YI JUN ZHANGApplicantAND:COMMISSIONER FOR ACT REVENUERespondent

[2017] ACAT 78

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

ZHANG v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2017] ACAT 78

AT 18/2017, AT 19/2017

Catchwords:             ADMINISTRATIVE REVIEW – eligibility for first home owner grant – whether consideration for purchase – sale between family members – agreement for loan for full purchase price from seller to buyer – whether loan agreement contemporaneous with the sale – whether transaction enforceable – whether intent to create legal relations – whether transactions are interdependent – whether a sham transaction

Legislation cited:      ACT Civil and Administrative Tribunal Act 2008 s 48

First Home Owners Grant Act 2000 ss 7, 13, 18, 26

Cases cited:BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65
Jones v Padavatton [1969] 2 All ER 616
Popiw v Popiw [1959] VR 197
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133
Briginshaw v Briginshaw (1938) 60 CLR 336
Masters v Cameron (1954) 91 CLR 353

Heilbut Symons & Co v Buckleton [1913] AC 30
Rabbath v Commissioner for ACT Revenue [2011] ACAT 25

Tribunal:                  Senior Member B Meagher SC

Date of Orders:  27 September 2017

Date of Reasons for Decision:         27 September 2017

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          AT 18/2017

BETWEEN:

YI JUN ZHANG

Applicant

AND:

COMMISSIONER FOR ACT REVENUE

Respondent

TRIBUNAL:Senior Member B Meagher SC

DATE:27 September 2017

ORDER

The Tribunal orders that:

1.The application is dismissed.

………………………………..

Senior Member B Meagher SC

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          AT 19/2017

BETWEEN:

DONGQUAN ZHANG

Applicant

AND:

COMMISSIONER FOR ACT REVENUE

Respondent

TRIBUNAL:Senior Member B Meagher SC

DATE:26 September 2017

ORDER

The Tribunal orders that:

1.The application is dismissed.

………………………………

Senior Member B Meagher SC

REASONS FOR DECISION

Introduction

1.In two separate applications, the applicants seek orders by way of review of decisions of the respondent refusing them a first home owner’s grant.

2.In matter AT 18/ 2017, Yi Jun Zhang is the applicant. He is the son of Wei[1] Zhang and Ping Luo. Dongquan[2] is the father of Wei.

[1] Wei is also known as William

[2] To assist clarity, I propose to use only the first names of the family members but intend no disrespect

3.Wei and Ping owned units that Wei, a now retired builder, had erected in Macquarie ACT. He and Ping entered into contracts of sale of Unit 3 to Yi Jun and Unit 4 to Dongquan. The premises were residences and Yi Jun and Dongquan had not bought a home before. Yi Jun is a 19 year old student at ANU.

The applications, the decisions and the T documents

4.Yi Jun[3] made an application to the respondent for a home buyers concession[4] dated 9 February 2016 but said to have been received on 11 February 2016. It was filled in by a lawyer, Mr Tony Redfern, who appeared for the applicants before the Tribunal. It describes the land as Unit 3 Block 32 Section 22 Macquarie. It was said not to be an off the plan agreement.[5] A certificate of occupancy[6] was said to have issued on 30 October 2015. As it was said the parties were related, a valuation was provided. It was said the property was being transferred for less than its dutiable value. It was said the same legal firm was acting for both parties.[7] The dutiable value was stated to be $380,000 ($358,000 had been crossed out). The purchase price was said to be $358,000. It was a new property. The date of agreement was said to be 5 December 2015.[8] It was said that the buyer would occupy the home. The application contained a declaration that the key matters were true by Yi Jun. It is dated 8 November 2015.[9] That date appears to be a mistake and nothing was said about it at the hearing. There was also a statutory declaration dated 22 December 2015[10] in which Yi Jun said he was the son of the sellers; the property was new; he could not provide a home loan application and his mother and father were lending him the whole of the amount of the purchase price. The attached valuation by Colliers said the market value was $380,000.

[3] Dongquan did also and it is dated 11 February 2015 (presumably meaning 2016). His application says the agreement was 5 November 2015 (presumably meaning 5 December 2015). His sale price was $400,000 but the valuation was $410,000. The transfer lodged for stamping was signed by the vendors and showed the address as the unit whereas the contract shows the address as his former home

[4] This a concession in respect of stamp duty

[5] At the time of the contract, the plan had yet to be registered but the building was completed

[6] See T-Documents page 25

[7] There is much confused evidence about that. Mr Redfern and Wei said Wei was acting for himself and Mr Redfern for the purchasers. Yi Jun thought he was acting for both

[8] Nothing was said about it at the hearing but that is a Saturday

[9] The application by Dongquan is dated 8 December 2015 so presumably Yi Jun’s was made then too

[10] Dongquan has also made a statutory declaration in similar terms (see T-Documents page 38) saying “my son and his wife are lending me the whole amount of the purchase price” He did so again after being asked for more information about his income at (see T-Documents page 72) by then according to Mr Redfern the loan agreement had been signed - see later evidence. In both declarations his address is his former address not the unit

5.The duty concession application also attached the transfer which was signed by the sellers and referred to a contract dated 5 December 2015.[11] It is a Law Society contract but the filed copy[12] does not include the standard clauses in a Law Society contract. They are readily available on the Law Society website for a small fee. They contain conditions requiring payment of a deposit and the balance of the purchase price on completion among other things. The front page has a schedule of key information and states the price to be $358,000 and the deposit to be $35,800. Mr Redfern’s trust account is the stakeholder. Yi Jun’s address is given as an address in Weetangera. Subsequent oral evidence revealed that was his parent’s home at the time.

[11] T-Documents page 33

[12] They were later provided as part of the evidence.

6.There were additional clauses delaying completion until registration of the units plan had been effected and notified. It was clearly intended that the standard clauses were to be included as special condition 14 enables a deposit by instalments and refers to clause 2 the standard deposit clause.[13]

[13] Clause 17 also amends a number of the standard clauses

7.A duty assessment of $9,800 was made by the respondent on 15 February 2016.[14] However this was reassessed as $20 by a notice dated 10 March 2016. This is, in effect, a grant of the concession.

[14] T-documents page 70

8.The transfer was registered on 3 May 2016 and refers to a settlement date of 12 January 2016 from which date the buyer becomes liable for rates.[15]

[15] T-documents pages 73-74

9.The application, the subject of this case, for a first home owners grant was made on 24 May 2016.[16] It states his current residential address as at the unit concerned. The settlement date and the time, he said, he commenced to live there was 21 January 2016. He gave his bank details for an electronic payment to him.

[16] T-documents page 75

10.On 5 July 2016, the respondent refused the application because there was no consideration for the eligible transaction as required in section 18 of the First Home Owners Grant Act 2000 (the Act).[17] This was based on the information that there was no bank loan and the sellers, his parents, were lending him the entire purchase price.

[17] T-documents page 92

11.Mr Redfern wrote back on 29 August 2016 objecting and refers to a loan agreement. This was enclosed. The title it was said was retained by Wei as security. Reference was made to section 13(6) of the Act.

12.The loan agreement has the date 5 December 2015.[18] Yi Jun’s address is given as the address of the unit. The loan refers in the recitals to the purpose to help facilitate the ability of the borrower to purchase the property. In the recitals, it also uses the clause “unless otherwise agreed in writing”.[19] The agreement records an acknowledgment that the lender has lent the borrower $358,000 and the terms of the agreement are the terms upon which the lender is prepared to continue to lend the loan amount. There is a provision for interest at the current CPI rate until repayment. The loan was to be repaid when the property was sold or when the borrower died. The section number for the property is mistakenly said to be section 24 instead of section 22. The date is inserted again above the signatures by the same hand. There is a right given to the lenders to register a mortgage and retain the title deed.

[18] T-documents page 95

[19] T-documents page 95

13.On 6 March 2017, seven months later, the objection was disallowed.[20] In his reasons the respondent’s delegate sets out the history which is in accordance with the above. He notes that the loan agreement was not provided when the statutory declaration of 22 December 2015 was made about the reason for not attaching a loan application. The reasons refer to sections 7, 13(1), (2) and (6), and 18 of the Act. The delegate accepts that consideration is to be determined by reference to the general law and accepts that proposition as stated in Rabbath v Commissioner for ACT Revenue [2011] ACAT 25 at [40] where it is said at [39] and [40]:

Under section 13(6) (a) FHOG Act, the consideration for an eligible transaction in the form of a contract for the purchase of a home is the consideration for the purchase. Although in its statement of reasons at first instance and upon reconsideration, the Respondent relied upon the Explanatory Memorandum to the First Home Owner Grant Bill which states that consideration is defined for the purposes of this provision as the amount paid for purchase of the home, the Tribunal considers that the meaning of the word "consideration" in this provision is not so confined and the meaning of the word must be understood by reference to the general law. Under the general law, the concept is broader and contemplates non-monetary promises.[21]

[20] T-documents pages 9-16

[21] Rabbath v Commissioner for ACT Revenue [2011] ACAT 25 at [39] and [40]

14.The delegate pointed out that the money referred to in the contract was not paid nor required to be paid and concluded that there was no consideration flowing from the applicant. He listed a number of factors:

(a)There was no repayment arrangement specified in the loan agreement. [This appears to point out that there are no regular periodic payments required].

(b)The loan agreement was a contract in its own right wherein the vendors had given an amount to the owner in exchange for a promise to repay.

(c)The promise to repay was the consideration for the loan agreement.

(d)No money was paid by the owner to the vendor even though the contract says it is payable.

(e)The promise under the loan agreement has no bearing on the transfer of the property by the vendors.

(f)The reference in the objection to consideration being the promise to repay is “illusionary” and is thus no consideration.

(g)There was no separate consideration for the transfer as consideration for the loan agreement could not also be consideration for the property transfer.

(h)There was no requirement for a loan agreement to be in place to “affect” the transfer.

(i)It is a gift.

15.The delegate distinguishes it from a bank mortgage where the consideration is the advance in return for the promise to repay and interest not the transfer of the land.

16.The delegate also rejects a reference in the objection to there being security arguing that it was Torrens title land and there was nothing the vendor could do to reclaim the title in the event of loan default.

17.The T-documents for the application by Dongquan were almost identical and are not repeated here. There was an error in identifying the unit number as Unit 3 in the loan agreement instead of Unit 4.

The application

18.Both applicants appealed to the Tribunal on 3 April 2017.[22] Dongquan’s application is in the same terms.

Documents filed in the Tribunal subsequent to the applications

[22] T-documents pages 5-16

19.Both sides filed a statement of facts and contentions. Proposed witness statements were filed by the applicants being statements by the two applicants and by Wei.

20.In the statement of facts and contentions filed on behalf of Yi Jun part of the facts asserted is the statement that the loan agreement was signed on the same day. Reliance is placed on the example of collateral contracts so that the entry into one agreement can be consideration for the benefit bestowed by another. Reference was made to Heilbut Symons & Co v Buckleton [1913] AC 30, 47 and Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133, 139. Mention was also made of the obligation assumed by the new owners to pay rates and outgoings. It is not proposed to set out further the contents of this document as the arguments have developed significantly since then.

21.The respondent in his statement of facts and contentions has added a question not addressed in the original decision or its review by the Commissioner. This was whether the respondent is of the opinion that the transaction forms part of a scheme to circumvent limitations on or requirements affecting eligibility or entitlement to a First Home Owner’s Grant (FHOG). It argued that the loan agreement was not valid being between family members and there was no intention to create legal relations. Reliance is placed in the recitals that say, “unless otherwise agreed in writing.” This is said to indicate a lack of serious intent to be bound. The absence of detailed provisions concerning default and the like is said to indicate a lack of a right to sue. An argument is made that the consideration is past because of the acknowledgement that the loan has already been made. It is argued that the clause relating to repayment is uncertain because it does not make clear whether it applies to the first of the two events to occur or whether it is discretionary. The mistake in the description of the section number is said to make the contract unenforceable. It is argued that the timing of the loan agreement may be a scheme to circumvent the Act and refers to section 13(2) of the Act. It argues also that if the loan agreement is enforceable the two contracts are not collateral contracts. The only intelligible point here is the correct assertion that the contract of sale contains no condition that the buyer must enter into the loan agreement. This is said to be implied by the applicant.

22.In his response, the applicant objects to the new grounds asserting a scheme and lack of validity of the loan agreement.

The legislation

23.Relevant sections of the Act are as follows:

7    Entitlement to grant

(1)  A first home owner grant is payable on an application under this Act if—

(a)the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria; and

(b)     the transaction for which the grant is sought—

(i)   is an eligible transaction; and

(ii)   has been completed; and

(c)     if the first home owner grant cap applies to the eligible transaction for which the grant is sought—the total value of the transaction is not more than the amount of the first home owner grant cap.

Note 1       The first home owner grant cap applies to an eligible transaction with a commencement date on or after 1 January 2011 (see s 13A).

Note 2       See s 13B for how to work out the total value of an eligible transaction.

(2)  Despite subsection (1) (a), an applicant need not comply with the eligibility criteria to the extent the applicant is exempted from compliance under this Act.

(3) Only 1 first home owner grant is payable for the same eligible transaction.

13 (1)An eligible transaction is—

(a)a contract for the purchase of a new home in the ACT made on or after 1 September 2013; or….

(2) However, a contract is not an eligible transaction if the commissioner is of the opinion that it forms part of a scheme to circumvent limitations on, or requirements affecting, eligibility or entitlement to a first home owner grant and the commissioner will, unless satisfied to the contrary, presume the existence of such a scheme, if—

(a)for a contract to purchase a home—the purchaser had an option to purchase the home granted before 1 July 2000 or the vendor had an option to require the purchaser to purchase the home granted before that date; or

(b)for a comprehensive building contract—either party had a right or option granted before 1 July 2000 to require the other to enter into the contract; or

(c)for a contract made on or after 1 September 2013 that—

(i)the contract replaces a contract made before 1 September 2013; and

(ii)the replaced contract was—

(A)a contract for the purchase of the same home; or

(B)a comprehensive home building contract to build the same or a substantially similar home.

(3)The commencement date of an eligible transaction is—

(4)Subject to any qualifications prescribed under the regulations, an eligible transaction is completed when—

(a)for a contract for the purchase of a new home—

(i)the purchaser becomes entitled to possession of the home under the contract; and

(ii)if the purchaser is to obtain a registered title to the land on which the home is situated—the necessary steps to obtain registration of the purchaser’s title have been taken; or

(6)The consideration for an eligible transaction is—

(a)for a contract for the purchase of a new home—the consideration for the purchase; or…

contract for the purchase of a new home means a contract for the acquisition of a relevant interest in land on which a home is built.

18Amount of grant

(1)The amount of a first home owner grant is the lesser of the following:

(a)the consideration for the eligible transaction;

(b)an amount determined by the Minister.

26Grounds for objection

(1)The grounds for the objection must be stated fully and in detail and must be in writing.

(2)The burden of showing that the objection should be upheld lies with the objector.

The following may apply to the ACAT for review of a decision of the commissioner under section 29:

(a)the objector in relation to the decision.[23]

The hearing

[23] First Home Owners Grant Act 2000

24.Mr Redfern appeared for the applicants. Ms Irving of counsel appeared for the respondent. Mr Redfern said in his opening that the loan agreement was signed on the same day as the contract of sale.[24] He also said that the units plan was not in fact registered until 17 December 2015.[25] This is verified by the title search in the T-documents done by the respondent.[26] Dongquan did not speak English and his language was a Mandarin dialect. No accredited interpreter had been arranged. An acquaintance of the applicant’s family attended for this purpose. Concern was expressed by counsel for the respondent. Initially, I decided to proceed and take it as far as we could. However, it soon became apparent that the interpreter did not clearly understand the English spoken to him by Mr Redfern or the Tribunal. During this interchange, I observed that Dongquan was understandably confused by what was happening. As it was clear that whatever he knew about the transaction was what he was told by his family, I did not think his evidence would assist. Nonetheless, if the applicants wished to call him and had an accredited interpreter available, they could have done so.[27] This did not happen. In the circumstances, I would not draw any negative inferences from this.

[24] Transcript of proceedings page 13. At page 14 he said it was correct that there was a meeting of all parties on 5 December 2015. See too page 22 where he says they are signed on the same day

[25] Transcript of proceedings page 13

[26] T-documents page 92 of the documents in Yi Jun’s matter

[27] Transcript of proceedings pages 25 and 43

25.In his opening, Mr Redfern explained that Wei wanted to help his son with student accommodation and a chance to own his own property. In the case of his father, it was explained that he was having marital troubles and wanted to live apart from his wife and as Wei had the units for sale he saw this as a way to help his father. Dongquan subsequently reunited with his wife and the property was sold, the loan was repaid with interest and the balance was paid to Dongquan.

26.He also said there was “no round robin of cheques”.[28] He confirmed that his case was that the “totality of the circumstances” gave rise to a binding agreement that in return for the transfer of the property the transferees promised to repay the money in the loan agreement.[29]

[28] Transcript of proceedings page 17

[29] Transcript of proceedings page 18

27.Wei gave evidence. In chief, he said he was a retired builder and had built the units (6) in Macquarie of which the two units in the case were part. In relation to his father there were issues between his parents, who lived in Canberra, at a time that Wei and his wife were moving to Queensland. His father approached him as his eldest child and said he didn’t have a place to live. Dongquan proposed that he buy one of the units as they were close to transport and services he might need. Wei knew his father would not be able to afford it. His father asked whether Wei would lend him the money. Wei was not prepared to just give it to him as it was a big amount of money.

28.Wei explained that he was also talking to his son, Yi Jun, about university accommodation. As he was moving to Queensland this was an issue as Yi Jun was to attend Australian National University (ANU). Yi Jun could not afford the rent for student accommodation and they discussed an arrangement whereby Yi Jun would buy the unit. Each unit was different and the price would vary. He engaged Colliers to value the units so they could fix a price. They engaged Mr Redfern to do the paperwork. Wei knew about first home grants and thought they were eligible but had not realised there was a stamp duty concession because the properties were below the capped price.

29.He thinks his father moved some items in to the unit early and later moved in in early January 2016. His son moved in about Christmas time or early January. Wei had not yet moved to Queensland and did so later in 2016. He thinks Yi Jun and Dongquan opened their own electricity and gas accounts and they paid for the rates.

30.Later in about January or February 2017, Dongquan raised the question of selling the unit as he was not sleeping well in the unit and had health problems. Wei had the certificate of title. An agent was obtained and it was sold and Mr Redfern acted. Dongquan in fact moved back to his previous address. The settlement was in April 2017. It sold for $467,500. From the proceeds, there was an agent’s commission and costs. Wei worked out the CPI interest owing and took the loan money and interest and there was about $40,000 left. Dongquan got that.

31.He said Yi Jun is still living in his unit and there are no immediate plans to sell.

32.Wei said he thinks they all signed the loan agreement and the contract on the same day.[30]

[30] Transcript of proceedings page 37

33.In cross examination, he said he engaged Tony (Mr Redfern) as they had used him a lot before. In this case he believed Tony was advising his son and father and he (Wei) was acting for himself. It was pointed out that there were different addresses for his father and son on the documents. The loan agreement gave their address as the unit they bought, whereas the sale agreement gave their previous addresses. He denied the loan agreement was signed at a later time.

34.Mr Redfern was then asked by the Tribunal whether he wanted to give evidence about the date the loan agreement was signed. He said from the Bar table that he believed they were signed on the same date but decided not to give evidence.[31]

[31] Transcript of proceedings page 42

35.Yi Jun gave evidence. He confirmed the reason for the discussion concerning his accommodation. His parents were moving and he had been living with them. If he was to rent while attending ANU, it was very expensive so the idea of buying the unit was raised. The units at Macquarie were convenient and they agreed to get a valuer and decided on a vendor finance arrangement. A loan was considered desirable in case he entered into a de facto relationship.[32] He thought it was a good deal for him because the price was below the valuation. He became responsible for the outgoings and has paid them since the purchase.

[32] The alternative was a gift which would make the property vulnerable to a claim by a de facto spouse

36.He said he read the sale agreement and the loan agreement on the same day at Mr Redfern’s office.[33] His mother, father and grandfather were all there. He thought Mr Redfern was acting for both sides but he did not get advice from him and considered it for himself. He said he thought he signed both documents on 5 December 2015.[34] He moved in in late 2015 or early 2016. He is thinking about changing the loan so as to make some payments. His father has the title. He does not consider it was a gift. If he wanted to sell he would ask his father first and listen to his advice. He may sell when he completes his studies and put any profit into another property depending on the market.

[33] Transcript of proceedings page 47

[34] Transcript of proceedings page 49

37.In cross examination, he first said he signed the two documents on the same day. It was pointed out to him that there were different addresses and asked again. He then said he could not remember. He thought he was sleeping at the unit earlier than this day. He had pointed out to him that at the time he swore a statutory declaration on 22 December 2015 in respect of the duty concession his address was at his parents’ place not the unit. He said he had signed the loan agreement before he swore the statutory declaration.[35] However, later he said he did not know.[36] Mr Redfern prepared the loan agreement but not on his instructions and he did not have to pay anything for his services – but he was unsure whether he had paid anything. He understood a fee of $1,000 was paid but he did not know how or by whom.

[35] Transcript of proceedings page 55

[36] Transcript of proceedings page 55 line 43ff

38.He was asked some questions by the Tribunal about the timing of the documents and said he was not sure and he had been to the office a number of times as he had taken his grandfather there.[37] However he said he had only been to the office when everyone was there twice. The second time was after this dispute had arisen.[38] He was asked in re-examination about who was there on 22 December 2015 and he said his parents were there and he did not remember whether his grandfather was there but would not be surprised if his grandfather signed his statutory declaration on the same day.[39]

[37] Transcript of proceedings page 58

[38] Transcript of proceedings page 58

[39] Transcript of proceedings page 60

39.There was the discussion about whether Mr Redfern might give evidence and he decided he would but sought an adjournment as he wanted to get another lawyer to adduce his evidence. I granted that adjournment but reserved costs. In the course of this discussion he accepted as correct that it was his case that the documents were signed on the same day.[40]

[40] Transcript of proceedings page 62

40.Subsequently Mr Redfern has filed a witness statement in which he says the loan agreement was not signed until late January 2016 although it was in the course of being finalised on 5 December 2015 and had been discussed as integral to the whole transaction. He dated it 5 December 2015 and told the parties he was doing so.

41.The matter resumed on 16 August 2017. Further evidence was given.

Further evidence

42.Mr Redfern again appeared and had no one else to assist him. He later explained that he did not think he could adduce evidence but had checked “the rules” and now thought he could. It should be noted that this was not the way the matter was put when an adjournment was sought. I had granted an adjournment because I understood that Mr Redfern felt vulnerable without another lawyer there to take his evidence. I also expected he might take advantage of the time to seek advice from another lawyer about any conflict he might have.

43.Mr Redfern had brought with him the complete contracts of sale. They were identical. They were tendered and had the Law Society’s standard terms in them. Two copies of one were made and the Tribunal kept one. The respondent was given one and Mr Redfern was given his original documents back.

44.Mr Redfern then gave evidence. He said that the witness statement that he had provided to the Tribunal was true and correct. He was cross examined. He said in answer to questions from Ms Irving and later from the Tribunal that the terms of the loan agreement had been discussed in full at the first meeting. Wei had rung him to tell him what the family had agreed and asked him to do the paperwork. He said when he heard that there was a loan involved he suggested that there should be independent advice for the borrowers. He said Wei then suggested that he would act for himself and the applicants could be advised by Mr Redfern.

45.He agreed that Wei had been a regular client and he had previously handled property sales for him. It transpired that at about that time Wei had sold the other four blocks in the complex and Mr Redfern had acted for him. These sales were instrumental in allowing a mortgage to the National Australia Bank to be removed. In the meeting, he agreed that his only communication with Dongquan was through the family. He described Yi Jun explaining it to Dongquan and pointing to relevant parts of the contract as he gave advice in English. He believed that Dongquan followed what was said and was visibly happy with the explanations. He said that he would know if the advice was not conveyed accurately and he was sure it had been.

46.He said that whilst all the details of the loan had been agreed the loan document was not yet ready as there had little time available to get it finished. The parties then all signed the contract.

47.Mr Redfern then explained that there needed to be a stamp duty concession application and Yi Jun and Dongquan came in on 22 December 2015 to sign the declaration. He was asked why the loan agreement had not been sent with the application or referred to in the declaration. He said that he was only required to provide the contract and the need to explain why there was no home loan application was because the Revenue Office wanted information about means not details of the borrowing. In any event as it transpires on 22 December 2015 the loan agreement had not yet been completed. The declaration however discloses that the purchase price was being met by a loan from the sellers.

48.He said he was away overseas until late January and it was on his return that the loan agreement, in the terms already discussed, was signed. He said he backdated it to 5 December in the presence of the parties and they knew this. He did so because he understood that this was when the agreement was, in fact, made but had yet to be written. Later, in argument, he described it as an agreement that recorded the existing oral agreement and referred to Masters v Cameron.[41]

[41] (1954) 91 CLR 353

49.He was asked about the dates of settlement and said that they were not based on any settlement in the conventional manner and he “made them up”. In his eyes they were not important, He said that the loan agreement had been made in late January and that may coincide with the date 21 January 2016 but the date 12 January 2016 was not correct as he was away then. At some time, he had the stamped signed transfer, a discharge of mortgage and the title deed available to be produced. He believed by the time the promise to repay the loan had been formalised and the documents needed to effect a registration of the transfer were in his possession, as a lawyer for the purchasers, that there had been completion. The transfer was not lodged until 18 April 2016 and was registered on 3 May 2016.[42]

[42] T-document page 73

50.The Tribunal asked him about the discrepancy between what he told the Tribunal at the prior hearing namely that the loan agreement was made on 5 December 2015 when he now said it was late January 2016. He initially appeared to argue that he had said that. When told firmly that he had, he accepted it. He did not appear to articulate an explanation. He agreed however that he was mistaken and had realised that when he consulted his Google calendar in the adjourned period.

51.He did not produce any contemporaneous communications or diary entries that might assist the Tribunal in having confidence when these matters occurred. He said that most communications were by email and when the client attended it was often shortly after a phone call, so there may well be no records that clarified dates. It was put to him that the loan agreement was only created after the FHOG application was first refused. He denied this.

52.Mr Redfern also explained that he was not paid any fees but got reimbursement for disbursements from the Dongquan sale of about $1,000 for the registration fees.

53.There was no other evidence.

54.Oral submissions were the made and I gave leave for the parties to supplement them in writing. It was intended that this would deal with any new arguments based on the recently produced standard terms of contract.

Impression of witnesses and some finding of facts

55.I saw nothing in the demeanour of Wei or Yi Jun that caused me to doubt their veracity. I thought Yi Jun, in particular, was a good witness and readily conceded that his grasp on dates may be mistaken. Wei also gave his evidence in a responsive manner. Both men appeared intelligent.

56.I do not propose to make any adverse comment about the evidence of Mr Redfern. I was troubled by some of his statements that he appeared not to see as a problem. The shift from the numerous statements that the loan agreement was signed on 5 December 2015 to late January 2016 is hard to excuse. I am prepared to accept that it was done in good faith but it does not instil confidence in what he says. Likewise, the admission that the dates of settlement were made up was not reassuring. Similarly, backdating documents is not generally a good practice. It should be evident on the face of the document when the document was really signed even if it is also said to date from an earlier date. In his evidence, he often answered a question by giving an explanation that may have been correct but was not responsive to the point being put to him. An example was why he did not attach the loan agreement to the application for the stamp duty concession and the FHOG. He insisted that it was not called for. The point being made to him was that the contract in this case must have included the loan agreement as it was what was said to constitute the consideration. It was obviously not available when the declarations of 21 December 2015 were made but it was[43] when the application was made and a later statutory declaration was made by Dongquan in March.

[43] According to Mr Redfern’s evidence

57.As I accept the general tenor of the evidence of Wei and Yi Jun I find that there was from the beginning an intention by the parties to the two sales that it would be funded by vendor finance and that a loan agreement was intended to be made that gave effect to such an agreement.

58.Whilst Wei did not concede he may have been wrong about dates, Yi Jun did. I am not confident that the dates given by Mr Redfern are necessarily correct and must look to such indicators, as there are from the documents, to try and resolve this.

59.In order to find that the loan agreement was created after the rejection of the FHOG application I would have to be satisfied that the three oral witnesses are wrong and that they deliberately sought to create evidence to gain an advantage and represented that the loan agreement had been created contemporaneously with the sale contract. Whilst the onus of upholding an objection is on the applicants, in order to reach this conclusion – which involves a degree of fraud – I would have to be comfortably satisfied that it occurred.[44] I am not. Apart from the oral evidence as early as 22 January 2016, declarations were made about the proposed loans. Whist Yi Jun was not sure about all the dates, his evidence was clear that there was a loan agreement to be entered into from the start. This was also Wei’s evidence. His correct statement that it was a lot of money and that is why he wanted it paid back rang true. There were proper reasons advanced as to why it was intended to be done this way and not be a gift other than the possibility of getting a FHOG.

[44] Briginshaw v Briginshaw  (1938) 60 CLR 336

60.The cross examination revealed some discrepancies about the addresses but that is consistent with the loan agreement being entered into later than 5 December 2015. The evidence revealed that by January both applicants had moved in. Thus, the evidence of Mr Redfern that the loan was in fact finalised after he returned for holidays in late January fits with such perceived discrepancies.

61.I find that the loan agreement was in fact entered into in late January 2016. Whilst I have expressed some misgivings about the evidence of Mr Redfern, the fact that he volunteered, against what might be seen to be in his interest, that it was not 5 December 2015 as he first thought but this later date is persuasive. It also fits with the sequence of events. One argument against it is why it was not given to the Commissioner earlier, at the time of the stamp duty concession application in February or with the FHOG. Mr Redfern, who was responsible for making the applications, said he did not think it was necessary. He had attached the contract but not the loan agreement. He is correct in saying the reference in the statutory declarations, that there is no home loan application, is not one that requires the loan agreement to be provided. Further the existence of the loan is expressly referred to. Whilst it is correct that strictly the contract here is both the sale contract and the loan agreement, Mr Redfern did not so understand it and even when asked about it did not really see that it was.

62.Another argument is that if the loan had already been given as the loan agreement said it would not have been until completion which was some time later. However, I have come to the view that the description in the loan agreement of the loan having been given is just wrong and was another error in the document preparation. This view is explained later in these reasons.

63.Apart from the dates, I accept the evidence of Wei and Yi Jun and accept that Wei was repaid the loan money and accounted to Dongquan for the balance.

Submissions

64.Ms Irving made the same arguments that are in the Commissioner’s statement of facts and contentions. In a short outline, she said that the transaction was not an eligible transaction under section 13. She said no money had changed hands and thus the sale contract had no consideration as was required and the amount of any grant would be nil under section 18. She argued that there was no intention to create legal relations. It was open to the Tribunal to find the arrangements were a sham and designed to deceive. The two contracts were not collateral as they were entered into at different times and acceptance of the loan agreement could not be said to be contingent on acceptance of the sale contract. She argued that the mistakes in the loan agreement made it unenforceable. She argued that it was designed to get around the Act contrary to section 13(2). She also raised the problem of past consideration, if the loan agreement’s reference to the loan having already been made was correct. Additionally, she argued that the reference to a change to the agreement in writing being available for the loan agreement meant it was not serious. The conduct of Wei in getting the money initially from the sale by Dongquan was consistent with it really being Wei’s property all along.

65.Mr Redfern made the same arguments that are in his statement of facts and contentions. He argued that the contracts were collateral as whilst separate as to time there was in fact an oral agreement in the terms of the loan agreement at the first meeting on 5 December 2015 and the later written document merely formalised it. He referred to Hoyt’s Pty Ltd v Spencer.[45] He acknowledged that there was no reference in the sale contract that made it clear that the two were interdependent but argued that objectively the transactions in substance relied on each other to be effective and there would have been no completion of the sale contract without the loan in place.

[45] (1919) 27 CLR 133

66.He argued that the fact that the transaction was between members of the same family did not mean legal relations could not be created. He referred to Popiw v Popiw[46] and Jones v Padavatton.[47] He argued that the mistakes in the loan agreement were immaterial and it was clear what was intended

[46] [1959] VR 197

[47] [1969] 2 All ER 616

67.The further written submissions were not confined to any argument arising from the standard terms of the contract and repeated the arguments already explained. The only additional information that I found useful was the information provided by Mr Redfern about the adjournment. I had not appreciated it before and but for it I would have made an order for costs thrown away by the adjournment. I will explain this later.

Consideration

68.Construing the two contractual documents is confounding.

69.The contract of sale does not involve an actual payment of money at the time it is made other than a deposit. Special condition 14 varies standard clause 2 so that only 5% was supposed to be paid. In fact, no payment of deposit was made. Special condition 13 excludes any other arrangement oral or in writing from being relied on. Mr Redfern asserted that this clause was intended to meet issues that arise for an off the plan contract. It is however expressed more widely. It is an acknowledgment by the buyer that the written contract is the only document that constitutes the contract between the buyer and seller. There is provision in the standard terms for payment of the balance of the money on completion which shall be no later than 14 days from written notice of registration of the units plan because of additional condition 1. The plan was registered on 17 December 2015 so completion might be expected thereafter. There is no suggestion that any written notice was provided. There is no reference to the loan agreement in the contract of sale. It is common ground that no money was paid by the buyer to the seller.

70.The loan agreement is described in paragraph 12 above. Up until the time the contract is completed there is no transfer of money by anyone (ignoring the deposit). Thus, the reference to the loan having been made is wrong unless the agreement was made after completion. There is no provision that explains how the money flow occurs. In a usual loan arrangement, the lender would give the buyer a cheque to pay the vendor and the borrower would be liable to repay it to the lender. This did not happen. There must be assumed to be a notional transfer of money from the lender to the borrower and from the borrower back to the lender (wearing a vendor hat). The easiest way to provide for this would be to make a provision in the sale contract that spells out how the completion will occur and refers to the vendor finance. The applicant’s case requires a finding that at some juncture there was a notional transfer of funds from the vendors and lenders to the buyer as borrower and a further payment by the buyer to the seller.

71.It is not possible from the evidence to fix a date when this may have happened. It could not have been before the end of January and after the day the transfer was lodged namely 18 April 2016. The application for the FHOG was not made until 24 May 2016 after the transfer had been registered on 3 May 2016. The transfer would not have been stamped until 10 March 2016 when the concession for duty was allowed. Until this happened the vendor would not be able to provide registrable documents enabling the transfer. So, the notional completion would be between 10 March and 18 April 2016. Thus, there was no loan actually made notionally or otherwise until then.

72.The loan agreement incorrectly describes the property by using the wrong section number and the wrong unit number is listed in Dongquan’s loan contract.

73.The loan agreement has been performed by Dongquan when he sold. Because the money from the sale went to Wei in the first instance, this was pointed to as an indication that in reality Wei never lost control of the property and there was no genuine transfer. However, Wei said he accounted for the proceeds and Dongquan was paid the balance. This is what would happen in the case of a mortgagee and even though no mortgage was registered Wei held the title as security and had the right to lodge a mortgage.

74.Dealing with the Commissioner’s arguments, it is correct that no money changed hands. It does not follow that there is no consideration. Consideration need not be a monetary one as explained in Rabbath v Commissioner for ACT Revenue quoted earlier.[48] Thus, if the transactions can be characterised as a transfer of land in consideration of the purchaser entering into a contract of loan with the seller to pay the purchase price and interest as required under the loan agreement then there would be good consideration and it would exceed the amount of the grant under section 18.

[48] [2011] ACAT 25 at [40]

75.As was correctly submitted by the applicants, the fact that the transactions are between family members does not deprive them of an intention to create legal relations. The effort gone to – even if I find it was misguided in execution – clearly shows an intention to create well recognised legal consequences.

76.It was submitted that it was open to the Tribunal to find this was an attempt to create a scheme to circumvent the Act under section 13(2) a sham or an intention to avoid the Act. I am not satisfied that this is so, as I have explained in paragraph 59 above. It was understandable that the Commissioner may suspect such conduct but it involves a degree of culpability that is not made out on the facts particularly bearing in mind my assessment of the witnesses.

77.The mistake in the section number and the incorrect unit number in one document are clearly mistakes and it is obvious what the correct details are. The mistakes fall into the category of what is described as falsa demonstratio and do not affect the validity of the agreement.

78.The reference in the recital to it being capable of being varied in writing is, in my view, a red herring. All agreements can be varied by agreement whether the contract says so or not. The reference is in a recital and not in the operative part of the agreement. If it were in the operative part of the agreement it would usually be construed as being consistent with the existence of the loan and not to extend to it being discharged.

79.The fact that Wei got the money from the sale by Dongquan in the first instance, was not inconsistent with the agreement and was not indicative of anything that detracted from its enforceability.

80.It was argued that the loan agreement included an obligation that the borrower must repay the loan but no repayment arrangement was specified. There was no requirement for periodic repayment just repayment on death of the borrower or resale by him of the property. That is all that is needed. It was argued that the two events are not qualified by the words “whichever first occurs”. They do not need to be. The clause speaks for itself. It was argued that “any event” is too vague but what it means is the two events listed and any other event stated in the agreement. As there is no other event specified, it is limited to the two specified.

81.It was further argued that the two documents are not interdependent and the promise to pay supports the loan not the sale. Leaving aside the problem, about what is the consideration, the loan agreement explicitly refers to the sale agreement and makes clear that it must be dependent on the sale agreement. The sale agreement however has no reference to the loan agreement as the Commissioner correctly points out. He concludes that there is no requirement for the buyer to enter into the loan agreement for the transfer to occur and so in the absence of any money being paid the transaction is a gift.

82.He disputes that there is security akin to a mortgage and refers to the indefeasibility of title. This is not an argument that bears scrutiny. Of course, the buyer has got title but the loan agreement gives the seller an equitable mortgage by containing an agreement to provide a mortgage and also gives the seller security of the title just as a mortgagee might have. It may do the vendor no good if a third party obtained good title from the buyer but as between the buyer and sellers it is a good security. However, it is not necessarily relevant.

83.It is argued that the contracts are not collateral and the contract of sale stands on its own. Whilst there was an attempt to make them interdependent it is argued it failed. The promise to repay is consideration for the loan and not also for the sale. The sale makes no mention of the loan and the sale whilst stating a consideration namely payment of the money, the payment did not occur.

84.Based on the facts, as I have found them, there was a contract of sale that promised that the buyer would pay a sum of money. At the time it was entered into, all the relevant parties had discussed entering into a loan agreement that was effectively vendor finance for the lot. This was later put in writing and specifically refers to the sale contract as being affected by it. The words used are “The purpose of the loan is to help facilitate the ability of the borrower to purchase the property.” Whilst there is doubt as to when the loan contract was signed it seems more probable that it took place in late January 2016 and at the latest before the transfer was lodged in April 2016. The same lawyer had all the documents and consistent with his instructions and the agreement of Wei, he registered the transfer.

85.It seems to me clear, once it is accepted that the events were as stated by the applicant Yi Jun and by Wei, that in substance the two documents were supposed to be interdependent and whether they are called collateral contracts or not the consideration moving from the applicants was supposed to be the binding agreement to repay the loan of the purchase price and interest.

86.It was part of the Commissioner’s argument that the loan agreement was not enforceable. I am not persuaded by the submissions given for that conclusion but I am also not satisfied it is enforceable. Whilst the parties concerned remain on good terms, it no doubt would be carried out as they all subjectively envisage. If a party becomes disaffected there are a number of arguments that would make it difficult to enforce in the manner asserted here. The loan agreement would need to be rectified. That is a difficult remedy to obtain.[49] There may be arguments as to whether the parties have really had independent advice. The sale agreement needs to have implied a term that the sale price will be provided by the vendor finance. A term will not be implied into an agreement that is inconsistent with the express terms and unless it can be said to be so obvious that it goes without saying.[50] It is difficult to articulate the term that is consistent with the promise to pay the money. In fact, it would require a rectification of the contract as well.

[49] See for example Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65

[50] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 where it was said for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract

87.The substance of what in fact occurred is not adequately expressed in the documents. It is a significant matter for the administration of the Act for the Commissioner that he can rely on the documents that are lodged and apply the Act without having to look behind the written words and see what was being discussed orally as well.

88.Whilst I have accepted the evidence of Wei and Yi Jun, the Commissioner, in applying the Act, has only documents, including on occasion statutory declarations, to determine whether the transaction is eligible.

89.Here the Commissioner was given the sale agreement and had a statutory declaration that admitted the purchase price had not changed hands. Without more he was correct to say there was no consideration and the transaction was not eligible. He was then given the loan agreement and asked to accept it existed from the date it bears namely 5 December 2015. He was dubious about when it was created and as it turns out it did not get signed until late January or perhaps later up until 3 May 2016. The loan agreement misstates what happened. It asserted the loan had already been made. It could not have been unless it followed completion. If it followed completion – a fact I have not found – it is past consideration. If it did not follow completion, then it misstates what was happening. There is no express transfer of funds. A lot has to be implied and inconsistent obligations read together – contrary to Hoyt’s Pty Ltd v Spencer at 141 that says there cannot be collateral contracts if the promise is inconsistent with the main contract.[51] Here, because there is no reference in the sale agreement to the consideration being met by a vendor’s loan the sale contract is on its face inconsistent with the loan contract. In truth, they are not collateral contracts as that term is confined to a situation where there is a main contract and there is a warranty by one party to induce the other party to make the main agreement. It is more accurately a situation where there are two main contracts but one is argued to be dependent on the other. The sale contract is not so expressed. The loan contract arguably is so expressed but it misstates the situation by referring to a loan already made and does not explain in express terms how the notional transfer of funds is to occur.

[51] (1919) 27 CLR 133

90.In order for the transaction to be eligible there has to be consideration. The consideration expressed in the contract was not paid. The consideration said to have been provided instead is entry into the loan agreement. If the parties fell out and one sought to have such an arrangement enforced, a Court would have to rectify the loan agreement and the sale agreement. I am not persuaded that this would happen. Strictly, unless a court did rectify the agreements, the documents have to be construed as though they have not been rectified. In any event as I am not persuaded that such a rectification order would necessarily be made the consideration contended for has not been established. It follows that the transaction is not shown to be an eligible one under the Act.

Conclusion

91.In the context of administering the Act the Commissioner is entitled to expect the paper work to be self-explanatory. It is not and in some aspects, it is in error.

92.The documents do not expressly explain that the money payable under the sale contract will be provided by the seller advancing the sale price to the buyer and the buyer agreeing to enter into a loan agreement with the seller. They do not explain how the transfers of money are to take place. There was no exchange of cheques. The agreements are strictly not collateral and are not on their face consistent. Terms cannot be implied that cure the problem. In order to bring about the conclusion argued there would need to be rectification. There has not been any rectification. The documents must be judged in their unrectified state. Unrectified the sale contract is not eligible as there is no consideration. Even if it was open to assume what might happen if rectification was sought from a Court in equity, it is not lightly granted and requires clear proof of the common intention or prior agreement. If the parties were all ad idem as to what it meant there would appear to be no justiciable dispute enabling the remedy to be given. If they fell out the nature of the evidence that might then be given is not possible to predict. It could not be said with any confidence that the remedy of rectification would be provided. The ultimate onus in upholding the objection is on the applicants. Whilst I have some sympathy for the applicants, the inconclusive paper work means that I am not satisfied that this onus has been met.

93.I had left open the question of costs thrown away by the adjournment. The case would have been completed in one day if the adjournment had not been granted. The reason for the adjournment was the decision of Mr Redfern, the lawyer for the applicants, that he wanted someone else to take his evidence. At the time, I had thought that he may not have anticipated the need for this occurrence. In fact, on the resumed date he did not have anyone to adduce his evidence and stated for the first time that he had been worried about whether ‘the rules’ allowed him to give evidence without someone to adduce it. More importantly, it transpired that the evidence he gave was inconsistent with what he had previously asserted to be the position. I have not made any adverse findings about that but it at least indicates inadequate preparation. Also, the ‘rules’ are something he should know.

94.There is limited power to order costs under section 48 of the ACT Civil and Administrative Tribunal Act 2008 but in my view but for what is explained in the written submission occurring after the hearing, it would be fairly described as coming within section 48 (2)(b) as causing unreasonable delay.

95.Mr Redfern explained that the proceedings had belatedly taken an unexpected twist in that an argument that this was a deliberate sham had been added in the ACAT application even though that was not asserted in the original decision or internal review. This was an argument that I have rejected and as Mr Redfern submits was without any foundation other than suspicion. Clearly, he felt that this might then mean that he was implicated in such conduct. He did in fact want to gather his thoughts and considered getting another lawyer in to assist. He also wanted an opportunity to review all the notes and dates and make sure he had was able to give the evidence correctly. The issues about the changing addresses of the parties and the dates of various matters were not clearly expressed in the respondent’s statement of facts and contentions. Thus, whilst he may have been expected to have a better grasp of the dates anyway, it was not unreasonable that he felt unprepared. He also checked the rules that were referred and was reassured by Ms Griffin in correspondence, that I had not seen, that there would be no objection about him continuing to act as well as give evidence. Ms Griffin writing on behalf of the respondent certainly went on with the attack on his role and honesty. In short, he was attacked on the basis that I have rejected as having no foundation. In all the circumstances, I am not persuaded that I should make any order about costs.

96.The order in both matters will be that the applications be dismissed.

………………………………..

Senior Member B Meagher SC

HEARING DETAILS

FILE NUMBER:	AT 18 & 19/2017
PARTIES, APPLICANT:	Yi Jun Zhang and Dongquan Zhang
PARTIES, RESPONDENT:	Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	Ms Irving
SOLICITORS FOR APPLICANT	Redfern Legal
SOLICITORS FOR RESPONDENT	ACT Government Solicitor
TRIBUNAL MEMBERS:	Senior Member B Meagher SC
DATES OF HEARING:	28 June & 16 August 2017