty. Division 3 of Pt 6 of Chapter 2 deals with first home owner concessions. It provides for certain duty concessions where the transferee of a property is entitled to or receives a grant under the FHOG Act. The transactions to which concessions may be applicable are referred to as FHOG concessional transactions. Relevantly, s 142(1) of the Duties Act defines a FHOG concessional transaction as follows:
(1)A reference in this Division to a FHOG concessional transaction is to a transfer of, or an agreement for the transfer of, dutiable property where -
(a)the transferee or, if there are more than one, each transferee -
(i)is paid a first home owner grant in relation to the property or becomes a person to whom a first home owner grant is or will be payable, in relation to the property; or
(ii)becomes a person to whom a first home owner grant would be, or would have been, payable in relation to the property if consideration had been given for the transfer of the property;
and
(b)the unencumbered value of the land, or the land and home, the subject of the eligible transaction to which the first home owner grant relates, does not exceed -
(i)if there is no home on the land - $400 000; or
(ii)otherwise - $600 000.
Section 143(1) provides that duty is chargeable on a FHOG concessional transaction at the applicable concessional rate of duty. In this case, the applicable concessional rate of duty, if it is to be applied, would be nil.
Section 141 of the Duties Act defines transferee for the purposes of s 142 as follows:
transferee, in respect of a transaction, means a person to whom the property the subject of the transaction -
(a)is transferred; or
(b)is agreed to be transferred,
other than -
(c)a person who, under the FHOG Act, would not be required to join in making an application for a first home owner grant; or
(d)a prescribed person.
Section 3 of the Duties Act defines 'transaction' to 'include an event'.
Section 42(2) of the Duties Act provides:
Duty is not chargeable on the transfer of dutiable property to a transferee under an agreement for the transfer of dutiable property if -
(a)when liability for duty on the agreement arises, the transferee and the purchaser of the property under the agreement are related as referred to in section 43; and
(b)the agreement is duty endorsed.
Section 43 describes the relationships that attract the benefit conferred by s 42(2), and includes, relevantly for present purposes, siblings.
Agency
In the applicant's initial written submissions, the applicant submitted that Ms Kinley was at all times acting as an agent for Ms Whyte. That submission appears to have been based upon reliance on s 42(4) of the Duties Act which provides that duty is not chargeable on a subsequent transfer of property to the principal of an agent, where the agent had entered into the relevant agreement. That contention was subsequently abandoned in the applicant's submissions in response to the submissions of the Commissioner. It is not, therefore, necessary to deal with the detailed submissions made by the Commissioner in relation to the law of agency and its application to the present case.
The effect of the substituted purchaser form
The applicant described 'the essential issue' as being 'the timing and effect' of the application embodied in the substituted purchaser form. The submission continued:
It is the applicant's contention that [a substituted purchaser form], once completed by eligible parties (as in this matter), is effective in transferring the right title and interest in the underlying contract (in this matter, the offer and acceptance dated 15 October 2009) from the purchaser named in the contract to the substituted person named in the [substituted purchaser form]. In the instant matter, from Katherine Kinley to Sarah Whyte, the Applicant. From that time onwards the original purchaser has no further interest in the contract being replaced and substituted by the substituted purchaser.
It therefore, of necessity follows that all benefits and burdens of the contract fall on the substituted purchaser.
The substance of that submission is essentially that the substituted purchaser form constitutes a novation of the contract. I do not accept that submission.
The substituted purchaser form is designed to provide information to the respondent relevant to the application of s 42 and s 43 of the Duties Act. It does not in its terms, nor in my view in its effect, create any contractual rights or obligations between the parties named as purchaser and substitute purchaser.
A similar question arose in Harry v Fidelity Nominees Pty Ltd [1985] 41 SASR 458 (Harry v Fidelity Nominees) where the execution of a memorandum of transfer by a nominated third person was found by the trial judge to constitute a novation of the original contract of sale. On appeal King CJ noted that novation would involve a new contract between the parties nominated in the original contract of sale and the nominee, having the effect of rescinding the original contract and bringing into existence in its place a new contract between the original vendor and the nominee. While noting that novation may arise from the conduct of the parties, King CJ said at 461:
The mere execution of a transfer to a nominated third person is, however, a far from adequate foundation for a conclusion that there has been a novation. Transfer by direction to a nominated third party is a common feature of a transaction of sale and purchase and of itself is no foundation for a finding of novation. That is even clearer where, as here, the transfer to the nominee is contemplated by the inclusion of the contract of the words 'and or nominee'.
The force of that conclusion is greater when the reasoning is applied to the question of whether the execution of the substituted purchaser form has the effect of novating the agreement. Unlike the memorandum of transfer in Harry v Fidelity Nominees, the vendor is not a party to the substituted purchaser form. It would be extraordinary if the execution of a form by one party to the contract and a third party could unilaterally affect the rights and obligations of the other party to the contract without any consent, or even knowledge, of that other party.
The execution of the substituted purchaser form does not, by itself, alter the contractual rights and liabilities arising under the offer and acceptance.
The use of the expression 'or nominee'
The effect of the inclusion to a reference to a nominee in the description of the purchaser was also discussed by King CJ in Harry v Fidelity Nominees. His Honour said at 460:
The notion of a vendor binding himself to accept an unknown nominee in place of the named purchaser as the party to whom he must look exclusively for the performance of the contract is unusual. It is not a transaction into which one would expect a sensible vendor to enter. Indeed it is by no means clear that such a provision could be made legally effective. The substitution could only occur if the nominee subsequently agreed for fresh consideration or under seal, to perform the respondent's obligations under the contract. For the respondent to be released not by reason of a subsequent novation agreement but by the effect of the words 'and or nominee' in the original agreement, a great deal would have to be implied into those words. I would be most unwilling to construe a contract as containing a provision of such unusual character and dubious validity unless the language of the contract was quite clear.
I think that adequate effect is given to the expression 'and or nominee' if it is construed simply as expressing the ordinary right to require that the property be transferred to a nominee.
I respectfully adopt those observations for the purposes of this case. There is no basis for concluding that the Trustee in bankruptcy as vendor at any point relieved Ms Kinley from her contractual obligations and accepted Ms Whyte as bound to perform the obligations of purchaser under the contract. The presence of the words 'or nominee' on the offer and acceptance do not justify any different conclusion.
Is Ms Whyte the 'transferee' under the offer and acceptance
I have set out above the definition of transferee under s 141 of the Duties Act. Transferee is defined 'in respect of a transaction' as meaning the person to whom the relevant property is transferred or is agreed to be transferred. It is common ground that the process of acquisition of the property by Ms Whyte involved two 'transactions' for the purposes of the Duties Act. The first was a dutiable transaction as defined by s 11(1)(b) namely 'an agreement for the transfer of dutiable property, whether conditional or not'. The second is the transfer of land form which constitutes a dutiable transaction under s 11(1)(a), namely a transfer of dutiable property.
The alternative descriptions of a transferee in respect of a transaction for the purposes of s 141 no doubt recognise the different character and effect of dutiable transactions as defined in s 11(1)(a) and s 11(1)(b). Thus, in relation to a dutiable transaction which is a transfer of dutiable property, the transferee is the person to whom the property is transferred. In the case of a dutiable transaction being an agreement for the transfer of dutiable property, the transferee is the person to whom the property is agreed to be transferred.
Duty the subject of objection in this case was charged on the offer and acceptance. I agree with the Commissioner's submission that, in relation to that transaction, the person to whom the property was agreed to be transferred is Ms Kinley.
Ms Kinley at all times remained a party to that contract albeit that she directed that the transfer be made to her sister. Ms Kinley was not paid a first home owner's grant and would not have been entitled to be paid a grant. She was therefore, not entitled to the concession provided for in s 142 (1)(a) of the Duties Act. Duty was therefore appropriately raised at the residential concessional rate under s 147 of the Duties Act.
It follows that the application for review of the assessment of duty on that basis should be dismissed.
The applicant's other arguments
Mr Whyte, on behalf of the applicant, drew attention in the submissions filed to some apparent uncertainty on the part of assessors within the Office of State Revenue as to the correct approach to the assessment of duty in the particular circumstances of this case. It does appear that there was some confusion as to the proper treatment of the question of duty on the offer and acceptance. Given the unusual circumstances in which the offer by Ms Kinley was made and accepted, some level of uncertainty among those assessing duty is perhaps unsurprising. Those circumstances provide no assistance to the approach to be taken to the proper construction of the Duties Act, and no weight can be given to the submissions on that point.
Orders
1.The decision of the respondent made on 30 July 2010 to disallow the applicant's objection is affirmed.
2.The application for review is dismissed.
I certify that this and the preceding [44] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE J A CHANEY, PRESIDENT
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