|Date of judgement||6 December 2011|
|Judge(s)||Deputy President Needham|
Judicial Member Hole
Non-Judicial Member Bennett
|Court or Tribunal||Administrative Decisions Tribunal Appeal Panel|
Duties – meaning of "in conformity with an agreement"
Gardiner v Heading  2 KB 284
This matter involved an appeal by the Chief Commissioner against the decision of Judicial Member Block in the Administrative Decisions Tribunal to set aside the decision of the Chief Commissioner to impose ad valorem duty in respect of a transfer of property ("the Transfer") at Bondi ("the Property") from Ms Laura Gomez and Ms Monica Da Silva ("the Vendors") to Mr Sam Scarfo ("the taxpayer"). Judicial Member Block found, at first instance, that the Transfer was liable to nominal duty under s. 18(2) of the Duties Act 1997 (NSW) ("the Act") on the basis that it was made "in conformity with" an agreement in respect of which duty had been paid.
The Appeal Panel allowed the appeal, and accordingly confirmed the decision of the Chief Commissioner to assess the Transfer with ad valorem duty, on the basis that the Transfer was not made "in conformity with" an agreement in respect of which duty had been paid.
On 24 November 2009, Mr Stone attended an auction of the Property and, after successfully bidding at the auction; executed a Contract for Sale of Land ("the Contract") in respect of the Property in his own name. Mr Stone paid the 5% deposit under the Contract and was subsequently reimbursed for this amount by the taxpayer.
On 22 January 2010, Mr Stone executed a direction to the Vendors to prepare the Transfer with the taxpayer as the transferee. Mr Stone also executed a statutory declaration in which he stated that he had attended the auction for and on behalf of the taxpayer.
The sale of the Property settled on 16 February 2010 and ad valorem duty was paid in respect of the Contract. On that same day, the Transfer was stamped with duty of $10 payable under s. 18(3) of the Act. However, on 25 February 2010, the Chief Commissioner determined that the Transfer did not fall within the concession under s. 18(3) of the Act and issued an assessment requiring the payment of ad valorem duty in respect of the Transfer.
At first instance, Judicial Member Block held that:
s. 18(3) of the Act did not apply to the Transfer; and
s. 18(2) of the Act did apply to the Transfer on the basis that the Transfer was made in favour of the undisclosed principal under the Contract (in this regard Judicial Member Block held that neither section 18(2) of the Act nor previous case law required that a transfer must be made in favour of a party identified in a contract in order for the transfer to be "made in conformity" with that contract).
The issue on appeal in this matter was whether the Transfer was made "in conformity with" the Contract within the meaning of s. 18(2) of the Act.
The Chief Commissioner submitted that the Transfer was not "made in conformity" with the Contract in circumstances where the taxpayer was not, in any way, identified on the face of the Contract.
The Chief Commissioner relied on the following relevant case law authorities, to support the proposition that s. 18(2) of the Act could only apply to the Transfer if the taxpayer was identified on the face of the contract:
The Chief Commissioner submitted that Judicial Member Block had erred in finding that the words "in conformity with" had a wider meaning than a person identified or named on the face of the Contract. The Chief Commissioner also submitted that the law of agency and undisclosed principal had no relevance to deciding what is meant by the term "in conformity with" in s. 18(2) of the Act. Further, the Chief Commissioner submitted that Judicial Member Block had erred in construing the words "in conformity with" by reference to the heading to s. 18 ("No double duty").
The taxpayer submitted that Judicial Member Block had correctly interpreted s. 18(2) by reference to its statutory purpose, which was to avoid the imposition of double duty. Further, the taxpayer submitted that the Transfer was "in conformity with" the Contract, because the Contract was between the Vendors and the taxpayer on the basis of an undisclosed principal being a party to a contract between the principal and the Vendors.
In relation to s. 18(3)(d) of the Act, the taxpayer submitted that Mr Stone (the agent) and the taxpayer were "related persons" by reason of the fiduciary duties Mr Stone (as an agent) owed to the taxpayer.
In reply on this issue, the Chief Commissioner submitted that s. 18(3)(d) could not apply because, at the time of entry into the Contract, Mr Stone was not a trustee (based on the reasoning in the decision of Sharpe v Chief Commissioner of State Revenue  NSWADT 6).
The Appeal Panel decided that the cases of Lake Victoria, Vickery and Sharpe are authority for the proposition that for the Transfer to be "in conformity with" the Contract, the transferee must be a person identified in the Contract as the transferee. Accordingly, as the taxpayer was not identified on the face of the Contract, the Appeal Panel held that s. 18(2) of the Act did not apply to the Transfer.
The Appeal Panel held that the doctrine of undisclosed principal, and the contractual issues that arise from that relationship, does not assist the taxpayer in the way determined by Judicial Member Block.
The Appeal Panel noted that a transfer to a third party, unrelated on the face of the contractual relationship to the purchaser, is indeed a transfer to an unrelated third party, meaning that no "double" duty had been paid at all. Accordingly, the Appeal Panel was satisfied that its decision did not result in "double" duty being payable as the Transfer was a different transaction to the Contract.
In relation to s. 18(3) of the Act, the Appeal Panel held that s. 18(3) of the Act did not apply to the Transfer on the basis that the facts only disclosed a mere agency relationship, and not a trust relationship, between Mr Stone and the taxpayer. In this regard, the Appeal Panel placed weight on the fact that the agent (Mr Stone) did not have title to the property; he merely had a contractual right to have the property transferred to him.
In summary, having found that the concessions in ss. 18(2) and 18(3) did not apply to the Transfer, the Appeal Panel confirmed the decision of the Chief Commissioner to assess the Transfer with ad valorem duty.