Happy Days Property Pty Ltd v Chief Commissioner of State Revenue [2016] NSWCATAD 289

Background

This was an application for review of the decision of the Chief Commissioner of State Revenue (“Chief Commissioner”) to reassess an undated real property transfer form (“the Transfer”) to ad valorem duty of $22,940 in respect of the transfer of 211/55 Harbour Street, Mosman (“the Property”), from Toby Rowley Browne, Julie Anne Brown, Paul Derek Buckley and Jennifer Jean Buckley (together, “the Vendors”) to the Taxpayer.

The key issue in these proceedings was whether the Transfer was eligible for concessional duty of $10 under s.18(3) of the Duties Act 1997.

Pursuant to s.50 of the Civil and Administrative Tribunal Act 2013, and by way of agreement between the parties, this matter was heard on the papers (ie the Tribunal dispensed with the need for a hearing and determined the matter on the basis of the written submissions and evidence lodged with the Tribunal).

On 17 March 2015, a contract for the sale of land in relation to the Property (“the Contract”) was entered into between the Vendors and “FB Transitions Pty Ltd as trustee for Happy Days Custody Trust” as purchaser. The Contract had a completion date of 42 days after the date of the contract, being 28 April 2015. The purchase price was $610,000. Duty of $22,940 was assessed in relation to the Contract on 30 April 2015 and was paid.

After 17 March 2015 and before the proposed settlement date of 28 April 2015, Westpac, from whom the purchaser intended to borrow money in relation to the purchase, indicated that it did not accept FB Transitions Pty Ltd as custodian, and required that a different entity hold the Property.

Consequently, on 7 April 2015:

1. the Taxpayer (Happy Days Property Pty Ltd) was registered; and
2. a Deed was entered into between FB Transitions Pty Ltd, Happy Days Management Pty Ltd and the Taxpayer under which the Taxpayer replaced FB Transitions Pty Ltd as the custodian of the Happy Days Custody Trust.

The Transfer was originally stamped by the Chief Commissioner with nominal duty of $10 pursuant to s.18(3) of the Duties Act 1997 on 30 April 2015.

Following a review of the Transfer, the Chief Commissioner then issued a Notice of Assessment in relation to the Transfer, for ad valorem duty of $22,940 payable, on the basis that the concession in s.18(3) of the Duties Act 1997 did not apply.

Statutory Framework

Pursuant to the Duties Act 1997 both:

1. a transfer of dutiable property (s.8(1)(a)); and
2. an agreement for the sale or transfer of dutiable property (s.8(1)(b)(i));

are transactions which give rise to duty.

Accordingly, there were two dutiable transactions in this matter, being the Transfer and the Contract, and each independently gives rise to a liability for duty.

Section 18 of the Duties Act 1997 is intended to prevent “double duty” being charged in certain circumstances. S.18(3) provides:

“The duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $10 if:

1. the duty chargeable in respect of the agreement has been paid, and
2. the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement, and
3. the transfer occurs at the same time as, or proximately with, the completion or settlement of the agreement, and
4. at the time the agreement was entered into, and at the completion or settlement of the agreement:
   1. the purchaser under the agreement and the transferee under the transfer are related persons, except as provided by subparagraph (ii), or
   2. if the purchaser purchased as a trustee, the transferee and the beneficiary are related persons.“

The Chief Commissioner accepted that s.18(3)(a), (b) and (c) of the Duties Act 1997 were satisfied in this case, and so the key issue in dispute was whether s.18(3)(d) was satisfied. In this regard, s.18(3)(d)(ii) was the relevant provision to consider as FB Transitions Pty Ltd purchased the Property as a trustee.

Submissions

The Taxpayer submitted that the Chief Commissioner was not entitled to payment of double duty on the following four grounds:

1. as the Taxpayer was the trustee of a trust of which Mr Dickin was the sole beneficiary, the Taxpayer was entitled to the s.18 concession;
2. having previously stamped the Transfer with duty of $10, the Chief Commissioner was estopped from reassessing the Transfer to further duty;
3. the reassessment had denied the Taxpayer the opportunity to renegotiate the contract; and
4. the Chief Commissioner had improperly relied on the decision in Rowntree Investments Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 141 which was made after the Transfer had been stamped with $10 duty.

The Chief Commissioner submitted, in response to each of those grounds:

1. the Taxpayer was not entitled to any of the concessions under s.18 of the Duties Act 1997.  In particular, s.18(3)(d)(ii) refers to two points in time: “at the time the agreement was entered into, and at the completion or settlement of the agreement”.  The relevant parties must be related at both those points in time.  It is not sufficient if they are related at only one of those points in time.  At the time the agreement (the Contract) was entered into on 17 March 2015, the beneficiary under the Happy Days Custody Trust, being Happy Days Management Pty Ltd, and the transferee under the transfer, being the Taxpayer, could not possibly be “related persons” because the Taxpayer did not exist at that time (it was only incorporated on 7 April 2015);
2. there was no estoppel against the Chief Commissioner properly administering the Duties Act 1997;
3. the purchase was settled before any documents were submitted to the Chief Commissioner for stamping, meaning there was no alternative course available to the Taxpayer; and
4. the Rowntree decision did not change the law.

Decision

Senior Member Isenberg found that the concession under s.18 of the Duties Act 1997 could not apply to the Transfer.  In relation to the Taxpayer’s submissions, Senior Member Isenberg:

1. accepted the Chief Commissioner’s submission that s.18(3)(d)(ii) could not be satisfied at both the time the agreement was entered into, and at the completion or settlement of the agreement, because the Taxpayer did not exist at the time the agreement was entered into (on 17 March 2015);
2. found that the principle of estoppel does not apply to the Chief Commissioner in reassessing the Transfer, and that such a reassessment was permitted under s. 9 of the Taxation Administration Act 1996;
3. noted that the Contract and the Transfer were not submitted to the Chief Commissioner for stamping until after the purchase had been completed, and in this regard accepted the Chief Commissioner’s submission that “by that point of time it was too late” (at [44]); and
4. found that the relevant law applies by statute, and not because of the decision in Rowntree (and so accepted the Chief Commissioner’s submission that the Rowntree decision was an example of the application of the current law).

Orders

Senior Member Isenberg affirmed the Chief Commissioner’s decision.

Link to decision

Happy Days Property Pty Ltd v Chief Commissioner of State Revenue [2016] NSWCATAD 289